US Trade Deficits: A Tariff Equalizer

While the EU is blistering as they attempt to retaliate against Trump’s steel and aluminum tariffs, they are now attempting to target peanut butter and orange juice.   But the trade war isn’t simply the US vs the EU, it is also the EU against the UK!   However, the commodities their economic experts target is rather odd; Brazil accounts for 50% of all global orange juice. US production is in a downward spiral, has been for years, exasperated recently by Florida crops destroyed by Hurricane Irma and – exports are “flat”.   Which means the tariff on orange juice is worth $0.00.  

US peanut butter export partners include Canada, Mexico, Europe and Japan. The European consumers are concentrated in The Netherlands, the UK, Germany and Spain.   Unlike other European countries, The Netherlands top export partners include the UK and the US with Germany being the number one destination.   In 2016, Spain’s highest trade surplus partner was the UK at $8.2 billion, an increase of 3,014%.

The EU has already initiated a trade war with the UK using BREXIT as blackmail.   However, in their tit-for-tat plundering, it would appear they haven’t considered the consequences to countries in the EU other than Germany and France. Given they are the fundamental leaders of the EU decision making schematic, they don’t appear to be making wise choices.

Currently, the UK’s largest trading partner is the EU, with the US coming in a close second. If the EU cuts off the UK and imposes tariffs, the US is calmly waiting in the shadows ready to pick up any slack.   While the EU already slaps a 10% tariff on the import of US automobiles, by contrast, German automobiles are charged an import duty of just 2.5%. The hypocrisy of the German government and by default the EU Commission is beyond comprehension.

It would seem that the EU and Germany are playing a game of chicken without realizing their engine is out of gas.

In 2016, 54% of UK imports came from within EU countries.   If the EU hardlines trade, the UK will slowly shift partners. Currently the largest trade partners include: Germany, Spain and The Netherlands (the same countries that like all the US peanut butter…weird).

While the EU has been considered an ‘emerging superpower’ over the last decade, its share of the global economy has been steadily declining. Add to the fray the growing welfare as a result of refugee and immigration policies, the demand that the EU fund their own military, and Economic policy decisions now seem to be playing a game of chicken without a car…

And the media is at the wheel.

The EU Commission has grown into a Fat Walrus with a budget closing in on $160 billion Euro’s and most assuredly rising. Taxing, penalizing, overseeing, demanding, and fining seem to be their role.   Air pollution is a problem in the EU and despite targets being established in 2005 and 2010, 23 of 28 countries don’t meet the goals.   It’s a joke.

Sanctions on member states not meeting ‘refugee quotas’ was another EU brainchild that has backfired.

And yet, we continue to forget the sage fairy tale that recounts the race between the tortoise and the hare.   While the EU Commission has stated that a) this has been in the air for some time, and b) they will retaliate, and c) they will take this to the WTO, retaliation is not a defense recognized by most courts…  

The US trade deficit in goods is $811 billion, with the largest categories being commercial aircraft, automobiles, and food. The largest deficits were earned with China, Japan, Mexico and Germany.  Germany imports autos, aircraft and pharmaceuticals, while it exports autos, industrial machinery and medicine.   China charges a 25% tariff on US imports of automobiles.

For the Democrats and the GOP to gasp at the horror of equalizing tariffs, they would seem to have ulterior motives that don’t include the prosperity of the US.   Most recently, Trump announced that his goal was to create just that – a direct constant equalizing of all tariffs – thereby eliminating ‘inequality’ – the same catch-all phrase employed by Democrats about – everything Democrat…

But after all the hrumphing and blubbering and demanding, it looks as though the EU, Japan and Australia are begging for their own exemptions.   Bottom line? Trump is looking to close the trade deficits – China, Japan and Germany – it is now your call.

Germany: Imports and Exports with US

Germany and France have jointly stated that they will alter their own corporate tax rates in defiance of Trump lowering the US rate to 21%.   Currently, Germany’s average rate is about 38-39%, and roughly 33% in France. Turkey, Russia, the UK, and Switzerland all fall below the new US rate. So why would Germany and France really care?   Spain, Italy, Canada, Australia, The Netherlands, China, South Korea and Indonesia are already below the rates imposed by France and Germany. So what’s the big deal about the US lowering it’s rate?

Its a false perception.  Its news.  Its media bias.  And it creates divisiveness.

The EU, albeit Germany and France, are also screaming bloody bull because Trump has stated he is imposing tariffs on imports of steel and aluminum. But the US only imports 3% of it’s steel from Germany, most imported steel comes from Canada, Brazil, South Korea, Mexico, Russia, Turkey and Japan.

According to the Economic Policy Institute, “surging steel imports put up to half a million US jobs at risk.” With Trump promoting infrastructure spending, there needed to be in place some barriers that would force companies to buy American. During the Obama administration steel imports doubled.   Since 2000, US aluminum production has dropped 77%, and the world market share has dropped from 16% to less than 2%.   During the Obama administration imports rose roughly 80%.   By contrast, China’s production has gone from 11% to 53% and they represent the largest world producer.

Making America ‘competitive’ seems to go against the European model.

Opinions from Germany’s DW suggest that Trump is simply being ‘unfair’.   How dare Trump put the American people before Europeans!   Ranting on, the columnist declares that Trump is ‘anti-globalist’ and only cares about the US…   He then attacks the American steelmakers for not switching their focus to more specialized high-value steel. Again, why would Germany be so bent out of shape over a commodity that only represents 3% of all imported steel to the US?

Germany’s ‘slowest growing export is steel’ according to WETx.

The retaliation proposed by Merkel is set to include tariffs on blue jeans, bourbon and Harley motorcycles.   The EU is claiming that by Trump imposing these tariff measures on two items, steel and aluminum, he will be responsible for all EU countries retaliating…   Interesting. So, retaliation is not their fault?   If I steal your motorcycle and then you steal my car – are you not responsible for anything? It is a strange ethic to denounce the US and Trump because we are focusing on ourselves instead of them.

Germany represents only 7.9% of US exports and only 5.5% of the US imports.   The European Union accounts for 54-58% respectively of Germany’s trade.   Trade with the US is not substantial. Trump’s tariffs did not target the biggest exports of the EU, they targeted China. Had Trump wanted to hit Germany, he would have imposed tariffs on Germany’s largest exports: automobiles and machinery. He didn’t.

The largest importer of US Bourbon is Canada. The world’s largest exporter of jeans is China.   The largest exporter of motorcycles is China, followed by Japan, Germany, India, and Italy.   Harley Davidson has already been largely impacted by Japanese manufacturing. Their biggest market remains in the US, with the international market representing roughly 38% of sales including; China, India, Africa, Middle East, EU, and South America. They have been aggressively pursuing smaller bikes to accommodate a changing demographic, however the main motorcycle markets in the EU remain to be Vespa, Honda, Ride, Derby and KTM. The ‘total’ US market share of all motorcycles in the EU was 2.9% in 2011.

So why would Germany target these particular markets?

Maybe because Merkel felt obliged to give the appearance she was going to respond to the big meany Trump so as to continue the media promotion that he’s a big, bad meany guy who only cares about Americans and not Germans…  

Or maybe all the rhetoric coming out of the EU is simply BLATHER.