Internal trade frictions within the European Union generate higher costs than the steepest tariffs former US president Donald Trump threatened to impose on the bloc, according to a study by economists at the European Central Bank (ECB), cited by Bloomberg and Agerpres.
The analysis, authored by ECB economists including Lucia Quaglietti and Vanessa Gunnella, estimates that internal barriers such as divergent national regulations, heavy administrative procedures and anti-competitive practices amount to trade costs equivalent to tariffs of around 67% on goods and 95% on services within the EU’s single market.
Before signing a trade agreement with the United States last summer, Trump had considered imposing tariffs of up to 50% on all EU imports.
Unlocking the single market’s potential
The findings strengthen the ECB’s calls for European governments to deepen integration within the single market, which encompasses around 450 million consumers and more than 26 million businesses. ECB President Christine Lagarde has repeatedly stressed that fully harnessing the single market’s potential is crucial for Europe’s economic prosperity.
“The single market provides substantial economic and strategic benefits” and “represents Europe’s first line of defence in a rapidly evolving geopolitical landscape,” the economists wrote. Reducing existing barriers is seen as essential for boosting competitiveness, strengthening resilience and safeguarding economic stability.
While the authors acknowledge that not all barriers can or should be eliminated, they note that adopting standards similar to those of the Netherlands, one of the most integrated EU economies, would significantly reduce trade frictions. Even a modest 2% cut in internal barriers could fully offset the long-term impact of higher US tariffs on EU output.
External pressures are unlikely to ease. Trump recently threatened to impose additional 25% tariffs on countries doing business with Iran, a move that could affect the EU, which imported roughly €660 million worth of goods from Iran between January and October last year.
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