Trump’s trade war and the case of washing machines

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Donald Trump’s announcement on April 2nd has communicated the new tariffs that the United States will impose on imports. This has clearly had the effect of an earthquake on the economic and political world. In particular, the 20% tariff on the European Union drew a sharp rebuke from European Commission President Ursula von der Leyen. The EU leader said it was a major blow to the world economy and the consequences will be dire for millions of people.

The White House’s calculation methods, according to which the EU would impose tariffs of 39% on average on the U.S., have been contested. Ursula von der Leyen said the EU was ready to negotiate with the U.S. but was also prepared to respond. Now it is preparing for further countermeasures to protect its interests.

The impact of the tariffs is expected to be heavy, affecting companies and consumers. German Chancellor Olaf Scholz explicitly called wrong the decision of President Trump and said that the U.S. has chosen a path at whose end lie only losers.

The emblematic case of washing machines during the 2018 tariffs

The 2025 trade war will also involve the household appliance industry and what happened in 2018 could happen again. Even then, President Trump had imposed tariffs on certain goods with the aim of protecting the U.S. economy.

As reported in the article “The Production Relocation and Price Effects of US Trade Policy: The Case of Washing Machines” by Aaron Flaaen, Ali Hortaçsu, and Felix Tintelnot, published in the American Economic Review  (2020): «With the 2018 tariffs, on nearly all source countries, the price of washers increased nearly 12 percent. Interestingly, the price of dryers—not subject to tariffs—increased by an equivalent amount». Why also dryers? Because these products are generally sold together with washing machines and retailers price them more or less the same. There is also another element to consider: the American producers, despite the benefits deriving from the tariffs imposed, had to deal with the tariffs on steel and aluminum and the related increases in production costs. The decision to impose tariffs, therefore, risks having several negative implications once again.

Trump's trade war and the case of washing machines

Italy is more exposed on finished products

According to Ispi (Italian Institute for International Political Studies), from the point of view of the exposure towards the United States, Italy and the EU are very similar. The exports to the USA represent about 3% of GDP for both.

For both Italy and the EU, the main sectors are machinery, chemical products and finished products, which together account for 77% and 82% respectively of exports to the United States. But there is one difference that is important to emphasize. If the weight of the machinery sector is more or less the same, the EU is more exposed on the chemical sector (32% vs 20%) while Italy is more exposed on finished products (19% vs 11%).

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