European Bureaucrat Urges, ‘Buy American’!

What Happened?

The late and former British prime minister, Harold Macmillan once said, ‘Jaw, jaw is better than war, war.’

He could have amended that slightly to read, ‘Jaw, jaw is better than trade war, war.’

One of president-elect Donald Trump’s most controversial policies is his plan for tariffs.

That is, to impose big import tariffs on goods coming into the country.

Many said it wouldn’t work… and that Trump would have to drop the idea.

Well, with 52 days until Trump enters the White House, it seems the tariff plan is already working, in a surprising way…

Why it Matters

The Financial Times reported yesterday:

‘Christine Lagarde has urged Europe’s political leaders to co-operate with Donald Trump over tariffs and buy more products made in the US, warning that an acrimonious trade war risks wiping out global growth.

‘The European Central Bank chief said in her first interview since Trump won his second presidential term that the EU needed “not to retaliate, but to negotiate” with a president-elect who has threatened a blanket tariff of up to 20 per cent on all non-Chinese US imports.’

It seems world leaders are taking Mr. Trump a lot more seriously than they did last time.

You may remember how the Germans laughed when Mr. Trump warned them it was risky to rely on Russian gas. Turns out he was right, when the Russian gas supply stopped after Russia invaded Ukraine.

It seems that after the experience of his first term, world leaders and bureaucrats now seem to understand that he means what he says… and he’ll follow through on it.

So, what could this mean?

The effect could be the opposite to what most have feared about a tariff. The fear is that it will cause a slump in global trade as foreign products become too expensive for Americans to buy.

America is, after all, still the world’s biggest economy. And the American consumers’ purchasing power is still important to foreign countries.

How it Affects You

But rather than a global trade slump, there’s a real chance the tariff (or the threat of a tariff) could actually boost trade. Governments and businesses will be so keen not to upset Mr. Trump, that they’ll do all they can to encourage trade relations.

Foreign businesses could end up onshoring manufacturing on U.S. soil. Both for domestic consumption and for export.

Of course, nothing is certain yet. But the fear of the Trump tariffs may turn out to be nothing to fear at all. The American economy could be set for a bumper 2025.

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