In this photo illustration, a double exposure images shows U.S. President Donald Trump against the EU flag.
Sopa Images | Lightrocket | Getty Images
European Union leaders urged a calm response to U.S. President Donald Trump’s tariffs that have battered global markets, days after a more bellicose China pulled the trigger on retaliation.
“The reaction to the tariff war was predictable. The stock market earthquake from Japan through Europe to America must be survived without nervous decisions,” Polish Prime Minister Donald Tusk said Monday in a Google-translated social media update. “The Polish stock market also got a ricochet, but political and economic stability are our assets in this difficult time. We will calmly persevere!”
Germany’s acting Economy Minister Robert Habeck likewise on Monday pleaded for a “calm and united” European riposte, noting regional countries cannot solve the matter on their own, according to Reuters. His comments marked a more sedate response from his previous reassurance last week that Trump will “buckle under pressure” if Europe joins forces over tariffs.
Their comments arrive as European stocks plunged by another 4.2% at 11:35 a.m. London time, amid heightened danger of lower U.S. demand for European goods and of recessionary risks in the world’s foremost economy.
Poland and Germany are among the 27 nations slapped with 20% reciprocal tariffs under Trump’s measures targeting the European Union, revealed last week alongside a broader spate of other sweeping global duties.
The two countries face different impacts: export-reliant Germany which places goods worth 157.9 billion euros ($173 billion) transatlantic, is set to bear the brunt of levies in its already languishing auto sector.
Tusk meanwhile previously said the Polish economy could suffer a 0.4% gross direct product (GDP) hit as a result of Washington’s latest duties, while the Polish Economic Institute stressed in analysis that U.S. demand contributes just 2.6% of the national GDP, but that tariffs posed a broader indirect risk to the country and could place burden on individual sectors through growing economic uncertainty.
Looking at Central & Eastern European countries, ING analysts assessed that “the US-EU trade war alone wouldn’t bring down the entire CEE economy via the export channel” but noted lingering danger from imported and perceived inflation.
“And perceived inflation is a silent threat: by reducing consumer confidence, it will increase savings and kill any momentum in consumption growth. With the region just emerging from a cost-of-living problem (or crisis in some cases, like Hungary), the spillover of perceived inflation into weaker consumption via the confidence channel is something we need to monitor,” they said, also flagging potential negative impact on Western European foreign direct investment.
“This void could quickly be filled by Chinese investors, which could provide some positive stimulus but also create further headaches for the European Commission and expose recipient countries to EU-China trade tensions,” they said.
The EU’s response remains under question, amid recent warnings from Goldman Sachs that the Trump tariffs could deliver a total trade-related hit of 0.7% to the euro zone’s GDP this year, and Deutsche Bank analysts saying the White House measures could knock between 0.4-0.7 percentage points off the EU’s economic output and warning of impact on labor markets and “indirect costs from abroad, including a meaningful increase in recession risk in the US.”
So far, EU chief Ursula von der Leyen has pledged the bloc’s readiness for “further countermeasures” in an initial response, should talks fail — with Reuters reporting the union could be preparing an imminent counterstrike. Europe’s reticence stands in contrast to the approaches of Canada and China, which have both enforced retaliatory tariffs in response to Trump’s protectionist trade policies in recent months.
Amid an intensifying trade war and bloodbath in U.S. and global markets, Trump on Sunday reassured that he doesn’t “want anything to go down, but sometimes you have to take medicine to fix something,” after previously standing by the imposition of tariffs to reduce the U.S.’ trade deficit with counterparties.