Europe Welcomes Trade Steps With U.S. But Many Questions Remain

Europe Welcomes Trade Steps With U.S. But Many Questions Remain

Europe Welcomes Trade Steps With U.S. But Many Questions Remain

European officials on Thursday hailed a deal with the U.S. to avert a trade war despite a lack of details that could derail the vague accord and upend efforts to resolve outstanding issues.

President Donald Trump and European Commission President Jean-Claude Juncker on Wednesday said EU members would buy U.S. liquefied natural gas and soybeans in return for a U.S. pledge not to impose new tariffs on European vehicles.

Washington and Brussels also pledged to slash tariffs on industrial goods — other than cars — and to cooperate against unfair Chinese trade practices. The deal would be voided if Mr. Trump doesn’t hold off on additional levies on cars

It also doesn’t immediately lift tariffs the U.S. levied on imports of steel and aluminum from the EU last month or retaliatory measures imposed by the EU. In a joint statement and comments, the two presidents pledged to “resolve” the matter.

“It is very important that the EU and the U.S. work together in the field of trade and don’t fight each other,” Dutch Prime Minister Mark Rutte said on Twitter, welcoming the “positive outcome.”

The details of how the accord will be executed remain unclear, especially as the European Commission — the EU’s executive — is not directly involved in energy or agricultural purchases, which an EU official stressed Thursday was up to private companies and market conditions.

French Finance Minister Bruno Le Maire said his government is seeking “clarifications” on terms of the agreement, reiterating Paris’s commitment to safeguarding EU standards on health, food and the environment, as well as its demand for a reciprocal trade deal that opens American markets to European exporters.

A high-level working group will work to fill in the details, said commission spokesman Alexander Winterstein on Thursday.

“This is a win-win outcome, and that’s the way we see it,” he said.

Negotiators from the EU, led by European Trade Commissioner Cecilia Malmstrom, and the U.S. will hammer out a report in 120 days that will establish the framework for future negotiations toward a trade deal, the EU official said. That would be past the midterm elections in the U.S., and it would then take at least some months to hammer out a trade deal.

“A more limited agreement of this type is much less difficult to negotiate and manage in terms of complexity, if the political conditions are of course in place,” the EU official said.

The handshake largely echoes an offer put forth by the EU in May, with some additions, such as the pledge to buy more U.S. soybeans — a major American agricultural export under pressure from Washington’s escalating trade war with China.

The EU slightly shifted its position by entering talks before the White House exempts the bloc from its metals tariffs, but it has not expanded concessions already on the table to secure waivers and de-escalate trade tensions.

Still, the agreement comes as a relief, especially for the bloc’s political heavyweight and economic engine, Germany.

Berlin has been particularly concerned about car tariffs that would hit some $60 billion of annual European exports to the U.S. Mr. Trump has specifically targeted German carmakers in his tweets criticizing EU auto tariffs, which at 10% are quadruple the U.S. levies. The U.S. has a 25% levy on European light trucks.

“Good news from the USA,” German Economics Minister Peter Altmaier tweeted after the announcement. “Breakthrough achieved that can avoid trade war & save millions of jobs!”

Yet Washington and Brussels left autos out of their decision to push ahead for a free-trade deal on industrial goods. An EU official familiar with the discussions said the leaders carved out cars because they couldn’t agree on zero tariffs.

“Are German cars safe? They are, for now,” the official said. “But we are not naive. We don’t know how long it will last.”

German Chancellor Angela Merkel has also been under pressure from Mr. Trump to halt a pipeline project that would double Russia’s gas-export capacity to Germany. During the North Atlantic Treaty Organization summit earlier this month, the president chastised her for what he said was undermining security by funneling billions of dollars annually to Moscow.

Brussels can’t say how much it might buy but U.S. soybean prices are dropping amid Washington’s trade war with Beijing, while rising oil price are making American LNG more competitive. The factors could fuel European demand for imports and please Mr. Trump, two EU officials said.

The EU’s LNG and soybean concessions are “a bit of a stunt,” one EU official said. “You give something without giving anything.”

One option Mr. Juncker mentioned was for the EU to build more LNG terminals that could facilitate higher imports. The EU has redoubled its commitments to diversify its energy sources since Russia’s annexation of Crimea in 2014.

The EU has committed EUR16.4 million ($19.2 million) for a Croatian LNG project and approved almost half a billion euros in state aid a Lithuanian LNG terminal.

Other prominent European leaders — led by French President Emmanuel Macron and Ms. Merkel — unsuccessfully pleaded with Mr. Trump to spare trans-Atlantic allies from his metals tariffs. Mr. Juncker’s bid to bolster ties coincided with rising opposition from Republican lawmakers and industry groups to Mr. Trump’s threats to escalate his trade war with China, which EU officials said helped the bloc’s top executive sway the president.

“In this case, the context provided the platform to come to some meeting of the minds, but let’s see if we can come to a final deal,” an EU diplomat said. “I’m a bit cautiously optimistic.”

Manjula

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