Trump strikes a deal with EU to avert trade tensions
The US and the European Union (EU) have announced that they have reached a deal to avert escalating trade tensions and that they will hold off on further tariffs while they work to resolve disputes over steel and aluminium, and cars.
US President Donald Trump called it the start of a “new phase” in remarks from the White House on Wednesday, with European Commission president JeanClaude Juncker by his side.
He said the two sides will “resolve the steel and aluminium tariff issues, and we will resolve retaliatory tariffs. We have some tariffs that are retaliatory. And that will get resolved as part of what we’re doing”.
Juncker said that when he accepted Trump’s invitation to talks, “I had the intention to make a deal today. And we made a deal today”. For now, he added, “We will hold off further tariffs, and we will reassess existing tariffs on steel and aluminium.”
Trade between the US and the EU stands at an estimated $1 trillion, and accounts for 50% of global trade. The end of hostilities between the two sides will be watched and parsed by countries around the world which have been dragged into a trade war by Trump’s unilateral tariff on steel and aluminium, including India, which is in the middle of its own negotiations with the US.
The sudden announcement came in an urgent push from the Europeans rattled by Trump threat to increase the tariff on the millions of cars the US imports from Europe. But it was not clear if Trump will hold the ceasefire line this time, as he is known to have gone back from some previous deals and hit back with more levies such as with China.
For now, there was relief and cheer. “I am pleased to learn that
WASHINGTON:
the United States and European Union reached agreement today to work jointly to reduce trade barriers and, together with other partners, strengthen the World Trade Organization (WTO),” International Monetary Fund (IMF) managing director Christine Lagarde said in a statement. “The global economy can only benefit when countries engage constructively to resolve trade and investment disagreements without resort to exceptional measures.”
Trump said that as part of the deal, the US and EU will work towards “zero tariffs, zero nontariff barriers, and zero subsidies on non-auto industrial goods”. They will also work toward reducing barriers and increasing trade in services, pharmaceuticals, chemicals. He added that the EU will buy soybeans from the US. Under the new deal, the EU will also buy more LNG from the US, which might give Trump bragging points as he has challenged Europe—specifically Germany—for its dependence on Russian crude, and set up the US as a competitor.
The US and the EU also agreed to work on setting up standards and trading norms, essentially mechanisms for resolving differences and disputes. And they will also work together against China, a common threat which was not named but was unmistakably clear in the description offered by Trump of a common goal: “To address unfair trading practices, including intellectual property theft, forced technology transfer, industrial subsidies, distortions created by state-owned enterprises, and overcapacity.”
US talks with China are proceeding on a different channel marked by much engagement at very high levels, acrimony and confrontation, and America appears to be showing more signs of the consequences than China.
New Delhi, as Ottawa, Mexico City and, of course, Beijing, would look at the US-EU deal— and the announcement, the body language of the two principals and their words—closely for clues to resolving its own trade disputes with the US brought on by Trump’s tariff announcements. India has taken the US tariff on metal imports to the WTO but has also sought to engage with the Trump administration, signalling clearly a willingness to manage the differences and guide them “gently” toward a resolution unlike the path of confrontation chosen by Beijing, as Indians have pointed out to the White House.