Europe Sees Trade Tensions With U.S. Eating Into Economic Growth COLLAPSE The ec

Question

Europe Sees Trade Tensions With U.S. Eating Into Economic Growth

COLLAPSE

The economic growth in Europe is expected to halt as a cause of external forces. These external forces include recent trade conflicts with the U.S. and internal political issues with the EU. GDP growth predictions have been reduced from 2.3% to 2.1%, with another fall to 2.0% next year.

The trade conflicts with the U.S related to the steel and aluminum tariffs imposed last month. Retaliation came out of Brussels on American products. Other causes that hinder economic growth include rising energy prices and uncertainty in policy.

There may be increased trade tension between the U.S and Europe as President Trump speaking of imposing a 20% tax on European cars and investigating if there are national security risks to auto imports. Mr. Trump is also imposing additional tariffs on Chinese imports.

Link to article: https://www.wsj.com/articles/europe-sees-trade-tensions-with-u-s-eating-into-economic-growth-1531388833

Questions:

1) How do foreign trade tensions result in halted growth for a country?

2) How can Europe alter their trade policies and partners to increase economic growth in case things get worse with the U.S.?

Explanation / Answer

There are few determinants of Economics growth. These are innovation, R&D, foreign trade. Foreign trade is now considered as one of the important determinants in econic growth. Strategic trade policies are commonly used these days to increase their share in global trade. Strategic trade policies envisages using trade barriers to improve there share in world trade. These trade barriers are tariffs, quotas, subsidy etc. Nowadays countries are confronting each other by involving in tariff war. They are involved in various confrontation sometimes in form of quality standards, environmental damage etc. Increased confrontation reduces the domestic production, reducing employment , income etc.

2) Europe and it's partner can come to decision where there can prevent tariff war with US by involving in negotiations . Trade negotiations in international in international forums, multilateral trading pacts can be a solution to the problem. European countries can move WTO 's dispute settlement form against tariff imposed by US . In WTO dispute resolution is through negotiations and hearing both parties petition .

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