It is cheaper to buy, but at what price?
The introduction of 20% of customs rights to European products can lead to deflation, that is, to a decrease in prices in Europe.
This situation will be caused by an increase in proposal from China, as well as in the European Union.
“One of the factors that will lead to the prices of the EU will naturally export countries such as China, which are currently redirected to Europe,” said Euronews Niclas Puiirs, a researcher of Broegel.
“The second factor that explains why Europe can potentially observe the drop in prices in the fact that some exports to the United States currently remain on the market. For example, if the customs rights to Italian wine are high, there will be more wine in the unique market, and prices for these products will be lower, ”the researcher adds.
At first glance, the price of prices, by the same, is useful for stimulating the purchasing power and consumption of Europeans and, therefore, growth.
But, on the other hand, deflation has a harmful effect on the economy, as it encourages families to postpone their purchases to expect a new price descent.
This creates a vicious circle of wages and an increase in unemployment.
Uncertainty
For Tobias Gerke, the investigator of the European Council on External Relations (ECFR), the current uncertainty represents the greatest risk to the economy.
“These customs rights are widespread. All products, all exports in Europe in America will be affected. Let’s think about machines, chemicals and cars. These companies can now face a burden, ”says Euronews researcher.
“I think this is the biggest risk. The uncertainty that will be installed means that companies may not invest in Europe. This can have a very negative impact for several months or several years, employment and growth, ”he adds.
Nevertheless, economists do not have a crystal ball, and there are many unknown factors that make it difficult to forecasts. In particular, the reaction of China and the reaction of the European Union will have a large weight on the balance sheet. US President Donald Trump can also use customs rights as a lever in other negotiations.
By 2023, the EU registered a commercial surplus of 48 billion euros in the United States.