New Front in Trade War Is Bad for Europe But Good for Gold

New Front in Trade War Is Bad for Europe But Good for Gold

With the World Trade Organization ruling that the European Union unfairly subsidized Airbus, a new front will soon be opening in the worldwide trade war. The United States will now be able to retaliate against the EU by placing tariffs on EU goods. But that isn’t a victory for US consumers, who now will face higher prices on many goods imported from Europe.

While the initial tariffs are expected to fall on Airbus parts, imported wines and liquors, and other luxury items, it’s widely anticipated that the US will engage in “carousel” tariffs, switching tariffs around from item to item over a period of months so that European firms won’t know from one month to the next whether their products will be subject to tariffs.

Of course, that will also wreak havoc on US importers and consumers, who no longer will know from month to month whether their favorite cheese, sausage, wine, or other European goods will be increasing in price or not. With Europe already facing a recession, plus the increasing likelihood of a hard Brexit, the addition of new tariffs isn’t a welcome change.

Even if the WTO rules that the US has similarly unfairly subsidized Boeing, and if the EU decides to retaliate in turn by placing tariffs on US goods, that won’t do anything to improve the European economy or help EU consumers. About the only silver lining to the entire situation is that the outlook for gold (and silver too) will look increasingly bright.

European investors have already been stashing gold away in anticipation of a rocky Brexit, and with Germany sinking towards recession gold demand on the continent will only continue to increase. That demand will contribute towards a rising gold price not only in Europe but also in the United States, benefiting those investors who have had the foresight to invest in gold to safeguard their retirement savings.

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