Well, that de-escalated quickly.
After chatting for less than two hours, U.S. President Donald Trump and European Commission President Jean-Claude Juncker walked into the White House Rose Garden Wednesday afternoon and announced that they had struck a deal to stop the cycle of tit-for-tat tariffs that has been threatening to blow up into an all out trade war between some of the world’s most important economies. Trump declared it was a “big day” that marked a “new phase” of cooperation between the United States and the European Union.
Trade tensions between the two sides had been building since the Trump administration imposed heavy tariffs in May on foreign steel and aluminum imports, including those from Europe, which retaliated with taxes on billions of dollars worth of American goods. Trump has recently threatened to intensify the conflict by slapping duties on European car imports. But during their press conference, Trump and Juncker said the U.S. and EU would hold off on any new tariffs while negotiating a new trade deal to eliminate all tariffs and non-tariff barriers on industrial goods other than autos. They also vowed to “resolve” the issues over steel and aluminum.
As part of the deal, Juncker promised that the EU would buy more soybeans and liquefied natural gas, and would work with the U.S. to press for reforms at the World Trade Organization aimed at countering some of China’s trade practices, including intellectual property theft and overproduction of steel.
Heading into today’s meeting, it was unclear how much Juncker and Trump might accomplish (I, for one, had low expectations), in part because European officials suggested they were not planning to make any specific offers on trade, and had said they had no intention of negotiating until Trump lifted his tariffs on metals. At the press conference, however, Juncker suggested that wasn’t the case. “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,” he said.
Trump will, of course, brag about said deal as a win for the U.S. But while this agreement may in fact be a positive step for all parties involved, Europe doesn’t appear to be making much in the way of concessions. Let’s go piece-by-piece:
No new tariffs while negotiating a new trade deal: It sounds a lot like Trump has agreed to restart negotiations on something akin to the Trans-Atlantic Trade and Investment Partnership, the proposed U.S.-EU trade deal that collapsed in 2016. Meanwhile, Germany no longer has to worry about Trump rear-ending its auto-industry with tariffs. Result: win-win.
Unwinding the steel and aluminum tariffs and retaliatory tariffs by Europe: Again, this just involves pushing reset on some of Trump’s more aggro trade moves.
Europe buys more soybeans: It’s not entirely clear to me how Juncker is going to arrange this, since the European Commission is a bureaucratic body that isn’t typically in the business of purchasing overseas commodities, but either way, it’s a nice olive branch that probably won’t cost buyers in France or Germany much given that U.S. soybean prices are globally competitive. It does give Trump an opportunity to say he’s looking out for American soybean farmers whose products have been hit with heavy tariffs in China, however, so he gets a PR victory.
Europe buys more natural gas: During the press conference, Juncker said that the EU would build more terminals to import liquified natural gas from the United States. But it’s unclear what that means, exactly. Europe has already started purchasing more gas from the U.S. in recent years, and the commission president’s statement left a good deal of ambiguity about what exactly would change. As CNBC notes: “He did not specify whether he was referring to new terminals in addition to those already planned, or whether the EU would invest in the large on-shore plants or more affordable floating facilities.” Still, it looks good for Trump.
Working together to reform the WTO: This may actually be the most promising part of the entire agreement. One of the most fundamental problems with global trade today is that the body governing it, the WTO, was simply not designed to deal with China’s brand of state capitalism, which has allowed the People’s Republic to exploit all sorts of loopholes in the system that have caused problems for its partners. Instead of enlisting allies to put pressure on China and possibly reform the WTO, however, Trump has spent the past year and a half fighting a multifront trade war that alienated just about everybody. Juncker seems to have convinced our president that he’s better off teaming up with Europe to take on Beijing than he is trying to score points in his weird vendetta against Angela Merkel by going after Volkswagen with tariffs. Also, this suggests that Trump will now work toward fixing the WTO, rather than blowing it up entirely—which is probably good if you believe that global institutions contribute to peace and prosperity. Score one for the globalists.