Luxembourg’s economy in the trade war? | Luxembourg word

Donald Trump wants to prevent his import tariffs from acting like an April joke. Therefore, they should come into force on April 2 and not the day before. Six days before this date, the US President announced that it would prove all auto imports with an inch of 25 percent. What effects will these Trump-Zölle have on the Luxembourg economy? Ruben Dewitte, Economic Research Team of the ING and visiting professor at the University of Gent, provides answers.

In the Grand Duchy, no cars are produced that are exported to the USA. Nevertheless: « In 2023, Luxembourg exported worth 515 million euros to the USA, which corresponds to 15.8 percent of all exports to countries outside the EU, » says Ruben Dewitte. With another product group, steel and aluminum, the Grand Duchy is more affected. Since March 12, the USA has been raising tariffs at an altitude of 25 percent on steel and aluminum imports. « Around 40 percent of Luxembourg exports in the USA are made of steel and aluminum, » says the economist. In addition, Luxembourg also delivers steel to other countries that produce products from them that are then exported to the USA.

Nevertheless, Trump’s love for imported in imports will not put the Luxembourg economy under too much pressure. « Our analysis shows that the effects of the US import tariffs on the Luxembourg economy are below the EU. The direct effects are limited, but the tariffs can affect Luxembourg detours.

The Luxembourg-American trade in services is even more decisive than that of material goods, emphasizes Dewitte. « The risk increases when you consider that Luxembourg also provides services for other EU countries, whose products are then exported to the USA. » Ruben Dewitte explains this using an example: « German car manufacturers that export to the USA are dependent on financial services from Luxembourg. » If tariffs are levied, this part of the Luxembourg economy is also affected.

Taking this fact into account, the overall effect of the US tariffs on the Luxembourg GDP is around one percent, « which indicates that the effects of the US tariffs on the Luxembourg economy will be relatively low ». The most important EU export sectors to the United States are pharmaceutical and chemical products, cars and machines. Other EU countries are exposed to greater risk. The most economically exposed countries are Ireland, Germany and Italy.

Both sides lose in an customs war

Companies that export their products to the USA, he advises to carefully observe the development. For product groups that are not yet occupied with tariffs, the construction of inventory in the USA is an option – if only a short -term one. « It is best to prepare for the worst, but also to remember that the tariffs may not be permanent, » advises Dewitte.

In the EU there are counter -tariffs. Luxembourg mainly imports planes, helicopters and aircraft parts from the USA. Actually, from April 1st, against tariffs should be introduced to US products such as whiskey or motorcycles. But these were postponed to avoid a trade war. « From an economic point of view, it is in the interest of both sides to avoid an customs war, » says Dewitte. He sees the solution in negotiations. « In the past, trade agreements have targeted zero tariffs, zero commercial barriers and zero subsidies for non-automobile industrial goods. »