**Trade deal theatre** It didn’t take long for the grandiose statements from Sunday’s EU-US trade deal announcement to start to wilt under closer scrutiny. First, on the $750 billion of purchases of US energy over the next three and a half years: last year, the EU imported $88 billion worth of energy from the US – this would need to triple to meet the target, regardless of whether the US was offering the cheapest product. Total EU energy imports last year were just over $430 billion – so, the deal implies that half of all EU imported energy will have to come from one potentially hostile supplier. That’s just crazy, in terms of both economics and politics. It’s also not doable: the EU government doesn’t have the power to mandate where private companies import energy from, without official rulings which would take time, especially given internal hostility to the deal. What’s more, the US doesn’t have the capacity: its exports of crude, liquid natural gas (LNG) and metallurgical coal last year reached almost $170 billion, according to commodity data firm Kpler. Adding other categories such as refined petroleum products and nuclear technology pushes the total up to almost $320 billion – but still, the US can’t divert most of that to the EU without violating other trade agreements, as well as the free market principle that producers should be able to sell to the highest bidder. According to Politico, a senior EU official has specified that the energy part of the trade deal is “contingent” on sufficient supply in the US, shipping capacity and refining infrastructure in the EU being available. Does Trump understand this? So, the energy purchase commitment is flimsy at best. But that hasn’t stopped supply concerns from pushing the Brent benchmark oil price back above $70/barrel. Next, the promised $600 billion investment by the EU in the US? It might not happen. It turns out the number is a guesstimate based on discussions with businesses and industry associations of planned private investment in the US. But this will obviously be up to the individual companies; the EU cannot dictate how their investment is directed. The $550 billion investment commitment squeezed out of Japan is in a similar bind. The White House statement after the agreement was reached last week reads: “Japan will invest $550 billion directed by the United States to rebuild and expand core American industries. The United States will retain 90% of the profits from this investment.” The insane economics, as well as reports that the total amount was raised at the last minute by President Trump with the negotiators sitting in front of him, signalled that this was pure theatre. Indeed, yesterday Japan’s chief trade negotiator Ryosei Akazawa revealed more details of Japan’s understanding of the commitment. Only 1-2% of the amount will be investment; the rest will be in the form of loans. President Trump perhaps doesn’t understand that nuance – speaking to reporters last week, he said: “It’s not a loan or anything, it’s a signing bonus.” So, what happens when Trump realizes he’s not getting the trillions of foreign investment he’s been bragging about? Will he care enough to walk back the deals? US Treasury Secretary Scott Bessent said that the Japan deal would be revised quarterly, and that if Trump wasn’t happy, tariffs would revert back to 25%. This was apparently news to the Japan team, who insist this was not mentioned in the negotiations. The underlying message is that the agreements are neither binding nor lasting. There are real costs and real revenues involved, and they are already having impact. But one way to look at this situation is like a boat out in a hurricane – there will be damage, but the turmoil will pass, either because a court overturns Trump’s strategy of economic policy via executive order, or because a shift of Congressional power after the midterms curbs the President’s authority on trade, or because a new Administration in 2028 changes tack.

I talked about this and more in today's Crypto is Macro Now -