EU Officials Will Try And Trick Trump Into ‘Plurilateral’ Deal On Auto Tariffs

Donald Trump is mad at cars.

And also at Harley-Davidson motorcycles.

But mostly at cars.

Specifically, he’s mad at European cars and even more specifically, he’s made at Mercedes, which, if he has his way, will be banned from Fifth Avenue, presumably to give him more room to “shoot people” – “without losing any voters”, of course.

You probably know the Mercedes story by now, and I would simply excerpt it from the original in WirtschaftsWoche, but it’s far more fun to use the following screengrab from a CNBC article dated May 31:

there are two hilarious parts of this CNBC screenbgrab, both highlighted. pic.twitter.com/K8atd68q19

— Heisenberg Report (@heisenbergrpt) May 31, 2018

Trump has threatened to slap tariffs on auto imports in the interest of “national security”, an absurd proposition that has been met with rebuke from pretty much everyone including, most recently, BMW, but also from General Motors, which is now in Peter Navarro’s crosshairs for daring to speak out against a patently absurd policy initiative.

Trump’s ongoing threats (delivered via Twitter and also at a series of campaign rallies across the country) have weighed heavily on European automakers. The SXAP is sitting at 10-month lows and has fallen pretty much in a straight line of late:

Well, according to the Financial Times, EU officials are trying to cobble together some kind of last-ditch proposal to present to Trump when he meets with Jean-Claude Juncker this month. Here’s FT:

Three diplomats said the European Commission was studying whether it would be feasible to negotiate a deal with other big car exporters such as the US, South Korea and Japan. Such a move could address Mr Trump’s complaint that the US sector is unfairly treated, while reducing export costs for other participating countries’ auto sectors.

Under such a deal, participants would reduce tariffs to agreed levels for a specified set of products – a concept in international trade known as a “plurilateral agreement” that lets countries strike deals on tariffs without including the entire membership of the World Trade Organization.

So basically, they’re trying to trick this moron (Trump), by selling him a multilateral agreement in the guise of something that circumvents the World Trade Organization.

I guess they’re thinking that in light of recent reports, they might be able to get Trump to agree to something like this if they can pitch it to him as an end-around on the WTO.

“Trump has railed at the bloc’s imposition of a 10% tariff on imports of passenger cars compared with US duties of 2.5%,” FT goes on to write, before reminding you that “the EU says his complaint ignores the higher barriers the US imposes on other products, such as pick-up trucks.”

Right. And that recalls what SocGen’s Albert Edwards said in his last note. To wit:

… the widely divergent 10% vs 2.5% tariff rate on autos between the EU and the US may indeed look like an anomaly in favour of the EU, it is nothing compared to the 25% protection US light trucks and pick-ups receive.

In any event, I’m not sure much will come of this, because at the end of the day, it’s not entirely clear that Trump is actually interested in “resolving” these disputes.

Rather, with each passing week it seems like he’s hell-bent on actually reshaping the global trade order.

The problem with that, if you’re flyover America, is precisely what I said it was in my Tuesday column for Dealbreaker – I’ll just leave you with an excerpt from that post:

Over the past six or so months, the burgeoning trade war has presented Trump’s base with something of a paradox. Apparently, reclaiming lost greatness entails being “tough” on trade, but due to the very same globalization of supply chains and markets that Trump claims is hurting America, being “tough” on trade necessarily entails some rather nasty outcomes for the very same Americans whose cause he claims to champion.