00:00For more on this story, we can bring in Kirsten Abrasensky, Global Head of Macro for ING Research.
00:07Thank you so much for joining us on the program.
00:09Last year, we had the EU, which effectively rushed to conclude a free trade agreement with Washington.
00:15With this new tariff threat from the U.S. president, where does that deal stand?
00:21Well, this deal clearly stands or hangs in the balances because it is up to European Parliament.
00:27And the vote is actually scheduled for this week to sign off the European commitments in this deal between the EU and the U.S.
00:35And therefore, this is clearly hanging in the balances.
00:38And I think that also Europe will not ask itself, you know, how reliable is the U.S. still when doing these agreements?
00:46Donald Trump has singled out several countries, including France, Germany, effectively countries that sent troops to Greenland.
00:55And over the past a few days, can the U.S. single out specific European Union countries and slap tariffs on them?
01:04Or does it have to work on the bloc as a whole?
01:08In theory, the U.S. could single out individual countries.
01:13But in practice, this is very difficult because, well, we have one border.
01:18We have one border.
01:19We have one custom.
01:20So that is practically very hard to do.
01:23But still, if the U.S. administration actually realized that this is very hard to do, who would stop the U.S. administration in imposing additional tariffs for all of the EU?
01:36I know Europe is trying to show that it's united in its response.
01:40But is the EU united as a bloc?
01:42That is a good question and a very tricky question.
01:48I think of all the comments that we had over the weekend, it looks as if the EU is more united than it was last year.
01:55But still, when push comes to shove, the big question is whether the individual governments can actually leave their national interests in trade with the U.S. behind.
02:07Because it's obvious that, for example, a country like France is less exposed to trade with the U.S. than a country like Germany.
02:14So now this is really up to the European Union to stand as a united front and show limits to the U.S. government.
02:24Also, to be very clear, I think Europe would really have to go all in in terms of reaction, of trade reaction to inflict economic harm on the U.S.
02:38Because when you look at trade itself, the EU is more dependent on trade with the U.S. than the other way around.
02:44I wanted to ask you about that, because what are some of the tools that the EU could use to respond?
02:48France, for instance, wants this anti-coercion mechanism instrument triggered.
02:53This has never been used. So how would it work exactly?
02:55I think the first thing that we have is still the long list of tariffs that was negotiated already last summer, but that was never put in use because we got the deal last summer between the EU and the U.S.
03:09These suspended measures will or could become effective if nothing is done by February.
03:16So that is the number of close to 100 billion euro tariffs from the EU on U.S. goods.
03:21Then we have, like you mentioned, the anti-coercion tool that is something that has never been used before.
03:27It is called or known as the trade bazooka.
03:31We don't know how it's going to work.
03:33We only know that it gives the European Commission all freedom to either come up with counter tariffs, to limit investments in Europe, to also go for export controls or to even intervene in intellectual property.
03:47I think, you know, if you summarize all these things, if Europe was really to try to inflict economic harm on the U.S., Europe would have to go for tariffs on digital services.
03:59Because when you look at the trade balance on goods, it is clearly in the favor of the U.S., meaning that the EU exports more to the U.S. than the other way around.
04:09I want to jump in very briefly because the U.S. could also hit back as well.
04:13As you said, Europe is a lot more dependent on the U.S., not in terms of just big tech, but also financial services, things like visa transactions, etc.
04:22Could the U.S., could Donald Trump play dirty if he wanted to?
04:27Of course he could.
04:28And I think this is the biggest risk of the current situation.
04:31And this also means that the current situation is much riskier than where we were last summer, because this is also not only about trade.
04:40It is actually putting enormous unknown stress on the transatlantic relationship, probably the worst or the most challenging situation for the transatlantic relationship since the end of World War II.
04:53Because if, you know, we don't watch out, we're really in the midst of an escalating spiral with a tit-for-tat, and then there is no end to how much harm each party or each side could do to the other side.
05:10And now, Supriya, I remind you, there are no winners in trade wars.
05:14Trade wars only, no losers.
05:16We're in real uncharted territory here.
05:18Kastan Abreski, we're going to have to leave you there.
05:20Thank you so much for joining us on the program today.
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