Comment by ben_w
1 month ago
It will take a lot to shift that trade dynamic, but the current US administration seems quite energetic about rapidly tearing down Chesterton's Fences that it doesn't understand nor want to spend the time to understand, so I'd not bet on this remaining so even for the next 3 years.
And yes, I do understand how utterly bonkers it is to suggest something this big changing over just 3 years.
That trade dynamic isn’t going to shift unless the EU becomes a lot more insular.
The War in Ukraine is dampening trade with Russia. The EU is struggling in their trade relations with the PRC even more than with America right now, and fears them more than they fear us. A trade deal (“Mercosur”) with South America is in the process of potentially blowing up, and if it’s not passed in its current state, Brazil is looking to walk for the remainder of their President’s term in office.
So the EU’s options are limited.
> So the EU’s options are limited.
Part of the issue if that as you move up the value chain your list of potential trading partners shrinks, as lower-income partners aren't viable.
Look at GDP per capita (I picked nominal, for export consumption purposes): https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nomi...
Europe's options for high-value exports at scale are... who?
Europe's options for high-value exports at scale are...
each other. Intracontinental trade has always been a large part of Europe's wealth.
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... and if you look at history you will find this situation, no viable export partners, is the norm and not the exception.
Although I would add that what makes good export partners is not GDP directly, but changes in GDP and that mostly comes from changes in the debt levels of these countries. So, ironically the Russian threat, and the EU debt increase in response to it, can probably be expected to raise the GDP of EU countries by 2-3% or so. So EU-US trade should actually increase, tariffs or no tariffs. Besides, tariffs are a tax on the poor, and it's not the poor importing stuff (just ask the poor in the EU how it's been going). US basic needs manufacturers, like farms, are the ones that are going to lose big, and keep losing big, due to tariffs. Oh, and the poor, of course. I'm sure Trump will make some of his typical eloquent remarks about the poor needing to lose weight and spend less on children.
By contrast, the US will need to do it's very best to not reduce public debt or really increase interest rates they're paying in the next year and a half. Not because of Trump's intentions but because of how he scheduled the massive debt increase last time he was in office. The way he was probably actually fucked by Biden, you know what he was screaming about for years, is that he put a $10 trillion dollar refinancing requirement for the US in for 2025-2026-2027 that he expected to fuck up his successor. Then Biden "stole" most of the good part of Trumps debt increase: the decrease in debt repayments for the US government 2016-2020 ... and delivered the refinancing disaster right back ... to Trump.
That was Trump's financial plan: massive debt increase in 2017, scheduled to come due (require refinancing) ... 8 years later. "Apres-nous le deluge" I believe this principle is called. So Trump's plan was 2017-2021: lots of debt repayment paid by massively increasing US debt, including refinancing debt due in 2021-2025. then 2021-2025, spend the extra income, knowing the bill isn't due until 2025-2029. Then, Biden got to spend the 2021-2025 money ... and send the bill to Trump. Like is often said when it comes to Trump's supposed brilliance: "ooops...".
Probably Trump expected to be out of the office at the start of 2025 and just leave his successor with a massive and difficult refinancing ... and Biden and democrats dropped that hot iron right back into Trump's lap.
So Trump introduced a massive new tax, which of course won't cover the sums he needs. He will raise taxes further.
The EU certainly has limited options, I agree about that.
The problem I see is the risks are not under the EU's control. We may face becoming much more insular regardless of what any of us ourselves actually want.
Trump is behaving in a manner not consistent with EU nations retaining indepdendence and sovreignty. And also betting the future of USA on economic development plans (and military plans) that do not seem realistic.
The insular part was a very small, maybe too subtle of, joke.
That’s also not a viable option for the EU, or more specifically: the constituent nations of the EU. They’re as dependent on trade as we are, maybe even more so, and so we are stuck in this relationship where we constantly piss each other off in various ways, and believe me when I say it goes both ways.
Technically the biggest blow to the US-Europe trade relationship came from the Biden administration. The IRA was naked attempt at pulling European companies from Europe and push them to invest in the US instead.
Trump policies look extreme because tariffs are often seen as crude and outdated but it's very much a continuation of economic hostility rather than a novelty.
I don't believe this is possible, even at Trump speed. It's much easier to wreck NATO than to reshape the world economy to that extent.
Indeed, but it's not impossible for him to simply wreck the economy faster than it can be correctly reshaped.
Boris Johnson: Hold my pint.
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I didn't believe Brexit would happen either, until it did.