Trade Dispute Between the EU and the US: Potential Tariffs and Inevitable Price Increases

The new US tariffs on aluminium and steel are creating uncertainty in transatlantic trade. On March 31, 2025, the current tariff suspensions on several US products, including cranberries, cranberry juice, peanut butter, and kidney beans, are set to expire. It remains uncertain whether the EU will impose retaliatory tariffs, but such a response is highly likely.

European Commission President Ursula von der Leyen has condemned the US measures as "unlawful" and has promised decisive countermeasures. In the past, the EU responded to similar US tariffs by imposing duties on products like jeans, bourbon whiskey, and motorcycles. A similar strategy could now be implemented once again.

Market Impact: Price Increases Are Unavoidable

Regardless of how the situation unfolds, price increases appear inevitable:

1. Short-Term Price Surge Due to Preemptive Buying:
   • Market participants fearing increased import costs may stock up on goods before potential EU tariffs take effect.
   • This increased demand could drive prices up even before any tariffs are implemented.
2. Rising Prices Due to Tariffs:
   • If the EU enforces new tariffs, US imports will become more expensive from April 1, 2025.
   • These higher costs will likely be passed on to consumers.
3. Market Risk If Tariffs Are Not Imposed:
   • If tariffs are not implemented, the initial wave of stockpiling could lead to oversupply.
   • This would result in a market downturn as businesses try to offload excess inventory, causing prices to drop.

Recommendations for Traders:

• Act Quickly: Businesses looking to avoid potential tariff costs should consider importing US goods now.
• Weigh the Risk: Stockpiling now could lead to an oversupply crisis later, potentially pushing prices downward.
• Consider Alternative Suppliers: Diversifying sources may help mitigate dependency on US imports.

The situation remains volatile, leaving traders with a tough decision: buy now and accept short-term price increases, or wait and risk higher import tariffs. Either way, strong market fluctuations are expected.

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