Has Trump Won the Trade War with Europe?

On July 25, 2018, at approximately 3:00 p.m. eastern daylight time, the tweets fell silent, and a truce was declared on the European front of the trade war between the United States and, well, the rest of the world. President Donald Trump of the United States of America, and President Jean-Claude Juncker, representing the forces grouped under the banner of the European Union, agreed to cease further hostilities and attempt to work out a permanent peace treaty that enshrines the right of all nations to free and fair trade. Sort of.

This being only a truce, rather than a treaty, there was no band present to strike up either “The Star Spangled Banner” or the “Ode to Joy.” The teetotaller American and the reportedly grape-loving Luxembourgish politician made the announcement in the White House Rose Garden, after which Trump retired to toast his victory with a chocolate shake and Juncker departed for some champagne, possibly in a quantity that critics say caused him to stumble at a recent NATO meeting, a stumble Juncker attributes to a painful attack of sciatica.

For Juncker, the deal met his principal objective-satisfying the demand of his principal paymaster, German chancellor Angela Merkel, that he persuade the American leader who has bullied and insulted her not to fire his biggest gun, aimed directly at her economy-the imposition of stiff tariffs (perhaps of 25 percent) on Germany’s auto sector, which employs over 800,000 workers, and earned €423bn last year, a substantial portion from the sale of 494,000 cars exported to America and brought in virtually duty-free. Those tariffs will not be imposed if the ongoing negotiations prove successful in converting the truce into a permanent peace.

For Trump, the victory was greater than even he imagined it might be. He has been arguing that tariffs are merely a tactic in the trade war, his way of persuading the trading partners who have been taking unfair advantage of America to come to the bargaining table. Which the E.U. has done, proving that Trump is not a mad protectionist, but, at least for now, a champion of freer, fairer trade that will benefit American workers, farmers, and businesses. In return for agreeing to attempt to resolve all steel and aluminum tariff issues, and related retaliations, here’s what Trump got:

The parties will work towards zero tariffs and removal of all trade barriers for non-auto industrial goods, the fate of autos to be decided at a later date.

The E.U. will “almost immediately” increase its purchases of soybeans. Soybean farmers have been hit hard by China’s decision to aim its retaliation for U.S. tariffs squarely at them, in a so-far failed effort to shake their support for Trump in key states with close senate races (North Dakota, Indiana, Missouri). Trump countered by resuscitating a Depression-era statute that allows him to dole out $12 billion to strapped farmers, no congressional approval needed, and now has further proof to offer farmers that he “has their backs.”

The E.U. will import “massive” amounts of American LNG, a bonanza for U.S. natural gas producers that at the same time diversifies Europe’s energy supplies, diluting the power over Europe’s energy supplies that Nordstream 2, the planned pipeline from Russia to Germany, will put at Putin’s disposal-a “horrible” project Trump told a miffed Merkel.

The U.S. and the E.U. will work together to reform the World Trade Organization, which Trump has been accused of planning to wreck.

Most important, the E.U. and the U.S. will combine their forces-some 50 percent of global GDP-to end the theft of intellectual property, forced technology transfers, industrial subsidies to state-owned enterprises, and the use of excess capacity to drive global prices below cost.

The combination of U.S. and E.U. economic firepower is perhaps the most important feature of the agreement. While China’s President, Xi Jinping, his debt-laden economy slowing, is shopping the world for allies in the Asian theater of the trade war, Trump has enlisted Europe in his battle to end the trade practices that China has used and is using to achieve dominance in the industries of the future.

Unfortunately for Trump’s critics, try as they might, they cannot interpret this as anything other than a victory for his belligerent tactics. It is said around Washington that if the president walked across the Potomac River his critics would say the feat proves that Trump can’t swim.

None of this is to ignore the fact that America has taken casualties in the trade war. And will take more if the truce unravels. Ironically, one such is Whirlpool, which benefitted late last year from the first shot in the trade war when Trump imposed tariffs on imported washing machines with which Whirlpool could not compete. What Trump tariffs giveth, Trump tariffs taketh away. Tariffs imposed six months later on steel and aluminum drove Whirlpool’s costs up and its earnings and share price down. Then there is Harley-Davidson, saved from bankruptcy 33 years ago by a protective tariff, but now unable to compete in foreign markets because of tariffs imposed on U.S.-made motorcycles in retaliation for tariffs on steel and aluminum. Those tariffs have also hit U.S. metal bashing industries hard, and caused Kentucky’s bourbon makers considerable pain. But even winners must take some casualties.

In almost exactly 100 days voters go to the polls to elect all 435 members of the House of Representatives and 35 members of the Senate. After saying goodbye to Juncker, Trump headed to Iowa to make certain the hostile media could not successfully downplay his victory for farmers. He is hoping to prove, as Winston Churchill once remarked, that “Meeting jaw to jaw is better than war.” Either way, unless this deal unravels-perhaps because Juncker can’t deliver the EU’s 28 members-it should be a vote-getter for Republicans.

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Afterword: The reliably unbiased New York Times covered the story on page one of yesterday’s edition under the headline “Truce on Trade Follows Route Obama Paved”, and sub-headline, “Trump Claims Victory in Crisis He Started.”