Trump has announced a major trade deal with the EU, 15% tariffs and major commitments by Europe to buy American energy and weapons.

 

President of the European Commission Ursula von der Leyen and President Donald Trump. Fox News/Getty.

President Trump and EU Leader Ursula von der Leyen have come to a major trade agreement with 15% tariffs for EU goods in America. Fox News. The deal will avert a trade war and bring predictability to US-EU trade relations. Europe will also buy $150 billion of US energy for the next three years, make $600 billion worth of investments and unspecified military sales. The trade deal was no sure thing and will be seen as a win for Donald Trump. 

My Comment:

Generally speaking Trump got a good deal here. It's not the 20 or 30% tariffs he was threatening but it's a huge increase over the much smaller pre-Trump tariffs. He also got major commitments by Europe to buy energy and weapons and even invest in the United States. If you are hearing people complain about this either they hate Trump or are European. 

It's a much more mixed bag for Europe. The best thing I can say for them is at least there is stability. There are a few industries, like auto manufactures, that actually got their tariffs reduced, 15% is a lot better than the 27.5% it used to be at. And there are several industries, most notably airplane manufacturing, where both sides agreed to a "zero for zero" tariff scheme where both sides agreed to void tariffs for those products. 

The tariffs will hurt, no doubt about it. Prices for European goods may go up a bit, (but dramatically less then folks realize, it's not a tariff on the end user price, it's the wholesale price that gets taxed), but it's the lack of demand that might hurt things. 

But what is really going to hurt Europe is the energy costs they are going to get from this deal. Russian natural gas is dramatically cheaper than American LNG and it's going to raise prices quite a bit. Energy prices are always way more damaging than people realize, as it is used for just about everything. Keep in mind, Europe usually uses gas for home heating and those prices, already out of control in Europe, are going to increase. 

For the United States this is going to raise a lot of money. The tariffs have already put the federal budget into the black last month and this will be even more money flowing into the United States. That's not even including the money that will be raised by energy purchases and European investment. And this is far from the only trade deal the United States has passed, given that China and Japan had similar agreements, we are going to gain quite a bit of money that will hopefully be used to pay down the debt and/or make things better for US Citizens. 

I do have to say that how successful Trump has been here in terms of tariffs is. A few months ago people were in an absolute panic as the market crashed after Trump announced his tariffs. I said folks should calm down and realize that this was a negotiating tactic and eventually a deal would be made. Those folks, the sky is falling chicken littles, have been proven wrong, and they are pretty quiet now. It's quite bizarre, because we did the same song and dance during the 1st Trump term, and the economy was fine until the Pandemic killed everything.