When the Germans invaded the Soviet Union and the Japanese bombed Pearl Harbor, the Axis Powers learned a pretty big lesson that should have been obvious. If you're going to go to war, it might be a good idea to not start one with the entire world. Three against the rest of the planet should have been easy numbers for the Axis statisticians to break down. Now think about those odds and how ludicrous it sounds to win a fight like that, and now think about how many countries we're currently threatening a trade war with. China, all the countries within the EU, Mexico, Canada… and the list goes on.
We simply cannot fight a war on all fronts. The U.S. economy isn't invincible. Something's got to give, and we might have seen the beginning of that yesterday. President Trump and the head of the EU made a joint statement yesterday from the White House, announcing a pause in the escalating trade war with the Europeans. The escalation had been ongoing ever since the Trump administration hit the EU with steel and aluminum tariffs. Europe then retaliated by imposing over 3 billion in tariffs on U.S. goods. The President, in turn, threatened an imminent response targeting European cars.
Now we're not entirely sure how long this ceasefire will take place, and we're definitely not out of the woods yet. We do know that President Trump agreed not to follow through with European car tariffs and to quote, "reassess" the steel and aluminum tariffs while negotiations are taking place. In return, Europe will boost purchases of U.S. soybeans and import more of our natural gas. So let me get this straight. All we have to do is not do something we hadn't done yet - the car tariff - and just "reassess" something we've already done? In return Europe buys more of our stuff?
Sounds like a win to me!
But Tariffageddon still looms. This is a temporary agreement that still has a long way to go. The President tweeted that the eventual goal is the elimination of all tariffs. If that's the case, there's still a loooong way to go. The President isn't wrong about the EU having greater tariffs on U.S. goods. That's a fact. How many U.S. built cars do you see in Paris? Probably not many. The EU smacks a 10% tariff on our cars. But that's low considering how Europe tariffs the crap out of U.S. agriculture imports. 17% on apples… 20% on grapes.
This is a temporary agreement that still has a long way to go.
So yeah, there's a long way to go. Let's hope this progresses. Because if this breaks down, as it does with China, Mexico, Canada - and the eleventy billion other countries we're threatening trade war with - we'll lose.