Trade Dispute: Trump Told Macron the EU is "Worse" Than China

Mike Mish Shedlock

In a strong hint at what's going to happen next, Trump complained to French president Macron the EU is worse than China.

Please consider Trump tells Macron the EU is "worse" than China.

In their bilateral meeting in the White House's Cabinet Room, on April 24, Macron said to Trump, "Let’s work together, we both have a China problem," according to a source in the room. The source said Trump responded that the European Union is "worse than China."

"He then went on a rant about Germany and cars," the source added. (In their private meetings Trump has taken Angela Merkel to task for her country's tariffs on U.S. automobiles and the ease with which German carmakers like Mercedes, Volkswagen and BMW can sell into the U.S. market.)

Trump also says that America has a fairly balanced trading relationship with France but that the U.S-European trading relationship is very unfair.

US Trade With China"Eu

Germany Worse than China?

For some numbers please see U.S. Trade Deficit by Country, with Current Statistics and Issues.

  1. China - $636 billion traded with a $375 billion deficit.
  2. Canada - $582 billion traded with an $18 billion deficit.
  3. Mexico - $557 billion traded with a $71 billion deficit.
  4. Japan - $204 billion traded with a $69 billion deficit.
  5. Germany - $171 billion traded with a $65 billion deficit.

This is not even close. The US has an annual trade deficit with China of $375 billion but only $65 billion with Germany.

However, China's overall trade surplus is primarily with the US. China runs a deficit with much of the world.

Germany's Surplus Greater Than China

Reuters reports Germany trumps Asia with world's largest current account surplus

Ifo said the German current account surplus — which measures the flow of goods, services and investments — was the world’s largest for the second year running in 2017 at $287 billion, followed by Japan with $203 billion.

U.S. President Donald Trump has criticized Germany for doing too little to reduce its trade surplus with the United States, accusing Germany of “very bad” trade policies.

Ifo said China slipped to third place last year with a surplus of $135 billion, less than half Germany’s.

From that aspect, Germany is far worse than China, especially when one takes into account the size of the countries.

But what's the goal? Balancing global trade or the US deficit?

Penis Envy

The US combined deficit with Canada, Mexico, Japan, and Germany was $223 billion. The US deficit with China alone was $375 billion.

For now, Trump seems hell bent on punishing Germany. Perhaps it's penis envy. Germany has the largest in the world.

Tariffs on German cars coming up.

Whatever Trump's goal, his policies will cost the US.

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Mike "Mish" Shedlock

Comments (15)
No. 1-15
Tengen
Tengen

Pretty sure balancing the US deficit isn't the goal, since it will reach nearly a trill this year, and should pass $1T annually by 2019 or 2020. If this is what striving for a goal looks like I'd hate to see the alternative.

Not sure what Trump's issue with German cars is, but he has apparently harbored it since his famed 1990 Mercedes rant at the latest. Perhaps as things were dwindling with Ivana, an alluring woman spurned his advances whilst hopping into an S-class? With Trump, that seems as likely an origin story as anything else.

Realist
Realist

Trump may indeed start a trade war. Even I didn’t think he was that stupid. However, he may prove me wrong.

Mike Mish Shedlock
Mike Mish Shedlock

Editor

I think it's pretty clear a trade war has started

Tony_CA
Tony_CA

Mish study up on the reciprocity agreements put into place between the US, Western Europe, South Korea and Japan after WW2. Trump is just going to make a few tweaks which should have been corrected a long time ago. All will be fine-MAGA.

Tony_CA
Tony_CA

Germany needs to brought to heal for the damage they have done to Southern Europe.

SMF
SMF

In my home country of Ecuador, a small, cheap plasma TV runs me about $300. A better TV of the same size here would be about $120. Relatives living in Europe have come here to the US and brought an empty suitcase to fill it up with our cheap products to take back home. American stuff in many places is unbelievably expensive due to uneven and unfair tariffs. Even them up and people in foreign countries would benefit as well by paying less than they do now.

caradoc-again
caradoc-again

The cost of social programs has to be covered by something. I don't see Germans wanting to see their safety nets reduced anytime soon. Ageing population, possible downturn in exports through barriers or global recession. How long before Germans express anxiety through the press and at the ballot box? A more anxious, nationalistic, populist Germany in the EU will lead to change but no way to tell what changes precisely. Any EU country seen to be sucking at the German tax payers tit will receive little sympathy in the Fatherland. Guess who. Southern Europeans.

Sechel
Sechel

My big concern here is that could take 12-18 months for Trump's trade policies to show up in our GDP numbers. I say this because the George H Bush's economy didn't improve until after Clinton took office. We're just over a year into Trump's Presidency and he didn't start putting up the trade barriers immediately. In the mean-time Trump's fans looking at our numbers may mistakenly conclude his policies are somehow working.

Webej
Webej

The U.S. data report U.S. goods and services trade with Canada totaled an estimated $673.9 billion in 2017. Exports were $341.2 billion; imports were $332.8 billion. The U.S. goods and services trade surplus with Canada was $8.4 billion in 2017, but a $17.5 billion goods deficit with Canada in 2017 counting only goods. The largest item in the goods category is oil!

Blacklisted
Blacklisted

Why are you talking about Germany, when the President said the EU? The trade deficit with the EU in 2016 was $147B, and in 2017 it was $151B, and based on the the first four months of 2018 we are on pace for a $178B trade deficit this year, which will get much worse no matter what Trump does, because the EU economy is imploding under govt largess and the dollar will increase, making our products more expensive even without tariffs. Armstrong's idea of indexing tariffs to the currency makes sense -

Trump likely doesn't know what he's talking about regarding trade, but neither does anyone else. However, in this blind leading the blind trade policy, I still like Trump's dumb luck. Europe's going to need much cheaper goods as their currency falls, so they should reduce tariffs - and they should also reduce taxes so their citizens have more of their dwindling currency.

If Central Banks listen to Armstrong for advice, why shouldn’t we?

Realist
Realist

Hi Pi,

Mish wants everyone to eliminate their tariffs, including the US. He has stated that many times.

What I find interesting is that so many Americans believe that it is only the other guy who has tariff barriers. The reality is the US has higher tariffs than many of their trading partners.

According to the World Bank and the WTO:, less-developed countries tend to have the highest trade barriers. Developed countries are generally less restrictive: 27 of the European Union's 28 members, for example, have an applied tariff rate of 1.6% (Iceland's is even lower, at 0.7%). This may not remain the case, however, as political opposition to pro-trade policies spreads in the developed world. Nor are the 10 countries with the lowest tariffs all wealthy:

Top ten countries with the Lowest tariffs Country Weighted mean applied tariff • Singapore 0.00% • Macao (China) 0.00% • Hong Kong 0.00% • Switzerland 0.00% • Brunei 0.50% • Botswana 0.57% • Georgia 0.66% • Iceland 0.71% • Mauritius 0.74% • Canada 0.85% Source: World Bank, 2016 data

Weight applied tariff rates of countries not in the top ten: note that the US actually has a higher overall level of tariffs than almost all of their trading partners, except Mexico and China.

Mexico 4.36% China 3.54% USA 1.61% Europe 1.60% Japan 1.35% New Zealand 1.27% Australia 1.17% Norway 1.02%

I know that the Trump followers will ignore the fact that the US is actually one of the worst when it comes to tariffs.

pi314
pi314

@Realist - The trade situation is more complicated than the data you provided. For example, China does not have the same regulatory and environmental restrictions as the West. That gives them unfair trade advantage if you think about it. The elephant in the room is the hundreds of billions of dollars in trade deficits. This is not sustainable long term and we should all be grateful that someone, Trump, is addressing it.

Realist
Realist

I wasn’t referring to China. I was making the point that the US has higher tariffs than Europe, Canada, Japan, Australia, New Zealand etc. Trump is screaming at his allies for having high tariffs, when the US has even higher tariffs. As a result, he risks turning America’s friends into foes. He also risks starting a trade war, where everyone loses. As far as regulatory and environmental restrictions, the US has far fewer of those compared to the countries i have mentioned. It’s time for the US to follow the same environmental and regulatory rules as its allies. Compared to the G7 countries, the US is the dirtiest shirt.

pgp
pgp

Trade always benefits the producer who does it cheaper - obviously. Clearly if you only pay your workers peanuts it doesn't take a lot to be the biggest exporter. That's where China is in the story. The EU (eg Germany) has always had (and maintains) modern manufacturing facilities thanks to the post-war rebuild, and they've used that to produce quality products cheaply.

Free trade can only work if everyone trades on an even playing field, as happens within a country, where everyone gets paid the same and efficiencies are equivalent. Otherwise, improving efficiency is doable but fixing the wage disparity is unlikely to happen any time soon. Inevitably China and Asia will continue to be net exporters - as long as their corrupt autocratic and patriarchal political systems survive.

Inevitably, the idea of free-trade is like believing in democracy. To really work it requires an enlightened, egalitarian and standardized global civilization.... something the world is unlikely to see for centuries.


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