EU Restricting US Imports 'May Be First Stage in Further Measures' - Economist

The European Union has introduced higher tariffs on US goods, worth 2.8 billion euros, on Friday. Products such as bourbon whiskey, motorcycles, tobacco and orange juice will carry a tariff of 25%. 50% tariffs were introduced on US footwear, clothing and washing machines. Sputnik spoke about this issue with chief economist Yaroslav Lissovolik.

Sputnik: The EU is imposing what seems to be a tit for tat tariff, or in any case that was the motive, tit for tat tariffs on US imports to Europe. Do you feel that the measures proposed are in fact equal as far as the impact that they will have on US markets compared to those imposed by the Trump administration?

Yaroslav Lissovolik: Well this is certainly the intention and that is likely to be largely the case. We know that the overall impact of the US trade restrictions is larger and we are talking here in terms of 2.8 billion euros in measures undertaken by the European Union. 

This is just the first stage and further measures could be contemplated in the long term, but at the same time, what the European Union is also saying is that these measures on the part of the EU to restrict imports from the US could be reversed in case there is a reversal coming from the US in terms of their own restrictions.

So basically this is all about reciprocity and I think depending on the actions of the US, depending on their response, we will see what further measures may be contemplated by the EU.

Sputnik: Why do you think the Trump administration is actually focused on stealing aluminum imports to the US?

Yaroslav Lissovolik: Well I think part of the reason is simply that the localization or the concentration of these industries in the US is such that a significant portion of this industry is located in what you may call [swing] states in terms of the US electoral process. Some of these states tend to be very important in terms of political outcomes so yes basically we have seen it before and not just now that the Trump administration is targeting such restrictions.

We also saw under the Bush administration similar protectionist measures that were in part probably driven by political considerations that have to do with the substantial role of the sector — of this aluminum and steel sector, in a number of very important states.

Sputnik: Who benefits from the higher tariffs both in the US and in the countries that have imposed them in response?

Yaroslav Lissovolik: I really don’t see any substantial benefits quite frankly because you shouldn’t look at this situation only as one round effect. Clearly there is the second; there is the third round in terms of reciprocal measures by the EU, by other developing economies. So the overall sum of all of these effects not just the unilateral imposition of these tariffs but also the impact of the response from trading partners, I think that tends to bring the overall […] to the negative territory both for the US and the world economy and the main, largest economies in the world as well. 

The views and opinions expressed by Yaroslav Lissovolik are those of the speaker and do not necessarily reflect those of Sputnik.