Today, the Chancellor of Germany raised the ghost of the financial crisis as she released a warning that the potential fallout from a trade war could have dreadful consequences.
While addressing the lower house of parliament, Merkel said that the tariffs that will be imposed by the United States on European cars would likely be “much more serious” as compared to the recent levies on steel and aluminium and the leaders of the continent must work together in order to coordinate a response to the threats of Donald Trump.
She stated: “The international financial crisis, which ensured that we now act in the framework of the G20, would never have been resolved so quickly, despite the pain, if we hadn’t cooperated in a multilateral fashion in the spirit of comradeship.”
She continued: “This has to happen.”
Donald Trump, the President of the United States of America, has threatened to impose a tariff of 20% on all European cars that will be coming to the United States if the EU does not remove its own trade barriers.
Last Sunday, Trump even went so far as to say that Europe is “possibly as bad as China” when it comes to trade. As tensions heighten between Beijing and Washington, the first round of new Sino-US tariffs will start to be implemented this coming Friday by both countries on products that are worth $34 billion (£25.9 billion).
Additional rounds are then anticipated as Trump has threatened to impose punitive taxes on a massive $450 billion of exports coming from China. China pledged to retaliate against these threats.
Earlier this week, the European Commission warned that they could retaliate against as much as $300 billion of exports from the United States if the Trump administration chooses to penalise the auto industry of Europe.
Last May, the US government started a probe into the auto imports to decide whether they are affecting the national security.
The European Union has said that the investigation that was conducted by the United States “lacks legitimacy, factual basis and violates international trade rules.”
In an evaluation of the heightening tariff spat between the economic superpowers of the world, the World Trade Organisation said that the global economic growth was “in jeopardy” and appealed for a “de-escalation.”
In its report that was published today, the WTO stated: “The worrying trend is the increase in trade restrictive measures which has come at a time of increasing trade tensions and associated rhetoric.”
As a comment on the report, Director-General Roberto Azevêdo stated that the rising tensions and restrictive trade measures “should be of real concern to the international community.”
Oxford Economics, a think tank, has stated that once the trade war escalates, global growth could be reduced by 0.4 percent, wiping away hundreds of billions of pounds off the value of the world economy.
It stated: “We estimate tariffs have been imposed on $60bn of products, 0.3% of world trade so far, but this would rise to over $800bn of trade.”
In today’s address of Merkel, she said that the United States should work with its partners to look for a multilateral solution that would address its trade complaints.
She added: ”Germany will do everything to prevent the situation from escalating.”