Ferragosto and Free Trade

August is here! Italy is shutting up shop and heading to the beach. Though with the current weather, the usual seaside activities are somewhat subdued.

The Karas family is vacationing in Paris and Normandy this year. Since rain gear is standard equipment on the French Atlantic coast anyway, we’re prepared for anything.

Just before my departure, the EU and the US settled their tariff dispute. Last weekend, both sides announced a trade agreement in Turnberry, Scotland. It sets a base tariff of 15% on most EU goods.

Now the EU faces criticism, even from within, for not imposing retaliatory tariffs. “Bad deal,” “asymmetric,” “unbalanced,” they say, pointing to the 15% US tariffs versus zero percent on the EU side.

Why Europe’s restraint is right

Europe didn’t choose free trade purely principle. It agreed to the 15% under pressure because Trump threatened 30%. Still, I welcome this approach.

The EU Commission could have imposed retaliatory tariffs. Instead, it absorbed the hit and kept its markets open. That may seem naïve, but avoiding tit-for-tat tariffs was the right call. This restraint could prove victorious long-term, because open markets ultimately benefit everyone.

My Viewpoint newsletter is also taking an August break and will resume September 5. If something is on your mind in the meantime, drop me an email or send a postcard. I welcome suggestions for the fall.