Friday, March 2, 2018

The Beginning of a US-EU Trade War?

It was news number one last night on German public TV.  Actually, after you watched enough of came to realize that they had devoted about 400-percent of a story that only had three or four key features to it. 

The EU basically says that the evil-Trump is about to embark upon tariffs, and they have to respond.  At the head of this path is the Commissioner....Juncker.

What is the US talk?  Well...they believe to correct this 'dumping' practice or government-helped pricing, the US needs to introduce import tariffs of 25 percent on steel and 10 percent on aluminum from Europe.

The EU says....unfair.

Somewhere in the middle is the World Trade Organization, and their leaning toward zero tariffs.  If someone did subsidize or help a company improve their profits...well, that's part of the business game.

So the US products that would have tariffs introduced against them?  They mostly talk about Jack Daniels and the various whisky distilled in the US, Harley-Davidson motorcycles, and some vegetables (they cherry-pick in order to avoid problems).

The US slant to this?  To be honest, there's not much steel or aluminum now manufactured in Europe....India took a good bit of their business over the past thirty years.  Journalists have chatted about this for the past decade.  So there is a marginal amount of steel and aluminum in this discussion.  The fact that the news folks refuse to talk about 'how much' is a curious piece of this story.

The threat to the US?  Most of the US whisky I see on German store shelves....are at hefty prices already.  You might see Jack Daniels on some discount deal around Christmas time in Germany, but it's fairly expensive to drink the stuff.  Adding 25-percent tariff on it? Well...the rich guys probably don't care.

The Harley Davidson bike?  In the summer period, on the might see a hundred bikes in a single day.  German enthusiasts already have to pay the VAT deal, with the high just tossing another 25-percent tariff onto the bike?'s a unique bike. Some might view it as being worth it.  In this case, I would speculate some guys going into a non-EU country....buying it and driving it for a summer vacation, storing it for a year, and then trying to bring it back into the EU without any taxation situation. 

The vegetable thing?  Most of the regular market folks don't sell US products....the exception I see revolve around apples (but if you notice, they didn't mention apples in their threat).  Who uses the US vegetables mostly?  Frozen food makers.  Go look at the frozen fries area....those are usually identified as Idaho potatoes.  Would Germans buy a bag of frozen fries which identify the product as Italian-grown potatoes?  I would have my doubts.

Where does this lead onto?  Eventually, someone is going to open up the door and have a discussion about the WTO (World Trade Organization) and it's slanted view on things, and make some of the business folks worry about the conversation.  The EU should have been worried years ago about India taking over the steel market....yet they did nothing but accept it. 

Stand by for this to be a long-term 'fake-worry'. 

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