Von der Leyen Cautions Trump Against Trade War Impacting Global Economy

At the World Economic Forum in Davos, Ursula von der Leyen, the President of the European Commission, expressed concerns regarding a potential trade war with the United States under the new presidency of Donald Trump. She underscored the intricate economic ties between Europe and the U.S., emphasizing that both sides have much at stake.

Von der Leyen highlighted that the trade volume between the EU and the U.S. amounts to approximately EUR1.5 trillion, which constitutes about 30% of global trade. She noted that European companies employ 3.5 million Americans, and an additional million jobs in the U.S. are directly linked to trade with Europe.

She illustrated the interdependencies of the two economies by pointing out that American aircraft are constructed using European components such as control systems and carbon fibers, while U.S.-made pharmaceuticals rely on European chemicals and laboratory tools. Furthermore, Europe imports twice as many digital services from the U.S. compared to the entire Asia-Pacific region, and U.S. suppliers account for over half of the EU's liquefied natural gas imports.

"Both sides have a lot at stake," von der Leyen stated, emphasizing the necessity for early communication to explore shared interests and engage in negotiations. A potential area for dialogue could be the expansion of U.S. liquefied natural gas exports, which she mentioned in a previous address last November.

While von der Leyen refrained from directly naming Trump in her speech, she acknowledged the Republican's campaign promise to impose tariffs on imports, which could range from 10% to 20%, with an even higher rate of 60% for Chinese goods. This approach is aimed at bolstering domestic manufacturing and reducing the trade deficit. The disparity in trade, where European firms have a higher export volume to the U.S. than vice versa, remains a point of contention for Trump.

Should the U.S. implement new tariffs on European goods, the EU is likely to respond with reciprocal tariffs on American imports, escalating the potential for economic conflict. Both leaders must navigate these complex trade relationships carefully to avoid detrimental impacts on their respective economies.