In a tweet Wednesday night, President Trump boasted that he struck a deal with European Union officials to increase European soybean purchases from American farmers. The purchases would be made in exchange for a pledge by the Trump administration not to impose any new tariffs on European vehicles.
“European Union representatives told me that they would start buying soybeans from our great farmers immediately. Also, they will be buying vast amounts of LNG [liquefied natural gas]!” the president tweeted, hours after meeting with European Commission President Jean-Claude Juncker at the White House.
European Union representatives told me that they would start buying soybeans from our great farmers immediately. Also, they will be buying vast amounts of LNG!
— Donald J. Trump (@realDonaldTrump) July 26, 2018
The deal exempts European automakers from Trump’s reported threat to impose a 25 percent tariff on some $200 billion in “foreign-made vehicles,” according to the Washington Post. As the outlet noted, the president believed imposing such tariffs would force American drivers to buy domestic, thereby benefiting U.S. car manufacturers. Experts said it would cause prices on all cars to skyrocket.
Republican lawmakers immediately praised the deal. “This is an important first step,” House Ways and Means Committee Chairman Kevin Brady (R-TX) told reporters. “This could lead to exempting Europe from steel and aluminum tariffs.”
Sen. Rob Portman (R-OH), who previously expressed concern over how tariffs were hurting his state’s agriculture industry, was also optimistic. “It’s going to help defuse some of the concern out there, not only in farm country but in our economy generally,” he told Bloomberg. “It’s a first step. We’ve still got to work out the details. But it’s been hard these last few weeks to see any light at the end of the tunnel.”
Dutch Prime Minister Mark Rutte similarly praised the deal, tweeting Thursday morning, “I welcome the positive outcome of the conversation between [Juncker] and [Trump]. It is very important that the EU and the US cooperate in the field of trade and do not oppose each other.”
But experts have doubts. According to the Wall Street Journal, Juncker, as the head of the European Commission, has little power to promise increased soybean or energy purchases, as they rely on private companies business decisions and “market conditions.”
“[The LNG and soybean pledge is] a bit of a stunt,” an EU official told the Journal. “You give something without giving anything.”
Paul Donovan, chief economist at UBS Global Wealth Management, agreed. “The real winner here would appear to be the European Union. The U.S. auto tax threat was reversed in exchange for nothing that means anything,” he told CNBC. “…The U.S. is already the largest exporter of soybeans to the EU. There are no subsidies, trade taxes or quotas on soybeans in the EU. Private farmers decide whether to buy more soybeans or not.”
Analysts and energy insiders who spoke with The New York Times similarly said LNG exports may increase at first, given the slowdown in European production. However, given that Europe can purchase Russian gas at a lower price, U.S. companies that do end up exporting to Europe may end up losing money.
“While American gas exports have grown rapidly, most shipments have gone to Asia and Latin America, where prices have been higher,” the Times reported Thursday, quoting Marco Alvera, chief executive of Italian natural gas infrastructure company SNAM. “Price differences mean American gas is usually attractive to European buyers only during cold snaps, when prices on the Continent rise.”
U.S. soybean prices have been hit hard by Trump’s trade war with China, leaving farmers in a desperate situation. Earlier in July, Trump slapped China with a 25 percent tariff on $34 billion worth of Chinese goods. In response, China levied its own tariffs on an equal amount of American-made goods, such as propane, cotton, tobacco, and — most notably — soybeans.
In the aftermath of that retaliatory strike, U.S. soybean prices dropped to $8.55 a bushel, a 10-year low and an astonishing 13 percent decline since January.
As of yet, it’s unclear whether the proposed bump in European imports could save U.S. soybean farmers, as the plan relies heavily on private purchases. However, according to Bloomberg, European buyers were already slated to purchase more U.S. soybeans due to Trump’s trade war with China, which has forced Brazil — a major soybean producer — to funnel more of its product to China, creating less competition in Europe.
“It’s already happening. While China concentrates its purchases on Brazil, the rest of the world turns to the U.S,” Pedro Dejneka, partner at MD Commodities in Chicago, told Bloomberg.
Trump will nonetheless view any increase in purchases as a personal victory.
“Tariffs are the greatest! Either a country which has treated the United States unfairly on Trade negotiates a fair deal, or it gets hit with Tariffs. It’s as simple as that – and everybody’s talking!” he tweeted Tuesday. “Remember, we are the ‘piggy bank’ that’s being robbed. All will be Great!”