The threat to Europe – a shock sale

The threat to Europe: shock sale from China

Andreas Cervenka

Reporter and economic commentator

This is a commentary text. Analysis and positions are those of the writer.

Updated 18.38 | Published 14.56

Donald Trump's tariff war is turning the world economy upside down.
Now countries in Asia are expected to dump cheap goods in Europe, which will put pressure on industry. At the same time, China is introducing its own tariffs against the US.
The risk is that 2025 will be another lost year for the Swedish economy.

           

           Cervenka on the tariff war: "Of course there will be a bad atmosphere"

           1:17

Make America Wealthy Again was the headline when Donald Trump on Wednesday evening presented tariffs for all countries that want to do business with the US.

Conclusion: Americans became 30,000 billion kronor poorer when Wall Street prices traded down at the fastest pace since the pandemic.

Or as they say in Trumpian language: “it’s going very well”.

China has responded with its own tariffs against the US. Photo: Ken Ishii / AP

It would be possible to laugh at the amateurishness of Trump’s speech, such as the fact that the tariffs were calculated using a model so primitive that a middle school student would blush, or that islands inhabited only by penguins are now being punished with tariffs. We should probably be glad that the penguins don’t speak our language.

But it’s not particularly funny. The words yesterday were also harsh. The Financial Times editorial page calls the tariffs the worst self-harm behavior in modern economic history.

If the tariffs are introduced, the average level will be the highest since the early 1930s. It wasn't exactly a great time for the world economy, to put it mildly.

What happens now? First, general chaos as governments and companies try to calculate how the tariffs will hit them. The worries on the stock market are unlikely to disappear anytime soon.

Donald Trump seems to hope that countries will offer the US various things in exchange for not having to pay the penalties, but it remains to be seen what will come of it. Quite a few appreciate being invited to negotiations by someone brandishing a shotgun.

Donald Trump's tariffs are turning the world economy upside down. Photo: AP

In the short term, both companies and countries will reorganize their trade. Volvo Cars has already announced that production must be moved to the US, American companies are closing factories in Canada and Mexico. And so on.

China did not delay in its response. The country is introducing tariffs of 34 percent on all imports from the US. The announcement caused the stock market to plummet.

The trade war between the US and China is thus escalating. And could quickly have side effects.

The countries that have received the highest tariffs, such as China, Vietnam, Cambodia and Bangladesh, must now find alternative markets to find a market for their products. The tariffs that the US now wants to introduce – a total of 70 percent for China (with the new surcharge of 34 percent) and 46 percent for Vietnam – are so high that they are described as walls.

The FT reports that politicians in Brussels now expect an influx of cheap goods to Europe.

The business community there is already pressured by low-price competition from Asia when China, which has overcapacity in its industry, has begun to focus more on exports.

These are enormous volumes of goods that will find new buyers. China's exports to the US amounted to 440 billion dollars in 2024, around 4,400 billion kronor.

This could hit European companies in an already weak economic situation.

One measure being considered within the EU is to impose emergency tariffs on Asia to stem the tide.

Swedish Trade has long lamented the effects of the tsunami of imports from Chinese e-commerce giants such as Temu and Shein that has washed over Sweden.

“The Swedish recession that has been going on for over three years would finally give way in 2025 was the idea,” writes Andreas Cervenka. Photo: Viktoria Bank/TT

Donald Trump's declaration of economic war on the rest of the world could not have come at a more opportune time. The Swedish recession that has been going on for over three years would finally give way in 2025, the idea was. The fragile recovery was already in danger due to rising food prices.

There was some good news on Friday morning when Statistics Sweden's preliminary figures for March showed that the consumer price index CPI only increased by 0.5 percent at an annual rate and that the CPIF measure, which the Riksbank looks at most, fell from 2.9 percent in February to 2.3 percent.

Now there is a risk that it will come to a standstill.

Which households dare to start spending money when the stock market is crashing? Which company dares to invest when the whole world is rocking?

When the Riksbank recently lowered the interest rate to 2.25 percent, growth for Swedish GDP was predicted to be 1.9 percent in 2025 and that the interest rate will not be touched in the coming years.

On April 15, the government will present its spring budget amendment. Finance Minister Elisabeth Svantesson's latest guess was that the Swedish economy will grow by 2.1 percent this year.

Both of these forecasts already feel obsolete.

The question is how quickly the Riksbank and the government will wake up to the fact that since Donald Trump's "Liberation Day" we have been living in a completely new world.