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Culture War Roundup for the week of July 28, 2025

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I think this so-called "deal" is very silly. Obvious points:

  1. This is a public humiliation for von der Leyen, whatever the actual deal turns out to be. For too many MAGA supporters, that is sufficient for it to be a good deal for MAGA.
  2. Unlike the Japan "deal", where the Japanese authorities publicly disavowed the investment pledges the White House announced, the EU is being low key about the fact that there is no agreement on what the investment pledge actually is. But the White House explicitly say that the $600 billion investment pledge is additional to existing commitments, and the Commission explicitly say that it is a restatement of existing plans.
  3. The energy purchase pledge is fake. The EU Commission has no authority to make the Member States or European companies buy American energy they don't want to. And even if they did, the US lacks the physical capability to increase energy exports that much, and the EU probably lacks the physical capability to increase energy imports that much.
  4. As with the UK "deal", the EU announcement says that the US will cut steel tariffs subject to a quota arrangement to be agreed as part of the legally binding agreement. Unlike the UK "deal", the US announcement says that this will not happen. Given the political importance of steel tariffs, this would normally be sufficient to prevent ratification if this were a real deal.
  5. The non-tariff part of the announcement is very thin indeed - basically just paperwork reduction. Trump implied on social media that the EU would accept US manufactured goods based on US safety standards - both the US and EU announcements say this won't happen.

This is significantly further from being an actual deal than the UK "deal" was - the UK "deal" was thin but the UK and US announcements were sufficiently similar that you could imagine smart people who wanted to do a thin deal closing the gaps over the course of negotiating the legally binding agreement. This looks suspiciously like a kayfabe deal (similar to ones Trump did with Canada an Mexico back in March) where von der Leyen allows Trump to announce a yuge win while giving up very little of substance - the only part of the deal which is likely to actually happen is cutting EU tariffs on US manufactured goods from an average 1.6% to zero.

The other thing is that if EU is hoping to weather the storm and then it will be off

There are two ways this can blow over in less time than it takes to negotiate the legally binding deal (which, even if it is possible, will be of order a year). One is that the legality of the tariffs works its way up to SCOTUS who (correctly) say that the President does not have the authority to do what Trump is doing. The other is that the impact of the tariffs on US manufacturing (which is net hurt by the tariffs, both because there are higher tariffs on raw materials than on manufactured goods, and because tariffs hurt disproportionally hurt complex supply chains in general) and US consumers forces the final TACO. I personally rate the chance of SCOTUS overturning the tariffs at 75% and the chance of a TACO over the summer at 20%, for an overall chance of 80% that the political environment is completely different by the time the deal could be ratified.

No matter if 2028 is dem or rep year - this deal will be requested to be honored.

Midwestern MAGA (including Vance) or Dems will want to renegotiate the deal because they will want to change the underlying industrial policy (of promoting natural resource exports at the expense of US manufacturing). Continuity Trump will want to renegotiate it because Trump renegotiates everything as a matter of course.

even if it is implementation is botched as hell

The craziest thing here is that the Trump administration is trying to negotiate an accounting identity. Trump is bragging about securing $600 billion in investment pledges. But the whole point of the new approach to tariffs is to reduce the trade deficit, which is equal by accounting identity to net foreign investment in the US. The only way the EU can invest $600 billion in the US is by running a trade surplus, which is precisely the thing Trump says he wants them to stop doing.

If the deal actually happens, it would be bad for American manufacturing (partly because of the de-escalating tariffs, but most importantly because exporting $250 billion a year of energy will mean diverting energy away from domestic industry). But I don't think that bothers MAGA - as I say here, at the level of vibes MAGA want to go back to exporting natural resources like in the good old days, not to reindustrialise America. And if the deal actually happens it would be great for American natural resource producers.

And no one is brave enough to even propose retaliation.

Lets see what happens with China.

Mostly this. There's probably more to be said about that optics of the deal than the substance, not least because of the multitude of interests in inflating / signal boosting the more propagandastic elements for, well, propaganda. At the end of the day, though, it doesn't 'make' people buy stuff, and almost certainly includes a lot of purchasing that would already happen regardless.

I do think one of the more salient / relevant / 'why this deal will pass despite the critics' is that it puts an end (for now) the tariff issue, whereas deliberately trying to scuttle it would re-raise the issue and likely lead to higher. As much as, say, Paris will love to hate on this bill and decry it and so on, the BATNA tariff is higher, not lower, to the tariff in this agreement.

I suspect- though can't say with too much confidence- that another of the elements of this deal is how it will probably shape the European military modernization funds. A lot of the most recent discussion on the face-saving/'what's really in it' has focused on the limits of compulsory purchasing. However, a bigger issue is if EU-wide funding mechanisms will have the 'buy Europe' clauses that were being pushed for. I wouldn't be surprised if even if this deal doesn't 'make' anyone buy US military goods, it also undoes legal restrictions on EU funds being used for that purpose. As in, no one has to buy American, but at the same time people can buy American with funds that were previously being advertised as excluding American.

trying to negotiate an accounting identity ... which is precisely the thing Trump says he wants them to stop doing

And is now firing people for similar! If he wants Powell to lower rates, bad job numbers would help...

How is monetary policy an accounting identity?

A lot of monetary policy thinking starts with MV=PY which is an accounting identity.

For non-economists - M is the total quantity of money in the economy, V is the number of times each dollar is spent in a year, P is the price level, and Y is real GDP. So we say that the total amount of money spent is equal to nominal GDP. A lot of monetarist and monetarist-adjacent macroeconomics is arguing about which elements in this accounting identity are causes and which ones are consequences.

Sure there are accounting identities involved. But the way I interpret the phrase is as saying that the action favored by Trump has a necessary consequence because of such an identity. For example, if your assets increase, either your liabilities or equities increase.

This is not the case for employment (what the comment I was replying to mentioned). There is no accounting identity in monetary economics (that I know of) which links interest rates and employment. There is the Phillips curve, but we can argue about the slope, causality, etc.

Lowering interest rates is not crazy, even if Trump suggests it. Even Milton Friedman recommended it.

What he really needs to do is negotiate tariffs with Powell instead of the Europeans. Powell has more of what he wants, and is a better negotiator.