Another victory for Trump they can’t hide

Nick Hubble

The trade negotiations between Donald Trump and Claude-Jean Juncker apparently got off to an interesting start: “If you want to be stupid, I can be stupid as well,” Juncker supposedly told Trump.

This is exactly what Trump had hoped for. Juncker fooled himself into being pragmatic. That’s a break with EU policy, which had been to oppose Trump on principle. “We won’t negotiate with a gun to our heads” said French President Emmanuel Macron, his finance minister and the German foreign Mminister on separate occasions.

But being pragmatic opens you to being persuaded by arguments. Including those coming out the end of a gun.

The rest of the EU was shocked by where this new-found pragmatism led Juncker. The Telegraph’s Brussels correspondent wrote there will be “howls of protest” in the European Parliament.

But what’s the deal? The Wall Street Journal explains:

Mr. Trump said the U.S. and the EU had agreed to “work together toward zero tariffs, zero non-tariff barriers and zero subsidies on non auto-industrial goods.”

He said the EU had agreed “almost immediately” begin buying more U.S. soybeans and that the European bloc had agreed to increase LNG exports from the U.S. The EU will be a “massive buyer” of LNG, Mr. Trump said.

Instead of taking a principled and rule-based stand against Trump, the EU’s man handed the Americans an impressive victory. Trump got what he came for, and he didn’t even have to leave the White House to do it.

The Trump-hating mainstream media has since done its best to cover this up. But it had to resort to a bizarre narrative to do it.

Journalists claim Trump is giving in to the EU because he’s under pressure in the US. Big business and farmers are both complaining about his tariffs. So at the meeting with Juncker, Trump gave up on those tariffs.

This is hilarious. The idea that Trump responds to such pressure is ridiculous. Just look at how much more his other policies upset all and sundry. Until they worked…

Which is exactly what’s actually going on here. Trump’s actions are completely consistent with his rhetoric and aims. He hasn’t backtracked or flip-flopped. He’s merely used basic negotiation tactics. And succeeded.

As Nigel Farage put it, “I would say that Donald Trump has achieved more in one day of trade negotiations [with the EU] than Theresa May has in two years.” If only May would follow the same technique, Farage laments.

Trump’s tariff threats are what sent Junker to the US, just as his military threats triggered a change of heart in North Korea.

The deal with the EU, like the deal with North Korea, is a success in Trump’s book. The inability of the media to see this is driven by their inability to see Trump’s aims in the first place. They think Trump is against trade, just as they thought he was a warmonger. But he isn’t either, as he has made clear many times. He’s in favour of free trade, with the prerequisite of this being reciprocal.

The argument is not about free trade. The argument is purely about how to get there, and how to make it reciprocal. The media and mainstream assume it’s a straightforward path. You just negotiate a trade deal.

In Trump’s view, this hasn’t worked. The US is being taken advantage of. Instead, giving the likes of Europe and China a taste of their own anti-trade medicine is the best way of getting those places to lower trade barriers and subsidies.

This is what allows the media to characterise Trump as being anti-trade. And as having backed down by cancelling tariffs. Both are wrong.

Trump is being aggressive in order to negotiate a trade deal from a position of strength and to trigger a breakthrough. When it comes to lowering tariffs, you’ve got to have some in order for each side to lower theirs together.

The idea that success lies in second order effects is something the mainstream media has always struggled with. But second-order effects are always the key.

If you invade Syria, Iraq or Afghanistan, you may defeat whoever holds power there. But what happens next? What are the second-order effects?

A refugee crisis which enables terrorism in central Europe. And terrorist hotbeds in the Middle East.

The second-order effects of banning alcohol are well understood. But we still ban drugs in the hope the first-order effects will get them off the street.

Back to Trump’s trade wars. If the second-order effect of threatening a trade war is a negotiation of free trade, and that is Trump’s aim, his actions make perfect sense. And the agreement with the EU is a flimsy sign that it’s working already.

But it is flimsy. At least that is a valid criticism of Trump’s deal with Juncker.

You might remember the same accusations of Trump’s deal with North Korea though. That it was hollow, non-binding, flimsy, and wouldn’t hold. Things appear to be going well there, as sceptical as I may be.

Of course, if you use Trump’s negotiating technique, the threat has to be credible. Or actually playing out. Trump understands this. As does Vladimir Putin, but that’s another story. They’re probably the only world leaders who can pull it off thanks to the wacky reputation that the media helps to portray.

Farage has been pointing out why Trump’s negotiating tactics work so well with the EU. They fear what he might do.

Theresa May’s version of this same negotiating technique was to declare “no deal is better than a bad deal”. But all her actions since proved she believes otherwise.

That’s why Trump told her to sue the EU. To make her threat credible. And then watch the EU’s leadership fly to London to do a deal.

Trump’s critics fool themselves, but no one else

Let’s take a closer look at the second part of the deal Trump made with Juncker. The Financial Times argues that this particular aspect of Trump’s victory is hollow too.

Trump proudly claims the EU has agreed to import American soybeans and natural gas. But “The EU itself is a buyer of neither soyabeans nor natural gas,” writes the FT. It’s just a political institution.

So ha! Trump is wrong! His victory is a promise to buy from someone who doesn’t buy! What an idiot. He really fell for it…

This is an incredibly dishonest argument. Clearly the meaning of Trump’s claim is that the EU will not prevent the importation of soybeans or gas by imposing tariffs or favouring other import sources.

The Telegraph uses the same wording as Trump: “The EU already buys 30 million tons of soybeans”. A penny for every time the FT has made use of the same phrasing…

Playing word games like this is pathetic journalism.

But the FT is of course technically correct. It’s the EU’s private businesses that import and export. And they already buy more than 30 million tonnes of soybeans a year. All the EU has done is promise to keep their tariffs on US soybeans at the level they’re already at – 0.

So Trump is clearly an idiot after all, right? He’s touting an achievement that hasn’t actually changed anything. How can you claim victory when the enemy merely promises not to change anything?

Again, this is an incredibly dishonest portrayal. The Telegraph gives away how misleading the FS’ argument is: “[…] the joint promise not to impose fresh tariffs spares farmers from expected EU tariffs on soybeans which would have followed measures against the European car industry.”

Trump is touting his success in avoiding the EU’s retaliation, while getting the EU to lower their tariffs and subsidies. It’s an extraordinary success. A victory without concessions from or costs for the US. Touting the lack of tariffs is perfectly valid when paired with an agreement to cut tariffs in the future.

Attempts by the media to manipulate this by only discussing a specific segment of the deal in isolation are only harming their own credibility. It’s the deal as a whole that counts. The net compromise.

What about gas? Well, the EU is reliant on Russian gas. US gas would be far more expensive. And the infrastructure doesn’t exist to import it. So, once again, Trump looks like an idiot. He’s accepted a promise from an EU politician, who has no actual say in whether EU businesses import the gas in the end, and it can’t be imported anyway.

Not so fast. Gas is well within the political sphere of decision making. What Trump has done is clear the way for Russian sanctions to take hold in Europe by providing an alternative supply source. That’s a major coup for American influence in north-eastern Europe writes the Telegraph: “Baltic countries, which faced shortages after Russia turned off the supplies, will welcome US-flagged ships arriving on their shores and under Mr Putin’s nose.”

The German media’s news exposes the mainstream’s ridicule of Trump on the import infrastructure. Translating from Der Spiegel, “there will be a new gas import terminal at the Elbe river. The project won’t make money for a few years. But it was wanted politically. Germany could become less reliant on Russian gas as a result.”

The Telegraph explained it too: “As for LNG, the truth is the EU, which is hugely dependent on Russian gas, is already investing in infrastructure to take in LNG shipments because it wants to diversify its energy suppliers.”

Again, the mainstream media’s criticism of Trump is deliberately misleading.

What actually happened is clear. Trump has managed to force a trade renegotiation with the EU, an impressive concession from the EU.

To do this, Trump threatened tariffs until the EU gave in and came to the negotiating table. But thanks to the new deal, the costs which Trump’s critics foresaw from the threatened tariffs are not playing out. The EU and the US have stepped back from their threats to impose tariffs, leaving the key change the EU’s concession to negotiate a cut in tariffs – precisely what Trump set out to do.

Instead of celebrating the efficacy of Trump’s negotiating tactic, critics criticise him for pointing this out as a victory because it was the previous state of affairs already.

But that’s the whole point. Trump avoided the costs he was lambasted for, and delivered the breakthrough in trade that he promised his voters.

Can you imagine if we’d hired him to negotiate Brexit?

Until next time,

Nick Hubble
Capital & Conflict

Category: Economics

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