Those who followed the first-term trade negotiations will likely remember the challenges of dealing with the European Union and their entrenched dependency on retaining the Marshall Plan system; a one-way tariff process that enabled Europe to rebuild after World War II.
Unfortunately, as with all long-term financial subsidies, the beneficiary becomes dependent and retaining benefit is their only objective.
Former Commerce Secretary Wilbur Ross spent the majority of his time focused on trying to negotiate with the EU to remove these ridiculous trade benefits that have long exhausted their usefulness. Enough is enough.
Term-two Commerce Secretary Howard Lutnick has the same regional assignment formerly held by Wilbur Ross, with U.S. Trade Representative Jamieson Greer in full support.
Treasury Secretary Scott Bessent has ASEAN nations as his primary regional focus, Lutnick’s primary region is the EU and President Trump is personally attentive to China and the USMCA. USTR Greer then goes to the primary with the closest deal under consideration and organizes the paper construct, the technical aspects. It’s an overall similar arrangement to term-1 only with a much bigger scope.
As would be expected from historic reference points in trying to break this insufferable one-way Marshall Plan system, the EU is once again operating in bad faith and will not give up their status. When President Trump says the entire reason for the EU to form was to ensure their retention of this Marshall Plan benefit, he’s not wrong. That’s the brutally honest background.
President Trump has announced today that a 50% tariff rate will be applied toward all EU imports until such a time as they come to the negotiation process willing to let go of their economic model dependent on the one-way benefit. There really is no other way to break the Gordian trade knot, other than to cut it – forcefully.
President Trump (via Truth Social) – “The European Union, which was formed for the primary purpose of taking advantage of the United States on TRADE, has been very difficult to deal with. Their powerful Trade Barriers, Vat Taxes, ridiculous Corporate Penalties, Non-Monetary Trade Barriers, Monetary Manipulations, unfair and unjustified lawsuits against Americans Companies, and more, have led to a Trade Deficit with the U.S. of more than $250,000,000 a year, a number which is totally unacceptable. Our discussions with them are going nowhere! Therefore, I am recommending a straight 50% Tariff on the European Union, starting on June 1, 2025. There is no Tariff if the product is built or manufactured in the United States. Thank you for your attention to this matter!”
President Trump has other points of leverage and pressure that can be applied, including a U.S. withdrawal from NATO or a drawdown of U.S military presence, forcing the EU to spend more for their own security. However, the increasingly firm nudges from President Trump in that direction have resulted in EU words, not EU actions.
I fully support a more confrontational trade position from the USA toward the primary beneficiaries of these old trade systems, China, the EU and Canada. China is the biggest problem, but the EU dependency system is the most entrenched. Canada will be confronted when the USMCA is reopened for negotiation and two bilateral Free Trade Agreements are the likely outcome.
In addition to the Marshall Plan aspect, the EU is not going to give up their trade advantage position for the same reason Canada will not. In order to get to a place of free and reciprocal trade with both Canada and the EU both economic models need to give up their underlying “climate change” policies.
The financial benefits the EU and Canada receive via trade subsidies and one-way rules is the money that fundamentally underpins their ability to chase rainbow energy policy. If Canada and the EU had to finance their own “Green Energy” initiatives without the money gained from the U.S. trade imbalance, they would not be able to afford it. This is the core of the problem. It’s not just and entrenched unwillingness, there’s also an ideologically entrenched inability.
We have accepted and discussed this dynamic for years on these pages, and what we are going to see with the trade confrontation both in Canada and the EU is very predictable. Eventually, if the EU and Canada refuse to move, there is going to be a necessary cleaving; essentially a trade embargo blocking them from USA access….
