00:00Earlier, I spoke to Karsten Brzezinski, the global head of macro research and chief economist at ING Germany, and asked if the EU's response will help matters.
00:10I think this is the right way to move along. It is better than going for an imminent escalation.
00:18I think the European Union had made clear before that it is willing to make a deal.
00:22The European Union had offered quite a lot to purchase, for example, LNG and soybeans.
00:29The EU had even gone so far in saying that they would be willing to slash tariffs to zero.
00:35What other tools do you think the EU has at its disposal to get a deal over the line?
00:41Well, I think many, many diplomatic skills behind closed doors. That is one.
00:46The other one would be really to threaten. I think that is not what the EU is willing to do right now.
00:52But don't forget, there is already a retaliation package on the table.
00:58Only it was delayed and it would now become effective, I think, mid-June.
01:03So I think that is still something that the EU could use.
01:06The EU could also make very clear that it is willing to retaliate further.
01:11But it is also willing to actually go for higher tariffs.
01:15And the ultimate retaliation matter by the European Union would be if they were to include services.
01:22Because the EU exports more goods to the US than it imports from the US.
01:27But when it comes to services, the EU is clearly importing much more from the US than it exports to the US.
01:35How damaging would higher tariffs be for Europe and indeed the United States if a deal is not secured?
01:42If we really were to see these 50% US tariffs on European goods, that would be pretty damaging for the European economy, but also for the US economy.
01:52Well, to give you some numbers, 50% tariffs would mean that the Eurozone economy would grow by something like 0.6 percentage points less than normally.
02:06Well, we are expecting the Eurozone to grow by 0.7% this year.
02:10So it makes sure that these 50% tariffs would push the European economy close to stagnation.
02:17In the US, however, these tariffs would clearly be stagflationary.
02:21So they would lead to surging inflation as it is US consumers paying the price for it.
02:27And at the same time, followed by higher inflation, US economic activity would also slow down.
02:33In reality, do you think that the White House could try to negotiate individually with countries in Europe, as some people close to the Trump administration have suggested?
02:43That is what the Trump administration had always hoped for.
02:46Well, it is actually not possible, at least not really out in the open, because in Europe, it is the European Commission that is really responsible for all these kind of trade agreements.
02:59Of course, I'm behind behind the scenes.
03:02There might be some bilateral talks.
03:04But I think that the Europeans have really come up with a very close frontier towards the US.
03:17So the Europeans have really spoken with one voice here, and they have not really been playing against each other.
03:24So I think it will be extremely hard for the US administration to really try to break up or to open up a very close, well, harmonious European frontline.
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