'Indirect effects': US tariffs could see Belgian household income drop

Politics
0
887

brussels times

By Lauren Walker

Households in Belgium may feel far removed from Donald Trump's presidency. However, his additional tariffs on the European Union (EU) will place the burden of these measures on consumers, a leading economist warned.

Imposing sweeping tariffs – a tax on goods that the US imports from other countries – has long been a staple of US President Trump’s economic agenda. Since starting his second term, he already targeted China, Canada and Mexico (the latter two paused tariffs with last-minute deals), and he is now threatening to put additional tariffs on EU imports.

Trump announced his intention to impose a general 25% additional tariffs on US imports of steel and aluminium from across the world, including the EU. "But in addition, probably on Tuesday, Trump will decide on specific additional tariffs on US imports from the EU, which is expected to be applied on a large set of products," Eric Dor, Director of Economic Studies at the IESEG School of Management, told The Brussels Times.

It remains largely unclear what shape these additional tariffs would take. Initially, Trump spoke of a certain percentage applying globally to all products. "But very recently, he has hinted at reciprocal tariffs." This could mean raising US tariffs on imports from countries that charge higher tariffs on American goods.

While talk of such tit-for-tat levies may seem alien to many people in Belgium, households should be concerned. Companies pass along higher production costs to consumers, meaning individuals will be paying the price.

Threatened sectors

Additional tariffs decided by the United States would threaten about €529 billion in EU exports to the US per year and about €33 billion per year for exports from Belgium.

The importance of the US as a client varies among EU members. For example, exports of goods to the US accounted for just 1.28% of Slovenia's total exports in 2023, while this figure was as high as 26.61% in Ireland. In Belgium, 6.34% of its exported goods were bought by the US.

Credit: IESEG/ Eric Dor

Belgium's main exported goods are pharmaceutical products (54,38%); machinery, mechanical appliances and related products such as air pumps, fans, turbojets and harvesting machinery (7,72%); road vehicles and their accessories (5,27%) and organic chemicals (4,26%).

"These are the sectors for which the sales would be strongly threatened by the direct impact of additional tariffs," Dor explained. The pharmaceutical sector, in particular, is expected to be badly hit, as 25% of all exports of pharmaceutical products by Belgium are sold to the US.

Impacting EU exports

However, this is only the direct impact. There is also an indirect effect on European countries who trade with each other. Many EU countries' exports are strongly exposed to the US, meaning they would be heavily impacted by an increase in US tariffs.

This will result in a sharp drop in the countries' income, resulting in them importing less from other EU Member States. Belgium, for example, is a key exporter to other EU countries, including France, the Netherlands and Germany. However, they will likely import less from Belgium due to the losses of production and income incurred if their exports to the US decrease as a result of the tariffs.

The exports of Belgium to these other EU countries will then decrease. Added to this is the impact of decreasing Belgian exports to the US. "These effects would be very impactful for Belgium," Dor said. "If exports decrease, the resulting loss of income will trigger a decrease in household income and consumption. As a result, the overall loss of GDP of Belgium will be higher than the initial decrease in exports."

The EU could react with retaliatory measures by increasing its tariffs on its US imports. Belgium ranked second in the bloc when it comes to the share of imported goods from the US (6.06% of its GDP). "This can be explained by the fact Belgium has a big harbour near the Atlantic." Belgium mainly imports chemicals, including pharmaceutical products, from the US.

How ‘Our Moon’ shaped life on Earth and human history

A daily fish oil supplement slashed serious heart risks in dialysis patients

Leaders of five African countries head to Washington to meet Trump

Putin cancels plan to storm last Ukraine holdout in Mariupol

express opinion

Users of Guests are not allowed to comment this publication.

'Indirect effects': US tariffs could see Belgian household income drop

Impacting EU exports

KpNews is impartial news about everything happening in the world. We, like the Nemo Point, are equally distant from any attempt to present information in one light or another.