“It’s the biggest of all the deals,” said President Donald Trump of the trade deal he reached over the weekend with the European Union. “I think it’s the biggest deal ever made.” It seems like just last week that he crafted “perhaps the largest Deal ever made.” Oh, that’s right. It was last week with Japan. Records are made to be broken.
Both the EU and Japan agreements impose a 15% tariff across the board on imports. In the European deal, most American exports will have a tariff of 0%.
In dollar terms, the EU deal is even more significant, mainly because the 27-member bloc represents America’s largest trading partner, accounting for $605 billion in imports. Whereas Japan agreed to invest $550 billion into the U.S., the EU trumps that with $600 billion, as well as Europe agreeing to buy $750 billion in U.S. energy over three years. That’s critical in terms of undermining Russia’s stranglehold. It also includes European purchases of military equipment, which comes on the heels of the major NATO deal to buy American weapons.
The Wall Street Journal’s editorial board, as it is wont to do this year, poured some cold water on the good news: “Alas, the deal doesn’t appear to address America’s biggest commercial grievances with Europe, such as digital taxes, punitive regulation against U.S. tech firms, and such faux food-safety rules as GMO restrictions and bans on hormone-treated U.S. beef. Nor does it require Europeans to pay more for drugs, one of Mr. Trump’s longstanding complaints. Mr. Trump seems to have abandoned these goals in favor of his beloved tariff, which is a tax increase on American consumers and businesses.”
That last sentence belies the Journal’s real complaint: Don’t do tariffs, ever. For decades, we’ve advocated for free trade as part of the basic conservative approach to free markets. Yet we also realize that other countries do lie, cheat, and steal, and that Trump has a valid complaint when he says America is often getting the short end of the stick. We’re willing to give him a chance with tariffs to see what he can do.
As we’ve previously noted, tariffs aren’t always about trade. They’re often about American security interests with allies and adversaries alike.
“We’ve had a very good relationship over the years,” Trump said of Europe, “but it’s been a very one-sided transaction, very unfair to the United States.”
European Commission President Ursula von der Leyen mostly conceded the point. “It is about rebalancing,” von der Leyen said while she sat with Trump. “You can call it fairness; you can call it rebalancing. We have a surplus, and the United States has a deficit, and we have to rebalance it.”
For what it’s worth, France isn’t happy. Realizing that tariffs will impact critical exports such as wine and makeup, Prime Minister François Bayrou declared it a “dark day.” Though President Emmanuel Macron hasn’t yet commented, he did just agree to recognize a nation of “Palestine,” so there’s that undignified feather in his cap. I’d also expect the French to wave the white flag soon enough.
