By Elton Gomes
On Wednesday, United States President Donald Trump said he is working along with European Commission President Jean-Claude Juncker to eliminate tariffs and barriers to trade, thereby momentarily reducing tensions amidst escalations of a trade war.
Trump said that it was a ”very big day for free and fair trade” as he stood alongside Juncker. The US and the European Union (EU) have been imposing tariffs on each other after the Trump administration announced new taxes on steel and aluminium imports.
“We agreed today, first of all, to work together toward zero tariffs, zero non-tariff barriers and zero subsidies on non-auto industrial goods,” Trump said, as per CNN. The US president hinted that both sides have agreed to put a hold on tariffs that made a trade war unavoidable.
“We will not go against the spirit of this agreement unless either party terminates the negotiation,” Trump said. “So, we’re starting the negotiation right now but we know very much where it’s going.” While talks proceed, Juncker said that the EU and the US have agreed to “hold off on other tariffs,” CNN reported.
What did the US and EU agree to?
Trump said the EU has agreed to import more US soybeans and liquid natural gas, which could help Europe to move away from its dependence on Russia. Secondly, both sides will work together towards zero tariffs and clearing other economic barriers to non-auto industrial goods. Thirdly, the US has agreed that it will not place a 25% tariff on European cars coming to America. Lastly, the US and EU will prevent any tariffs in the future as negotiations over steel and aluminium tariffs continue.
Both Trump and Juncker seemed pleased with the negotiations. Trump looked upbeat and called it a “new phase” of relations with the EU. He added that the deal would open markets for farmers and workers, increase investment, and lead to greater prosperity in both the United States and the European Union and that it will also make trade fairer and more reciprocal, as reported by Vox.
Lacking specifics
Although Trump’s meeting with Juncker seemed positive on the outset, the meeting failed to provide concrete details on how both parties will fix differences over trade, analysts said.
In a statement released on Wednesday, Goldman Sachs said that ”the news is not uniformly positive.” The bank said, “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,” CNBC reported.
James Nixon, the chief economist at Oxford Economics, also spoke to CNBC and said that there is “massive uncertainty” as to what the US-EU deal means. Nixon added that the White House is seemingly returning to a “kind of multilateral relationship and trade dealings, which to be honest we haven’t seen from the United States yet.”
As per the CNBC report, in May 2017, the US had claimed that it had put the trade war with China “on hold” as the US initiated meetings with China to discuss bilateral relations. However, such talks ended in early June without any agreement.
A report in the Straits Times claims that the US-EU deal is likely to embolden Trump to increase the heat on China as per senior economist Chua Hak Bin said. Chua said, ”Trump will likely blow his trumpet and argue that his trade war threats are working.” He added that Europe’s truce with the US might have ironically increased the probability of a full-blown US-China trade war.
Elton Gomes is a staff writer at Qrius