US Tariffs: Wifo Chief Warns of Growing Uncertainty

The trade measures ordered by Donald Trump were scheduled to take effect at midnight (Washington local time; Thursday 6:00 AM CEST), as the US President confirmed a few minutes earlier on his platform Truth Social.

According to calculations by the Austrian Institute of Economic Research (Wifo), the US tariffs are likely to reduce Austria's economic output by 0.1 to 0.2 percent in the short term. The immediate effects of the tariffs on the economy here are predictable, "but the uncertainty (...) is harder to quantify," Felbermayr said on Thursday in the Ö1 midday journal of ORF. Accordingly, the negative effect could also be greater due to uncertainties. These include, according to Felbermayr, disputes over the interpretation of the deal between the EU and the USA. It is also uncertain whether the tariff rate will remain at 15 percent in the long term, or whether the USA will raise the tariffs again in the future.

Felbermayr Sees Open Questions in Tariff Enforcement

Felbermayr also sees many open questions in the enforcement of the new tariff rates. It is unclear, for example, how the USA will handle the fact that tariff rates vary significantly between its trading partners. International supply chains could also be disrupted if containers are stuck in US ports due to tariff uncertainties. However, the economist sees a danger primarily for the competitiveness of European companies: "The consequences in Europe will be noticeable and I fear faster than the USA backtracks," said the economic researcher.

The head of the NEOS delegation in the EU Parliament, Helmut Brandstätter, demanded in a statement on Thursday "a strong Europe that does not passively accept economic blackmail." EU Commission President Ursula von der Leyen should not be intimidated by the US President. The party sees "free trade as a guarantor of global prosperity."

Trump Sees USA Disadvantaged in Foreign Trade

In addition to the EU, nearly 70 countries are affected by the changed tariff rates, each to varying degrees. Trump justifies his radical tariff policy with alleged trade deficits, which he claims pose a national security risk for the USA - hence there is a national emergency that justifies the tariffs. His approach is also legally disputed.

A few minutes before midnight, Trump announced on Truth Social that the tariffs would now take effect. "Billions of dollars will flow into the USA, mostly from countries that have exploited and laughed at the USA for many years," he wrote in capital letters.

EU Commission Interpreted the Deadline Differently Until the End

Trump had ordered the new tariffs by decree last week. The EU Commission interpreted the deadline differently until the end and assumed that they would take effect only on Friday (August 8). Why both sides did not find a unified line in communicating the start date until the end remained unclear.

For countries not on the long tariff list, other duties apply. The USA is also negotiating separately with China and Mexico. Additionally, Trump has threatened or already imposed punitive tariffs against countries doing business with Russia in the energy sector, thereby indirectly supporting the Kremlin in its war of aggression against Ukraine - as was the case with the special tariffs for India.

15 Percent: A Good Compromise - Or Too Much?

The EU Commission recently reached a new basic agreement with its American trade partners: This reduced the threatened tariff rate by half to now 15 percent, after Trump had previously suggested a rate of 30 percent on most EU exports to the USA in a letter weeks earlier.

Critics viewed this as a known tactic of the president: placing excessive demands to then reach a compromise that does not fulfill the worst fears of the opposing side but significantly benefits the USA. The European Commission now faces accusations of failing to protect the European market in return with equivalent tariffs on US imports from competition.

Billion-Dollar Additional Agreements

In addition to the 15 percent tariff rate, the EU assured Trump that it would purchase energy from the USA worth 750 billion dollars (around 650 billion euros) by the end of his term. According to von der Leyen, liquefied natural gas (LNG), oil, and nuclear fuels from the United States are to fill the gaps that will arise from the planned complete abandonment of Russian gas and oil.

Furthermore, 600 billion dollars are to be invested in the USA. The EU Commission refers to expressions of interest from European companies. A commission official clarified that this is a matter for private companies, and the commission as an authority cannot guarantee this. The commission did not disclose which companies have expressed investment intentions and to what extent.

One Deal, Two Interpretations

In any case, there are different interpretations of the 600 billion on both sides of the Atlantic: According to Trump's statements, the investments are at the free disposal of the United States. "They have given us 600 billion dollars that we can invest in anything we want," he said in an interview with CNBC. It is effectively a "gift." This contradicts the statements of the EU Commission.

In response to the question of what would happen if the EU did not deliver the said investments, Trump threatened tariffs of 35 percent. Since the investment commitments are spread over several years, it is unclear when this point might be reached.

(APA/Red)

This article has been automatically translated, read the original article here.