MIT's Simon Johnson: Trump's Tariffs are 'Massively Counterproductive'

EU's Response to Tariffs

• 🇪🇺 The EU is carefully considering its response to US tariffs and is unlikely to appear meek or entirely compliant.
• 🤝 The EU has proposed a 'zero for zero' deal on industrial tariffs, which may still be on the table.
• ⚠️ A more dramatic response could involve using their 'anti-coercion instrument' to take counter-measures against US services exports, though some EU countries may urge caution.

VAT and Negotiation Tactics

• ❓ The US administration appears divided on the issue of Value Added Tax (VAT), with some advocating it as a problem while others, like the Treasury Secretary, do not.
• 🚫 The EU views VAT as a fundamental part of their public finances and a non-starter for negotiation or withdrawal.
• 🤔 Simon Johnson questions whether the negotiations are in good faith or merely a 'shouting match', which could destabilize the global economy.

Geopolitical Context and Trade Relations

• 🌍 The broader context includes Russia, Ukraine, and NATO, influencing European sentiment towards the US.
• 🤨 Europeans are reportedly unhappy with Trump's aggressive moves and his attitude towards Ukraine, viewing him as potentially sympathetic to Putin.
• 📈 Despite US GDP growth, Europe faces deep structural economic problems and needs to invest more in science and technology, not be pulled into a trade war.

The Purpose of Tariffs

• 💡 Simon Johnson suggests that potential deals, such as energy agreements, could be made independently of tariffs, indicating tariffs may not be the primary negotiation point.
• 📉 He argues that the tariffs are unnecessary and massively counterproductive.
• ⚖️ The best-case scenario involves lengthy negotiations leading back to the status quo, while the worst case involves destabilizing global financial sectors with spillover effects for the US.