by Louis Navellier
June 3, 2025
When President Trump made his recent trade deal with Britain, which contained no reciprocal tariffs (just a 10% baseline tariff), one thing became crystal clear, namely that the Trump Administration wants to boost farm exports. So, Prime Minister Keir Starmer received plenty of criticism from the British media for allowing the U.S. to compete with British beef at the expense of British farmers and getting nothing in return. Now President Trump is striving to get Switzerland to open up its agriculture markets, disrupting its monopolistic high prices in cheese and iconic brands like Nestle. Switzerland has the highest food prices in Europe due to the protectionist barriers that have been erected to protect its domestic industry.
These two nations are independent, but they underline the fact that the EU is a mixture of 27-nations, and these kinds of protectionist barriers exist all over the European Union (EU), so the Trump Administration is striving to secure favorable trade deals with both Britain and Switzerland to set a baseline for a trade deal with the EU. I do not expect the EU to allow the Trump Administration to impose a 50% tariff on EU goods, but if trade negotiations keep progressing, they will reach a compromise, since the deadline for the 50% EU tariffs to be imposed has been extended to July 9th after the EU asked for that extension.
Last Wednesday, the U.S. Court of International Trade blocked President Trump from imposing sweeping tariffs on imports under the International Emergency Economic Powers Act, effectively thwarting any reciprocal tariffs on the EU and many countries. Obviously, the Trump Administration immediately appealed this Court ruling and got a temporary reversal, so it will be interesting to see when this issue will be resolved by the Supreme Court. The media is also reporting that there are other ways for President Trump to impose tariffs, so his quest to impose reciprocal tariffs is not likely to be prohibited longer term.
In the event that the EU cannot reach a favorable trade deal with the U.S. this year, I suspect it could lead to the eventual implosion of the EU, which clearly does not represent all 27-nations in the EU equally. The EU started as a trade and monetary union, but it has mutated into an increasingly dysfunctional entity that meddles in the local politics of its members in France, Germany, Italy, Poland and Romania. The EU essentially attacks candidates that oppose open immigration, climate change or other EU policies.
Why President Trump’s push to get Europe to open up its agriculture markets is so interesting is that the EU has been systematically destroying the livelihood of farmers by its mandate to comply with the Paris Climate Accord by: (1) restoring 30% of their farm land to a “natural state,” (2) culling their animal herds to reduce carbon dioxide, and (3) switching to organic fertilizers from chemical fertilizers made from nitrogen/potash. These oppressive farm rules created new political parties, like the Farmers’ Party in the Netherlands, which refuse to “restore their fields to a natural state” which includes flooding much of their fields with salt water after building a system of dikes hundreds of years ago to keep the sea water out.
Clearly, the consequences of the Paris Climate Accord have not been very well thought out and threaten the livelihood of EU farmers, so the fear of U.S. agricultural imports is further threatening EU farmers.
So, what is the EU going to do – besides enforcing green mandates – to effectively block U.S. agricultural products? The real problem is that the EU allows agricultural products from Latin America, so if they erect barriers on the U.S., they will also hurt Latin America’s agricultural exports. I hope you see why the EU is a dysfunctional mess and might break up if they continue to harm EU farms and major businesses.
Germany’s new Chancellor, Friedrich Merz, will be meeting President Trump in Washington D.C. on Thursday. It will be interesting to see if President Trump’s call for the German automakers to expand their U.S. operations will be openly discussed when Merz and Trump appear before the media. In the past, President Trump has offered work VISAs for any Germans that move to America to work in the BMW, Mercedes, and VW Group’s auto plants here. Furthermore, President Trump has bragged about: (1) dramatically lower electricity costs, (2) lower labor costs, (3) no EV mandate by 2035 – and other pro-business advantages. Many southern states are ready to expand their operations to accommodate the German auto industry. As a result, President Trump’s meeting with Merz will be especially interesting.
In the meantime, Chancellor Merz implied that the EU could retaliate against U.S. technology companies if the trade conflict with the Trump Administration escalates. Specifically, Merz said he aims to reduce tariffs and defuse tensions with the White House. Merz said, “At the moment, we strongly protect U.S. technology companies” adding, “That can be changed. I don’t want to escalate this conflict. I want to solve it.”
Germany has also dispatched its Economy Minister, Katherina Reiche, to Brussels to plead with the European Commission to approve a plan to support energy-intensive industries, such as cement, glass, steel and chemicals. Reiche said, “Not having steel production in Germany …and to no longer have basic chemical production would mean entering into new dependencies.” For instance, Germany is seeking to approve a reduced electricity rate for energy intensive industries via an EU subsidy, since its Net Zero mandate is systematically causing electricity prices to soar, destroying Germany’s industrial base. Obviously, if Germany gets an EU electricity subsidy, other EU members will also seek similar subsidies.
As a result of diverse national needs, the eventual implosion of the EU is getting closer as Brussels’ oppressive regulations attack some of the traditional power industries within once-mighty Germany.
The Fed Keeps Fighting “Phantom Inflation”
Fed Chairman Jerome Powell continues his search for “phantom inflation”, saying that inflation is now their #1 priority. Specifically, Powell said at the Fed’s research conference that, “We may be entering a period of more frequent and potentially persistent supply shocks, a difficult challenge for the economy and for central banks.” Powell also addressed graduates at Princeton University, his alma mater. In his commencement speech, Powell told the graduates, “I had brushed off my parents’ one academic suggestion, which was to major in economics, which struck me as boring and useless.” Powell then added, “After 13-years at the Fed, I admit I was wrong about that.” Interestingly, Powell graduated with a degree in politics, and President Trump has been criticizing the Fed Chairman for “playing politics.”
Speaking of inflation, the Fed’s favorite inflation indicator, namely the Personal Consumption Expenditure (PCE) index, rose only 0.1% in April and 2.2% in the past 12-months. The core PCE, excluding food and energy, also rose 0.1% in April and 2.5% in the past 12-months.
The Commerce Department reported that personal spending rose only 0.1% in April after surging 0.7% in March, which is not very inflationary, so the Fed has all the reasons its needs to cut key interest rates as soon as it can overcome its inflation fears, in a year of very low inflation. The most interesting economic statistic last week was that imports declined 19.8% in May after a massive inventory buildup in previous months. Lower imports will help to boost second-quarter GDP estimates after a weak first-quarter GDP.
President Trump has urged the Fed to start lowering rates, since higher rates are hurting the economy. The Financial Times posted a scathing opinion piece entitled “America’s Rising ‘moron premium.’” This opinion piece – in one of many anti-Trump English publications – insinuated that President Trump could have a “Liz Truss moment.” (She is the former British Prime Minster who was ousted after only seven weeks in office when bond yields soared in the wake of her tax cut proposals). Although President Trump responded to the “bond vigilantes” by suspending reciprocal tariffs for 90 days, in the end, lower trade barriers should be the net result as other countries drop their tariffs in exchanges for lower U.S. tariffs.
In the end, freer trade should be the end result, just like the recent trade agreement with Britain, with no reciprocal tariffs. Clearly, the Financial Times still has U.S. envy and needs to report more on why Britain is imploding, which is why Nigel Farage’s Reform Party is now the most popular party in Britain.
The good news last week was that the Conference Board announced that its consumer confidence index surged in May to 98, up from 85.7 in April. Especially encouraging is that the expectations component soared to 72.8 in May, up from 55.4 in April. Other components, like business conditions, employment prospects, and future income also rose in May, so after consumer confidence declined for five straight months, the May resurgence is very hopeful for the summer, since consumers are now suddenly upbeat!
Another good sign of consumer confidence is that Costco (COST) announced its earnings on Thursday, with quarterly same-store sales rising 8%, which is a sign that consumer spending remains strong. Since Costco is a major gasoline retailer, the fact that its same store sales rose despite lower gasoline prices is an important signal. Costco will also be key to helping move the bloated inventory of goods that were “dumped” in the U.S. in the first quarter in an effort to beat the coming U.S. tariffs. The company has stockpiled many goods, such as patio furniture, with no price increases foreseen for the summer months.
Finally, Canadian Prime Minister Mark Carney remains committed to Net Zero by 2050, which is making provinces like Alberta and Saskatchewan very nervous, due to the fact that the elimination of fossil fuels and chemical fertilizers (e.g., potash) would be devastating to their respective economies. Ironically, Canada accounts for up to 25% of global carbon emissions due to their annual Boreal fires, where the peat in the ground burns from lightning strikes, so if Prime Minister Carney were really serious about carbon emissions, he should try to curtail these natural peat fires. Although the Boreal fires have already started in Alberta, Manitoba declared a state of emergency from an out-of-control fire near the town of Flin Flon.
Navellier & Associates; own Nvidia Corp (NVDA), and Costco (COST), in managed accounts. We do not own Volkswagen (VWAGY), in managed accounts. Louis Navellier and his family own Nvidia Corp (NVDA), and Costco (COST), via a Navellier managed account, and Nvidia Corp (NVDA), and Costco (COST), in a personal account. He does not personally own Volkswagen (VWAGY).
All content above represents the opinion of Louis Navellier of Navellier & Associates, Inc.
Also In This Issue
A Look Ahead by Louis Navellier
The EU Now Seems to be Fighting for Its Long-Term Existence
Income Mail by Bryan Perry
“Trumpenomics” is Finally Kicking In
Growth Mail by Gary Alexander
Rising Debts Limit America’s Growth Potential
Global Mail by Ivan Martchev
More Trillion Dollar Swings
Sector Spotlight by Jason Bodner
Turn Up the Quiet
View Full Archive
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