The new US administration has sent jitters across the world with trade plans that could severely damage the EU.
Raising tariffs is not the right tool to address economic or national security concerns, European Commissioner Valdis Dombrovskis said on Thursday, recommending that US President Donald Trump instead focus on tackling economic inequality.
“On aggregate, things seem to be working quite well in the United States; where there are some issues, they are probably more linked to income inequality,” the Latvian, who was previously EU trade chief, told a panel organised by the World Economic Forum in Davos.
Dombrovskis, who is now Commissioner for the Economy and Productivity, argued that the disparity between rich and poor is a graver problem in the US than even in the worst-performing of the EU’s members, Bulgaria.
“That’s obviously generating also certain political problems, which Trump may now be trying to solve with tariffs, but focusing on addressing income inequality overall would be the most efficient way of addressing those issues,” he added.
Since his inauguration earlier this week, Trump has repeated his threat to impose tariffs on EU goods entering the US in order to “get fairness” in the bilateral trade relationship. The Commission’s trade spokesperson, Olof Gill, has hit back, citing trade statistics show the two economies are complementary.
Trump has said he’s preparing tariffs on Canada and Mexico to apply as early as 1 February, by which date China could also be hit with a 10% export levy.
Some studies have suggested that, by hitting key EU sectors such as cars and chemicals, Trump’s plans could damage the bloc’s economy by as much as 1.5% of GDP.
A presidential memo released on Monday said the US will establish a “robust and reinvigorated trade policy” that “promotes investment and productivity, enhances our nation’s industrial and technological advantages, defends our economic and national security, and benefits American workers and businesses”.
But Dombrovskis, pointing to the EU’s own economic security strategy, argues that any national security concerns can be better addressed by restrictions on exports or foreign investments which may pose a risk.
“We think that it’s important that likeminded democracies work together,” Dombrovskis said, referring to bilateral and trilateral engagements among the G-7, the group of leading nations that includes the US, Japan, UK and major EU members.
Earlier in Davos, Commission President Ursula von der Leyen warned she’d be ready to defend EU strategic interests against unjustified measures.
“We will be pragmatic, but we will always stand by our principles. To protect our interests and uphold our values: that is the European way,” she said, outlining an agenda of diversifying suppliers through trade deals.
Earlier this month, the European Commission announced an updated commercial agreement with Mexico, the re-launch of negotiations with Malaysia and upcoming talks with India.
Before Christmas, the EU also secured deals with the Mercosur countries – Brazil, Argentina, Uruguay and Paraguay – and with Switzerland.
Read the full article here
