There are just a few hours left until April 2nd, the “Liberation Day” as he called it Donald Trump, the date on which the US Administration will make public the terms of the new tariff policy and import regulations in the US market. Financial markets and operators will finally be able to clarify their assessments of the economic impacts of the new Trumpian order. Hanna C. Norberg is a Swedish economist, founder of TradeEconomista.com, independent consultant to numerous governments and international organizations. She has worked for the WTO, the OECD, the Swedish Ministry of Finance and above all with the European Commission on the various free trade agreements that regulate relations with the most important economies in the world (South Korea, Japan, Canada, T-Tip with the United States).
Donald Trump's tariff policy is driving economic operators crazy. Can you see a precise strategy or is it a chaos without any logic?
“It seems that the only strategy behind the current US administration’s trade policy is chaos and power-assertion. While this may be an effective negotiating approach in other contexts, in global trade, where supply chains are complex and built over the long term, the uncertainty this strategy creates is extremely destructive. Perhaps even more damaging than the tariffs themselves.”
What can we expect, in terms of reactions and counter-reactions, in global trade over the next few months?
“Tariffs tend to hit the economy that imposes them the hardest. The economic costs of tariffs and the risk of provoking hostile reactions will, however, dissuade many trading partners from taking immediate retaliation. The European Union, as the only trading partner large enough to withstand these pressures, will respond with targeted tariffs, calibrated to discourage further aggression.”
With what strategy?
“The European response package will be structured to be reciprocal in size, with a special focus on certain politically sensitive geographic areas in the United States. It will also avoid targeting goods used in strategic production and focus on products for which alternatives produced outside the United States are easy to find.”
Which economy will suffer most from this phase of global trade closure?
“The breakdown of global trade rules will hit developing countries the hardest. The economies most affected will be those most integrated with the US, namely Canada and Mexico. Canada has had no choice but to respond decisively, while Mexican President Claudia Sheinbaum has shown surprising and impressive assertiveness.”
How will tariffs impact global growth?
"The impact will be very negative. Major international organizations, such as the OECD and the IMF, are already revising their global growth forecasts downwards and this trend will continue in the coming months. The economic models on which these forecasts are based have never contemplated such extreme measures, so we are in uncharted territory in terms of the size of these shocks."
In your opinion, which European industrial sectors will have to review their production organizations?
"First and foremost, steel, aluminum and the automotive sector. However, the erosion of trust in trade relations, in addition to the tariffs themselves, will have repercussions throughout the economy and across all sectors."
At the same time, will there be productive sectors that will be able to benefit from this sort of downsizing of globalization?
"When the dust settles, some sectors or players may emerge stronger, at least in relative terms. It is difficult to make predictions at the moment, except for those sectors that profit from uncertainty, such as freight forwarders and law firms specializing in international trade."
Is inflation set to return to the forefront of the US and the European Union?
“I just attended an event where the Swedish Minister of Trade and Development suggested renaming Trump’s ‘Liberation Day’ to ‘Inflation Day.’ His reasoning is hard to argue with: the US will definitely see higher prices due to tariffs and reduced competition. But uncertainty and disrupted supply chains pose an inflationary risk to economies around the world.”
Do you believe that the European Union can find a new path to industrial growth with European rearmament policies?
"The increase in public spending on rearmament will increase GDP, with positive effects on the economy. Furthermore, since the United States is increasingly perceived as a reliable partner and ally, investments in this sector will go to European companies to a greater extent than in the past."
An opportunity also for an industrial and competitive realignment of the automotive sector in the service of investment plans for rearmament?
“I don’t see a direct connection between the two sectors, so I would say no.”
In these weeks of media brawling, the increasingly complicated relationship between Trump and Europe has been the main focus. How is China reorganizing?
“There are no clear signs of repositioning. The Chinese government, probably to avoid tensions with the US, has maintained a cautious stance on tariffs. Despite Trump's criticism of China during the election campaign, it is not hitting it harder than other trading partners, which is probably seen favorably by Beijing. At the multilateral level, Chinese officials are speaking out in favor of a rules-based global system. It must be said, however, that China's economic model is based on exports and Beijing is still increasing the sale of state-subsidized products, such as electric vehicles, which are literally invading the global market”.
And Europe…
"With the closure of the US market, these products will flow elsewhere, which will not be politically sustainable in the long run. The EU has already opened several anti-dumping investigations against China: if this trend does not slow down, the global perception - not only in Europe - towards it will become increasingly negative."
If you had to bet on the future of Europe: will the more sovereignist and nationalist impulses win in the short term or do you see room for new steps of integration?
“It is true that we are seeing a rise in nationalism in Europe, as in Hungary or as we are seeing in the recent developments in Turkey. However, the Russian invasion of Ukraine, which pushed Sweden and Finland to join NATO, and the abandonment of US support for Kiev, have led to an unprecedented increase in European public spending. The only way to resist Trump is to show a united front. After Brexit and Trump's first term, we have seen a greater willingness to collaborate and integrate in Europe, and I think this is the silver lining of this whole situation.”
