Trade war is always dangerous and almost always ends with only losers, says Rikard Forslid, economics professor at Stockholm University and expert on international trade.
Swedish steel and engineering industry will likely be affected negatively. But depending on how potential tariffs against the EU are designed, Forslid is not extremely worried.
Ten percent is not a huge trade barrier, but it's clear that it will lead to losses, and when the EU responds, it will get even worse, he says.
How ordinary Swedes can be affected depends on how the EU responds. With general import tariffs, it will be like for American consumers.
The imported goods will become more expensive, and what we buy from the USA will become more expensive. It will likely affect consumers and lead to some inflationary tendencies in the entire economy – and make it harder for the Swedish Central Bank to lower interest rates, says Forslid.
"Serious misjudgment"
At the same time, the 25-percent tariffs that the USA is now considering imposing on Canada and Mexico can hit Sweden. For example, truck manufacturer Volvo has invested over seven billion kronor in a new factory in Mexico.
That investment will be misguided with such high tariffs. Swedish companies have seen North America as a unified market, but if Trump now suddenly divides North America into three zones, those who have invested in Mexico will be in trouble.
Rikard Forslid compares North America with the EU's internal market. With Trump's trade war, the system is being torn apart.
The EU's internal market allows for spreading out production, making certain components in Eastern Europe where it's cheaper. Exactly the same has been done in the USA. It's very harmful to American industry if they break up the value chains they have in North America.
I think it's a serious misjudgment by Trump.
Can negotiate
Robert Bergqvist, senior economist at SEB, says that the EU will try to negotiate with Trump to avoid a trade war.
Both Ursula von der Leyen, chair of the EU Commission, and European Central Bank chief Christine Lagarde are in favor of the EU trying to make an effort to establish more equal trade relations with the USA.
Bergqvist believes it can lead to increased imports of grain, energy, or natural gas from the USA.
Then Trump can actually go ahead and say to his voters that he has introduced some tariffs against certain sectors, certain goods against the EU, but above all, he can say, "Look what I've achieved: 'Now the EU wants to import more goods from the USA'."
