Has President Trump Lost His Grip on Reality?

The further President Donald Trump's term has progressed, the more obvious it seems that he has lost his grip on reality. The latest sign of this was his demand that Europe should retroactively pay compensation to the USA for not being able to produce goods competitive on the European market (example).

It is clear that European countries will not agree to such extortion. Nor will they stop exporting goods to the U.S. if Americans wish to buy them.

In this respect, it will be particularly interesting to see how much Trump manages to reduce the sales of European products in the United States. One would assume that price increases of even tens of percentage points—caused by tariffs—would significantly reduce their sales. However, it is also true that, in a similar way, the sale of American products to Europe will become more difficult due to countertariffs.

Lately, I have begun to suspect that Trump does not genuinely understand this. And therefore, he does not realize he should stop before irreversible damage is done to European-American trade relations.

And that is why I believe he has lost his grip on reality.

Previous thoughts on the same topic:
Economic Decline Awaits Americans as Trump Imposes Tariffs
Donald Trump’s Reliability as an Ally Has Proven to Be Questionable
The Real Problem with American Cars: Poor Market Fit

Economic Decline Awaits Americans as Trump Imposes Tariffs

Economists are quite unanimous in their view that tariffs hinder economic growth and overall welfare. They also agree that free trade and the removal of trade barriers boost economic growth.

These views stem from the fact that free trade lowers the prices of goods and services for both producers and consumers. Moreover, tariffs partly translate into higher prices, which negatively affect importers, exporters, and consumers alike.

This holds true even when tariffs are intended to protect a specific industry, as they inevitably increase production input costs and trigger retaliatory tariffs. Import tariffs can also harm domestic exporters by disrupting supply chains and raising their input costs.

In the long run, an even more harmful effect of tariffs is that they reduce competition between companies. As a result, businesses operating in tariff-protected markets become inefficient and less innovative, ultimately leading to difficulties—especially if the tariff barriers are later removed.

All of this seems to be entirely unknown to U.S. President Donald Trump, who is set to announce import tariffs on "all" trade partners today. This is despite the fact that the tariffs he imposed during his first term had a negative impact on American employment, as noted by Jyrki Ali-Yrkkö, Director of the Research Institute of the Finnish Economy.

Unfortunately, potential U.S. tariffs would have equally negative effects on America's trade partners. As a result, it won’t be just Americans who "enjoy" economic decline, but almost all nations across the world.

Previous thoughts on the same topic:
The Real Problem with American Cars: Poor Market Fit
Finland and the USA: Strong Allies with Shared Interests or a Trade Dispute?
Trump’s Tariff Weapon Worked, but Will Finland’s Development Aid Strategy Succeed?

The Real Problem with American Cars: Poor Market Fit

The President of the United States, Donald Trump, says he plans to impose import tariffs on the European Union quite soon. The reason for this is the weak demand for American products on the old continent.

This also affects Finland, as e.g. Tesla is the only American car brand with a significant market share here. Moreover, many of its models are manufactured either in Germany or China.

When it comes to cars, the problem with sales in Finland is not anything other than the weakness of American offerings. American cars are simply too large to fit comfortably into local parking spaces, and they consume far too much fuel.

The latter issue is largely due to the high fuel taxes in EU countries. While a gallon of regular gasoline costs just over three dollars in the U.S., the same amount costs around seven dollars (6.8 euros) in Finland. Additionally, the income level of Finns is about one-third lower than in the U.S., while taxation is significantly higher.

Therefore, the export problems of the U.S. automobile industry will not be solved by imposing tariffs on EU countries but rather by designing cars that are suitable for Finland and Europe in general. However, it remains to be seen whether American companies - and the USA under Trump's leadership - have the necessary willingness to do so.

Previous thoughts on the same topic:
Finland and the USA: Strong Allies with Shared Interests or a Trade Dispute?
Trump’s Tariff Weapon Worked, but Will Finland’s Development Aid Strategy Succeed?
Former President Donald Trump is Also the Upcoming President – But What Does It Mean?

Finland and the USA: Strong Allies with Shared Interests or a Trade Dispute?

Finland has always had excellent relations with the USA. As a sign of this, President Alexander Stubb has refrained from criticizing Donald Trump’s administration and has instead sought to understand its actions—even to the extent that some have speculated he is overly deferential to it.

There is, of course, an excellent explanation for Stubb’s and Finland’s approach: as a neighbor of Russia—and following the era of Finlandization, when the country had to be cautious in its dealings with the Soviet Union—Finland is now heavily dependent on NATO and, consequently, the USA to guarantee its military security. Nevertheless, Finland will remain a state governed by the rule of law, firmly committed to defending the inviolability of national borders against all major powers. This applies to Denmark as well.

In this context, it is extremely unfortunate that President Trump is threatening the EU—and, by extension, Finland—with trade tariffs that would hinder transatlantic commerce. Such measures would be particularly harmful to open economies like Finland’s, whose prosperity relies heavily on foreign trade. It would not be beneficial for the United States either, as it could negatively impact the very positive attitude that Finns generally have toward Americans.

It remains to be seen whether Trump and his administration understand this and seek to balance trade between the USA and the EU through other means. Moreover, in the end, high US tariffs would be paid by ordinary American voters, which is unlikely to increase Trump’s popularity in his own country.

After all, there are plenty of people in the US who struggle to cover their daily expenses. And they certainly did not vote for Trump so that he would plunge their personal finances into even greater hardship.

* * *

Finally, I would like to share a message with my American readers from my country’s Minister for Foreign Trade, Wille Rydman (Finns Party). At the end of last week, he made the following remarks:

"The United States has been focused on utilizing Alaska’s mineral resources. Here, Finland’s world-class geological expertise can offer significant contributions. The U.S. plans for Alaska have also emphasized the development of basic infrastructure, particularly in telecommunications, an area where Finland has strong capabilities."

"The U.S. has also prioritized improving its situational awareness in the Arctic. There is room for development in sensor technology, measurement and monitoring systems, and the utilization of space technology. Finland has expertise in all these fields."

"We are working to open markets through ICE Pact cooperation, which could allow Finnish shipyards to contribute their capacity to icebreaker construction. North America faces a shortage of shipbuilding capacity, making this a fantastic opportunity for our shipyards... We have the knowledge and capability to build the best icebreakers quickly and at a competitive price. Finnish maritime industry companies have supplied icebreaking technology for the most powerful polar icebreakers, Baltic Sea escort icebreakers, as well as smaller river and port icebreakers. Our expertise is extensive, and the industry operates on a global scale."

I sincerely hope that these considerations reach President Trump’s administration and encourage it to foster cooperation between Finland and the EU—natural allies of the United States—rather than risk a trade war that would harm all parties involved.

Previous thoughts on the same topic:
Trump’s Tariff Weapon Worked, but Will Finland’s Development Aid Strategy Succeed?
Putin, Trump, and the Prospect of Peace
Greenland's Future: A Battleground of Global Powers?

Trump’s Tariff Weapon Worked, but Will Finland’s Development Aid Strategy Succeed?

The leftist government of Colombia decided not to accept undocumented immigrants deported by the United States. As a result, President Donald Trump threatened the country with tariff increases: first to 25 percent and later to 50 percent.

This strategy worked, and Colombia's President Gustavo Petro reversed his decision, agreeing to accept its citizens. It remains to be seen whether any other country will refuse to take back its citizens if the U.S. deports them.

At the moment, however, it seems clear that Trump will not back down on this issue. The scope of the challenge is enormous, as millions or even tens of millions of people currently live and work in the U.S. doing low-wage jobs after arriving from developing countries in search of a higher standard of living.

This means that many individuals and businesses depend on undocumented labor. The big question, therefore, is how this labor will be replaced—if it is even possible. And if it is not, what will follow?

* * *

Finland also has a significant number of immigrants. Among them, those who have primarily arrived as refugees from North Africa and the Middle East have both struggled with employment and committed a disproportionately high number of crimes. In contrast, e.g. Ukrainians, Russians, Indians, Chinese, and Vietnamese are considered desirable and legal labor.

This is likely one reason why Finland is tightening the criteria for humanitarian immigration and aiming to remove undocumented individuals as well as foreign nationals who have committed crimes. As a small country, Finland does not have access to Trump’s “tariff weapon,” but by cutting development aid to uncooperative countries, it hopes to achieve the same result.

It remains to be seen, however, whether this “development aid weapon” will be as effective as Trump’s “tariff weapon.” Or will Finland have to develop additional measures before it can rid itself of unwanted individuals from developing countries?

Previous thoughts on the same topic:
Greenland's Future: A Battleground of Global Powers?
Finnish Immigration Policy Aims to Maximize Benefits and Minimize Drawbacks
Finland Suspends Development Cooperation with Somalia

Former President Donald Trump is Also the Upcoming President – But What Does It Mean?

Former U.S. President Donald Trump (Rep) won the election against his opponent Kamala Harris (Dem) and is now also the upcoming president. This offers Europe some food for thought.

In economic terms, Trump is expected to strongly advocate for the interests of American businesses and workers. This will likely manifest in the form of increased tariffs, making it harder for other countries to export their products to the U.S.

Europe – and other regions as well – will thus need to consider whether to respond with their own tariffs or simply criticize the Trump administration for its anti-free-trade stance. The former seems more likely, which could ultimately slow down global economic growth.

Trump is also expected to take a firm stance on the humanitarian migration flow from Mexico to the U.S.. This aligns with policies in some EU countries aiming for similar goals. However, it remains to be seen whether either will ultimately succeed in halting the flow of people from developing countries, driven by rapid population growth and a large standard-of-living gap with destination countries.

It is important to note here that, in the U.S., one must work to get by. In many European countries, on the other hand, it's been sufficient to collect social benefits and live off them comfortably.

In military terms, Trump’s overall stance is clear. He demands that NATO’s European members increase their defense spending, without which he won’t commit to guaranteeing their security in the same way the U.S. has done for decades.

Taiwan and Ukraine, of course, are special cases, and I haven’t quite grasped Trump’s stance on them. However, I assume he won’t leave Taiwan at China’s mercy, though Ukraine remains a bigger question mark.

My dear readers will undoubtedly recall that Trump promised to bring peace to Ukraine within a day. However, it’s unclear how he could even achieve that. Unless Trump issues Vladimir Putin an ultimatum to withdraw his forces from Ukraine or face the U.S. military.

Such an approach might indeed work, but in that case, there would be a risk that Russia’s cornered dictator would resort to nuclear weapons. And that would be disastrous for everyone in this world.

Be that as it may, Donald Trump is taking responsibility for U.S. policy, and others must accept that. For Finland’s part, President Alexander Stubb summed up the situation by stating that Finland will get along with the U.S. regardless of who leads the country. On this, I have no further comments.

Previous thoughts on the same topic:
A Message From and To Vladimir Putin
Finland Will Thrive with Any US President, Trump Survived the Assassination Attempt
Trump is leaving Africa

 

Rising Trade Tensions Between the EU and China

It is well known that China has in recent years conquered global markets by generously supporting its own industry. As a result, it has brought, for example, the European automotive industry almost to its knees, and some of it has already been relocated to China.

However, now the European Union member states are planning to impose permanent tariffs on electric cars manufactured in China. This would increase the cost of importing cars from China to Europe by five to ten thousand euros at current prices, depending on the manufacturer, assuming the tariffs are passed directly onto the prices.

It remains to be seen what will happen if the decision is implemented. It is likely that at least some sort of trade war will break out, unless a miracle happens and a fair agreement is reached on the level of state subsidies.

This would, of course, require that China understands the reason why the EU is imposing tariffs and accepts the principle of fairness, which would include mutual respect. However, this is probably too much to expect, at least until enough damage has been done to both parties' economies through mutual squabbling.

Previous thoughts on the same topic:
China uses Western universities to educate its youth
China is betting on scientific excellence
Does China prove the superiority of market economy?