Strategy focus - The start of a trade war

U.S. Moves to Tariffs Act. While Trump had been clear during his campaign about his desire for a protectionist policy, he surprised by the speed, scale and extent of the tariff increases, both in terms of geography and goods covered. China, Canada and Mexico, as well as steel and aluminum have already been affected and there are strong threats of an extension to European goods from April.
 
A mapping of trade between the United States and Europe. The US trade deficit has deteriorated significantly since Covid. It is high in particular vis-à-vis China, the European Union, ASEAN, the developed economies of Asia and Mexico. It mainly concerns consumer goods, capital goods and automobiles. The United States, on the other hand, has a trade surplus in services. 
The euro area, as a whole, has a trade surplus. It appears to be in deficit only vis-à-vis China. France has a moderate deficit, mainly due to energy. France's exposure to US tariff increases is limited at the macro level but could weaken sectors such as aviation, pharmaceuticals and food.
 
Protectionism: if the objectives are multiple, effectiveness would remain limited.  The U.S. government has announced a number of reasons for its protectionist trade policy: to reindustrialize its economy, reduce its dependence on China, reduce the federal budget deficit, and rebalance some global imbalances. However, even a significant increase in tariffs is expected to have only a limited effect on its objectives.
 
A risk of more inflation and less growth. For the US economy, the increase in customs duties would result in more inflation and weaker-than-expected growth at the beginning of the year, playing a role equivalent to an increase in consumption taxes. For the rest of the world, Canada and Mexico would experience a significant shock to growth given the importance of trade with the United States to their economies. For the euro zone, these measures should also have a negative effect on activity, but much more limited given the lesser weight of US trade.

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