Please consider Juncker’s Trade Pitch to Trump: ‘I Can Be Stupid, as Well’.
Once Mr. Juncker entered the Oval Office, it was clear Mr. Trump was in a mood to negotiate, said a senior European Union official who was present.
Mr. Juncker grabbed the opportunity to argue that both sides need to refrain from further punitive tariffs or they would foolishly harm themselves.
“If you want to be stupid,” he told Mr. Trump, “I can be stupid, as well.”
Backing up his points, Mr. Juncker flipped through more than a dozen colorful cue cards with simplified explainers, the senior EU official said. Each card had at most three figures about a specific topic, such as trade in cars or standards for medical devices.
“We knew this wasn’t an academic seminar,” the EU official said. “It had to be very simple.”
What Happened?
In a nutshell, Trump backed down.
Why?
My assessment yesterday was accurate: Trump was feeling the heat from Republican senators and all automakers.
For details, please see Trump and Juncker Supposedly Agree to Trade Deal: Lies All Around.
- My lead-in: “Color me skeptical as to how long this lasts and what happens next.”
- Middle quote 1: “It will take the EU and the US a decade to work out a real agreement. Juncker by himself cannot promise anything. All 27 nations in the EU have to ratify trade deals.”
- Middle quote 2: “So, is Juncker lying today or was he lying two days ago? The US is not going to supply the EU with LNG. That is a direct and blatant lie by Trump. The EU will get natural gas from Russia via Nordstream2. US LNG would be far more costly. So there are lies all around.”
- My conclusion: “With 35 companies and organizations bitching about Trump’s inane tariffs, this is best viewed as either a reversal by Trump or a political stunt that accomplishes nothing. Obvious lies aside, it is a good thing to deescalate trade war talk.”
Eurointelligence Comments
Eurointelligence commented early this morning echoing what I stated yesterday.
We are not sure that the EU can deliver what Juncker promised, and a different interpretation of what was agreed emerged almost immediately.
One of the reasons for Trump’s apparent U-turn may have been yesterday’s profit warnings from US car makers due to tariffs on steel and aluminium.
The big question is whether this is for real or whether, as the FT put it, this only constitutes a ceasefire in a trade war. It is not clear whether he was simply looking for an opportunity to declare victory and move on, or whether he will return to this issue. While the EU thought it agreed to include talks to open up the EU market to US agricultural goods, Trump interpreted the result in a way that could set the EU up for failure. “Soybeans is a big deal. And the European Union is going to start, almost immediately, to buy a lot of soybeans — they’re a tremendous market — buy a lot of soybeans from our farmers in the Midwest, primarily. So I thank you for that, Jean-Claude.” [Mish Comment: Juncker cannot agree to that. It’s a lie, as is LNG]
Die Welt asks why cars are excluded from this agreement, especially given Trump’s obsession with them. The answer is that it is politically easier for both sides to agree to drop tariffs on general industrial goods than on cars. It is quite possible that the US and the EU might end up with a broad package of measures to liberalise trade, as well as higher US tariffs on imported cars. Before the meeting, the Washington Post quoted sources close to Trump as saying that the president was ready to impose a 25% tariff on all car imports – about $200bn worth. This issue is clearly not off the table.
We agree with the conclusion of the article – that it is too early to be relaxed about US/EU trade relations, but the agreement yesterday should nevertheless be regarded as an encouraging sign.
We need to watch out for reactions from France in particular. The Germans naturally welcomed it. We are not sure the French will be happy.
And finally, we are in full agreement with Adam Tooze, who makes the point in an article in the New York Times that the EU is not right about trade just because Trump is wrong. They are both wrong. He sees the real issue as Europe’s obsession with competitiveness.
Answer Already?
TRUMP RETAINS LEVERAGE TO IMPOSE TARIFFS IF U.S. AND EU CANNOT COME TO A DEAL; EU NEEDS TO OPEN TO MORE U.S. AUTO EXPORTS: RTRS
— zerohedge (@zerohedge) July 26, 2018
Trade Negotiation Strategy Explained
Sadly, this is what’s become of trade negotiation policy: Anything you can do, I can do stupider. I can do anything stupider than you.
Related Articles
- Trade War Casualty List: 35 Companies and Organizations Complain
- My assessment that a Tariff Backlash Could Cost Republicans the Senate is clearly in play.
Mike “Mish” Shedlock
Either way Trump wins. The key here that everyone missed is that the EU will join the US in targeting Chinese currency manipulate, unfair trade and intellectual property rights. Trump could have asked outright for the Europeans to join him in his trade war with the Chinese but the Europeans are wishy washy as a wet noodle. After this conversation with Trump, Juncker walked away with a strategy “that its better to join the US against a China target than to continue Trumps targeted focus on European trade. If the Europeans go wet noodle either on China or on lowering European tariffs then they know they will only be waving the red cape in front of the bull and make themselves a target again. So its a win for Trump. Its not a clear win just like the European guarantees to meet 2% NATO commitments aren’t targeted any earlier than 2024 which is after a Trump 2nd term. They aren’t clear wins but sometimes you have to get commitment and then build on it.
How do you know Trump backed down? This is the art of the deal – get more than what you started with while making others think you “backed down”.
Even with the hatred of Trump expresses daily by Hollywood, the MSM, and the “free traders” who benefit from the current Globalization of trade, at least he is an elected official, Juncker “when its important, you have to lie” is an appointed official representing the EU of 400 million citizens. With a drinking problem to boot. The cue cards were most likely for him instead of Trump.
Good luck trying to scare the EU into doing anything quickly. Its Byzantine decision-making processes mean it takes years to get anything negotiated, because all 27 member states have to agree unanimously. Just see how 10 years after the GFC it still has no solution to the problems of Greece or Italy.
The coming sovereign debt crisis will “scare” the EU, and as we know, govt never acts proactively or admits its mistakes.
There is ‘no solution to the problems of Greece’ because the EU, or specifically the EuroZone, are not prepared to face reality. Merkel can’t turn around to her voters and tell the truth – ‘Right lads, all those billions we lent Greece are lost, never to be seen again’. That’s reality.
Somehow they fudge whatever needs fudging. Even Italy. Remember it’s all based on the distilled capabilities of the best in breed of everything manipulative and controlling. Straight out of the playbook of Hitler’s finest.
Just having full ratification across all territories is a barrier to entry. Sorry, but you are wasting your time. The EU only reacts to existential crises. Create one of those and you stand a chance else get lost in a foggy labyrinth of BS.
Trump is not always wrong. Equalise tariffs where it makes sense and then the EU will start to work towards solutions.
Juncker can NOT agree to soybeans or LNG for the EU (28 countries at the moment, more looking to join, each Country’s parliament having to ratify most EU deals) but in my opinion it is likely that Juncker has been talking with Merkel and Macron beforehand and Merkel and Macron have given Juncker a commitment of things he could promise to Trump.
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Then INDIVIDUAL countries like Germany and France will buy LNG and soybeans etc. from USA.
Also since Merkel stil is the “boss of bosses” in EU she will most likely tell other smaller countries “It would help Germany and EU if you would buy LNG and soybeans etc. from USA, you want to help and be a real European, right?” and many countries will also do that)
If they stick to the rules I don’t think any country in the EU can act in a trade deal of any sort solo. It needs full OK of the 28. Buy above market price may be OK, but no individual deals that offer an advantage others in the 28 can’t access at the same time. If this is correct what “stupidity” is it to pay over market price for LNG or Soybeans?
The body language didn’t look too good to me. There’s more going on than we can know. Snide remarks about Trumps intellect also sound like he is being Nannied by the Eurocrats. Same attitude to all USA imho. You Anglo-saxons have a lot to learn from the French.
Learn it or be taught via coloured cards delivered by a drunk who ran Luxembourg. It would be funny if it wasn’t so tragic. US President dealing with Junker as an equal. Sorry state of affairs indeed.
One last thing, moves for the EU to police the internet too. Wait & see.
Sovereignty no longer exists, official. That is the thinking in Brussels. Old ideas of sovereignty are dead and they are the first to recognise it and everyone else is backwards looking, UK, USA etc.
Treat the EU as if it is the New Soviet Union with fewer nukes. Even Gorbachev thought it was that way. It’s a good way to think of it as it then becomes easier to understand. A free market US approach is an anathema to them and Trump.
Unfortunately the US doesn’t have leadership able to come to terms with this reality and bend it to US benefit. The US will become more like the EU in order to access EU markets. Their approach will spread like a virus. That is how the system is designed.
GOOD LUCK US FARMERS. EU wants to force the world to do things their way.
Sad to say, EU bureaucracy and statism will win.
This is a nail in the coffin of the US as the world’s big dog, irrespective of who your President is.
Socialist, statist EU will beat the US in trade and use non-trade barriers and French derived standards to prevent US exports to Europe whilst the US remains open and further in debt to defend Europe and afford EU boondogles.
It will be so until there is a massive debt crash.
So, lets then all cheer on, and do our best to speed up, amplify and make as massive as possible, the debt crash. Gold at $22/oz as of yesterday is the target. The closer the faster, the better. Now, let’s get crackin’ !
Junker and Trump are a reflection of the choices available to democracy. These days it is a special class of ignorant elitists that gravitate toward government. Maybe we need an electoral system that votes for candidates selected at random from the general public, like jury duty. Governments run by people living in a privileged parallel reality are as useless as no government at all.
More like, Infinitely worse than no government at all…
Keep government properly restrained, and they aren’t so bad. Irrespective of whichever voodoo ritual happens to be the currently en vogue means of determining who gets to be part of it.
Washington supposedly had a $7mill budget for the year. No standing army. No means of printing himself richer by just debasing those he ostensibly “served.” And a population armed to realistically resist attempts by Washington to increase his $7mill allotment by all that much. Keep Trump similarly restrained, and I have no doubt his government wouldn’t be all that bad, either.
What early America demonstrated, was that it is the size, extension and lack of institutional restraint on government that leads to the totalitarianism we have today. Not whether power is nominally distributed by strange women in ponds handing out swords; or by equally strange, more thoroughly indoctrinated, peons in booths, dimpling chads.
Government that CAN grow larger, WILL grow larger. The guys making the rules, will always and everywhere make ones that benefit themselves first. And second, that benefits those most able to get them reelected. Resulting in growth of government, and increased wealth and prestige redistribution, towards the well connected. Away hence, by necessity, away from everyone else.
Which is why the next Great Leader will never materialize. No matter how Bolivarian he claims to be, or how “tough” he manages to sound when spouting banalities on TV shows.
A Great Leader of a country, is simply someone who doesn’t lead much. Who abrogates pretty much all his power. And that of all those around him. While leaving others maximum freedom to simply and cheaply route around whatever programs he does institute, if they don’t agree with them. Since he knows the one and only way to judge whether the programs are good or not, is to see whether people voluntarily agree to participate in them or not.
Has no-one ever been involved in a real-world multi-party negotiation? This is a long game — a very long game — and there are too many amateurs trying to call the final score while the first inning is in progress.
Something to ponder: Who is the real target? The EU agrees to take more soy beans. But China just put tariffs on soy beans (as part of their long-running trade war against the US). But but China needs those soy beans to feed its population. But but but now those soy beans will be going to another market, and China could find itself in deep do-do. Those who get their “news” from the myopic anti-Trumpers at the NYT are likely to make some very bad financial decisions over the next few years of continuing negotiations.
The EU won’t do a god damn thing with Soybeans as a result of this. China’s SOEs may react but EU importers are price dependent. Zero gain to Trump.
China needs soybeans and there is NO extra soybean production capacity in the world so either China needs to import the soybeans from USA tariffing them which leads to price increases on food in China which leads to Chinese people being mad at their government which leads to social unrest in Chinese economy already teetering on the brink.
OR
China needs to import soybeans from elsewhere with NO tariff while EU will consume US soybeans.
I am betting part of the soybeans USA will be selling to EU will end up in China because soybean demand in China is massive…
Everyone can save face:
-China gets soybeans through the backdoor while being TOUGH on Trump
-EU plays nice with Trump so Merkel and Macron avoid being yelled at by the leaders of their big companies
-Trump gets continuing soybean exports meaning happy farmers voting republican in 2018
Excellent post Mish. Particularly fond of the “I can do anything stupider than you” line. Why the fork in the road: “this is best viewed as either a reversal by Trump OR a political stunt that accomplishes nothing.” Why not BOTH? King Chaos said it himself: “I alone can fix it.” Believe me, he meant to say he’d F it up all by himself first, fix it, and then take credit. Sad.
In business or politics you will NOT get the things you want just by asking.
There is lots of dancing beforehand and the best deals are those where both believe they have won.
It is easier to think that you have won against an opponent that has made crazy demands and crazy threats-> Trump’s art of the deal…
Perhaps most precious quote regarding negotiating with Trump,
“we knew this wasn’t an academic seminar,” the EU official said. “It had to be very simple.”
I always thought of Juncker as duplicitous rather than stupid, but I do give him points for showing up with color coded, simplified cue cards. Trolling each other in front of the cameras has to be at least half the fun of playing 9D chess.
Would be curious to know who exactly twisted Trump’s arm here. If these accounts are true, that he was ready to concede off the bat, somebody got to him. Could a cadre of Repub senators chasten him? Also waiting to see if he keeps bellyaching about the Fed, which has far more interesting implications.
I strongly believe enough Republican Senators complained to finally matter. I have a list actually and was working on that until these humorous and non-shocking (to me) articles came out.
Republican senators from states with lots of farming complained so something had to be done so Trumplican party does not lose the house in 2018. Enter EU as the superhero promising to buy soybeans from USA while China will buy non-USA soybean production and EU will also likely route part of the soybeans they buy from USA to China so China saves face and Chinese leaders can act TOUGH against Trump while they still get soybeans for China. Everybody is happy…