How Juncker got the better of Trump

Trump, a German American, has no love for the land of his grandfather either. (That would be the Wilhelmine era draft dodger who became a Gold Rush brothel owner.) The Germans exemplify everything Trump hates about the EU.²

Germany persistently fails to meet the Nato Newport summit target of 2 per cent of GDP defence spending (wisely, probably, since like the Japanese they have done very well out of not being a ‘hard’power; arms are a mug’s game.) Worse, they have a $45 billion trade surplus with the US, much of it involving luxury cars. Trump has clearly brooded on the serried rows of parked Audis and Mercedes in Manhattan and he doesn’t like what he sees.

Trump resents the EU’s world of cautious compromise and multilateral engagement with the world, especially if this includes Iran. Like his roving hobgoblin, Steve Bannon, and apparently a raft of his new ambassadors in Europe, Trump wants to divide and rule the EU so as to better dominate its isolated parts. Countries of 40, 60 or even 80 million people do not have the collective power of 500 million, a figure amplified last week to over 600 million through the trade treaty with Japan. Each such treaty (and others with Mercosur and Mexico are to come) contains geographical indicators whose effect is to constrict the market for equivalent US products such as Feta, Kobe beef or Parmesan.

Trump is a businessman with a zero sum optic, in which there are clear ‘Winners’ and ‘Losers’ – which is another way of saying he knows the price of everything and the value of nothing. He also needs to mobilise his ‘flyover’ electoral base, not just with belligerent Tweets, but with concrete benefits, hence the 25% tariffs he slapped on steel and aluminium imports.

Knowing how to deal with the belligerent President  is a difficult call. It’s tempting to treat him like any overbearing bully and to call his bluff. That was evident in the EU’s and China’s response to the metals tariffs. They imposed targeted retaliatory tariffs on farm products, Kentucky Bourbon and Harley Davidson motorbikes, and talk of independent defence initiatives soared.

This began to hurt. Farmers in Illinois, Iowa, Missouri and Nebraska are now contemplating unsold beef or pork, and mountains of wheat and soybeans whose prices are falling (China has turned to Brazil). Not to mention apples, berries, cherries and nuts. Many of these farmers are Trump supporters. That is why the President has, amid much Republican outrage, decided to cushion them with $12 billion from the Commodity Credit Corporation.³

Such governmental largesse has not gone down well with Republican free traders such as Rand Paul or Ben Sasse, who sense Soviet-style central planning coming to the Mid Western plains. Sasse said that the CCC money resembled “golden crutches” for farmers whose legs Trump has chopped off. Lobby groups such as Farmers For Free Trade and Americans for Farmers and Families are hostile too. “I became a farmer to sell beef, not to take help from the state,” commented AFF leader Casey Guernsey. Urban Democrats have also drawn attention to the big subsidies US agriculture receives already.

The steel and aluminium tariffs have also hurt manufacturers of cars, motorbikes and washing machines, from GM to Whirlpool. Milwaukee-based Harley Davidson has been hit with EU retaliatory tariffs which have risen from 6% to 31%. Each big road bike costs an extra $2,200 to purchase in the EU, a cost which the firm is absorbing to the tune of $100 million. The firm’s turnover has contracted by 3% and its profits by 6.4% in Q2 and has said it will move production offshore.

As for Trump, he has threatened Harley, which may take production offshore, with opening the floodgates to foreign bikes. So, to recap, his tariffs hurt Harley Davidson, they take evasive action, so he threatens to ruin their business.

He acts the same way with foreign governments, thinking that if he acts tough, they will come crawling to Washington. They will make concessions and the world will revert to normal, on Trump’s terms. This is how Juncker’s visit was billed. Unfortunately that is not how things work.

Plants which close do not reopen, and the Mid-Continental Nail Corporation in Missouri, Amercia’s largest nail manufacturer, is a useful example. It imports its metal from Mexico and has been hit hard by the tariffs. It could shut. If it reopens, it will be in Mexico.

Firms with complex supply chains will establish them elsewhere, and the new suppliers will not gladly relinquish this new business. Nor will Latin American farmers who capture the corn and soybean market in China after US produce has been turned away. Moreover, countries will find permanent work-arounds. The Japanese salvaged the Trans-Pacific Partnership after Trump rejected it. Australian, Canadian and New Zealand farmers now have an advantage in the Japanese market, as do European wine producers and car-makers after the EU-Japan trade deal was completed. Things do not revert to normal after all.

Mr Juncker is a smarter man than many of the Eurosceptic herd in this country credit. So many Brexiters I know, who cannot be readily separated from the wine bottle, make snide comments about ‘Druncker’. But the sharp operator arrived with a framed photo of the cemetery in Luxembourg where General Patton is buried, for the President. It was inscribed with the words: “Dear Donald, let’s remember our common history”.

He had also decided to entirely separate defence and trade, and to pursue the German approach of superficial accommodation rather than the French desire for confrontation. While Malmström dangled vague zero tariffs on all motor vehicles at perplexed Republican Congressmen, Juncker offered to buy more US soybeans and LNG, provided Trump suspended current hostilities. Juncker knows perfectly well that European consumers don’t like US cars, and that they are suspicious of GM and hormone saturated foods.

Trump felt the love, and declared a truce, perhaps after realising that he needs allies for the bigger showdown with China. So more pointless noise, more anxiety for American workers and their bosses, and, as in the case of the President’s sensational gambits with Kim or Putin, a pathetic climb down, this time to a genially steely former prime minister of Luxembourg, who deserves his cognac on the flight home. As for Trump, he might be interested to discover the home of the Mid-Continental Nail Corporation is called Poplar Bluff.

---

Michael Burleigh is an historian and commentator on world affairs. His 12 books include The Third Reich: A New History (Samuel Johnson Prize 2001) ; Moral Combat; Small Wars and Faraway Places and The Best of Times, Worst of Times: The World As It Is which appears in November.

burlm11