U.S. import tariffs could cost Dutch economy billions: ING

If American president Donald Trump goes through with his plan to protect the United States' industry with tariffs on imported goods and services, the Dutch economy could suffer a loss of billions of euros, according to calculations by ING Bank, Financieele Dagblad reports.

The bank based its calculations on a U.S. import duty of 10 percent. If that is the case, the Netherlands will export 3.7 billion euros less to the United States. That will result in the Dutch gross domestic product being 0.3 percent lower, according to the bank.

In their calculations ING economists Raoul Leerin and Timme Spakman assumed that 8 percent of the money the Netherlands earns from exports comes from the United States. They also included the added value that Dutch companies get from sales to the U.S. as well as exports via third countries with the U.S as final destination, such as parts for German cars for the American market. The ING model is based on the World Input-Output Database, which is funded by the European Union and affiliated with the University of Groningen.

The ultimate effect of such a tariff is an addition and subtraction of various side effects, according to the researchers. The 3.7 billion euros in damage on a 10 percent tariff, for example, includes the assumption that exporters take a large proportion of the charge for their own account, without passing it on to their customers. It is also assumed that the European Union will not leave it at that and will use similar reprisals to put the Trump-government under pressure.

The ING economists come to the conclusion that the U.S. is the second most important market for Dutch exports, before Germany and after Britain. The Dutch economy is for 3.5 percent dependent on demand from the U.S., well above the EU average of 2.5 percent. That demand creates 300 thousand jobs in the Netherlands, according to the bank.

As yet there is not much clarity on how high Trump will make the import tariff, if he goes through with it. Before he was actually president, he mentioned a rate of 35 percent for cars in an interview with foreign media, according to FD. Lower rates were later mentioned.

At another point, after taking up residency in the White House, Trump appeared to support an older tax reform plan from the Republicans that got a majority in Congress. In that plan the profit tax rate is lowered from 35 percent to 20 percent, but it is intended to exempt the profits made by U.S. products being exported. In practice this means that it wil become easier to export from the States, but much more expensive to import to the country, according to FD.

If Trump goes with that option, there will be no harm to the Dutch economy if Brussels retaliates with similar measures, according to ING. "On balance, that ends in a classic case of money being moved around by the government."