The US and EU have agreed to try and create an environment of zero tariffs, barriers or subsidies – an undertaking that appears to have diminished the prospect of a prolonged trade war between the two groups.
In a surprise announcement in the Rose Garden of the White House, Donald Trump and European Commission President Jean-Claude Juncker, said they had reached an understanding on lowering barriers between the two sides, whose annual trade in goods and services is worth more than $1 trillion.
“We agreed today, first of all, to work together towards zero tariffs, zero non-tariff barriers, and zero subsidies on non-auto industrial goods,” said Mr Trump, with Mr Juncker by his side.
“We will also work to reduce barriers and increase trade in services, chemicals, pharmaceuticals, medical products, as well as soybeans.”
He added: “This was a very big day for free and fair trade.”
In turn, Mr Juncker said he “had the intention to make a deal today and we made a deal today”. He said while negotiations were ongoing, “we will hold off further tariffs” and reassess existing tariffs on steel and aluminium.
Ahead of their appearance at the White House, it was reported that the two men had agreed the EU would increase its imports of soybeans and liquefied natural gas. Markets jumped on the news of the deal.
“We had a big day, very big,” Mr Trump said. “We set out to launch a new phase of close friendship between the United States and the European Union, strong trade relationships where both of us will win.”
The import of soybeans is a boost to American farmers, who have seen prices plummet after China slapped a retaliatory tariff on American goods including soybeans, in the wake of US tariffs on aluminium and steel.
Mr Trump had said earlier on Wednesday that the US was seeking a “level playing field” on trade with the EU.
“For years, the US has been losing hundreds of billions of dollars in trade with the European Union, and we just want it to be a level playing field for our farmers, for our manufacturers, for everybody and we also want a big beneficiary, frankly, to be the European Union and we think it can be good for everybody and that’s why we are here to discuss,” he said, sitting alongside Mr Juncker in the Oval Office.
The agreement is likely to dispel fears of an escalating trade war in the wake of Mr Trump’s decision to place a 25 per cent tariff on steel imports and a 10 per cent tariff on aluminium imports. The EU subsequently retaliated with tariffs on a number of US goods.
In what threatened to be a further escalation, Mr Trump’s aides had said he wanted to impose a further 25 per cent tariffs on auto imports, a move that would hit European car-makers like BMW and Volkswagen hard, as well as Japanese and South Korean car companies.
Mr Juncker told Mr Trump the two trading partners were “allies, not enemies”. “We should talk about reducing tariffs instead of increasing them,” Mr Juncker said, as Mr Trump nodded.
Just two weeks ago, the US president called the 28-nation strong EU, which includes many of the US’s oldest allies, an unfair trading partner and even labelled it a “foe”. Speaking to CBS on the eve of a meeting with Vladimir Putin in Helsinki, Mr Trump said the EU was an enemy because of “what they do to us in trade”.
Asked who was the US’s biggest enemy globally, Mr Trump said: “Well I think we have a lot of foes. I think the European Union is a foe, what they do to us in trade. Now you wouldn’t think of the European Union but they’re a foe.”
He added: “Russia is a foe in certain respects. China is a foe economically, certainly they are a foe. But that doesn’t mean they are bad. It doesn’t mean anything. It means that they are competitive.”
The Associated Press said the negotiations at the White House came as Mr Trump has touched off a series of trade disputes with global trading partners, including China, whom he accused earlier on Wednesday of employing “vicious” tactics aimed at hurting American farmers.
Mr Trump’s defence came after his administration announced a plan to provide $12bn in emergency relief for farmers who have been slammed by the president’s trade disputes with China and other countries.
Chinese President Xi Jinping said at an international summit in South Africa that the world faces “a choice between cooperation and confrontation”, in remarks that criticised escalating US tariffs on goods from China and other major trading partners. He warned that those who pursue “economic hegemony only end up hurting themselves”.
If the US and EU were to deepen their trade war involving car manufacturing, it would have major ramifications for both economies. The EU has a huge stake in the US industry, where European companies produce almost 3 million cars a year, accounting for over a quarter of production in the United States.
On Tuesday, Mr Trump had suggested in a tweet: “Both the US and the EU drop all Tariffs, Barriers and Subsidies! That would finally be called Free Market and Fair Trade! Hope they do it, we are ready – but they won’t!”
After the meeting on Wednesday evening he tweeted once again.
“The United States and the European Union have a $1 TRILLION bilateral trade relationship – the largest economic relationship in the world,” he said. ”We want to further strengthen this trade relationship to the benefit of all American and European citizens.”
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