On Wednesday, President Trump met with the European Commission President Jean-Claude Juncker for talks on trade. While no formal agreement was signed, the talks were very productive.
The United States placed $3 billion tariffs on metals from the EU on May 31. The EU responded by putting tariffs on an equivalent value of US products. The US threatened to raise the tariffs to $20 billion. The EU prepared to raise their own tariffs to $20 billion.
Now, after the talks, Trump is claiming victory on trade and diplomacy. He’s even in love with the EU.
— Donald J. Trump (@realDonaldTrump) July 25, 2018
There is a problem here. First and foremost, even if he is completely correct in how Juncker feels about him (a highly questionable position) it is undeniable that Trump’s popularity across the countries of the European Union is low. 11% of British think he is good or great, compared to 67% who think he is poor or terrible. (Newsweek) The same sort of negative polling holds in all EU countries except Greece… and unlike the British polling, most of those countries have not polled Trump’s popularity since the tariffs began and he has attacked the EU and the G7. (CNBC)
More from the President:
Great to be back on track with the European Union. This was a big day for free and fair trade!
— Donald J. Trump (@realDonaldTrump) July 26, 2018
Yes, it is… except that they’re not officially back on track quite yet. This is another example of Trump celebrating a failure. Nothing was actually accomplished beyond words; no formal agreement was signed. Rather, the two sides agreed that their goal is the reduction of tariffs and an expansion of free trade. They also agreed to hold off on implementing new tariffs while negotiations were ongoing.
NEW tariffs. As far as the existing ones? That answer can be found in the official EU statement:
In addition, it will identify short-term measures to facilitate commercial exchanges and assess existing tariff measures. While we are working on this, we will not go against the spirit of this agreement, unless either party terminates the negotiations.
We also want to resolve the steel and aluminum tariff issues and retaliatory tariffs.
They still exist, and they’re still hurting American industry and farming.
The reason it was a big day for free and fair trade is because the EU has been demonstrated to be a trustworthy ally. Unlike North Korea, for whom we permanently suspended all military operations on the Korean peninsula in exchange for relatively meaningless promises, when the EU says it wishes to normalize trade it can be reasonably assumed that they will work to normalize trade. Trade has not been normalized, in direct opposition to the spin delivered by many sites, but there is justifiable hope for it.
Even when that happens, however, it still represents a net loss for America. We will have moved from a fairly open trade arrangement with the EU back to a fairly open trade arrangement with the EU, at the cost of trust and positive opinions from our allies and the loss of millions of dollars for American businesses.
That brings us back to President Trump.
European Union representatives told me that they would start buying soybeans from our great farmers immediately. Also, they will be buying vast amounts of LNG!
— Donald J. Trump (@realDonaldTrump) July 26, 2018
Yes, they will buy soybeans. Bloomberg explains why:
That’s because the 25 percent tariff China slapped on U.S. soy imports earlier this month promises to reshape the global market for the commodity. The U.S.-China tiff means it’s likely that Brazil, the No. 2 producer, will end up selling more soy to China as a result. That’s something that traders anticipate, based on the higher price Brazilian soy is fetching over U.S. supplies.
Facing a reduced Chinese market, U.S. soybean exporters have few options other than to target the EU. And the fact that Brazilian shippers will be sending more cargoes to China means less competition in Europe. Rabobank International Ltd. predicted in June that the U.S. may overtake Brazil as the biggest soybean importer into the EU.
Mind, soybeans are plants. They’ve already been grown, and they were cultivated with the expectation of a known market. What was that market? Let’s go back to Bloomberg:
China could replace around 4 million metric tons of U.S. soybeans with Brazilian supplies in the fourth quarter if tariffs are implemented, according to Rabobank. Those losses would be partially offset by 2 million tons of non-China demand moving from Brazil to the U.S., driven largely by the EU, the bank said.
US farmers had produced four million metric tons with the expectation of selling them to China. Due to the Chinese tariffs, the prices of Brazilian soy are higher, and American farmers were stuck with unsalable product. Now, only because their usual sellers have found higher profits in China, a market that is interested in purchasing 2 million metric tons has opened in the EU. With two pounds of product for every pound desired, the prices United States soy farmers will realize on their produce is devastatingly low. It will drive many farms bankrupt, with the farmers being given the faint benefit of being able to sell their product, albeit for far below production cost.
In summation: Trump has started a trade war that is already having destructive effects on farmers and businesses. He has backed off of making it worse and accepted an invitation to try to reverse course. He has significantly harmed the image of the United States with our allies. And he is claiming credit for not undermining the willingness of the EU to buy some of our soybeans at steeply discounted prices.
This is what Trump and his supporters call “winning.”