Trump’s Trade Meeting with European Commissioner Juncker: Better than Nothing

trade reg

Tariffs are the greatest!

-President Trump, July 24, 2018

I have an idea for them. Both the U.S. and the E.U. drop all Tariffs, Barriers and Subsidies!

-President Trump, also on July 24, 2018

Many trade-watchers are breathing a sigh of relief about President Trump’s meeting yesterday with European Commission President Jean-Claude Juncker. The result was essentially a cease-fire. Juncker agreed that the EU would not impose a retaliatory car tariff it has been considering. In return, Trump agreed not to further raise steel and aluminum tariffs. These are both good things. But neither side is lowering any barriers. And neither side’s promises involve making things better. They have agreed to not make things worse. But in a bizarre, only-in-this-administration kind of way, nothing is better than nothing.

President Juncker also promised that the EU would buy more U.S. soybeans and natural gas, as though he has control over EU consumers’ spending decisions. He also pledged to work toward a US-EU bilateral trade agreement. Negotiations for such a deal will almost certainly last longer than Trump’s presidency, even if he wins reelection. This could be precisely why Juncker made the promise—Trump saves face, which is important to him, while Juncker can kick that can down the road until the White House has a less mercurial occupant. So even the actionable takeaways from the meeting amount to essentially nothing.

What does the new EU ceasefire mean? It is probably more of a strategic shift than anything else. The president’s biggest target on trade issues is China. To get China to reform its bad-faith trade policies—here the president has a point—will require both internal reform in China and international pressure. The U.S. is hardly the only country upset with the Chinese government’s penchant for intellectual property theft, disdain for property rights, and need for state control. And that’s ignoring the Chinese government’s human rights record, which we shouldn’t.

Trump’s tariffs are alienating allies the U.S. needs to achieve its policy goals against China. So rather than shifting toward free trade, what Trump is likely doing with the EU meeting is simply prioritizing the Chinese theater as the most important front in his imagined war.

While I dislike the phrase “trade war,” it may be an apt description for the way the Trump administration views trade. The analogy is obviously incorrect; trade is based on mutual consent, while war is the opposite. But the president and several of his advisors don’t see the issue the same way most people do. To them, trade really is like a war with winners and losers, fought at the level of nation-states and regional alliances. For one side to win, another side must lose.

Trade doesn’t work that way, of course. People only agree to a trade in the first place unless everyone involved expects to benefit. And, as even the best analysts sometimes forget, countries do not trade with each other, people do. But, with apologies to Larry Kudlow and a few other sound thinkers, the president hasn’t exactly chosen the best advisers on trade issues. So here we are, in a self-created trade war.

I no longer believe the president when he says he wants free and open trade (there are many other skeptics). Trump’s nationalism and zero-sum, adversarial thinking won’t allow it. So while it’s good that his trade battle against the EU won’t be escalating any further for the time being, that doesn’t mean Trump is admitting that his protectionist policies aren’t working. He is sacrificing one battle to gear up for a larger trade war against China. After all, Trump has the power to lower tariffs right now with the stroke of a pen, but he is not doing so. The Juncker meeting is likely the first step in doubling down against China, and that could hurt the United States economy, and the world’s, for years to come.