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GLOBAL MACRO: EU Response To Steel & Aluminium Tariffs Alone Likely Small [1/2/]

GLOBAL MACRO
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  • US-EU trade tensions continue to bubble away even if they clearly haven’t reached the level of friction seen with Canada, Mexico and Canada.
  • President Trump said last week that EU tariffs will “definitely happen” and has since announced 25% tariffs on steel & aluminium to be made effective Mar 12, although as we show these should have relatively little macro impact compared to other areas of EU trade.
  • Yesterday, EU trade chief Sefcovic spoke with Lutnick, Trump’s pick to become commerce secretary, Jamieson Greer, his pick for US trade representative and NEC Director Hassett according to an EC spokesman. The call was introductory and the two sides agreed to meet soon.
  • The EU earlier this week pledged to respond to the 25% tariff threat on steel & aluminium, having prepared multiple options depending on US policy, although there is nothing official yet.
  • EU exports of iron/steel and aluminium to the US are small from a macro angle, summing to E16bn over the past twelve months of data for just ~0.1% of EU GDP. Trump has previously targeted the EU due to its trade surplus with the US, although the targeting specifically of iron/steel & aluminium doesn’t do much to change things here considering net exports also just 0.1% GDP.
  • This should keep any potential European retaliation on the low side, despite Germany being the most exposed from a pure export of steel volumes angle. Retaliatory powder is more likely saved if greater attention starts to be placed on chemicals and related products (exports 1.1% GDP, net exports 0.6% GDP), broader machinery excluding vehicles and aircraft (exports 0.8% GDP, net exports 0.4% GDP) and vehicles themselves (exports 0.3% GDP, net exports 0.25% GDP) – see chart. 
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  • US-EU trade tensions continue to bubble away even if they clearly haven’t reached the level of friction seen with Canada, Mexico and Canada.
  • President Trump said last week that EU tariffs will “definitely happen” and has since announced 25% tariffs on steel & aluminium to be made effective Mar 12, although as we show these should have relatively little macro impact compared to other areas of EU trade.
  • Yesterday, EU trade chief Sefcovic spoke with Lutnick, Trump’s pick to become commerce secretary, Jamieson Greer, his pick for US trade representative and NEC Director Hassett according to an EC spokesman. The call was introductory and the two sides agreed to meet soon.
  • The EU earlier this week pledged to respond to the 25% tariff threat on steel & aluminium, having prepared multiple options depending on US policy, although there is nothing official yet.
  • EU exports of iron/steel and aluminium to the US are small from a macro angle, summing to E16bn over the past twelve months of data for just ~0.1% of EU GDP. Trump has previously targeted the EU due to its trade surplus with the US, although the targeting specifically of iron/steel & aluminium doesn’t do much to change things here considering net exports also just 0.1% GDP.
  • This should keep any potential European retaliation on the low side, despite Germany being the most exposed from a pure export of steel volumes angle. Retaliatory powder is more likely saved if greater attention starts to be placed on chemicals and related products (exports 1.1% GDP, net exports 0.6% GDP), broader machinery excluding vehicles and aircraft (exports 0.8% GDP, net exports 0.4% GDP) and vehicles themselves (exports 0.3% GDP, net exports 0.25% GDP) – see chart. 
image