A trade war between the US and Europe is unlikely to happen. Here’s why

Donald Trump and Jean-Claude Juncker.

Washington and Brussels have been at odds over trade since President Donald Trump was elected in 2016 and ended trade negotiations between both sides of the Atlantic. Trump has said that Europe is “possibly just as bad as China” when it comes to trade and called it a “brutal” trading partner.

However, despite U.S. threats over new tariffs on Europe and the latter’s willingness to retaliate, analysts are not expecting a trade war between the economic giants for several reasons.

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For us, a trade war requires trade as a share of GDP (gross domestic product) to decline,We think the EU would be in a much better position to retaliate than China and is prepared to do so in a highly targeted fashion ahead of the U.S. presidential elections in 2020,

Ricardo Garcia, chief euro zone economist at UBS, told CNBC Tuesday, adding a “low probability” to this scenario.

Trump shook the European Union last year when he decided to slap tariffs on European steel and aluminium. Brussels retaliated immediately, putting duties on denim, peanut butter and other American goods. The EU also took the case to the World Trade Organization (WTO).

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