Donald Trump’s so over it.
By “it,” I mean recalcitrance in Brussels, where EU officials aren’t demonstrating the kind of deference Trump expects in trade negotiations.
Minutes after threatening to slap 25% (or higher) tariffs on iPhones unless Tim Cook commits to making them in America, Trump suggested he’ll impose “a straight 50%” levy on all imports from the EU starting June 1.
It wasn’t clear whether that’d be in addition to auto tariffs or if “straight” means everything’s taxed at a flat 50%, from wine to cheese to clothes to BMWs.
He repeated the (false) claim that the EU’s “primary purpose” for existing is to bamboozle America on trade. Trump seemed vexed by the complexity of the issues. He complained about “powerful” barriers, “corporate penalties,” the VAT, lawsuits against US companies (some of which are mirrored in America) and what he called “monetary manipulations.”
The Europeans, Trump seethed, have “been very difficult to deal with” and so far anyway, the administration’s discussions with them “are going nowhere!” Apparently, Europe’s immune to the “art of the deal.”
To call this a joke would be generous. Trump’s brave now that US equities have largely retraced losses, and he probably thinks that by advancing the tax bill on Capitol Hill, he has some leeway to dial up the trade tension again.
Trump does this. He always has. He thinks higher stocks are a green light to push various envelopes.
Two things. First, the bond market’s had enough. Long-end US yields were lower on Friday, but for fiscal hawks, the tax bill’s the last straw. There’s blood in the water and the vigilantes smell it. Trump’s actions and behavior have eroded at least some of Treasurys’ safe haven appeal. If he resumes the trade war, there’s no guarantee that any accompanying risk-off impetus in markets will manifest as a bid for Treasurys. It could manifest as the opposite.
Second, this latest threat only underscores the perception that Trump’s too mercurial to be trusted. He’d argue the EU’s negotiating in bad faith, and maybe he’d be right, but the fact is, other nations will see in Friday’s threat what can, and probably will, happen to them if they don’t acquiesce to his demands.
No one enjoys being bullied and extorted. Maybe the strong-arm tactics can work with Taiwan and South Korea, but the EU’s a horse of a different color. So’s China. So’s Canada.
I’ve mentioned this before, and I’ll say it again: Trump likes to believe the only countries who count are the US, Russia and China. But that’s simply not true. Other countries have agency, and if he’s not willing to behave like a rational person, let alone a statesmen, some of those countries are going to call his bluff, which is to say tell him to piss off. That’s what China did, and what happened? He folded.
Trump surrendered a lot of leverage over the past two months. Having seen China stare him down, other countries may well decide to do the same. That’s the thing about maximalist positions: There’s a fine line between maximalist and unrealistic. A maximalist position is one that your counterparty could agree to at least in theory, even if they won’t in practice. An unrealistic position is… well, “Either you become the 51st state, or I destroy your domestic auto industry.”
If you don’t respect the line between maximalist and unrealistic, you lose leverage at the negotiating table instead of gaining it. Because no one can take you seriously even if they want to.
Maybe Trump’s 50% EU tariff threat will get things moving on a negotiated deal with Brussels, maybe it won’t. But this is self-evidently — unavoidably — stupid. And that’s the way markets are going to view it.
If the EU holds out, don’t be surprised if Trump brings up NATO or otherwise alludes to reneging on America’s mutual defense commitments, both explicit and implicit. At some point, overt threats of physical violence (either by the US or with the US’s tacit blessing) are all he’ll have left, and if he goes there, there really will be an international buyers’ strike for US assets.
I’m not sure why this hit me just this morning, but by all appearances and actions, Trump actually despises the United States. There’s nothing about the US he likes except it’s wealth and power. Which he is going about squandering at every opportunity. At times I feel like my country is already in the dustbin of history and a portrait of Jefferson Davis will be above every mantle from Sea to Shining Sea. Another thought I had right behind this one, is that it is no wonder Democracy is a failure. Half of the people are below iq90 and the another half are genetically authoritarian. It’s amazing we made it this far…
Well said. The sentiment is shared.
The problem seems to be a lack of democracy as the issue is one person wielding enormous power.
Yes, amazing.
Yes, well said. He has never been respected by anyone in his life. No one will support his businesses any longer. He doesn’t pay his debts. He doesn’t accept responsibility for anything. His daddy didn’t really like him, neither have any of his wives or business associates. All of his actions are aimed at hurting those who won’t bow to his whims. He is on a massive revenge trip to hurt all the people he can. He’s a white supremacist and an antisemite (much like Nixon) and all his actions are intended prove he is superior to everyone else. You couldn’t make up a better anti-hero if you tried.
To borrow a line from The Hunt for Red October: “This business will get out of control. It will get out of control, and we’ll be lucky to live through it.”
Every single day that Trump is president is a day where China looks like the best alternative for everyone else. There is literally an article in the Economist about how influencers are making China look cool. Since we’re dead set on fulfilling our empiric fall and decline, I guess everyone needs to start learning mandarin.
Can’t even let his 90 day pause play out. Emotional, impulsive, erratic, unreliable, fundamentally weak, and not here for long, is how peer powers see him.
Trump/advisers think the US has all the leverage, possessed of the largest consumer spending market ($18TR US vs $10TR EU vs $7TR China) and one of the lowest trade to GDP ratios.
If Trump’s other policies/behavior weren’t so unpopular, his fiscal policies so reckless, and his power so vulnerable (in the medium term) to market and consumer verdict, and if he wasn’t so out of his depth in international deal-making, he would be much better able to use that leverage.
“and not here for long”
Unfortunately there’s a Jr in the maga wings.
Did this dude get called by the market today?
Is this kid on the way to being exposed as a paper tiger?
He’s only been in office 4+ months. It’s exhausting! What will be left of our country after 3 1/2 more years of this sh!tshow?
Mercurial is a polite term. Totally demented is more apt.
Trump says the US trade deficit with EU is $250BN, but that is only the goods deficit. Including the services surplus, the US trade deficit with EU is only about $100BN (-ish, from 2023 BEA data) or about EUR 50BN (-sh, 2023 EU data).
I’m not a religious person at all. I don’t know what lies above or below us. That said, for someone who isn’t a “believer”, the only description I can come up for Trump is devil incarnate. This guy is wearing me out. The markets are becoming untradeable with this guy in office. Of course he feels emboldened to pick tariff fights again with stocks back around liberation day levels. Good thing most traders were already at the beach this morning or the trading day could have been worse.
Non-woke cis-tariffs gonna make us all rich!
No apparent follow through on this thunderbolt. Maybe this is simply an exercise in monetizing the power of market manipulation.