The big headline this week is the U.S.–EU trade deal. The straight story is this: The deal puts a 15 percent tariff on about 70 percent of European exports to the United States, while Europe commits to buy more energy and military procurement from the U.S. Upon the announcement of the deal, the euro fell and global equities fell, while U.S. equities were modestly higher. And Donald Trump was happy.
All true as far as it goes. But that summary misses the bigger theme of this deal. And that theme is clear: It’s embarrassment. And I mean embarrassment of several kinds.
The EU suffered the real shame of having weak bargaining leverage. As the deal was being concluded, the highly astute economist Olivier Blanchard (who hails from France) tweeted: “Why on earth should the European Union be willing to accept, as it seems ready to do, the 15% tariff? Are we really so weak that this is the best we can hope for?”
I was tempted to reply with one word: Oui.
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