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Trump and EU’s Juncker pull back from all-out trade war

Media captionDonald Trump: “This was a very big day for free and fair trade”

The US and EU have agreed to avoid an all-out trade war and work to lower tariffs, in talks that US President Donald Trump hailed as “a very strong understanding”.

He and European Commission chief Jean-Claude Juncker announced a “new phase” in EU-US relations, after more than two hours of talks at the White House.

Mr Trump’s threat to impose tariffs on European cars was put aside.

The EU plans to buy more US liquefied natural gas (LNG) and soybeans.

A joint statement said the two leaders agreed to “work together toward zero tariffs, zero non-tariff barriers, and zero subsidies on non-auto industrial goods”.

US import tariffs of 25% on steel and 10% on aluminium, imposed in March, will however remain in place.

The two sides will launch an expert working group to facilitate trade and lower barriers, and they pledged to refrain from new trade restrictions during those negotiations.

A full-blown trade war had been looming, fuelled by the tariffs introduced by Mr Trump.

EU-US relations had been further frayed by Mr Trump’s tributes to Russian President Vladimir Putin and his attacks on Nato and the EU.

Mr Trump’s language after meeting Mr Juncker was enthusiastic, in contrast with the angry tone he adopted previously towards the EU, calling it a “foe” on trade.

Mr Trump has come under pressure domestically because of retaliatory tariffs imposed on US goods by China, the EU, Canada and Mexico.

US chipmaker Qualcomm Inc appeared to be the latest casualty of the trade row with China, as Beijing made no announcement on Qualcomm’s proposed takeover of NXP Semiconductors, a deal valued at $44bn.

On Tuesday the Trump administration announced up to $12bn in aid for US farmers hurt by the Chinese tariffs.

What was agreed?

Speaking at the White House, Mr Trump declared a “new phase in the relationship” between the US and the EU, calling it a “very big day for free and fair trade”.

“We are starting the negotiation right now but we know very much where it’s going,” he said.

Mr Juncker thanked the president and hailed a “constructive meeting”.

Mr Trump said the EU would become a “massive buyer” of US liquefied natural gas and the joint statement said EU imports of LNG would increase, to diversify Europe’s energy supply.

Mr Trump has condemned Germany’s project to expand imports of Russian natural gas, via a new Baltic pipeline.

“The EU is going (…) to buy a lot of soy beans from our farmers, primarily in the Midwest,” Mr Trump said.

Some relief after months of turbulence

The BBC’s Adam Fleming in Brussels writes:

This is a ceasefire, not a peace treaty. Long-term, both sides have agreed to talk about trade issues. In the meantime neither will introduce any new tariffs, which presumably means Donald Trump will not follow through on his threat to target cars imported from the EU.

Brussels’ pledges to import more soybeans and to upgrade Europe’s infrastructure to buy more gas from the US cover some things that were probably going to happen anyway.

Mr Juncker will need the approval of the member states, which have different national interests and does he actually have the power to make the European economy gobble up more beans? Without details, it’s all just warm words, but after a turbulent few months of transatlantic relations those are worth something.

Media captionMany American farmers say they support US President Trump’s approach to trade

The pair also agreed to work towards reform of the World Trade Organization (WTO). Mr Trump accuses the WTO of treating the US unfairly – though mostly the US has won in arbitration cases there.

Mr Juncker said striking a deal on zero tariffs on industrial goods was his “main intention”.

“I had one intention today, to make a deal, and we made a deal. We have a number of areas on which to work together,” he said.

No announcement was made on car tariffs, and it was not clear whether any progress had been made on resolving the issue. Mr Trump had threatened to impose 25% import tariffs on European cars.

What’s been the reaction to the agreement?

On Twitter, EU Trade Commissioner Cecilia Malmstrom said the two were “turning a page” on trade, while German Economy Minister Peter Altmaier hailed it as a “breakthrough”.

However, others were more cautious in their response.

German Foreign Minister Heiko Maas tweeted (in German): “Juncker showed in Washington that it’s really not about who tweets most aggressively, but about whether one offers real solutions. Because Trump’s grassroots also feels that it only loses when we impose more and more senseless tariffs on each other.”

Mr Trump’s “America First” policy made him a fierce critic of the proposed EU-US Transatlantic Trade and Investment Partnership (TTIP), which is at a standstill. But his “deal” with Mr Juncker echoes some of TTIP’s ambition.

A former US Ambassador to the EU, Anthony Gardner, made that point in a tweet.

How did we get here?

Mr Trump imposed tariffs on steel and aluminium products from the EU, Canada and Mexico on national security grounds – something the EU is challenging at the WTO.

Mr Trump has railed against what he believes are unfair trade practices by US allies.

The EU has in turn retaliated with tariffs on iconic US goods ranging from Harley Davidson motorbikes to bourbon.

Harley Davidson and US car manufacturers have recently warned of the financial cost these tariffs are causing to their businesses.

Trump and EU’s Juncker pull back from all-out trade war}

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