Precisely as I recommended he do in response to EU (European Union) tariffs on Harley-Davidson motorcycles, President Trump has threatened to impose stiff tariffs on European auto imports. In return, the EU responded much like the cartoon cockroaches in the RAID insect killer commercials – full blown panic. The end of the world is at hand! Their world, for sure, but they want you to believe it’ll be the end of yours too. Prices will rise, they say. Sales will decline. So too will GDP (gross domestic product), a measure of the overall U.S. economy.
Perhaps their most interesting warning was in regards to BMW production at their Spartanburg, SC plant that produces their SUV models. (They call them “SAVs”, or “Sports Activity Vehicles.”) They claim that most of the cars made there are exported, and it’s true. As other nations respond with their own tariffs on American cars, they say, exports of those American-made BMW SUVs will decline and production will be cut, costing jobs.
Let’s look at the facts. That Spartanburg BMW plant does export about 75% of the vehicles it builds, with those exports having a value of about $10 billion. Is it really the loss of those BMW exports the EU is worried about, or is it something else?
Here are some more facts. In 2017, Germany exported approximately $30 billion worth of cars and parts to the U.S., while importing only about $10 billion from the U.S., resulting in a $20 billion surplus for Germany. The EU as a whole enjoyed a surplus of $44.1 billion in cars and parts with the U.S.
So what is the EU worried about most? The American economy and BMW’s $10 billion in exports, or their $44.1 billion surplus? The answer is obvious. They’re making a killing in the U.S. market, and Trump’s tariffs threaten to put an end to it,
And it’s not just the EU. Other globalist organizations have used similar scare tactics. General Motors made similar warnings, but are they more worried about domestic auto sales or their China operations?
Every day, the news is filled with stories about how trade war fears are weighing on global markets.
Will car prices go up? Probably. But they didn’t mention to you that your wages will rise faster. Will car sales decline? No, the opposite will happen. Sales of American-made models will rise faster than the decline in sales of EU cars as Americans grow more prosperous and opt for the less expensive American cars over the tariff-laden EU imports.
So don’t fall for the Chicken Little scare tactics. It’s impossible for the U.S. to do anything but win a trade war, since a trade deficit is what defines a loser in global trade and the U.S. has the biggest deficit by far. Anything that reduces that deficit makes America the winner.
If raising tariffs on imports were going to hurt the U.S. economy, then how do you explain that the economy is on a tear, putting up the best numbers in a long time – especially in the manufacturing sector of the economy? Investors seem to understand. While foreign markets – especially in Asia – have been taking a beating in the past few months, American markets are holding just below their record highs. Like the saying goes – money talks and BS walks. The big money knows that Trump’s tariff plan is good news for the American economy.