The World Trade Organisation (WTO) has ruled that the US can impose tariffs onto EU goods, what will this mean for shares?
What Has Happened Between The US And EU?
At first glance it may seem like this could be the actions of President Trump trying to divert attention away from the impeachment news and a pointless attack on the US’ allies.
However, the US and EU have been in dispute for over a decade about the level of subsidies provided to key industries of aircraft and agriculture.
Support for Airbus and Boeing by the EU and US is why both of them feel that it’s an unfair playing field.
The United States has decided to implement a 10% tariff on aircraft and a 25% tariff on agricultural and other items. A lot of the items that will have tariffs implemented come from France, Germany, Spain and the UK. The US tariffs will be put on goods worth around US$7.5 billion.
But it’s not going to be a one-way street. The WTO is currently deciding what tariffs the EU can impose on the US in response, with the European Commission wanting to put tariffs on US$20 billion of US goods.
The European Commission said, “if the US decides to impose WTO authorised countermeasures, it will be pushing the EU into a situation where we will have no other option than do the same”.
What Now?
Whilst this trade war doesn’t directly relate to the US – China trade war, it could certainly raise fears among investors and economists that it could be another step towards a global economic downturn if countries are less willing to trade with each other. I wouldn’t be surprised to see European shares fall over the next couple of days.
All of these tariffs could lead to price increases. Perhaps that’s how inflation will be kick-started again?
In any event, businesses like BHP Group Ltd (ASX: BHP) and Brambles Limited (ASX: BXB) which are exposed to global trade could see a reduction in demand for their products. That’s why I’m focusing my investment efforts on quality domestic businesses like the ones outlined in the free report below.
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