FRANKFURT – President Trump's trade war would make Europeans feel so much pain they would ask for mercy on the negotiating table. But it doesn't work well, according to a new study from the European Central Bank.
Almost a year after the White House had imposed tariffs on European steel and aluminum, the actual damage to European exports has been surprisingly mild, according to study released on Wednesday.
Some industries, especially heavy equipment manufacturers, may even have profits. This is because the White House has imposed a wider range of tariffs on Chinese products, making competing European goods cheaper by comparison and allowing them to gain market share.
The central bank's study, which comes as Europe and the United States are preparing to start high-level trade negotiations, reinforces other research that shows that the tariffs on European goods themselves have not been much. They have probably harmed the US economy more than their intended goals.
One reason is that much of the steel that Europeans sell to the United States is specifically formulated for specific applications, such as aircraft parts or oil drilling equipment. US companies cannot find domestic suppliers who are able to offer the same products, which often contain patented combinations of minerals or other metals. So they simply stop paying the rates of 10 percent on aluminum and 25 percent on steel and transfer the extra cost to US consumers.
"There wasn't necessarily much production capacity in the US to pick up slack," said Oliver Rakau, chief German economist at Oxford Economics, who was not involved in the central bank study.
At the same time, the trade war has a significant psychological impact. Mr. Trump has raged European trust with the tariffs and his threats to extend taxes to include cars. Horrible for what may come next time, business people delay plans to expand their factories or hire new workers.
"Uncertainty related to protectionism weighs on financial sentiment," said the Central Bank study, adding that it was just one of the reasons for Europe's weak growth.
Many economists have said putting tariffs on cars would significantly increase bets and cause much more damage.
As part of their study, as stated in The European Central Bank's monthly bulletin, Ms. Gunnella and Ms. Quaglietti also calculated what would happen if the US introduced 10 percent tariffs on imports from all countries, and if all the countries affected by the tariffs were retaliated in nature.
The US economy would suffer the greatest damage in such a trade war because US products would be more expensive abroad, estimated central bankers. China will move forward.
In Europe, damage to business understanding in the hypothetical trade war will largely be canceled by increased exports to countries other than the United States. European companies will be able to take market share from their US rivals in China.
There are already signs that European manufacturers of factory machines, construction vehicles and other heavy equipment are exploiting Mr. Trump's trade war with China. Industrial machinery is Germany's second largest export category for cars, and also an important sector in countries such as the Netherlands and Italy.
In recent years, Chinese companies have become skilled at producing sophisticated machinery and challenging the dominance of European rivals. But white house prices on Chinese products have given the European companies at least a temporary price advantage.
Still, few business managers thrive on the turmoil. "Additional trade conflicts will not be in our interest," Trumpf, a German company known for machines using lasers to cut steel, said in an email message.
The United States and China are Trumpf's two largest foreign markets, and it has factories in both countries, listed the company.
"It's good for Trumpf when it goes well for China, the US and Europe," the company said.