Trade war off?

Events move quickly in the Trump era. Since my last post, President Trump met with European Commission President Jean-Claude Juncker and announced a cease-fire with Europe.  A correspondent sends this link to Marc Thiessen at Fox news on the subject

it appears Trump is being proved right. On Wednesday, he and European Commission President Jean-Claude Juncker announced a cease-fire in their trade war and promised to seek the complete elimination of most trade barriers between the United States and the European Union. “We agreed today … to work together toward zero tariffs, zero non-tariff barriers, and zero subsidies on non-auto industrial goods,” declared the two leaders in a joint statement.   

…. contrary to what his critics allege, Trump is not a protectionist; rather, he is using tariffs as a tool to advance a radical free-trade agenda.

… during the G-7 summit he made a sweeping proposal. “I said, ‘I have an idea, everybody. I’ll guarantee you we’ll do it immediately. Nobody pay any more tax, everybody take down your barriers. No barriers, no tax. Everybody, are you all set?’ …

Now Trump’s hard-line trade strategy is being vindicated. Not only is the E.U. negotiating zero tariffs, but also it agreed to immediately buy more American soybeans — which helps Trump in his trade battle with China.

If Trump succeeds in using trade wars to bring down European and Chinese trade barriers, he may end up being one of the greatest free-trade presidents in history.

The question always remains with our President’s dramatic moves. Crazy like a fox or just plain crazy?  To his credit, it helps if your opponents think the latter.

Could this trade war really be in the service of a completely free trade agenda — either very well hidden, or newly discovered? There is nothing I would like to see more than a pure free trade world, and it is heartening to see this president or any president come close to endorsing such.

“Non-auto industrial goods” is already a big qualifier. US’ 25% import tax on pickup trucks remains, and Europe’s auto protection as well. Europe’s big barriers against agricultural goods remain, along with the US’ too. (Sugar quotas on and off since the 1790s, lots of Mexican produce barred even under Nafata.) Services, more important in the modern world than industrial goods,  are off the table. So pure free trade this is not.

“it [europe] agreed to immediately buy more American soybeans — which helps Trump in his trade battle with China.” Free trade this is not. In a free trade world, European governments do not stop private European people and companies from buying US soybeans. In a free trade world, government ministers do not agree to buy more American soybeans! That’s government run trade 101. Especially to gang up on a third party.

Valentina Pop and Vivian Salama at the Wall Street Journal add some reporting

Mr. Juncker stuck closely to the negotiating mandate handed to him by leaders of big EU countries including Germany, France and the Netherlands. Germany, which is heavily dependent on exports, was from the onset open to a trade arrangement, including abolishing EU tariffs on U.S. car imports. France, meanwhile, was vehemently opposed to opening EU agricultural markets.

Mr. Juncker told Mr. Trump and Mr. Lighthizer that any talk of including agriculture would kill prospects of a deal. He countered with a threat to drag public procurement into negotiations, which would question the Buy American Act, a nonstarter for the U.S. side.

Well so much for unfettered free trade. Plus, as widely reported, this was a cease fire. There is no schedule for talks or any other implementation of the free trade niravna.

“We can do stupid too” said Mr. Junckers, and he is right. This is stupid. We can shoot holes in the bottom of the boat to try to get you to stop shooting holes in the bottom of the boat. But if this is going to work, it had better work darn fast before the boat sinks.

Does President Trump really believe in a free trade world? Is this where it is all heading? In my last post I questioned the lack of a public goal to all this. Only two days ago — yes, an eternity in Trump time, but fairly recent for the rest of us, the President tweeted

$817 seems to represent the overall trade “deficit” (I hate that word!) and Mr. Trump has consistently labeled trade deficits a “loss” for the US. (No, just as your trade deficit with the grocery store is not a loss — you get the food!) If his hope is that the point and success of completely free trade is to eliminate trade “deficits,” Mr. Trump will be sorely disappointed, as will any of his supporters who view this as a goal.

Completely free trade will open up many slowly dying industries to quick death from international competition. It will open up many new industries to tremendous growth. But is Mr. Trump really prepared to accept the former? In his tour through steel country, he did not say, “In six months I hope to see you all unemployed and this mill shut down again. But the opportunities for the country in software development, banking services, and intellectual property are so huge, I want you to support it.”

The big question is, when does this stop? If it stops when we have global free trade, great. If we are going to keep plowing forward with tariffs, managed trade, countervailing subsidies, and so on until the trade “deficit” is eliminated, not so good.

OK, skepticism aside, yes he has twice said that the goal is totally free trade. I suggest the rest of the world call the bluff, if it is one, or give him what he wants, if not, immediately!

Tariffs, quotas, managed trade, arbitrary waivers, will damage the economy and our political system quickly. If this is going to work, it had better work fast.

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