Thursday, July 26, 2018

Did President Trump Just Win The Trade War?

President Trump and European Commission President Jean-Claude Juncker backed away from the brink of trade war yesterday. In an apparent victory for Trump’s hardline trade policies, the two leaders agreed to put new tariffs on hold and to reopen talks in hopes of reaching a permanent agreement.

The precise details of the preliminary agreement are not known, but Mr. Trump said that the EU had agreed to buy “a lot of soybeans” and increase imports of liquified natural gas from the US. There was also an agreement to meet further and seek a resolution to Mr. Trump’s tariffs on steel and aluminum. There was no timetable set for future talks.

While the reprieve from the trade war – one of them at least – is welcome, the extent of Mr. Trump’s trade victory is uncertain. While trade d├ętente seems to be in favor with Europe, the European Union is only one of the markets with whom President Trump has threatened to launch a trade war. Talks seem to still be stalled with Canada, Mexico, China and others.

There is also the looming question of steel and aluminum. The trade crisis began when President Trump imposed protective tariffs on imports of those metals and that issue has yet to be resolved. The Wall Street Journal reports that there is no timetable or agenda for further talks and notes that any agreement must include a consensus with all 28 members of the EU. A permanent written agreement most likely won’t be reached anytime soon and the truce could fall apart at any time.

The truce may reflect a political calculation by President Trump. A few hours before the announcement of the deal, CNBC reported that Republicans in Congress were openly critical of the president’s moves on trade. Speaker Paul Ryan (R-Wisc.) called the tariffs “basically taxes” while Majority Leader Mitch McConnell (R-Ky.) said, “We've been arguing aggressively that this is the wrong path for us.”

If past performance is any indication, it seems likely that President Trump and his supporters will declare victory in the trade war and then move along to other priorities. This occurred in June when the president said he had “solved that problem” of North Korea’s nuclear program after meeting with Kim Jong Un. After the meeting, North Korea faded from the headlines and there seemed to be no progress on more substantive talks.

Nevertheless, the tariff truce with Europe could give American companies the break they have been hoping for. Europe is America’s largest export market and ranks second in imports to the US. Neither country would benefit from a trade war. American companies from Coca-Cola to Whirlpool have been hit by the tariffs already. If the deal encourages President Trump to declare victory and end his tariff offensive, American business would breathe a sigh of relief.

And that is the real value of the deal between Presidents Trump and Juncker: It gives the president a way out of the trade quagmire in which he has become embroiled. What appear to be token concessions by the EU give Mr. Trump the opportunity to save face and claim a victory for his base and then reverse his potentially ruinous tariff policy.

President Juncker reportedly came to President Trump bearing a gift in addition to the EU’s trade concessions, a picture of the US military cemetery in Luxembourg where Gen. George Patton is buried. The picture was inscribed with the words, “Dear Donald, let’s remember our common history.” If the EU deal leads to both sides standing down, other trade partners may follow suit when they find that small concessions and flattery go a long way when dealing with President Trump.

Regardless of the outcome of the new trade talks with Europe, it must be remembered that the crisis, which has already hurt American companies and led to layoffs of American workers, was entirely avoidable. When the headlines of an agreement are written, they should read, “President Trump solves trade crisis caused by President Trump.”

Originally published on The Resurgent

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