MNI: US Tariffs To Cut EZ Value-Added By 0.5%-Austrian Cenbank

Tariffs which the U.S. is threatening to impose on several European states as it pushes to take control of Greenland would cut eurozone value added by 0.5%, according to Austrian National Bank calculations provided to MNI on Tuesday.

Simulations run using the OeNB’s Global Input-Output Model found that the impact on value-added for the euro area (EA-20) and the EU would amount to around –0.1% in the short run and –0.5% in the long run, assuming the U.S. goes ahead with threats to impose a 10% levy from Feb 1 and an additional 15% from June 1, the OeNB said.

Value-added calculations are seen by economists as a good proxy of national output.

Value-added losses for Austria through production linkages would run to -0.02% in the short run under a 10% tariff, and -0.06% under the full 25% tariff, the study found, with metal production, chemicals and mining the worst affected sectors.

Austria’s value added could be reduced by 0.15% over the long run were the U.S. to impose 25% tariffs on Denmark, Finland, France, Germany, the Netherlands, Norway, Sweden and the United Kingdom. (See MNI SOURCES: ECB Sees Slightly Disinflationary Tariff Hit)

The OeNB simulation assumes constant (2019) input–output relationships and does not account for changes in the behaviour of economic agents, such as general equilibrium effects, trade diversion, retaliation and uncertainty.