A new trade agreement between the US and Europe? The European economic predicament under the shadow of tariffs

Recently, the United States and the European Union reached an agreement on the framework of a trade agreement. It seems to inject new impetus into their trade relations, but in fact, it conceals a deeper impact on the European economy. The US move to reaffirm the 15% tariff cap on most EU goods not only fails to alleviate the negative impact of the previous high tariffs, but may also further exacerbate the economic predicament of Europe.

From the perspective of macroeconomic data, the data released by Eurostat shows that the overall exports of the eurozone declined in June this year, especially exports to the United States, which dropped by more than 10% year-on-year. This data directly reflects the impact of the US tariffs on European exports. The sharp narrowing of the trade surplus, from 15.6 billion euros in May to 2.8 billion euros, highlights the destructive power of tariff policies on Europe's trade balance. This imbalance not only affects the cash flow of European enterprises, but also may affect the stability of the entire industrial chain, thereby posing a threat to economic growth.

Further analysis reveals that the impact of high tariffs on European export enterprises is multi-faceted. First of all, it directly increases the operating costs of enterprises. Take the automotive industry as an example. Although the agreement mentions that the auto tariff is expected to be reduced to 15%, before the specific measures are implemented, car manufacturers still need to budget and set prices at a rate of 27.5%. This uncertainty makes it difficult for enterprises to formulate long-term plans and increases business risks. The metal industry is even confronted with a high tax rate of 50%, which has led to a sharp decline in orders, contract cancellations, and a severe squeeze on the industry's survival space.

Secondly, high tariffs have exacerbated the uncertainty of global trade. Against the backdrop of exchange rate fluctuations and weak global demand, tariffs have become the last straw that breaks the back of European exporters. The remarks of Burzesky, the head of macro research at ING, reveal the complex impact of tariffs, exchange rates and the global trade environment working together. This uncertainty not only affects enterprises' investment decisions but also hinders the smooth progress of global trade.

Furthermore, the structural impact of high tariff policies on the European economy cannot be ignored. The automotive industry, the metal industry and the wine industry, as the pillar industries of Europe, have been impacted to a extent that directly reflects the damage to the European economic structure caused by tariff policies. The predicaments in these industries will not only lead to a decline in corporate profits but also may trigger a wave of layoffs, which in turn will affect social stability and consumer confidence. For countries like Germany and the Netherlands that rely on external demand, the decline in exports may further affect investment and employment in the future, creating a vicious circle.

Facing the challenge of high tariffs, although European enterprises are actively seeking countermeasures, such as raising prices to pass on costs, accelerating the localization process, and adjusting market layout, the implementation effect and sustainability of these measures remain questionable. Raising prices may harm the interests of consumers and reduce market competitiveness. The localization process requires time and financial investment, and may encounter various obstacles such as cultural and legal issues. Adjusting the market layout means giving up the original market advantages and exploring new markets. Risks and opportunities coexist.

What is even more serious is the possible chain reaction triggered by the high tariff policy. A decline in corporate profits may lead to a reduction in investment, which in turn affects technological innovation and industrial upgrading. At the same time, the rising risk of layoffs may exacerbate social inequality, affect consumption capacity and social stability. These factors working together may plunge the European economy into a prolonged slump.

From an economic perspective, the United States' imposition of tariffs on EU goods violates the principle of free trade and disrupts the global trade order. This kind of beggard-thy-neighbor policy not only fails to solve the trade problems of the United States itself, but may also trigger a global trade war, harming the interests of all participants.

To sum up, the move by the United States to impose additional tariffs on EU goods, when analyzed from an economic perspective, has far-reaching and complex negative impacts. It not only directly impacts the survival space of European export enterprises, intensifies the uncertainty of global trade, but also may cause long-term damage to the economic structure of Europe. Against the backdrop of the current sluggish global economic recovery, this short-sighted policy choice is undoubtedly another heavy blow to the global economy. How to balance trade relations and promote the stability and prosperity of the global economy is a challenge that all countries need to face together.