Trade Agreements and Their Implications
For many of President Trump’s supporters, the trade deals negotiated with the UK, Japan, and most recently, the European Union, are seen as strong evidence of the president’s negotiating style. It’s almost like a badge of honor for them.
But, in reality, these agreements can be economically counterproductive and could hurt America’s global alliances.
The trade agreement that concluded at the end of July requires the EU to eliminate tariffs on U.S. imports. In return, the EU expects significant purchases of American energy and defense systems, alongside U.S. investments. However, they also face a 15% tariff from the U.S., which is notably higher than the average tariffs found in the industrialized world post-World War II.
These arrangements aren’t truly meaningful trade agreements; they lack the legal framework typically associated with such agreements. Instead of promoting trade liberalization, they essentially enforce new tariff barriers against some of the U.S.’s closest allies, pushing concessions from these nations under the threat of escalating tariffs.
Tariffs effectively function as a tax on Americans, meaning that the first ones to feel the pinch are U.S. consumers and the economy, particularly in industries that rely on imports from these partner countries. For instance, the BMW plant in Spartanburg, South Carolina, relies on various components from the EU. This makes its production less competitive. Jobs have already been lost due to similar tariffs on steel and aluminum during Trump’s first term, affecting numerous sectors dependent on these materials.
The geopolitical ramifications are even more concerning. EU Trade Commissioner Maros Sevkovic pointed out that it’s about security and issues like Ukraine. The European concessions were showcased recently, but there was little expectation that the deal would lead to a significant resolution concerning Russia.
The alliance the U.S. has maintained since 1945 is rooted in the perception of America as a fundamentally different kind of global superpower. Russia and China have dominated their territories through force, but the U.S. has historically enjoyed real friendships with nations in Europe, Japan, and Korea. Those nations generally appreciate U.S. leadership and have been accustomed to a certain level of decency in American decision-making.
However, that sentiment seems to be eroding. Trump appears to be transforming the voluntary, rules-based international cooperation system into something resembling quasi-colonial coercion. While supporters may find pleasure in the notion of allies being “forced to play by our rules,” these arrangements are unlikely to be sustainable in the long run. Countries like Canada and Mexico have realized that even formally ratified trade agreements offer limited protection against arbitrary tariffs imposed by the Trump administration.
Voters in Japan, the UK, and the EU may soon awaken to the reality of their situation. While the deals might hold up in the near term, they could face significant political backlash. Interestingly, the Japanese government delayed announcing its trade deal with the U.S. until after a significant Senate election, likely due to its political fallout. Similarly, the European Commission will face hurdles in convincing member states of the merits of this deal, even if it promises substantial U.S. investments and purchases of American goods.
For decades, European politics has criticized what they view as American domination, whether real or imagined. Now, they have tangible grievances: the EU is essentially tied to significant financial commitments to the U.S. through future military and energy purchases, while also having to accommodate trade policies that were previously unthinkable.
If the Trump administration deliberately aims to fracture the American alliance system with the EU, UK, and Japan, it’s tough to find a more effective method than these agreements. They undermine the benevolent vision of America that has underpinned its soft power globally for the past 80 years.
