This win needs to be sipped slowly for maximum enjoyment.
First, we would draw your attention to May 23rd, when President Trump announced an instruction to Commerce Secretary Wilbur Ross to begin a Section 301 review of the auto industry a week prior to the implementation of the Steel and Aluminum tariffs.
At the time when all media were discussing other ‘matters’ CTH pointed out the strategy that was visible in the Auto-Sector. China, the EU (specifically Germany), and Canada were the strategic trade targets in the approach. About a week later, Canadian Foreign Minister Chrystia Freeland snarkily announced her “sisterhood in trade” with EU Trade Minister Cecilia Malström, and how together they formed a strategy and were going to block President Trump. They were very pleased with themselves (please watch).
Freeland and Prime Minister Justin from Canada, then strategized with Emmanuel from France and Angela from Germany on how they were going to use the G7 to embarrass President Trump on trade conflict issues via the summit; and subsequent use of media press conferences. The entire thing back-fired, bigly. President Trump announced the tariffs would continue until trade reciprocity improved.
It’s been two weeks since the best-laid-scheme was attempted. In the interim, the international audience has watched President Trump’s unrelenting approach toward China.
In the grand-trade-conflict; China is a big fight none of the sideline players would ever attempt. However, the downstream consequence of the international trade team watching intently is their realization that President Trump is not bluffing. You can hear the proverbial gulps from across the Atlantic; and the tremors up North.
Back to May 23rd, 2018, and remember the auto tariff proposal. President Trump has made it clear that he’s more than willing to use reciprocal trade tariffs against all trade partners in getting fair and balanced trade. He ain’t bluffing.
Well, guess what just happened?
Yup, Germany, without consulting with Emmanuel from France, just unilaterally announce the EU is willing to drop all trade tariffs against U.S. auto manufacturers as part of their strategy to fend-off steel, aluminum and crushing auto tariffs.
BERLIN—Germany’s leading auto makers have thrown their support behind the abolition of all import tariffs for cars between the European Union and the U.S. in an effort to find a peaceful solution to the brewing trade war.
The U.S. ambassador to Germany, Richard Grenell, brought the proposal for a broader industry trade pact to the Trump administration on Wednesday, according to people familiar with the situation.
That would mean scrapping the EU’s 10% tax on auto imports from the U.S. and other countries and the 2.5% duty on auto imports in the U.S. As a prerequisite, the Europeans want President Donald Trump’s threat of imposing a 25% border tax on European auto imports off the table.
[…] A French official said Paris was unaware of the proposal, and it wasn’t discussed during a recent summit between French President Emmanuel Macron and German Chancellor Angela Merkel in Meseberg, Germany. (Read more)
Too damned funny.
Don’t overlook Angela Merkel making this announcement without consulting with Emmanuel Macron. The German auto-sector is vital to the German economy. Lose the support of the auto industry in Germany and Chancellor Merkel is toast.
Chancellor Merkel controls mini-brie Macron.
Emmanuel gets no respect (LOL).
What comes next?
How about the knee from Ms. Freeland’s “sister in trade“, Cecilia Malström:
WELLINGTON (Reuters) – The European Union is ready to engage with the United States to solve a trade row triggered by Washington’s decision to impose metal impose tariffs, E.U. Trade Commissioner Cecilia Malmstrom said on Thursday.
“We are always open to talk with the U.S. The whole EU is based on the idea that we talk,” she told a seminar. She described the tariffs as “illegal” as they contravened World Trade Organization (WTO) rules. She also said the WTO needs rules to address China’s subsidies and dumping of its goods in markets.
Oh, that winnamin is extra tasty….
The EU is now leaving Canada naked to the trade monster that is the indefatigable Trump. TTFN, it’s every snobby economic minister for themselves.
We must look at that video of Freeland again; just to savor the smugness of it all.
Ha,.. Ha,… Ha… stop, yer killin’ me.
Oh the winnamin. Perfect.
Now, the EU -Germany specifically- might seem like they are attempting to gain some leverage equity here; but really they don’t get any. U.S. automakers gain no short-term benefit from the EU dropping restrictive trade tariffs because Ford, and GM were forced to open plants in the EU to sell vehicles (prior best interests). The benefit to dropping the 10% tariff on American autos is really non-existent; it’s the threat of the 25% Trump tariff on German autos that has the entire sector panicked.
Jaw agape Merkel never thought vulgarian Trump would ever follow through on the 25% auto tariff, until she just saw Trump go from $50 billion against China to the whopping $200 billion tariff he just announced.
When you plant your tree in another man’s orchard, you might end up paying for your own apples; it’s a risk you take…
Gadzooks, that,…. that…. that Trump, he’s serious.
However, as mentioned, there’s no gained leverage for Germany in putting dropped tariffs on U.S. autos on the table. Almost all of the benefit is on the EU side of that proposal; and U.S. auto workers won’t gain. Fraulein Merkel better quickly start adding to her NATO defense funding and reconsider her opposition to the Iran deal withdrawal.
Commerce Secretary Wilbur Ross is the one handling the EU trade discussion; while Lighthizer and Navarro focus on NAFTA (all three involved in China). It is going to take much more equity on the table from the EU side for Secretary Ross to take a deal.
Hilariously, in response to Merkel’s proclaiming a zero tariff proposal; the CEO of Volvo, a Swedish brand owned by the Chinese, is well positioned to benefit because Volvo are about to launch production inside the U.S. with plans of export to the EU. Conversely, on the losing side, GM shifted to making cars in China (Buick Encore), and Trump is nailing them with a 25% tariff.
All foreign automakers with limited U.S. operations are seriously concerned that Trump’s auto tariff threats will hurt their sales and profits, and the only way to avoid losing market share is to shift production investment into the U.S; or back into the U.S.
Back to Canada, and the ill-fated, now back-fired, scheme of Justin and Chrystia; standing naked and alone, as the reality of national economic interests has their former anti-Trump trade allies headed for the exits to save their industries.
Yikes, amid all of Canada’s uppity antagonism and demands for gender equity in NAFTA trade negotiations now they’re seriously exposed and more vulnerable than ever to Godzilla Trump and his “killers’. The sight of a grinning Robert Lighthizer demands another slowly savored winnamin…. delicious.
Yup, the Canadian reality is beginning to sink in.
Stay With It:
What Canadians are only just beginning to realize is that Trump doesn’t bluff; he really means this stuff… Trade equity is part of President Trump’s DNA profile.
So we should keep an eye on Justin and Chrystia… My guess is, given the political stunt the Canadian duo just pulled at the G7 – President Trump is not inclined to take the lumps out of this one. It is increasingly likely that POTUS might quietly remove those 1 million imported Canadian autos from their manufacturing base and deliver them to Michigan, Pennsylvania and Ohio.
Actions have consequences.
Leverage; he is the master at it.