What's Trump's Real Trade Target: China or Europe?

Do Trump's endless trade volleys and sanctions have a clear target? Consider the possibility it's the EU, not China.

Out of the blue, and with open rebuke form Democrats and Republicans, Trump reversed sanctions on China.

This was peculiar in and of itself, but his rationale raised more than a few eyebrows.

All of a sudden. Trump is concerned about "too many jobs lost in China"!

One can rationalize this is about Rotting Cherries, Spoiled Pork, and Car Inspections, but could it be there is more than meets the eye?

Iran Sanctions

China is “already the winner,’’ said Dina Esfandiary, a fellow at the Centre for Science and Security Studies at King’s College in London, and co-author of the forthcoming ‘Triple Axis: Iran’s Relations With Russia and China’.

Turning East

EU Disharmony

5,000 German Corporations Hit By Trump Policy

One can rationalize this all away, but a translation from Spiegel Online underscores the key idea: Trump's Policies Hit Nearly 5,000 German Companies.

Sanctions on Europe. Not Iran

Eurointelligence fills in some blanks.

Over the last three days it gradually dawned on the Germans that Donald Trump's sanctions against Iran are in reality sanctions against Europe, and Germany in particular. The combination of third-party sanctions and changes to US tax laws has led to a situation where a large number of German companies now have an overwhelming interest to shift their business to the US, according to Spiegel Online.

FAZ notes that the helplessness of the German government is becoming increasingly evident, both economically and politically. The paper notes that even Angela Merkel is casting doubt on whether it is possible to maintain the Iran nuclear agreement after Trump's decision.

Goodbye Europe

The cover of Der Spiegel this week this week, "Goodbye Europe" says it all.

Intent or Collateral Damage?

China responded to Trump tariffs by inspecting fruit to the point it rotted, pork until it spoiled, and Ford autos in such a manner that it required disassembly. Trump changed tactics.

It's easy to make a case that the only thing Trump understands is force.

It's also possible Trump is totally clueless and he is ruled only by spur of the moment decisions.

Finally, one can make a case that Trump's true intent all along was to bust up EU solidarity and everything else is just a sideshow.

It's easy to make that case even though Occam's Razor suggests the alternatives are more likely.

Regardless, the EU's roll over and play dead response to the sanctions is a sure loser for the EU and a sure winner for China.

Ball in Play

EU, the ball is in your court.

Last week Merkel stated it's time for “Europe to take its destiny into its own hands.”

OK - Do it!

Staring at the ball as it rolls over you does not win points.

Mike "Mish" Shedlock

Comments
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Contrarian_Ed
Contrarian_Ed

It's also possible that Trump cancelling the Iran Deal is intended to increase the price of oil (and it has). The US exports more oil and petroleum products than it important, so higher prices only benefit the US (and benefit fracking companies, who employ lots of Trump voters).

Winners from higher oil prices: Russia, Saudi Arabia, US.

Losers from higher oil prices: EU and China

FelixMish
FelixMish

This whole trade thing is oddly reminiscent of Nixon's wage and price controls. Trying to centrally manage trade seems to be an exercise in whack-a-mole of the squeaky wheel. Serves to keep the people manning the hammer's arm busy. So, hey, they are content at least, if no one else is.

GiT
GiT

Europe is not challenging the US. It isn't only a matter of trade, there are also other aspects such as technology transfers. Since the very beginning of human history, technological dominance has always been related to military supremacy and security. China has been the biggest economy of the world before the industrial revolution and now is slowly rising back to challenge the dominance of the West. Now think of what would it mean China, still a state-driven socialist economy. getting the lead in AI, self-driving military vehicles and so on.

Kinuachdrach
Kinuachdrach

Why not just listen to the man, Mish? President Trump's stated goal is to bring jobs back to America by correcting the mis-balance in trade. After years of misguided unilateral free trade, the US has a trade deficit with almost every country -- which means there are lots of potential targets; China and Europe, not China or Europe.
President Trump long ago encouraged German auto manufacturers to build in the US more of the cars they sell in the US. Correcting that trade imbalance could be a win-win situation for US workers and German investors.

Realist
Realist

“It's also possible Trump is totally clueless and he is ruled only by spur of the moment decisions.“ Correct. And when the negative ramifications of his statements/decisions becomes apparent, he 1) changes his mind, 2) blames someone else, 3) moves on to screw something else up in order to divert attention. Don’t expect this to change.