Stimulating Industry Due to Trade War is ‘In’ Again

If there were one common thought among most of our interlocutors regarding the Interdepartmental Commission for Monitoring and Analyzing the Export Situation to the U.S., it would be the old (but proven countless times in practice) Churchillian: ‘If you do not want to solve a problem, establish a commission!’ However, in our case, there is also the question of whether we even have a problem, what exactly needs to be solved, and with what tools will sixteen minds solve it.

The Commission, namely, has sixteen members (it includes representatives from as many as seven ministries) and is led by the Minister of Economy Ante Šušnjar. But well, sixteen is smarter than two or ten, and considering that there are also representatives from HUP, HGK, Croatian Exporters, and HBOR in the Commission, just ten days after its establishment, the first meeting has already been held. Conclusion? ‘There are active mechanisms for preserving jobs if there were to be a relocation of production or loss of market due to new customs regimes, especially when it comes to smaller communities.’

Serious Consequences for the EU

At that first meeting, the most exposed industries were targeted: pharmaceuticals, defense, and IT, but that is where the list of directly affected ends. An interlocutor from business circles briefly (and anonymously) states that there will not be much work for the Commission because even Trump has retreated on tariffs towards all exporting countries and most goods, including medicines, our most important export product to the U.S.

– The pharmaceutical market is extremely regulated, so the introduction of tariffs would directly and immediately pass on to American consumers, which Trump cannot afford, which is why he has administratively cut prices. This has a much greater effect. On the other hand, most of these medicines cannot be replaced overnight with American ones. Building a factory takes years, not months, and the FDA does not allow medicines to enter the market in one day – our interlocutor tells us, who, when asked about the purpose of the Commission, responds that it will have more of an informational role because we cannot act on our own; all decisions are made in Brussels.

Although the head of HUP, Irena Weber, sits on the Commission, the chief economist of the Association, Hrvoje Stojić, states that the negative impact of the U.S.’s ‘retaliatory’ tariffs on our production is also reflected in the rising prices of raw materials whose production in the EU has decreased or we have almost none, so we import them from the U.S.

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Award presentation Hrvoje Mateljić 2024. Round Table 2: Hrvoje Stojić

photo Ratko Mavar

—– An example is the import of polyethylene, a raw material for the production of plastic packaging, which is increasingly produced in the U.S., Asia, Saudi Arabia, and Egypt due to significantly cheaper energy sources, so they can return it to the EU up to 30 percent cheaper. According to data from the U.S. Bureau of Economic Analysis, the total annual import of goods into the U.S. from the EU in 2024 amounted to $609 billion, while the value of imports from China was $440 billion, which means that tariffs will significantly affect international trade exchanges. It is expected that the trade deficit with certain countries will be reduced, and global economic growth could slow down due to the disruption of international trade flows. The changes announced by Trump affect not only the bilateral relations of the U.S. with certain countries but also more broadly, on the economies of the European Union. The EU, as a key trading partner of the U.S., could feel serious consequences from such tariff measures. The EU’s share in the U.S. trade deficit is about twenty percent, which is why it is one of the main targets of these protectionist measures. We expect that the increase in tariffs, if ultimately maintained, will lead to a reorganization of production chains on the continent, and a potential decline in bilateral trade with the U.S. could have long-term consequences for industrial sectors that rely on exports – Stojić states.

What will remain of tariffs, to whom, and what percentage, no one knows, probably not even Trump, but it is clear that the rhetoric and cowboy approach are slowly but surely calming down. However, perhaps more importantly for us – Trump has drawn attention to production, especially industrial, so the topic is carried both globally and locally. Read the full article in the new issue of Lider.