This Tariff Chatter

For around two months, this US-Germany-EU chatter over steel and aluminum tariffs have been going on. 

The simplicity of this argument is that the US steel industry has long complained about the unfair nature of 'cheap' imported steel, 'steel-dumping', and unfairness.  They will say it's killing the US steel industry, and it's been going on for thirty-odd years.

So President Trump decided to do something radical.....a tariff against any nation that seems to be in a government-supported scheme, or 'dumping' at cheap rates. But along the way, at least twenty other nations export steel into the US, and they are affected in some minor way.  Trump's tariff would affect them.

Some stat's:  81-percent of imported steel into the US....comes from ten nations (2016 numbers).  Germany makes up 4-percent of that (mostly all specialized steel).  What other European country is this group of ten?  None.  The four biggest import giants? Canada (17-percent), Brazil (13-percent), South Korea (12-percent), Mexico (9-percent). 

The Germans got all 'huffed-up' about this tariff deal early on.....mostly bent on anti-Trumpism.  The EU mechanism clicked on, and things went quickly to 'let's counter Trump with tariffs of our own'.  So a whole listing of counter-tariffs were built....meaning a new tax rate occurred with jeans, American-whisky, American cars, etc. 

Along the way....the Germans woke up and kinda realized that none of the other EU countries have much of an import-export steel/aluminium deal going on with the US.  Then they kinda woke up to realize that they don't have control of their import-export treaty deal anymore....it's all an EU-mechanism now.  So the EU, on it's own (not the Germans) is now constructing all kinds of things that might have true impact, or significant damage. 

In the past week, you can sense by comments within the Merkel cabinet that they've come to realize how big of a mess this has become with the EU-mechanism.  The topic of bringing the old dead TTIP-trade deal (fall of 2016) back to life?  That was a shocker, as Merkel admitted that this is the only method of resolving this tariff talk.

At various points, news media groups tried to suggest that this tariff deal of Trump would bring recession quickly into the picture, and trade balance would be destroyed.  Even I will admit....it was 'entertaining' to view.

But as you ponder upon this.....no one is restricting German steel/aluminium.  The deal would simply put a tax on it.  The US steel/aluminium makers would simply find a better market to operate, and nations without the tariff would start to find better deals awaiting them.  Vietnam or the Ukraine?  Well....they might see all of this as an opportunity.  The problem though is that Germany had special steel/aluminum practices, and you'd have to copy them (being expensive).  Maybe you'd quietly see some Vietnamese company walk in and buy a German steel company that has various patents and practices....to copy. 

The effect on tariff options by the EU against the US?  The US would have to go and find new markets.  To be honest though....just about every drop of American whiskey distilled now....could be readily bought and shipped into China.  I'm guessing other non-EU markets would eventually make up the market lost, although it might take months for this to develop.

So the rush is on, for a TTIP-like solution, and the Merkel crew has come to realize that they don't own the import/export business anymore....it's a EU-device.  And you really don't want Germans to wake up tomorrow to realize that they gave away this part of their national identity.....to the EU. All of this does not sit well for the summer 2019 EU election, and has the potential for the right-of-center and left-of-center parties across the EU to fail in dramatic ways.

The final part to this entire story is that the EU had several years to write the TTIP deal and get it passed via the EU structure and 28 countries.  They failed.....miserably.  Now?  They'd have to bring it back....with their most hated figure....President Trump.  Sadly, because they now realize this....he's an actual business guy, and he'll read between the numbers.  Even Chancellor Merkel has to be shaking her head....this 2016 failure of TTIP is a big mess now.