U.S. President Donald Trump has proposed new tariffs as part of his economic strategy, a move that could have significant global repercussions, including for Romania. Tariffs—taxes imposed on imported goods—are used to protect domestic industries, raise government revenue, or retaliate against trade policies.
However, they can also lead to retaliatory measures from affected countries, escalating into trade wars that harm all parties involved, from supply chains to individual consumers who will be asked to pay higher prices, writes eToro analyst for Romania, Bogdan Maioreanu.
. And history shows that these often lead to higher costs for businesses and consumers, but also a reduction in local and global GDP, loss of jobs and inflation.
Trump announced that 25% tariffs with Canada and Mexico will come into force tomorrow (Tuesday). He also threatened Europe with similar tariffs but the timetable for these is unknown yet. Tariffs can slow global trade volumes, leading to slower economic growth and higher inflation. The inflationary pressure may prompt central banks to raise interest rates, increasing borrowing costs and potentially dampening consumer spending and business investments. These measures can disrupt trade flows, affect investor sentiment, and lead to volatility in global equity markets. Companies included in the stock indexes FTSE Canada and FTSE UK have the highest exposure to US revenues, at 32.8% and 27.7%, respectively. Germany, France, and Mexico also have substantial revenue dependencies, reflecting strong trade linkages with the US.
Countries with high export dependence and significant U.S. revenue exposure, such as Germany, the UK, Canada, and France, are particularly vulnerable to the disruptions that tariffs might induce. Germany’s exports to GDP ratio is at an average of over 42% in the past 10 years. France is at over 32%, Italy at over 30%. Over 10% of German, 8% of French and 11% of Italian exports are going to the US. Trump tariffs will significantly impact the three largest economies of the EU.
Romania, being part of the European Union, could face indirect impacts from U.S. tariffs. While Romania’s trade with the U.S. is relatively small, only 3.6% of total exports, compared to other EU countries, we also export components that are included in other EU countries’ exports, such as German cars. In addition, any global economic downturn could affect Romanian exports and economic growth. In 2023 Romania’s exports to the US were 3.8 billion dollars. The largest categories of products exported were electrical machinery and electronics (27.5% of total exports), mechanical machinery and parts (16.6%), rubber articles including tires (8.1% of total exports), steel and Iron including products (13.8%) and car, tractor and trucks parts (5.6%). All these sectors might be affected.
On the other hand, if the EU imposes retaliatory tariffs, some Romanian industries might benefit from increased demand for EU goods within the bloc, but this would depend on the specific sectors affected and the overall economic conditions. Romania’s exports to GDP ratio was 39.2% in 2023.
Tariffs are levied on the value of imported goods at the point of entry into a country. They are typically paid by the importer, who then passes the cost on to consumers through higher prices. This can lead to increased costs for businesses and consumers, potentially reducing demand and affecting economic growth. Also, high tariffs might reduce the range of products in the market, causing supply chain constraints and inefficiencies that eventually lead to loss of jobs. Economists are trying to understand how the reality of tariffs will collide with Trump’s declarations that these will take US inflation down. S&P Global considers that if the tariffs to Canada, Mexico and China stay in place through 2025, U.S. consumer prices could see a one-time rise of between 0.5% and 0.7%. In addition, the inflation rate itself could approach 3% by the fourth quarter of 2025.
The Tax Foundation estimates that before accounting for any foreign retaliation, the tariffs on Canada, Mexico, China, and motor vehicles would each reduce US economic output by 0.1 %; the tariffs on the European Union would reduce US economic output by 0.2%, and the expansion of the steel and aluminum tariffs would reduce US economic output by less than 0.05%. Also, there are estimates that these tariffs might bring job losses of 269,000 for Canada/Mexico tariffs, 73,000 for China tariffs, and 81,000 for motor vehicle tariffs. However, some analysts see the impact to be much higher with around 700.000 job losses in the whole US automotive industry.
