I Coulda Made a Better Deal - Paul Krugman
Trump has now announced a trade “deal” with the European Union that looks a lot like the “deal” he made with Japan. I use scare quotes because there is little sign of a quid pro quo. The United States is imposing a 15 percent tariff that is lower than previously threatened, but still vastly higher than we had before Trump. Overall U.S. tariffs seem likely to settle roughly at the level that prevailed after the infamous Smoot-Hawley tariff of 1930.
In return we got a vague promise of higher European investment in the United States. When Japan made a similar promise last week, administration officials asserted that this would mean hundreds of billions flowing into rebuilding U.S. industry. Japanese officials, however, say that the money will consist almost entirely of loans and loan guarantees. This strongly suggests that Japan will, if it does anything at all, simply be sticking Trump’s name on money flows that would have happened anyway. There’s every reason to suspect that the same will be true of whatever the EU does.
And like the Japan deal, this deal seems to place lower tariffs on cars made in Europe, which have very little U.S. content, than on cars made in Canada, which contain many American parts. Add in the punishing tariffs on steel and aluminum, and Trump’s trade policy seems, if anything, to be tilting the playing field against U.S. manufacturing.
