Expectations were tempered ahead of European Commission President Jean-Claude Juncker’s visit to the White House on Wednesday, but a surprise announcement on an apparent trade breakthrough will likely buoy markets that were bracing for an escalation of America’s trade war with its European allies.
European trading partners, already incensed by US President Donald Trump’s tariffs on steel and aluminum, sent the delegation of high-ranking officials, which also included EU trade commissioner Cecilia Malmstrom, in an effort to fend off a further escalation in the form of auto tariffs.
A joint statement delivered by Trump, with Juncker standing by his side on the White House south lawn, said that the two sides would work towards “zero tariffs, zero non-tariff barriers, and zero subsidies on non-auto industrial goods.”
Amid growing pressure on the US president from business groups, lawmakers in his own party and their constituents, Malmstrom, the EU’s top trade official, warned earlier on Wednesday that if the Trump administration does not back off the threat of auto tariffs, Europe will slap import taxes on US$20 billion in US goods, primarily agricultural products.
The joint statement issued by Trump and Juncker specifically made reference to lowering tariffs on exports of US soybeans and increasing “strategic cooperation” in the area of liquefied natural gas. In negotiations with the US, China had hoped, but failed, to stave off a tariff battle with promises to purchase more agricultural and energy products from the US.
In a sign that the EU’s threats of putting more pressure on Trump’s political base, and alternative offer of helping buy their products, worked for the time being, Juncker said that no tariffs – including the dreaded auto tariffs – will be imposed while negotiations are ongoing.
Malmstrom also touted the meeting as a breakthrough on Twitter.
Important meeting at the White House today with @JunckerEU and @realDonaldTrump. Turning a page, agreed to facilitate trade between us, looking at zero tariffs on industrial goods, energy and regulatory cooperation. Also intensify work on reform of WTO.
— Cecilia Malmström (@MalmstromEU) July 25, 2018
The joint statement gave some indication that the EU was willing to work with the US on pressuring China to change its industrial policies, pointing a finger at Beijing, if not by name.
“We agreed today to join forces to protect American and European companies better from unfair global trade practices. We will therefore work closely together with like-minded partners to reform the WTO and to address unfair trading practices, including intellectual property theft, forced technology transfer, industrial subsidies, distortions created by state owned enterprises, and overcapacity,” the statement said, listing grievances that both the EU and the US have raised with China.