Shares of European automakers climbed yesterday after US President Donald Trump backed off his threat to levy tariffs on cars imported to the US during a meeting with European Commission President Jean-Claude Juncker, averting for the time being an escalating trade dispute.
Shares of BMW AG, Volkswagen AG, Fiat Chrysler Automobiles NV and Daimler AG jumped following a pledge from the two leaders to “hold off on other tariffs” while they negotiate a deal to expand European imports of US liquefied natural gas and soybeans, and lower industrial levies.
Germany’s VDA auto industry association called the meeting “a big step forward” and “good news for industry and consumers on both sides of the Atlantic.”
The two met on Wednesday at the White House with Trump warning that he would move forward with 25 percent tariffs on auto imports if the meeting with Juncker did not go well, prompting the EU to respond that such a move would bring significant retaliatory measures on US goods.
The breakthrough came after about three hours of talks, leading to their impromptu announcement in the Rose Garden.
“We had a big day, very big,” Trump said during a news conference with Juncker. “We are starting the negotiation right now, but we know where it is going.”
Trump hailed “a new phase” of trade relations.
The deal eases tensions for now stoked by Trump’s threat to impose new levies on car imports.
Trump could impose the 25 percent car tariffs on national security grounds once US Secretary of Commerce Wilbur Ross completes a required investigation, which could come any time before a deadline early next year.
Auto tariffs at that level would add about 10,000 euros (US$11,700) to the sticker price of a European-built car sold in the US, according a European Commission assessment obtained by Bloomberg News last month.
That would cut US imports of European cars and car parts in half, the commission said.
Trump on Wednesday said they would also try to “resolve” steel and aluminum tariffs he imposed earlier this year and retaliatory duties the EU levied in response.
The US and EU would also work together to reform the WTO and address unfair trading practices, they said in a joint statement.
Reaction in Germany, which would be one of the biggest losers in a trade dispute, was broadly positive. Still, the lack of clarity about the long-term EU-US trading relationship stoked continued concerns in Europe’s largest economy.
“Tariffs were, are and will not be great, even if the US president claims as such in his tweets,” DIHK chambers of industry and commerce president Eric Schweitzer said. “The solutions set out go in the right direction, but a healthy dose of skepticism remains.”
Marcel Fratzscher, head of the Berlin-based DIW economic institute, said the meeting had produced “a de-escalation, but not yet the all-clear,” and warned of the US possibly “manipulating” the WTO for its own goals and “further weakening multilateralism.”
The truce might prove to be short-lived if the two sides cannot resolve their differences over trade in vehicles and car parts, he said.
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