Trump received Jean-Claude Juncker, the chief of the EU’s executive arm, the European Commission, Wednesday to discuss trade issues given a recent deterioration in their relationship. The White House shook the EU by imposing steel and aluminium tariffs at the start of June and by threatening new duties on its car industry — a key engine for the European economy.
What has been agreed?
In a joint press conference, both leaders promised to work towards zero tariffs on non-auto industrial goods; to reduce barriers and increase trade in services, chemicals, pharmaceuticals, medical products and soybeans.
They also agreed to reform the WTO and that the European Union will buy more liquefied natural gas from the United States. Most importantly, they agreed to not impose new tariffs on one another while they work together on these issues.
“The U.S.-EU agreement to negotiate tariff reductions and to increase U.S. exports to the EU represents an incremental de-escalation of trade tensions between the two sides and lowers the risk of new U.S. tariffs on auto imports, at least in the near term,” Goldman Sachs said in a note Wednesday.
The bank added, however, that “the news is not uniformly positive.”
“The lack of specifics in today’s U.S.-EU announcement raises the possibility that the negotiations could falter at a later stage, as U.S.-China negotiations did earlier this year.”
The U.S. claimed last May it had put the trade war with China “on hold” as both countries initiated meetings to discuss their trade relationship. However, such talks ended in early June without any agreement and with the Chinese authorities refusing to buy more American products.
Trump and Juncker also vowed Wednesday “to resolve the steel and aluminium tariff issues and retaliatory tariffs” but without adding any detail on how that’s going to take place. The EU imposed duties on $3.3 billion worth of American goods last month in response to the metal tariffs Trump abruptly imposed.
James Nixon, chief economist at Oxford Economics, also told CNBC that there is “massive uncertainty” as to what Wednesday’s deal means. He added, however, that it seems the White House is returning to a “kind of multilateral relationship and trade dealings, which to be honest we haven’t seen from the United States yet.”
Elsewhere, UniCredit called the deal “vague” and one that “failed to elicit excitement among investors in Asia.”
Is there a winner?
“The real winner here would appear to be the European Union. The U.S. auto tax threat was reversed in exchange for nothing that means anything,” Paul Donovan, chief economist at UBS Global Wealth Management said in a note Thursday morning.
However, some argue that Trump is in fact the winner out of Wednesday’s meeting.
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