As European countries, finally, crank up defence spending, International Traffic in Arms Regulations (or “ITAR”) are likely to come up in conversations.
Reflecting on topics such as this got me thinking that so much of the Western supply chain in military kit is controlled by the US. On the positive side, you get economies of scale and all that comes with these kind of forces. For years, Americans have been keen on selling all this funky kit to the likes of Germany, Britain, etc.
The problem is that to follow an independent foreign and military policy in this new era means that chain is breaking. There is talk that the US can operate a “kill switch” so that countries using certain US-made weapons cannot use them in ways that an administration does not like. It reminds me a bit of worries about Chinese electric vehicles being vulnerable to such a “switch”.
This seems in some ways to be a risk management issue. There is a broader Nassim Taleb-style point about making defence and security in the free world less fragile. Think how much of our defence and communications run off a handful of networks and suppliers. There are US satellites, cloud computing services from the likes of AWS, Microsoft, etc; military hardware suppliers in the US such as Lockheed Martin, Raytheon, Pratt & Whitney. And many more. These systems generate great efficiencies and rich export earnings, particularly for the United States.
There’s a problem – a fragility. Europe has become dependent, complacent and comfortable.
As we found out because of the 2008 financial crisis and covid, overconfidence in certain institutions (US government, central banks, medical experts) can lead to dangerous outcomes. There is a sort of moral hazard problem. Just as “too-big-to-fail” bank bailouts create foolish attitudes about risk, a sense that the US military or whoever would ride to the rescue of a country meant too many nations got complacent. In fact, it is possible to see some of what is going on right now in behavioural terms. Incentives matter. Shield people against certain costs, and they become spendthrifts, borrow too much, or assume they can strike attitudes on things and there won’t be bad outcomes.
(See my related post on what countries such as in Europe, parts of Asia etc, do now.)
Does it matter, Poland apart, which countries in Europe (the EU) have the will to defend themselves?
Yes.
Incentives.
Given the recent actions of some European Union and NATO countries such as Romania, in overturning elections and (now) banning candidates, what are these nations defending?
It does not appear to be “freedom and democracy” as they claim – as they all have “Hate Speech” laws (so much for freedom) and they seem to despise democracy – see above.
Vice President Vance now seems vindicated – which will NOT please him, as he sincerely wanted the “allies” to hold to the principles, freedom and democracy, they claimed to believe in.
Of course, it is still possible that the “international community”, as the establishment calls itself, will now clearly CONDEMN what has happened in Romania – first the overturning of an election, and now the banning of the leading candidate (whether this candidate is any good or utterly useless, a waste of space, should be for the VOTERS to decide – I should not have to write that, but it seems I do have to write that), in which case there is still some hope that this alliance is based on principles that are worth defending.
As I have asked before – how can the United States have an alliance with powers that would, if they could, put the President of the United States and the Vice President and-the-people-who-voted-for-them in prison for their opinions?
This is not some small “cultural difference” – this is a divide of fundamental principles.
For all their talk of hating Mr Putin – the international establishment seem to share his version of “Freedom of Speech” – “you are free to agree with me – but NOT to disagree with me”, and his version of “democracy” – “there can be elections – as long as I win”.
Again – this is an empirical matter, it is still possible that the international establishment will condemn, clearly and without reservation condemn, what has happened in Romania.
Mr Ed raised the example of Poland.
Under the Law and Justice Party – the European Union (and the rest of the “international community” – including the American branch of it, the Obama, so called “Biden”, Administration) raised endless complaints about, mythical, “undermining of the rule of law” in Poland – with money being withheld from the government, and money (from both international corporate and government sources) being sent to opposition groups.
But when Mr Tusk (European Union Commissioner) became Prime Minister of Poland and really did start persecuting political opposition – all the “rule of law” concerns suddenly went away – and the money was turned back on again.
The former government of Poland was not “pro Putin”, quite the contrary, the “international community” (government and corporate) just did not like them.
So, again, what is being defended?
Paul, how do you know that JD Vance is sincere? A few years ago he denounced Trump. Nowadays he seems fine with a policy that prefers to be mean to democratic countries and play nice with autocrats (“Vladimir”). That rather undermined the impact of his scolding speech in Munich.
As for the conduct of certain European countries, I wonder which of them could reasonably be relied on the remain NATO members. Right now, Poland has very obvious reasons. As do the Baltics, and countries such as the U.K. in keeping Russians out of our territorial waters and near undersea cables.
I’m aware that Tusk has been a prick. He’s from a political class that, among other factors, explained why I voted for the U.K. to leave the European Union.
Now, let’s get back to the topic of my post. What’s your view on that Paul? Anything?
🥺
Or rather As European countries, finally, talk about cranking up defence spending…
Words are easy, actions delivering over months and years are hard and often diverted by later ‘events’.
They’re defending against Russian subversion, how’s that not obvious? If you think these are normal times, you aren’t paying attention.
DJ,
Have no doubt that it will happen. All the talk is of an increase in spending. Note that is an increase in spending not capability. It warms the cockles of every Keynesian so of course it will happen. Does that mean more troops, actually having aircraft on our aircraft carriers or any form of ABM capability? Of course not!
I’d take it seriously (as would Putin) if we were committing to actually fielding 100-150 Battle Penguins for just one example.
Johnathan Peace – it is indeed clear that Vice President Vance is sincere about the speech he made a couple of weeks ago – these are beliefs he has had since he was very young – a time when he suffered horribly, but found beliefs that gave meaning to his life.
What he doubted, and what I myself doubted about Donald J. Trump (remember I was a cog, a very tiny cog, in the Ted Cruz campaign AGAINST Trump – and said some quite dreadful things about Mr Trump, as he then was, in 2016) is whether Donald J. Trump shared these beliefs.
There has never been any doubt about what Vice President Vance believes – even his worst enemies do not deny that.
What is being defended? Is the “topic of the post” – a real description of what you are defending, how it is the “freedom and democracy” you claim it is. Otherwise further discussion is utterly pointless.
What I find disturbing is neither you, Johnathan Pearce or “Old Jack Tar” or others, seem to be condemning what has happened in Romania (the subversion of democracy – “justified” by patently absurd claims), or Poland (where people, very ANTI Mr Putin people, have had to flee for the “crime” of being out of favour with the new rulers) or anywhere else.
“Russia, Russia, Russia” is not enough – you need to explain what you are defending, how it is the “freedom and democracy” you claim it is.
Where is the Freedom of Speech and the democratic elections to allow the people to change POLICY (including to adopt policies the “international community” does not like – including the branch of the international community in their own countries, such as the unelected judges and the security and intelligence services) that you say you support?
Words are easy, actions delivering over months and years are hard and often diverted by later ‘events’.
You could say the same about most of what Trump does. After all, look at the back-and-forth over tariffs, which is then defended as “4-Day chess”.
Paul:
at I find disturbing is neither you, Johnathan Pearce or “Old Jack Tar” or others, seem to be condemning what has happened in Romania (the subversion of democracy – “justified” by patently absurd claims), or Poland (where people, very ANTI Mr Putin people, have had to flee for the “crime” of being out of favour with the new rulers) or anywhere else.
I am sure it is disturbing. You seem to be doing what you often do, which is not engage with the substance of a post, such as mine, which is about the need to avoid over-reliance on X or Y, and instead talk about how supposedly terrible Europe is. I am sure your points about Romania and Poland are true. That does not alter the substantive issue which is that European countries in general (not Poland, Finland a few others) have become dangerously exposed to reliance on US equipment and systems. That is now changing. I wanted to see what people think about that. So far, hardly anyone does. (Sorry if I sound like an irascible maths teacher where all the kids want to talk about baseball or something.)
You know me well enough Paul to know that I have no illusions about the rancid politics of Europe, including those in the EU. I voted for Brexit, and would do so again.
Look, to take a small example, at the corruption and violence of Malta, which joined the EU in 2003, and where a campaigning journalist called Daphne was blown up by a car bomb. Responsibility for that crime goes all the way to the top. She was murdered in 2017; justice has still not been fully done. Malta, as some readers might know, used to be a major UK and NATO naval and military base. Today, it plays the neutral card, but that might not be possible much longer.
Are these the “democratic countries” who conducted regime change operations in Romania, imprison vast numbers of people for speech, and refuse to cede any real power to political parties with impolite policies like the AFD in Germany no matter how much of the vote they receive in elections? Are these the same “democratic countries” who shut down civil society and implemented martial law over at most “the flu” during COVID? The list goes on and on.
How these “democratic countries” are ruled is nominally through elections but actually through mass media propaganda, weaponized deep state, NGOs, and a vast and oppressive federal bureaucracy completely unaccountable to the people.
And what does it mean “to be mean” exactly?
And what does it mean “to be mean” exactly?
Shlomo, have you been living in a desert island since the start of the year?
Trump’s pummelling of Zelensky, Canada, Mexico, comments that the EU was founded with the purpose of “screwing” the US. The list is getting longer by the day.
One thing I notice with Trump is that there is no positivity in his rhetoric much of the time. For instance, his actions have arguably made it easier for the liberals, led by Mark Carney, to win the elections in Canada. Canada has vast mineral resources; it is an important supplier of energy. Given its proximity to the Artic Circle and so on, it is important for military intelligence sharing to what China and Russia are up to, a fact that the wiser folk at the Pentagon are well aware of. But no, let’s make dipshit comments about Canada being the 51st state, and so on.
That is where Trump’s glowering sense of bullyboy gets you. It gets you into all kinds of problems, even if this oafishness has been useful in waking Europe up. It means those of a conservative political bent will want review how close they want to be seen with the MAGA approach. It is already showing itself to be toxic. That may be one of the biggest impacts of his first few weeks in office.
Oh you are referring to the reciprocal tariffs? So it’s mean when USA does it to other countries, but when other countries do it to USA it’s not mean?
Trump would happily remove all tariffs on any country once that country removes all tariffs and trade restrictions on American products. But that’s not going to happen and the “free trade” crowd loves to heap opprobrium on USA for implementing tariffs but hardly ever raises even a single word of objection when other countries do the same to USA. Many of these tariff regimes against American products have been in place for decades and have done great harm to American manufacturing and industry.
As for Mexico, the flow of fentanyl is a grave and serious issue – one that actually impacts Americans in a very serious way. The fentanyl crisis is what they told us COVID was – something that is killing Americans on a vast scale, crippling our communities, and harming our families. If it were up to me I might have already sent the 101st airborne into Northwestern Mexico to resolve the issue with force so there would be no need for tariffs to address that concern. Trump is playing with kid gloves, as usual.
Oh you are referring to the reciprocal tariffs? So it’s mean when USA does it to other countries, but when other countries do it to USA it’s not mean?
Canada and Mexico are, or were, in NAFTA, which unless I am mistaken was a free trade pact.
With the EU, I see that Trump objects to Value-Added Tax (VAT), which is a sales tax, not a tariff. He cannot even tell the difference between sales taxes – which are levied on all goods and services, foreign and domestic – and tariffs, which are levied on foreign imports.
The EU has a customs union tariff/non-tariff wall. It’s bad. The UK is, thanks to Brexit, out of that CU. But as I have noted before, even if not everyone plays nice, it is still a self-harming move to impose tariffs. It is also foolish if you turn them on and off like a switch – this volatility is hitting the equity market.
Trump would happily remove all tariffs on any country once that country removes all tariffs and trade restrictions on American products. If Trump has embarked on FTAs with that overt statement of intent, I must have missed it. Instead, he’s made it clear he loves tariffs. He thinks the US should revert to how it was under the late 19th century when the US had tariffs but no federal income tax. However, back then the federal govt. accounted for just 4% of GDP. Today, it is vastly higher. And yet Trump thinks tariffs can make the difference. They cannot without wrecking trade. He has said tariffs are his favourite word.
As for Mexico, the flow of fentanyl is a grave and serious issue – one that actually impacts Americans in a very serious way.
I am sure it is. The flow of illegal firearms to Canada is probably also quite an issue. And so on.
The problem with Trump is that he has different, often mutually contradictory reasons for tariffs, and the justifications shift all the time. One minute it is security; the next it is fairness, or the War on Drugs, or being hard on country X or Y.
“Trump is playing with kid gloves, as usual.”
Well, since the start of 2025, the US S&P 500 Index of equities has fallen about 2 per cent, wiping out the gains since Trump was elected in November last year. Those “kid gloves” need to be put into the laundry.
https://x.com/zerohedge/status/1897298757584388224
“If tariffs are so self-defeating as the “experts” claim, why are all the nations targeted by Trump so quick to retaliate [with tariffs of their own against America]”
https://www.whitehouse.gov/fact-sheets/2025/02/fact-sheet-president-donald-j-trump-announces-fair-and-reciprocal-plan-on-trade/
I am not sure if you realize the extent of the massive tariffs so many countries all around the world have had in place against American products for decades which have done immense harm to American industry and manufacturing.
I am all for free trade, but until we have that I am in favor of reciprocal trade. Just like Trump.
Look, I love Austrian Economics and I understand why you think this matters. I’ve read Mises, Rothbard, Hayek, etc.
I’m not saying it does not matter, but I am saying it is more complicated that you think. Number up is good, but the connection between the health of the stock market and the health of the American People is not super clear-cut to me. I think the primary reason why we have a different opinion on this subject is because I think that while there is some capitalism in America, there is not much and what we primarily have in USA these days is corporatism. Corporatism is not free markets.
Shlomo, the Zerohedge comment says this: “If tariffs are so self-defeating as the “experts” claim, why are all the nations targeted by Trump so quick to retaliate.”
The answer is that countries that retaliate are stupid, because they harm themselves. There is a lot of stupidity on all sides. It would be best if Europe and Canada etc had just not risen to the bait, and said that if America wants to hurt its consumers by hiking prices, so be it, but we won’t.
Yes, I saw the link about how Trump frames the case for “reciprocal” trade. I am sure there are a lot of examples of this or that country behaving badly (India has been an example of protectionism for decades). But again, note the tone of endless grievance, as if everyone is out to “get” the US.
The US has a surplus on services-based earnings with the rest of the world, and a trade deficit on manufactured goods. Funny how the services part tends to not be mentioned by those going on about the unfair treatment of the US in trade. https://www.bea.gov/data/intl-trade-investment/international-trade-goods-and-services
“Corporatism is not free markets”. I never said it was.
I know that the behaviour of stocks is not directly related, on a one-to-one basis, with how Mr Average Joe American is doing. It is a rough and ready yardstick of investor confidence (and there are far more unlisted, privately held small firms than big ones on the NYSE, etc). It is nothing more than a record of where people thought that earnings of US listed businesses were worth at any one point of time. Why does this matter in another way, however? Because if you threaten tariffs, then suspend them, then threaten them again, and so on, it creates “regime uncertainty”. It discourages firms from investing in the US, or wherever this sort of policy chaos appears to hold sway. Policy volatility is itself a cost. In insurance-speak, the premiums for US risk exposure go up.
Back to my OP: I think that the UK and other European nations will and should continue to buy and use US equipment and services; they’d be daft not to do so. What will change will be the amount of diversification and avoidance of concentration risks in the future.
Surely one of the reasons countries retaliate to tariffs with tariffs is because to not do so would lead to accusations of appeasement. Being accused of appeasement and the inevitable comparisons to Neville Chamberlain etc, especially when the the government imposing the initial tariffs is led by a man the press claim is the new Hitler, is not good for political careers.
I don’t think this is a good thing. But it is what it is.
You’re joking, right? Know what the tariff is to sell dairy into Canada?
The list of tariffs charged to US sellers sending product into Canada is long and very very high.
Define “you.” We here are quite happy with his results so far, six weeks into his term. I hear how horrible he is mostly from people outside of my country. That is entirely in keeping with the sentiment that saw him elected.