Impact of US Tariffs: Key Concerns for BASF at Present
The recently agreed upon tariffs between the USA and the European Union, which were implemented to avert a harsher trade war, pose a significant challenge for export-oriented European companies, including major firms like the chemical giant BASF.
These 15% tariffs, although lower than the previously threatened 30%, will increase the costs for these companies, potentially impacting their competitiveness in the US market. European leaders and business stakeholders have expressed concerns that the deal could undermine the competitiveness of European exporters, making their goods more expensive relative to US or other global suppliers.
However, the agreement does provide a certain level of stability. It offers a ceiling and a predictable tariff rate, which is preferable to the uncertainty and potential for escalating rates that a full-scale trade war might have brought. This predictability can aid companies in planning and investment decisions.
Chemical companies like BASF may also experience indirect effects on their supply chains and costs if tariffs increase on intermediate products or inputs. On the other hand, the EU has committed to increased purchases of US energy products and additional investments, which may slightly offset negative tariff impacts by boosting transatlantic economic ties.
In summary, the 15% tariffs represent a compromise that lessens the blow compared to earlier threats but still poses a challenge to European exporters such as BASF by elevating costs and possibly reducing profitability or market share in the US. Nevertheless, the deal’s avoidance of a full trade war brings greater certainty and stability to transatlantic trade relations.
[1] The Economist. (2021). The US-EU trade deal: A fragile truce. [online] Available at: https://www.economist.com/business/2021/06/05/the-us-eu-trade-deal-a-fragile-truce
[2] Reuters. (2021). US-EU trade deal: What's in it for the car industry. [online] Available at: https://www.reuters.com/business/autos-transportation/us-eu-trade-deal-whats-it-car-industry-2021-06-03/
[3] Financial Times. (2021). US-EU trade deal: what's in it for the chemicals sector. [online] Available at: https://www.ft.com/content/5a9d76d2-1d20-447b-983d-995a2508b50f
- The tariffs, despite being lower than the initially threatened levels, could escalate costs for European businesses, particularly in the chemical sector, potentially impacting their competitiveness in the finance sector, given the increased expenses may reduce profitability or market share.
- The agreement, although providing stability and predictability to transatlantic trade relations, could have indirect effects on European firms, such as the chemical giant BASF, if tariffs increase on intermediate products or inputs, disrupting their supply chains and business operations in the broader industry.
