Social disarray in the trade dispute

European Trade Union Confederation calls for protection of jobs and purchasing power

»The EU must develop a strong, coordinated industrial policy and protect jobs and production in Europe«, demanded Esther Lynch, General Secretary of the European Trade Union Confederation (ETUC), on Monday. The reason for this is the escalation in the trade conflict with the US: President Donald Trump announced additional tariffs of 30 percent on EU imports over the weekend. »Without targeted support, there is a risk of job losses, plant closures and a weakening of European industry«, warned Lynch.

According to an analysis by the trade union research institute ETUI, tariffs of 20 per cent already threaten at least 700,000 workers in the EU. At 30 per cent, the consequences would be even more serious. The ETUC is calling on the EU to treat the trade conflict as an emergency.

The US government is at present imposing a flat 10 per cent surcharge on all EU goods and sectoral tariffs of 25 per cent on steel, aluminium, and cars. The US tariffs would hit the export-oriented automotive and pharmaceutical industries particularly hard.

Simulations by the Ifo economic research institute show that German industry could shrink by 2.8 per cent as a result of the tariff policy. German exports to the US would decline by 38.5 per cent accordingly. »However, positive effects from trade diversion to other markets could partially cushion the losses«, said Andreas Baur, an Ifo trade expert, before Trump's announcement at the weekend.

The calculations were based on the assumption that Trump will introduce the country-specific tariffs announced on 2 April and levy the proposed 50 per cent surcharges on EU imports. In addition, product-specific import surcharges of 25 per cent are assumed for pharmaceutical and electronic products as well as steel, aluminium, cars, and car parts. The tariff dispute is increasingly causing uncertainty among companies. The negative macroeconomic effects are likely to take effect after the tariffs are introduced.

Trade union calls for immediate measures

Against this backdrop, ETUC is calling for a comprehensive package of measures. These include public investment, targeted aid for affected sectors such as the automotive and steel industries, and instruments to drive forward the green and digital transformation.

To avoid job losses, the union is calling for a new edition of the »Sure« programme. This programme financed short-time working in member states during the coronavirus pandemic through EU loans. This enabled companies to cut back on production without laying off staff.

ETUC is also calling for the EU fiscal rules to be suspended. These limit government debt to 60 per cent of gross domestic product (GDP) and new debt to three per cent of GDP. Many EU countries, including Belgium, Greece, France and Italy, have been well above these levels since the pandemic. »The rules must be suspended so that member states can protect their industry and production capacities«, the trade union statement said. This would require the approval of the Council of the European Union, i.e. the member states.

In addition, the trade union federation is calling for a permanent investment mechanism with social conditions to close the gap in public investment. The requirements include stronger co-determination rights for trade unions and the promotion of collective bargaining. This would strengthen domestic demand and reduce European companies' dependence on exports.

Such a credit-financed investment mechanism is currently being discussed with a view to the EU's medium-term financial framework. However, public support measures are not yet linked to social conditions. A legislative initiative by the SPD to introduce such a rule in Germany is currently on hold.

ETUC sees the purchasing power of workers as threatened by rising prices for essential goods such as food. A coordinated pricing policy is needed to curb inflation. »European workers must not be the ones to suffer from global trade conflicts«, Lynch emphasised. However, the EU cannot set prices, as this is the exclusive domain of the member states. Such a pricing policy could at most be coordinated between EU countries.

More bargaining power needed

Regarding the recent escalation, ETUC supports further trade talks with the US to avert tariffs. At the same time, it calls on the EU to counter the aggressive US policy and propose a digital tax. This idea also has support among the Greens and the Left in the European Parliament.

However, Bernd Lange (SPD), chair of the EU Trade Committee, recently described such a tax as unrealistic. According to Lange, it is difficult to find a uniform definition of digital business models and to determine exactly which revenues or profits should be taxed. In addition, the debate on such a levy has been deadlocked for years, partly because countries such as Ireland and Luxembourg have so far opposed it.

Considering the new tariff threats from the US, EU Commission President Ursula von der Leyen is continuing to focus on negotiations. She had suspended planned counter-tariffs on US imports, which were to take effect on 14 July, after Trump postponed the deadline to 1 August.

In response to the US tariff announcement, the Council of the EU has agreed on a second list of goods that could be subject to countermeasures, as EU Trade Commissioner Maroš Šefčovič announced at a press conference on Monday. The list could include imports from the US worth 72 billion euros and will be presented to the Trump administration during the ongoing negotiations.