Trump, European Union leaders pull back from trade war

WASHINGTON (AP)—President Donald Trump and European leaders pulled back from the brink of a trade war July 25 and agreed to open talks to tear down trade barriers between the United States and the European Union.

But the agreement was vague, the coming negotiations with Europe are sure to be contentious and the United States remains embroiled in major trade disputes with China and other trading partners.

In a hastily called Rose Garden appearance with Trump, European Commission President Jean-Claude Juncker said the U.S. and the EU have agreed to hold off on new tariffs—a move that would have marked a major escalation in trade tensions between the allies.

Trump and Juncker said they have agreed to work toward “zero tariffs” and “zero subsidies” on non-automotive goods.

“This will open markets for farmers and workers, increase investment and lead to greater prosperity in both the United States and the European Union,” Trump said. “It will also make trade fairer and more reciprocal. My favorite word: ‘reciprocal.’”

Juncker said, “When I was invited by the president to the White House, I had one intention: I had the intention to make a deal today. And we made a deal today.

“We have identified a number of areas on which to work together. Work towards zero tariffs on industrial goods. And that was my main intention, to propose to come down to zero tariffs on industrial goods.”

The biggest news made at the news conference was that the EU can import more U.S. soybeans. The sides will also work to reduce barriers and increase trade in services, chemicals, pharmaceuticals, and medical products.

“Soybeans is a big deal,” Trump said. “And the European Union is going to start, almost immediately, to buy a lot of soybeans—they’re a tremendous market—buy a lot of soybeans from our farmers in the Midwest, primarily.”

The two sides also decided to strengthen their cooperation on energy. The EU will build more terminals to import liquefied natural gas from the U.S. They also agreed to establish a dialogue on standards, and to work together on the reform of the World Trade Organization.

“It’s encouraging that they’re talking about freer trade rather than trade barriers and an escalating tariff war,” said Rufus Yerxa, president of the National Foreign Trade Council and a former U.S. trade official. But he said reaching a detailed trade agreement with the EU would likely prove difficult.

The tone was friendlier than it has been. During a recent European trip, Trump referred to the EU as a “foe, what they do to us in trade.” Juncker, after Trump imposed tariffs on steel and aluminum imports, said in March that “this is basically a stupid process, the fact that we have to do this. But we have to do it. We can also do stupid.”

Trump told reporters it was a “very big day for free and fair trade” and later tweeted a photo of himself and Juncker in an embrace, with Juncker kissing his cheek.

“Obviously the European Union, as represented by @JunckerEU and the United States, as represented by yours truly, love each other!” he wrote.

The president campaigned on a vow to get tough on trading partners he accuses of taking advantage of bad trade deals to run up huge trade surpluses with the U.S.

He has slapped taxes on imported steel and aluminum, saying they pose a threat to U.S. national security. The U.S. and EU are now working to resolve their differences over steel and aluminum—but the tariffs are still in place. And they would continue to hit U.S. trading partners like Canada, Mexico and Japan even if the U.S. and the EU cut a deal.

Whatever progress was achieved Wednesday could provide some relief for U.S. automakers. The escalating trade war and tariffs on steel and aluminum had put pressure on auto company earnings. General Motors had slashed its outlook, and shares of Ford Motor Co. and auto parts companies had fallen.

“Our biggest exposure, our biggest unmitigated exposure, is really steel and aluminum when you look at all of the commodities,” GM CEO Mary Barra said Wednesday.

Trump has also imposed tariffs on $34 billion of Chinese imports—a figure he has threatened to raise to $500 billion—in a dispute over Beijing’s aggressive drive to supplant U.S. technological dominance.

China has counterpunched with tariffs on American products, including soybeans and pork—a shot at Trump supporters in the U.S. heartland.

The EU is stepping in to ease some of U.S. farmers’ pain. Juncker said the EU “can import more soybeans from the U.S., and it will be done.”

Mary Lovely, a Syracuse University economist who studies trade, said, “The Chinese are not going to be buying our soybeans, so almost by musical chairs our soybeans are going to Europe.” The trouble is, China last year imported $12.3 billion in U.S. soybeans, the EU just $1.6 billion.

Trump’s announcement stunned lawmakers who arrived at the White House ready to unload concerns over the administration’s trade policies only to be quickly ushered into Rose Garden for what the chairman of the Senate Agriculture Committee called “quite a startling” development.

“I think everybody sort of changed what they were going to say,” said Sen. Pat Roberts, R-KS.

Trump recognized Roberts, saying, “Senator Pat Roberts. He loves those farms. He loves the farmers, like I do.”

Lawmakers said they still needed to see details of the agreement with the EU as well as progress on the other deals. But they said the breakthrough announcement was a step in the right direction.

“We have more confidence in him now than we did before,” said House Agriculture Committee Chairman Mike Conaway, R-TX.

Among other Hill leaders at the announcement were House Ways and Means Committee Chairman Kevin Brady, R-TX; Sen. James Lankford, R-OK; and Rep. Kristi Noem, R-SD; of whom Trump said, “I have to call her ‘governor’ now. That was a great win. Thank you, Kristi.”

Noem won South Dakota’s Republican primary for governor last month, and will face Democrat Billie Sutton, a state senator and former professional rodeo cowboy, in the November general election.

Senior Field Editor Larry Dreiling contributed to this report.