Despite a recent agreement on tariffs between the United States and the European Union, economists are cautioning against undue optimism and anticipating further disruptions from Washington. Michael Hüther, Director of the Institute of German Economics (IW Köln), voiced concerns that the deal’s investment and purchasing commitments are difficult to ensure and that the threat of tariffs remains a recurring possibility. He suggested that a more assertive negotiating strategy might have been beneficial for the EU.
Hüther anticipates a temporary period of calm following the resolution of the immediate trade dispute, noting that U.S. consumers are likely to bear the brunt of the 15% tariffs imposed, as German exporters are generally positioned to pass these costs on. However, the agreement doesn’t warrant significant celebration, as tariffs of any level impede global economic cooperation. “The Trumpian nonsense hasn’t been corrected” he stated.
Veronika Grimm, a leading economic advisor, is urging the European Union to focus on a robust growth agenda, warning against relying on debt-financed spending to mask underlying issues. She criticized the EU’s current trajectory, specifically the practice of financing arms and energy purchases from the U.S. as unsustainable. “The EU must finally wake up and take care of its own growth agenda” Grimm asserted.
Regarding the direct impact on German exports, Grimm acknowledged the burden of tariffs but expressed relief that the higher tariffs affecting the automotive industry have been averted. She acknowledged the necessity of importing both energy and weapons from the U.S. in the long term, but ultimately believes such reliance doesn’t constitute a sound growth strategy for the EU.