"Donald Trump's latest tariff threat, in pursuit of his goal of seizing Greenland, is a political nightmare for European leaders, but it could create a severe economic headache, too. As the International Monetary Fund (IMF) has repeatedly pointed out since Trump's trade war began in earnest last year, whatever the ultimate level of tariffs, uncertainty takes its own toll. And as IMF managing director Kristalina Georgieva put it in October, in the Trump era, uncertainty is the new normal."
"Businesses tend to hold back from new investment when they are unsure what the policy landscape will eventually look like as the UK learned to its cost during several years of Brexit wrangling after the 2016 referendum. And this latest threat comes just as businesses in the UK and the EU believed they could plan with certainty, after much-vaunted trade deals with the US were struck and signed with ceremony last summer."
"If Trump goes ahead with 10% tariffs in February rising to a punitive 25% on 1 June it will throw sand in the wheels of the economy at a fraught moment, with France deep in a budgetary crisis, and Germany hoping for an economic upturn after stagnating in 2025. For UK chancellor Rachel Reeves, the timing could not be worse, just as she had cause to hope for a modest upturn after a difficult 12 months."
Proposed US tariffs risk disrupting European and UK economies by creating policy uncertainty that reduces business investment. The IMF warns that uncertainty has economic costs, and business planning confidence that followed recent US trade deals could be undermined. A phased tariff hike to 10% in February and 25% in June would hit fragile recoveries in France, Germany and the UK. Existing tariffs are the highest since World War II and have pushed up some import prices, prompting selective cuts. Analysts warn that running down pre-tariff stocks and squeezed corporate margins could further lift prices and rekindle inflationary pressure.
Read at www.theguardian.com
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