On a trade war – The Economist:

‘Ever since President Donald Trump unveiled his Liberation Day tariffs in April, the world’s biggest trading relationship had been on the rocks. The European Union swung from trying to sweet-talk America into making a deal, to threatening retaliation. On July 27th dealmaking won out. At his golf course in Scotland the president and Ursula von der Leyen, the head of the European Commission, unveiled the outline of a preliminary trade agreement. The bloc has pulled off a tricky balancing act: making enough concessions to keep Mr Trump happy, while limiting the economic damage.’

(…)

‘The biggest concession is the bloc’s acceptance of a 15% tariff, which is more than nine times higher than the rate in place before Mr Trump returned to office. But the worst-case scenarios were so bad that Europe’s trade negotiators gave up on returning to anything close to those halcyon days. Over the past few months Mr Trump, convinced that the eu was ripping off his countrymen, had lobbed threats of duties ranging from 20% to 50%. And, as with a recent deal struck with Japan, European negotiators at least managed to lower the tariff rate on foreign-made cars, from 25% to 15%.’

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‘What of the commitments to buy American? Europe’s promise to purchase $750bn worth of American energy products over the next three years is hardly a concession. The eu’s own calculations show that it is an achievable number, says Ms von der Leyen, even though it is unclear how to get there in practice. More importantly, the deal might even give Russia hawks on the continent additional leverage to push reluctant member states to finally ditch their habit of using Russian oil and gas. In June the eu still imported about 2bn cubic metres of lng from Russia, about a quarter of what it imports from America, according to Bruegel, a think-tank. If Mr Trump’s pressure helps to end fossil-fuel imports from Russia, that is good for Europe.’

(…)

‘Moreover, there is no knowing if further tariff threats could arise, as and when the president is next displeased. Europe has struck trade peace for now. But Mr Trump’s love of tariffs knows few bounds.’

Read the article here.

Once upon a time a man sued me.

He told my lawyer he was my friend.

My lawyer answered: ‘Friends don’t sue friends.’

Allies don’t threaten allies with trade wars.

But the worst has been averted. For the time being.