Tariff Ping-Pong: Trump Again Threatens the EU

-edited

The moment Trump caved in on China tariffs, threats against the EU were a given.

China called Trump's bluff so the tariff threats return to the EU.

The EU problem is stickier because the EU does not buy US farm products and won't.

Please consider U.S. Proposes More European Tariffs Pending Airbus Case.

The U.S. widened its threat to impose tariffs against the European Union, pending the outcome of a World Trade Organization case over the EU’s subsidies of the airplane manufacturer Airbus SE .

The Office of the U.S. Trade Representative said Monday that as part of a long-running dispute over aircraft subsidies it would consider tariffs on an additional 89 items with an annual trade value of $4 billion, including cheese, pasta and Scottish and Irish whiskies as well as chemicals and metals.

The announcement expands the USTR’s earlier threat, and now leaves items with a trade value of about $21 billion a year under consideration for tariffs, according to the statement.

The issue between the aircraft companies, however, predates President Trump by over a decade. The EU and U.S. have been tangling before the WTO for about 15 years over dueling claims that airline manufacturers are unfairly subsidized. The WTO has found that both sides unfairly subsidize their aircraft and may make a decision later this year that would allow the U.S. and EU to impose tariffs as countermeasures to these unfair subsidies. The WTO will also rule on the extent of harm caused by the subsidies, which would determine the size of tariffs that would be permissible in response.

These tariffs differ from most others pursued by the Trump administration because they would be imposed in response to an official WTO ruling, rather than being unilaterally initiated by Washington.

First Mover "Advantage"

Trump has a first mover "advantage" if you consider levying tariffs with WTO permission an advantage.

Although both sides are guilty as sin, the WTO ruled against the EU first.

What Does Trump Want?

Trump wants a comprehensive trade agreement that includes agriculture.

The EU wants an agreement that does not cover agriculture.

Specifically, Trump wants to sell GMOs, chlorinated chicken, etc., to the EU but that is impossible.

Impossible? Why?

Because Trade deals with the EU must be unanimous.

Even if 26 other nations say OK, France will say no.

That's the end of the ag-deal story but pressure on the EU mounts in other ways.

Timing Pressure on EU

  1. German exports and industrial production are already under serious attack over diesel and coal by the Greens.
  2. In case of a No Deal Brexit, tariffs will hammer the EU vs the UK as the UK is a net importer of EU goods.
  3. Next, factor in the very real threat of US tariffs on German cars.
  4. Finally, factor in an out-of-control budget deficit in Italy against EU rules

The timing of this announcement could not possibly be worse for the EU.

Rise of the Greens

The Rise of the Greens = Deindustrialization of Germany

The vaunted German export machine is under serious attack, on multiple fronts.

Advantage UK

I do not believe Trump caves as easily on this one as he did with China.

If so, the UK is the big beneficiary.

Purposely or not, the timing of this announcement adds to the Increasingly Likely Odds of the UK Getting a Good Brexit Deal with the EU.

That would suit Trump just fine.

Mike "Mish" Shedlock

Comments (9)
No. 1-6
Harbour
Harbour

Any chance this was agreed on when Trump was in UK - a reasonable delay before acting on it so it doesn’t look purposeful?

Mish
Mish

Editor

Possible, but doubtful. It would have to be in a private closed-door discussion with Johnson. Nothing else works.

Realist
Realist

Same story over and over. Another day. Pick an enemy. Make up a grievance. Threaten them. Appear tough to your supporters. Focus their anger on this enemy. Who will be his target today?

RonJ
RonJ

"Because Trade deals with the EU must be unanimous. Even if 26 other nations say OK, France will say no."

That doesn't sound like democracy. Neither does an un-elected troika. It has taken 3 years for Brexit to resemble democracy, as well.

ariantes
ariantes

It's not only France that is opposed to a trade deal that includes GMO products, so does Germany, Austria and the Netherlands. Spain and Italy are opposed to agriculture imports from outside the EU in general. The idea of a trade deal with the US that includes agriculture is a non starter.