European Union and USA launch talks in bid to quell trade tensions

Roman Schwartz
July 28, 2018

Trump said he "opened up Europe for you farmers", to a crowd in Iowa on Thursday.

The White House deal is one to savour for the European Commission president, two weeks after doubts were raised, notably in Germany, over his fitness for the job after he was taken unwell during a North Atlantic Treaty Organisation summit where the United States president trashed his European allies.

The threat of a transatlantic trade war between the USA and Europe seems to have diminished following a successful meeting between Donald Trump and European Commission chief Jean-Claude Juncker last night.

"A breakthrough has been quickly made that nobody thought possible!"

The US threat of punitive tariffs on metals and cars remains, he said, adding: "That is very regrettable, and not a good basis for concrete negotiations".

He later told reporters that was a "major concession" on Trump's part and that he expected the U.S. president to follow through on it.

But Juncker said they had agreed not to impose any new tariffs while talks were taking place.

Treasury Secretary Steven Mnuchin recently confirmed that the first phase of trade negotiations with the European Union are underway.

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Germany's Economy Minister described the agreement - which means Washington will not follow through with a threat to impose tariffs on autos that would hurt the dominant German vehicle industry - as a "breakthrough" that "can avoid trade war". "Great for global economy", tweeted German Chancellor Angela Merkel's economy minister, Peter Altmaier. According to the WTO, China's tariffs are almost three times larger than the U.S.'s, putting American small business exporters at a competitive disadvantage with their Chinese competitors. "This trade war is cutting the legs out from under farmers, and the White House's "plan" is to spend $12 billion on gold crutches", he said. There are also intellectual property concerns associated with Chinese manufacturers stealing patented USA technology.

The Republican president has long complained that the WTO has been unfair to the United States, despite the fact the USA has won most of the disputes against China and others. Trump said he and Juncker agreed that the European Union would buy US soybeans, and that the European Union would become a "massive buyer" of USA liquefied natural gas.

But Republican Senator Lisa Murkowski of Alaska urged Trump on Twitter to "recognize that trade assistance is no substitute for trade itself".

Auto tariffs at the level Trump has threatened would add about 10,000 euros (US$11,700) to the sticker price of a European-built vehicle sold in the USA, according a European Commission assessment obtained by Bloomberg News last month. We reported in error that Canada has imposed tariffs on United States apples.

The two leaders did not specifically mention vehicle tariffs in their statements, keeping the focus on other industrial products. Just days before, Trump wrote that tariffs were the "greatest" when negotiating trade policy.

The United States signaled on Thursday it is set to push ahead on trade talks with Canada and Mexico after agreeing to suspend hostilities over tariffs with Europe in a fragile deal that may clear the way for renewed pressure on China. On Tuesday, his administration said it would use a Depression-era program to pay farmers up to $12bn, easing the pain for a politically important Trump constituency. It will also allow US consumers to purchase European goods at cheaper prices, putting more money in their pockets and stimulating the USA economy.

Some farmers and farm-state lawmakers, including Trump's fellow Republicans, ripped the move, saying they would rather trade with no tariffs than receive government help. "And we have plenty of it".

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