Trump Again Threatens Europe With Tariffs: Expect Instant Global Recession

-edited

Trump is hopping mad the EU for at least seven reasons. Mad enough to foolishly smack them with tariffs? I Believe so.

MarketWatch reports Trump Threatens Europe With Tariffs and Vows Veto as Senate Rejects Border Emergency.

As the U.S. and the EU struggle to iron out their differences on trade, Trump said, “they are willing to talk to us and if they don’t talk to us, we’re going to do something that’s going to be pretty severe economically. We’re going to tariff a lot of their products.” The president was almost certainly referring to imports of cars from the EU, a threat he has made in the past.

Trump made his comments to reporters as he met with Irish Prime Minister Leo Varadkar in the Oval Office. Trump also said on Twitter he anticipated a “large scale” trade deal with the United Kingdom, which is facing a delayed exit from the European Union.

Before the Senate voted on terminating Trump’s national emergency, he told reporters, “I’ll probably have to veto it,” and predicted his veto wouldn’t be overturned by Congress. The Senate passed its resolution 59-41, with 12 Republicans including Mitt Romney and Marco Rubio voting for it, prompting a one-word Trump tweet in response.

The declaration is already the subject of a legal challenge. Trump has attempted to coax Republicans into voting his way on the issue and painted those who vote against him as standing with House Speaker Nancy Pelosi and for crime and open borders.

Seven Reasons Trump is Hopping Mad

  1. Trump wants a trade deal that includes agriculture. The EU says no.
  2. Trump wants Germany to increase military spending, Germany has plans to cut military spending according to Eurointelligence. I do not know if Trump is aware of this yet. Discussion below.
  3. Trump wants Germany to scrap Nord Stream 2, a gas pipeline between Russia and the EU underneath the Baltic Sea. The EU sided with Germany.
  4. Trump wants the EU to buy US Liquid Natural Gas, but the EU instead will buy from Russia because its cheaper. This is part of the Nord Stream 2 issue.
  5. Trump wants the EU to abide by his sanctions on Iran. Instead, the EU created a mechanism in which European suppliers can trade with Iran in euros rather than dollars as a means to get around US sanctions. The mechanism is little used, if at all, but the idea infuriates Trump.
  6. EU tariffs on US cars are higher than US tariffs on EU cars. US tariffs on EU SUVs and Trucks are way higher than EU tariffs on US trucks and SUVs but that doesn't matter.
  7. Trump does not want Germany to use 5G technology from China's Huawei. Germany said it will go ahead. It is almost forced to. The reason is Germany is far behind the US. Its 4G technology is made by Huawei. My understanding is that there is compatibility between 4G and 5G if the vendor is the same. Thus, Trump's demand could set back Germany a couple of years.

German Military Spending

Spiegel Online has a terrific story that Olaf Scholz is torpedoing the planned increased in the German defence budget. Germany is spending only a meagre 1.2% of GDP on defence. Ursula von der Leyen, defence minister, recently proposed an increase in the defence budget to 1.5% by 2023, which would at least show minimal convergence towards the Nato spending target of 2%. But Olaf Scholz, her arch-enemy in the cabinet, is promising a mere €3bn increase, cumulatively over four years. This would leave the defence spending quota effectively unchanged. Since the inflation rate for defence equipment is above the average inflation rate, Spiegel notes that this constitutes a de facto cut in military expenditures.

I picked up the above from Eurointelligence. The article is in German.

Instant Global Recession

One of the reasons Trump is anxious to close a deal with China is so he can blast the EU with a massive dose of Tariffs. I do not think he wants two simultaneous trade wars.

This is another reason to expect Trump to not demand too much from China in a deal.

Should Trump rule that EU cars are a threat to US security, as he has threatened to do, the EU will retaliate strongly.

The end result would be an instant global recession. We are on the cusp of one anyway.

Mike "Mish" Shedlock

Comments
No. 1-9
Liberaldisdain
Liberaldisdain

And here is Mish, year 10 of calling for a recession. Couldnt get it on Obama for eight so now Trump. Sooner or later you will be right, just like a broken clock.

And maybe you will eventually be right about something pertaining to Trump. Eventually................

magoomba
magoomba

Recession GOOOOOOD.

AWC
AWC

If there is a good chance of recession, then isn't there an even better chance for massive QE? The Fed put a lot of work into it's sacred wealth effect. Hard to see it all thrown away now, sans some opaque agenda. Hint, hint?

The continuance (success??) of Trumps "economic policy," if one can call it that, is 100% dependent on Jay Powell. So, the question is, will Jay accommodate, or will he send Donny packing in 2020?

Tariffs, being not much more than end user taxes, can either be left free standing, resulting in unaffordability, and cuts in consumer spending, or they can be monetized, transferring wealth to .gov and local producers. Jay?

Blurtman
Blurtman

Don't know about stupid, but if prices go up on imported goods because of tariffs and they lose their cost advantage, domestically produced goods can expand their market share, if the companies play their cards right.

2banana
2banana

And yet America has the lowest unemployment in generations, wage growth for the first time in a 20 years, manufacturing jobs (good pay/benefits) booming, shrinking numbers of people on welfare rolls and most businesses hiring and who can't find enough people to hire.

Trump is not the president of the World. Trump is the president of the United States.