No sooner than I finished writing about Tariffs comes news from Eurointelligence that the US commerce department declared European cars a threat to US national security.
German media report this morning that the US commerce department has concluded its investigation into European car imports and handed over its report to President Donald Trump, who now has 90 days to make a decision. Handelsblatt has seen a draft which concluded that European cars constitute a threat to US national security, with a choice of three recommendations: a general import tariffs of 20-25%; targeted tariffs, for example for self-driving electric cars; or lower tariffs coupled with more support for the US car industry. FAZ reports this morning that the US car industry is lobbying heavily against these tariffs as it would face higher component costs as a result.
The diplomatic counter-offensive already started with Angela Merkel's speech at the Munich Security Conference, when she said that it was incomprehensible that German cars, many built in the US, constitute a national-security threat. The reason is very obvious: they don't. Even Trump knows that. But under WTO rules, this is the only legal means countries have to impose tariffs. The issue is political.
The depressing reality of the transatlantic drift was the main message from Munich over the weekend. Conferences like the MSC are a surviving relic of the heyday of multilateral global governance. The idea expressed in German media reports that they could serve as a bridge to heal transatlantic wounds is patently absurd. They have turned into forums of confrontation, where second-tier of political leaders echo their masters' voice, as Vice President Mike Pence did in Munich.
We conclude with a paragraph from a New York Times story, which in our view constitutes a good snapshot of where we are: "The Europeans no longer believe that Washington will change, not when Mr Trump sees traditional allies as economic rivals and leadership as diktat. His distaste for multilateralism and international cooperation is a challenge to the very heart of what Europe is and needs to be in order to have an impact in the world."
Staggering Political Comeuppance
I have seen Trump act with lies, ignorance, petulance, bullying, and preposterous threats, but this one takes the cake.
It is incomprehensible that European cars, or any cars for that matter, are a threat to US security.
With 2 Hours to Spare, 25% Auto Tariff Report Heads to Trump's Desk
Just a bit ago I reported With 2 Hours to Spare, 25% Auto Tariff Report Heads to Trump's Desk
I almost did not write that article because I did not believe there could be anything in the report. Silly me.
Perhaps it's silly Eurointelligence, with me foolishly taking the bait. If so, apologies in advance. Regardless, what I said earlier stands.
Here is the short synopsis: Trump is an economic illiterate.
My opinion now is the report was delayed based on whether or not the EU would give Trump what he wanted on two other issues described below.
What's the Bullying Really About?
Perhaps I should have seen this coming. Trump was rebuked on Iran over the weekend. The US demanded the EU cancel the nuclear accord with Iran.
The EU politely told Trump go to hell.
For details, please consider US Arrogance on Iran: Trump's "Coalition of the Unwilling and Openly Coerced"
Trump seeks to undo the one and only major accomplishment of the Obama administration, a nuclear accord and peace agreement with Iran.
Even if I agreed with Trump about the dangers of Iran, one person should not get to decide sanction policy for the entire world.
Three cheers to the EU for standing up to blatant Trump administration arrogance.
Nord Stream 2
Trump also demanded that Europe cancel Nord Stream 2, a natural gas pipeline between Europe and Russia. The EU just agreed to proceed, infuriating Trump.
Trump is OK with Russia and Putin when it suits his purpose, but bullies Russia and the EU otherwise. He routinely treats allies like adversaries.
I am sick of the the Art of the Deal nonsense.
Trump is nothing but an economically illiterate playground bully. And he has accomplished nothing by his bullying. A deal with North Korea may happen because he stopped bullying and started talking.
It is incomprehensible to Trump that trade is a two-way street in which everyone wins. Trump believes there is a winner and a loser in every deal, and he believes the world will let him win every deal.
Trump may as well believe in fairy tales. Eventually bullies get stood up to. It appears we are at that point right now with the EU.
Trump is surrounded by trade advocates as least as foolish as he is. So far, he has not made one major deal in which the US won anything.
If you seek a second opinion, and even if you don't, please consider "Peak Trump" by David Stockman.
Mike "Mish" Shedlock