Merz warns of looming financial crisis due to Trump tariffs
Future German Chancellor Friedrich Merz stated that Donald Trump's actions could significantly accelerate the onset of a global financial crisis. He emphasized that he would prefer Europe and the USA to reach an agreement on zero tariffs in their trade exchanges.
The future German Chancellor Friedrich Merz gave an interview to the German daily "Handelsblatt." "I hope for a new transatlantic free trade agreement. Zero percent tariffs on everything. That would be better for both sides," said Merz.
Merz warns of a crisis
The future chancellor also evaluated what might happen if Trump maintains his tariff plan for the EU. "Europe would have to focus on non-American markets if the USA decides to withdraw completely from global trade," he pointed out.
Merz also warned about the consequences of a trade war.
"President Trump's policy increases the risk that the next financial crisis will hit sooner than we expect. As Europeans, we must come up with a convincing answer," said the German politician, who will officially take office as Chancellor of Germany in May.
Zero for zero: The EU's proposal for the USA
Merz expressed support for the European Commission's "zero for zero" project, which proposes zero duty rates on certain goods, including cars. However, Donald Trump assessed that this is not sufficient and called on the EU to support the USA by purchasing energy. Elon Musk also previously expressed hope for zero tariffs with Europe.
It's worth recalling that US President Donald Trump signed an order imposing "reciprocal tariffs" of at least 10 percent on imported goods from abroad. For goods from the EU, they will amount to 20 percent.
The trade war sparked a strong market reaction
Donald Trump, however, suspended the tariffs for 90 days, excluding China. On Saturday, at 3:00 PM Eastern Time, the USA announced a list of exceptions that tariffs will not cover - including electronics, such as smartphones. Tensions between China and the States are escalating. The whole situation caused panic in the markets, which in reaction to the trade war were awash in red. They caught a moment of breath after the suspension of tariffs, but then returned to declines.
Simultaneously, turmoil also appeared in the US bond market. Bond yields rose significantly, which means higher debt servicing costs for the States. As mentioned in Money.pl, this is a sensitive point for America. "This is a kind of soft underbelly. A sell-off might hurt the USA," assessed Marek Rogalski from BOS bank brokerage. Experts believe that it was the problem with bonds that prompted Donald Trump to suspend the tariffs.
