New import tariffs announced by US President Donald J. Trump will have major implications for the Belgian economy and the people of Belgium. Belgian companies exporting to the US will be affected immediately. Uncertain times are also ahead for the Belgian economy in general, but also for everyday consumers.
After import tariffs on steel and aluminium and cars, the US will now impose a general 20 per cent tax on all European Union products starting next week.
This is bad news first and foremost for European companies exporting to America. The US is Belgium’s 4th largest trading partner. The tax makes Belgian products more expensive for Americans and US companies. So exports, important for an open economy like that of Belgium, will fall.
In total, Flemish companies export about 26 billion euros to the US. For sectors such as chemicals, pharmaceuticals, mechanical engineering and transport equipment, the US is an important market.
‘This is a sledgehammer blow. On that 26 billion euros a 20 per cent levy, that's 5.5 billion euros, will now be charged. This is really going to damage the Flemish and Belgian economies,’ says Hans Maertens of Flemish employers’ organisation Voka.
Economic damage could reach 12 billion euros
Import taxes disrupt the global economic chain. Belgian companies that supply companies in neighbouring countries that in turn export to the US will also feel the consequences.
In general, the trade war creates great economic uncertainty. Many companies, even if they do not export, will also be affected. At the moment, it is difficult to estimate what the exact impact will be. It will depend in large part on any negotiations between the US and EU on tariffs and counter tariffs that Europe will impose.
Voka estimates that the total economic damage for Belgium could amount to 2 per cent of gross domestic product. That translates as €12 billion euros. ‘We really do not rule out ending up in a recession,’ Mr Maertens noted.
Higher prices for consumers too?
An economic crisis would obviously affect consumers as well. For now, US consumers in particular will feel the tariffs. Companies that import are expected to pass on the taxes, so prices in the US will rise.
But this could also be the case in Europe over time. If the EU comes up with new counter-tariffs on US products in response, these will become more expensive for us.
‘This decision will hurt consumers in 2 different ways: there will be less choice in supply, and prices will also rise. Companies cannot absorb the extra cost entirely, as they will lose their profit margin. So they will have to pass that on to keep their heads above water,’ explains De Tijd journalist Ellen Vermorgen.
Analysts predict that the dynamics now emerging will generally lead to lower growth and higher inflation. Prices will therefore rise.
Ms Vermorgen also fears a recession. ‘People are especially worried about an economic slowdown in growth. The kind of barriers to global trade that you already see today, those are recession signals. The economy can't absorb that, which means you go to growth cuts and job losses. We are all going to feel this'.