RIGA - Both the United States and the European Union (EU) would feel the negative impact from the potential "tariff wars", EU Commissioner for Economy Valdis Dombrovskis told LETA after the World Economic Forum in Davos, Switzerland.
US President Donald Trump has promised to impose customs tariffs on EU goods, while a 10 percent customs duty on imports from China can be introduced already from February 1. The US president has also accused the EU of not importing enough US commodities and promised to "correct" that by imposing customs tariffs or urging to buy more oil and gas.
The EU commissioner underlined that the EU and the US are strategic partners and in the current complicated geopolitical situation, where authoritarian regimes challenge the existing rules-based international order, it is essential for like-mineded countries to work together. In Dombrovskis' view, the approach taken by the EU to relations with the new US administration is constructive and cooperation-oriented.
Dombrovskis noted that EU-US trade and investment volumes are the largest in the world compared to any other trading bloc among other countries. The EU commissioner added that the US and the EU together account for 42 percent of global gross domestic product.
"It is important not to create unnecessary economic problems and global economic fragmentation, which the International Monetary Fund has also pointed out. Global economic fragmentation into geopolitical blocs can reduce global GDP by 7 percent. It would be like removing the gross domestic product of Germany and France from the world economy," Dombrovskis said.
He believes that it is necessary to work to avoid the possible "tariff wars", and this is the EU's position in talks with the US president's administration. Dombrovskis noted that Trumps has ordered the relevant US authorities to carry out an analysis of tariffs and trade balances. They have been given 60 days to prepare the reports, so there is some extra time for negotiations with the US administration.
The EU commissioner warned that if the worst-case scenario were to materialize, the negative impact would be felt not just in the US and the EU. He argued that when economic problems emerge between the two largest economic blocs, this has negative repercussions all over the world, as Trump, for example, is also talking about introducing a 10 percent customs duty on Chinese imports. Dombrovskis stressed that this is why it is important to look for a constructive solution.
"If economic fragmentation happens, it will also have a negative impact on Latvia. This must be taken into account. Even though Latvia's export volumes to the US are not that high, there could be an indirect impact. The EU has many points of contact and cooperation with the US. Hopefully, we can avoid the most negative scenarios," Dombrovskis said.
The EU commissioner pointed out that the World Economic Forum was greatly influenced by the inauguration of the new US president, as well as by Trump's many statements, which are currently being evaluated. He stressed that Ukraine remains an important issue as Russia's aggression against Ukraine continues and so does the international community's response to it, both through sanctions against Russia and support to Ukraine. Dombrovskis concluded by saying that all these issues, including the uncertainties and risks currently prevailing in the world, were on the Davos Forum's agenda.
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