by Jan Strupczewski and Karol Badohal

Warsaw (Reuters) – The European Union finance ministers committed on Friday to maintain the unit of member states in the trade negotiations with the United States during the 90 -day respite offered by the suspension of American “reciprocal” customs duties.

Donald Trump announced on Wednesday that it immediately suspended “reciprocal” customs duties for 90 days that he had revealed only a week earlier against dozens of countries, up to 20% for EU members in addition to a floor rate of 10% which was however maintained.

“All finance ministers have agreed to the need for a unified position,” said Irishman Paschal Donohoe during a press conference after a meeting in Warsaw, the first between EU finance ministers since the announcement of the last American customs duties.

Valdis Dombrovskis, European Economy Commissioner, said that, according to EU executive estimates, the negative impact of American customs duties on the European economy should represent 0.2% of GDP by 2027 if these surcharges are temporary and are not the subject of reprisals.

If companies are starting to consider these customs rights as a permanent burden, or if retaliation measures were taken, the European economy could lose 0.5% to 0.6% of GDP by 2027, he added.

However, the impact would be more important for the United States, repeat European officials. The American economy would be reduced from 0.8% to 1.4% in the first scenario and from 3.1% to 3.3% in the second, according to these estimates.

“These modeled simulations do not take into account an additional loss of confidence of investors and businesses in the American economy, which would amplify the negative impact on GDP,” said Valdis Dombrovskis.

Improve the functioning of the single market

An increase in investment in Germany, which decided to reform its brake on debt and create a fund of 500 billion euros for infrastructure, could however provide support for the European economy, he said.

Officials from the European Central Bank (ECB) are more pessimistic and believe that US customs duties may have a negative impact of 0.5% to 1% on economic growth, depending on the outcome of negotiations.

The Commission for the moment providing for a growth of 0.9% this year for the whole EU, this means that American surcharge could plunge the European economy into recession.

“It is very difficult to put figures on all this at the moment but it is obvious that the global commercial difficulties will affect growth (…) in the euro zone,” said Paschal Donohoe, president of the Eurogroup, at Bloomberg TV.

EU finance ministers are as agreed as the commercial turbulence caused by Donald Trump reinforced the need for urgent initiatives to improve the operation of the European single market, with 450 million consumers.

This could go through an acceleration of the launch of a digital euro, the creation of a union for savings and the investment and diversification of trade relations in order to reduce EU’s dependence on the United States.

The International Monetary Fund estimates that internal barriers within the single market equivalent to 44% customs duties on goods exchanges and 110% on services.

“Use these 90 days intelligently”

The suspension of American customs duties intervened while the European Commission, responsible for commercial issues for the EU, had just barely announced a handful of hours before a response to other American surcharges on steel and aluminum. The European executive suspended this response in order to give negotiation a chance.

“We have to use these 90 days intelligently, we need a good agreement for European citizens and for European companies,” said Polish finance minister Andrzej Domanski.

The twenty-seven, however, endeavored not to reveal their desire for negotiation as a position of weakness.

“The American party must be aware that if negotiations fail, we will have another discussion on response mechanisms,” said German Minister Jörg Kukies.

Judging that the 90 -day break announced by Donald Trump “remains fragile”, the French president Emmanuel Macron summed up on X the state of mind of Europeans: “Our objective remains simple: to negotiate to have these unjust prices withdrawn and obtain a balanced agreement, without asymmetry”. But “Europe must continue to work on all the necessary countermeasures and mobilize all the levers available to protect itself,” he added.

Faced with the prospect of a failure of negotiations, each Member State also also endeavors to prepare support measures for its own most threatened industrial sectors in the event of a trade war with the United States, while US customs duties of 25% have already entered into force not only for steel and aluminum, but also the automobile.

The coordination of support for fragile industrial sectors, different from countries, will be crucial because certain governments have higher budgetary maneuver and can afford to support their companies more vigorously. These differences could distort competition within the European single market.

(With Benoit Van Overstraeten, Karol Badohal, Pawel Florkiewicz and Lewis Macdonald, Camille Raynaud and Bertrand Boucey, edited by Blandine Hénault)

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