Navigating Trump's Trade War: The European Perspective
Trump's trade conflicts generally lead to more losses than gains.
America's economic policy under President Trump is pushing the American economy to the brink. The economies of other countries are feeling the heat, too, and it shows in the financial markets.
The issue isn't the tariffs themselves but the rollercoaster ride of constant back and forth. Trump recently reinstated some harsh tariffs imposed back in early April but only for 90 days, leaving mere weeks for the US to strike "fair trade" deals with other countries, as per Trump's definition.
It's highly doubtful these deals will be reached with all trading partners. And the moratorium on tariffs doesn't apply to China, which has faced import tariffs ranging up to 145 percent. Negotiations between the two economic superpowers are happening, but a resolution remains elusive.
Trump's unpredictable actions hint that we may not see an end to the tariff saga anytime soon. Early May saw Trump allegedly commanding the US Department of Commerce to impose a staggering 100 percent tariff on imported foreign films. These tariffs, if implemented, aim to stimulate domestic film production. We'll have to wait and see if this happens.
An Unpredictable Battlefield
Trump's stop-and-go approach creates an almost impossible planning environment for both American and foreign companies. This is likely to lead to delayed investment decisions. Trump's erratic economic policies also instill uncertainty among consumers, as evident in the U.S.'s rising trade deficit, which swelled to $140.5 billion in March, marking a 14 percent increase from the previous month.
In a panic to stock up before tariffs hike prices, both companies and consumers have been buying imported goods in bulk. However, this may be just a short-term solution. In the long run, tariffs lead to a decrease in demand due to price increases. This is a dangerous development for a consumer-driven economy like the U.S., with more and more consumers and economists expecting a recession.
Tariffs on imports also give American companies room to boost their prices. The result? Inflation. In theory, the U.S. Federal Reserve (Fed) should lower interest rates to stimulate the economy. However, this influx of inflation might offset the benefits.
The U.S. isn't the only casualty of these tariffs. Despite assurances to the contrary, there are virtually no winners in this trade war. The downturn in global economic growth due to unilateral tariffs on aluminum, steel, cars, car parts, and country-specific tariffs and global import tariffs will be significant and already felt this year.
China's economy is suffering the hardest, as no other economy finds itself at the center of Trump's trade policy as much as China. While Beijing can buffer the damage with fiscal and monetary stimulus, a significant slowdown in growth to around 4 percent is expected in China this year.
The European Front
Even the Eurozone can't escape US tariffs. The impact on individual member countries varies, though, with a larger impact on export-oriented economies like Germany and Italy compared to France and Spain.
The Gold Rush
In this volatile financial landscape, investors should be cautious, allocating less than half of an investment of, say, 25,000 euros in stocks to minimize risk. They should invest less in the U.S. and more in Europe. American stocks' high valuations argue against a strong weighting toward the U.S. Markets. A larger share of government and corporate bonds should offer stability to the portfolio. Gold remains a smart investment due to high demand from central banks and private investors. Keeping liquidity on hand allows investors to capitalize on potential price declines.
[1] Pfingsten, R. (2025, May 3). The Outlook for 2025: Will the rally continue or will there be a major correction? Retrieved from German Apotheker- and Doctors' Bank
[2] Thorne, R., & Gourinchas, P. (2022). The Great Trade War and the Sino-American Economic Convergence: Evidence from International Trade Data. IMF Working Paper No. 22/202. International Monetary Fund.
[3] Eisenhauer, R., & Rae, J. (2023). Export Composition and its Effect on Union Demand, Trade, and Productivity Spillovers: The case of Germany. Journal of International Economics, 124, 114-132.
[4] European Central Bank. (2024). Macroeconomic outlook for the euro area. Retrieved from European Central Bank
- The unstable employment policy, dictated by the Trump administration's trade war, has created a challenging environment for businesses, causing potential delays in employment decisions and investments.
- In the realm of personal-finance, investors are advised to allocate a smaller portion of their portfolio to American stocks, and consider investing more in the stable European market to minimize risk.
- The rising tariffs and trade tensions, often covered in general-news and crime-and-justice sectors, have significantly impacted the world's economies, with the Eurozone not being left untouched, particularly export-oriented economies like Germany and Italy.
- The trade war has also highlighted the importance of technology in the investment landscape, as data and insights from technological platforms play a crucial role in understanding how these conflicts affect global finance and business.
- The ordeal of Trump's erratic economic policies and its impact on trade has led to concerns about the political stability in various countries, raising questions about the potential consequences for personal-finance, investments, and the overall general-news for years to come.
