europe Markets trade

Trump To Punt Again On EU Car Tariffs As Time Still Not Right To ‘Rid Fifth Avenue of Mercedes’

"The person... cautioned there is always uncertainty" around Trump and tariffs.

Donald Trump will almost surely punt (again) on Wednesday, when a 180-day deadline for deciding whether to move ahead with tariffs on European autos and auto parts expires.

Earlier this year, the Commerce department, in its infinite wisdom, decided that imported cars represent a grave threat to national security. The probe was conducted under Section 232, the same provision the administration used to justify slapping tariffs on steel and aluminum.

In order to defuse the clear and present danger posed by people driving BMWs, Trump told Bob Lighthizer to negotiate with Brussels lest he (Trump) should have to rid Fifth Avenue of Mercedes once and for all (the US president reportedly made a threat along those lines to Emmanuel Macron, as though Mercedes is made in France). Trump has already delayed a decision on the prospective duties once.

According to a person familiar with Trump’s thinking, the White House will probably put the decision off for another six months. “The person… cautioned there is always uncertainty surrounding Trump’s final determination when it comes to trades and tariffs”, Politico reports. “But barring some unforeseen development, the president is expected to announce another six-month delay”.

Although Trump managed to cobble together a skeletal “deal” with Shinzo Abe that effectively ensured Japan would be safe from tariffs on its autos and parts, it’s been clear for months that trade talks with Europe were going nowhere fast. At various intervals, experts have emphasized that even under the most optimistic projections, it will take a year or more to finalize the kind of sweeping trade agreement Trump appears to be angling for.

“We think six months will prove insufficient to negotiate and finalize a comprehensive trade deal, particularly since trade negotiations in the EU follow a set procedure that usually lasts several years”, Goldman warned in June.

(Goldman)

The upshot: Even if things went entirely according to plan, we would still be, at best, two years away from an agreement.

In October, tensions between Washington and Brussels ratcheted higher still when the WTO green-lighted retaliatory measures against $7.5 billion in EU goods per year in conjunction with the long-running Airbus spat. It was the largest arbitration award in WTO history (and came despite Trump’s repeated claims that the organization is “always f—ing” America).

The USTR promptly announced its intention to tax everything from French wine to cheese to whisky to olives, pork, butter and yogurt.

Europe will likely retaliate next year once a parallel dispute involving Boeing is adjudicated.

Holding fire on the auto tariffs will allow Trump to bask in the glory of the nebulous “Phase One” trade deal with China (assuming he actually cements it) without having to worry about whether duties on European cars might have an offsetting negative effect on market sentiment.

And yet, as Politico rather dryly notes, “it would also set the stage for Trump to revisit the controversial trade issue in the throes of next year’s presidential campaign”.

Strategery“.


 

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