European nations and France specifically, poised to reap benefits from the intensifying trade war
In a shocking move, the US has announced a trade war, leaving many economists and businesses in a state of bewilderment. While some have put all decisions on hold, waiting for clearer skies, France is seizing this chaotic moment as an opportunity to shine.
First off, France's international trade strategy, characterized by foreign implantation rather than exports, insulates French companies to a certain extent from tariff hikes. The revenue generated by French firms operating in the US amounted to a whopping €341 billion in 2022, dwarfing the €45 billion worth of goods exported from France to the US in 2023.
A 10% increase in tariffs, much like previous cycles of dollar depreciation, may seem ominous but isn't as detrimental as one might think. This is because American internal prices are around 20-30% higher than in France, providing some wiggle room for French exporters to hike their prices to cope.
However, it's crucial to note that this wouldn't hold true for enormous increases of 30%, 50%, or even 200%. Yet, there are powerful checks and balances limiting President Trump's enthusiasm for escalating tariffs. The financial markets themselves serve as a potent reminder. On April 2, Wall Street plummeted by approximately 10% (a staggering $6,000 billion or €5,474 billion) and the ten-year Treasury bond market witnessed a 0.5-point increase in interest rates in less than a week, translating to a $1,750 billion boost in the US federal government's debt. Furthermore, American corporations' pressure led to the recent exclusion of tariffs on computers and smartphones from China.
This turbulent time finds France strategizing between immediate economic pain and long-term industrial resilience. With the US pushing for domestic reindustrialization, France is contemplating diversification and cultivating "economic patriotism" to minimize US investments. Additionally, France is exploring imposing targeted tariffs on non-critical imports to safeguard EU supply chains.
Meanwhile, the tariff decisions reveal the US's commitment to prioritizing domestic manufacturing, while France grapples with the immediate economic damage and ambitions for long-term industrial robustness. This rocky road ahead underscores the transatlantic trade tensions and economic priorities guiding President Trump's policies.
- The average revenue generated by French firms operating in the US in 2022 was a staggering €341 billion, far surpassing the €45 billion worth of goods exported from France to the US in 2023.
- The US trade war creates a challenging environment for businesses, causing some economists to put their decisions on hold, while France views this chaotic moment as an opportunity to strengthen its position through policy and legislation.
- In 2022, a 10% increase in tariffs may not be as detrimental as one might think for French exporters, thanks to American internal prices being around 20-30% higher than in France.
- The tariff decisions in the general news highlight the US's policy-and-legislation-driven commitment to prioritizing domestic manufacturing, which war-and-conflicts, such as trade wars, aim to alter.
- France, in response to the US trade war, is contemplating strategic moves such as diversification, economic patriotism, and imposing targeted tariffs on non-critical imports to safeguard EU supply chains and minimize US investments.
