Isabel Schnabel, a member of the board of the European Central Bank (ECB), said on Wednesday that trade fragmentation is structurally harmful to economic growth and inflation, for Reuters.
Commenting on the tariffs during an interview on Newstalk Radio in Ireland earlier on the same day: “It will be negative around the world, and the density and durability of influence will vary depending on the scope, from products targeted on how long it takes, whether there are negotiations,” said EBC President Christine Lagarde.
“At the moment, investing in the USA is much less exciting, stopping and holding until there is much certainty,” added Lagarde.
FAQ tariff
Tariffs are customs duties taken for some imports of goods or product category. The tariffs are designed to support local producers to be more competitive on the market, providing price advantage compared to similar goods that can be imported. The tariffs are widely used as tools of protectionism, along with trade barriers and import amounts.
Although both tariffs and taxes generate government income to finance public goods and services, they have several distinctions. The tariffs are paid at the entrance port and the taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and companies, and the tariffs are paid by importers.
There are two schools of thinking among economists regarding the exploit of tariffs. While some say that tariffs are necessary to protect national industries and solve the problem of commercial imbalance, others perceive them as a harmful tool that can potentially augment prices in the long-term perspective and lead to a harmful trade war by encouraging Tit-For Tatt tariffs.
During the fall to the presidential election in November 2024, Donald Trump explained that he was going to exploit the tariffs to support the US and American producers. In 2024, Mexico, China and Canada constituted 42% of total US imports. According to the American office of the population, Mexico was distinguished as the best exporter by $ 466.6 billion. That is why Trump wants to focus on these three nations by applying tariffs. It also plans to exploit revenues generated by tariffs to reduce personal income taxes.
