Did you listen to President Trump and European Commission President Ursula von der Leyen on Sunday?
I don’t mean reading the various publications’ take on the trade deal they reached. Or even watching their coverage about it.
I’m referring to the actual announcement and follow-up questions from the press.
If you did listen the full way through, you would have heard a reporter ask President von der Leyen, “What are the U.S. concessions? What is the U.S. giving up in the deal?”
Her answer was striking:
So… the starting point was an imbalance: a surplus on our side and a deficit on the U.S. side. And we wanted to rebalance the trade relation, and we wanted to do it in a way that trade goes on between the two of us across the Atlantic. Because the two biggest economies should have a good trade flow.
And I think we hit exactly the point we wanted to find. Rebalance but enable trade on both sides, which means good jobs on both sides of the Atlantic. [It] means prosperity on both sides of the Atlantic. And that was important for us.
Translation: The EU got nothing… other than continuing access to its largest export market – at a lower tariff rate than it would have faced on August 1 but much higher than it has ever seen before.
Von der Leyen sounded calm and collected during her diplomatic non-answer. In fact, she seemed composed the whole appearance long.
But I have to wonder what was going on inside her head, especially when Trump commented, “I think your various countries are very happy about this.” With “this” meaning the European Union:
-
Agreeing to a flat 15% tax on exports to the U.S. across the board
-
Buying $750 billion in U.S. energy products
-
Investing $600 billion in the U.S.
-
Dropping all tariffs against almost all U.S. industrial goods
-
Significantly lowering levies on U.S. goods like automotives
-
Purchasing a significant amount of military equipment
But, at least so far, there’s plenty of reason to think that EU businesses are less than thrilled…
EU Leaders Hate the Trade Deal
Trump got everything he wanted. Von der Leyen got basically nothing.
Just ask the various leaders within the EU, including Hungarian Prime Minister Viktor Orbán. He described the agreement as Trump eating “von der Leyen for breakfast.”
A more measured Swedish Trade Minister Benjamin Dousa called it “the least bad alternative.”
Maybe.
Spanish Prime Minister Pedro Sanchez said he supports “this trade agreement… without any enthusiasm.”
And Danish Foreign Minister Lars Løkke Rasmussen acknowledged that “trade conditions will not be as good as before.” It’s not the arrangement he and his would have chosen. “But a balance must be found that stabilizes the situation and that both sides can live with.”
Dutch Minister for Foreign Trade Hanneke Boerma, meanwhile, said the European Commission should continue negotiating about the details, which are “not ideal.”
Then there’s France, whose Prime Minister François Bayrou practically called for a day of mourning. “It is a somber day when an alliance of free peoples, brought together to affirm their common values and to defend their common interests, resigns itself to submission,” he said.
While at least some politicians in France – and elsewhere throughout the EU – do agree with von der Leyen that the deal brings much-needed stability and predictability to international trade, French Minister for European Affairs Benjamin Haddad posted this on X:
Let’s be clear: the current situation is not satisfactory and cannot be sustainable. The free trade that has brought shared prosperity to both sides of the Atlantic since the end of the Second World War is now rejected by the United States, which is choosing economic coercion and complete disregard for [World Trade Organization] rules.”
Clearly then, not everybody is “very happy” about Sunday’s conclusion.
But there’s also not much the Europeans can do about it…
Last Thursday, I quoted a trusted European source of mine, Leo Nelissen, in predicting that the EU would “back down” to Trump’s demands. The way he saw it, the bloc had “no leverage” and could not “risk any disruptions.”
Trump knew that, which is why he came in – and came away – so strong. And Europe knew it, too. Von der Leyen even said herself, “It was the best we could get.”
A Happy Ending for America (and Maybe Europe, Too?)
Leo is right. The Europeans can’t risk any disruptions, not when they have so many other problems piling up.
Truth be told, European countries just aren’t doing so great these days, Trump or no Trump.
They’re suffering from population declines, political upheavals, and economic turmoil. To quote Capital Economics Group Chief Economist Neil Shearing from December:
… Europe’s most acute problems are no longer concentrated in smaller economies like Greece. Instead, it is Europe’s two most important economies [France and Germany] that are struggling. Without reform in France and Germany, it is difficult to escape the conclusion that Europe’s future is one of very low growth, continuing concerns about fiscal sustainability, and a dwindling sense of standing in a world increasingly characterized by a superpower rivalry between the U.S. and China.
The bloc is stagnating, a fact that JPMorgan Chase (JPM) CEO Jamie Dimon pointed out as well during his trip to Ireland earlier this month. “You’re losing,” he told Europe bluntly.
The problem is, the Europeans haven’t seemed motivated to do anything about it. That’s why I’m hoping Trump’s trade agreement will actually serve as a wakeup call.
Take the energy concessions Trump just got from Europe. My aforementioned contact, Leo, told me yesterday that this was a particular weak spot for his side of the Atlantic.
Ever since we [stopped getting] natural gas from Russia (excluding liquified natural gas, or LNG), we are dependent on nations like Qatar and the U.S. Trump knows that without U.S. LNG, the EU economy won’t function.
This weakness could have been avoided, Leo added, “if the EU had allowed domestic fracking.” But it prioritized environmental concerns over economic ones instead of finding a way to balance the two appropriately.
The result has clearly weakened the continent, both internally and internationally.
As I’ve said before, Trump’s tariffs are a big stick, and it appears to be working. He’s now won repeated trade victories on the global stage. His Big Beautiful Bill opened up enormous oil and gas opportunities, much of which will find its way to Europe, I’m sure.
This is a win for Trump and America. And, hopefully, it will be the motivation the EU needs to get their act together.
Until that happens, though, I remain in “invest in America” mode. After all, that’s where all the money is flowing.
Regards,
Brad Thomas
Editor, Wide Moat Daily
|
