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Trade War Re-Erupts in London

Foreign Policy reports U.S.-Europe Trade War Re-Erupts in London

Relations between the United States and its oldest ally, France, were dealt a one-two punch Tuesday after U.S. President Donald Trump lambasted French President Emmanuel Macron for his “very, very nasty” comments about NATO only hours after the Trump administration threatened big tariffs on billions of dollars’ worth of prestige French exports.

And as ugly as the war of words over NATO was at the summit in London, the fight over trade could go on even longer, with Trump reacting harshly to Macron’s imposition of a digital services tax that will hit big U.S. tech firms like Google and Amazon.

The Trump administration late Monday released the findings of its investigation into the French law and found that it is “unreasonable, discriminatory, and burdens U.S. commerce.” France argues that the law, which also affects European and Chinese firms, isn’t meant to target U.S. tech giants.

In response, the administration drew up a list of $2.4 billion worth of high-end French exports—from Gruyere cheese to handbags to champagne—that could be hit with tariffs of up to 100 percent by early next year in retaliation.

Digital Tax Tweet

This feud goes back to August and this Trump Tweet.

Proper Response

Tariffs? Forget About It.

Wall Street Journal writer James Freeman discusses the opportunity in Where’s a Trump Tweet When We Need It?

Rather than punishing U.S. consumers, Mr. Trump should consider spending more time belittling French policy makers. Step one is to explain why the United States creates great technology companies and France doesn’t.

According to Forbes magazine, the two richest people in the world are U.S. technology entrepreneurs. And there are five more American founders of digital enterprises in the top 15. Meanwhile, the richest people in France create lovely handbags.

Surely there’s some fun to be had at Mr. Macron’s expense, while reminding both American and French entrepreneurs that the U.S. is a better place to do business.

A better retaliation than raising costs on U.S. consumers would be for the President to announce upon his return home that the United States is raising the number of visas available to French tech workers. Recruiting France’s most talented people and allowing them to invent and live well in the U.S. is the best revenge.

Perfect Solution

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Freeman comes up with the perfect solution: Mock France - Invite the French Over.

Instead, Trump is on a fool's mission of hiking tariffs. The "Tariff Man" is on a tariff binge.

Mission Impossible

Trump is also worried about IP theft. But if US businesses don't care enough to stop doing business in China, nothing will change.

Besides, It's Mission Impossible Fight to Stop Theft of Ideas in the first place.

Michael Pettis at China Financial Markets also has the correct idea:

"The great strength of the US is its restless and at times uncomfortable creativity and innovation, driven by a complex set of legal, financial, political, cultural, educational and other institutions that few countries have been able to match, and which is why foreigners come to the US to create the billion-dollar companies that they cannot anywhere else. The US didn’t get rich by preventing the spread of technology but rather by staying ahead of it."

US Technology

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The US has the top four IP spots globally and 7 of the top 12. Germany is the lone EU entry at spot 12.

Q. Why is that?

A: The US has the largest, most open, capital markets in the world. Google, Apple, and Microsoft could not exist in the EU because the EU would bust them up in the name of competition.

Open for Business!

Instead of whining or retaliating with foolish taxes on French wine, make like China. Invite the best French innovators we can find to the US.

Mike "Mish" Shedlock