A ceasefire in the trade war

There are doubts over whether Trump’s EU deal will last. Matthew Partridge reports.


Jean-Claude Juncker and Donald Trump: peace for now
(Image credit: Copyright (c) 2018 Shutterstock. No use without permission.)

There are doubts over whether Trump's EU deal will last. Matthew Partridge reports.

"On 25 July 2018 the tweets fell silent and a truce was declared on the European front of the trade war between the United States and, well, the rest of the world," says Irwin Stelzer in The Sunday Times. Last week Donald Trump and the EU's Jean-Claude Juncker agreed to halt further tariff increases. At the same time the EU agreed to "increase its purchases of soybeans" and import "massive" amounts of LNG gas. In the longer run both sides would "work towards zero tariffs and removal of all trade barriers for non-auto industrial goods". Even Trump's critics "cannot interpret this as anything other than a victory for his belligerent tactics".

That's an exaggeration, says John Cassidy in The New Yorker. In reality, Europeans "gave up little except their prior refusal to negotiate under threat". For example, "Juncker's pledge that the EU would import more US-grown soybeans, for instance, formalised something that was likely to happen anyway". The changing economics of the gas market mean that increased European imports of LNG "may well have occurred without Wednesday's agreement". Still, "at least the meeting didn't end with the world's two largest economies descending into a full-scale trade war".

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Many obstacles to a lasting deal

Yet free traders shouldn't count their chickens yet, says Stephen Bush in the New Statesman. After all, "one reason why Trump's White House is so erratic is that the president's mind changes depending on which adviser is currently in favour". While "those wanting to avoid a trade war are currently on the up", that "could change". The fact that "Juncker has conceded very little that the EU hasn't already conceded in practice" may mean that "Trump decides he's been had andthat the whole mess is re-opened in the not too distant future".

The chances of a wide-ranging free-trade agreement are still slim, says Shawn Donnan in the Financial Times. "It is impossible to overestimate how difficult negotiations are likely to become." In 2013 both sides agreed to begin talks on the Transatlantic Trade and Investment Partnership (TTIP). These talks lasted three years before collapsing in 2016, as a result of both Trump's election and opposition within Europe. While the decision to exclude agriculture from future talks may reduce European opposition, it may make any deal harder to sell stateside since "farmers and their representatives in Congress don't like being excluded from trade deals".

Trump is still a protectionist

A further problem is that Trump will always have an incentive to take a protectionist stance, says Ross Douthat in The New York Times. The reality is that he "needs his tariffs, needs his trade war" to have any chance of winning a second term. After all, "it's the only remaining economic issue where he's stuck to his campaign promises and hasn't just deferred to traditional Republican priorities". The fact that these tariffs are generally unpopular doesn't matter as much as "their potential appeal to the narrow slice of blue-collar swing voters that he needs if he's going to be re-elected".

Khan steps up to bat for Pakistan

Imran Khan made his name as captain of Pakistan's cricket team. Now "he is captain once more only this time of his country", says Kiran Stacey in the FT. While Khan's PTI party fell short of an absolute majority, it won almost a third of the votes, after his anti-corruption message and "grand vision for his country" attracted young voters "fed up with terror attacks and a stagnant economy". (Opponents say he was also given a hand by the army a charge Khan denies.)

If anyone can shake up Pakistan, it is surely Khan, says Jeffrey Gettleman in The New York Times. He brings "more star power andmystique than any recent Pakistani leader and perhaps a better chance to change the country's narrative". At the very least, "there will be an initial fascination with him as he tours the world", which will help him in his quest to "solve Pakistan's dire debt crisis" the country is said to be seeking a $12bn bailout from the IMF and bring in foreign investment.

Khan's vision for Pakistan is "alluring", but "fanciful", says Una Galani for Reuters Breakingviews. While he wants to emulate China's Xi Jinping and India's Narendra Modi, he "has a weaker mandate, needs to form a coalition, and has fewer financial resources at his disposal". Pakistan is heading for another crisis foreign-exchange reserves now cover barely two months' worth of imports meaning that "a plan to increase welfare spending more than fourfold is unlikely to be implemented". And "even if Khan's hands weren't tied financially, he would still be politically constrained by the military". Overall, his ambitions "look well beyond reach".

Dr Matthew Partridge

Matthew graduated from the University of Durham in 2004; he then gained an MSc, followed by a PhD at the London School of Economics.

He has previously written for a wide range of publications, including the Guardian and the Economist, and also helped to run a newsletter on terrorism. He has spent time at Lehman Brothers, Citigroup and the consultancy Lombard Street Research.

Matthew is the author of Superinvestors: Lessons from the greatest investors in history, published by Harriman House, which has been translated into several languages. His second book, Investing Explained: The Accessible Guide to Building an Investment Portfolio, is published by Kogan Page.

As senior writer, he writes the shares and politics & economics pages, as well as weekly Blowing It and Great Frauds in History columns He also writes a fortnightly reviews page and trading tips, as well as regular cover stories and multi-page investment focus features.

Follow Matthew on Twitter: @DrMatthewPartri