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Jul 26, 2018

Car shares jump after US and EU agree trade war truce – business live | Business I The Guardian

theguardian.com

Car shares jump after US and EU agree trade war truce – business live | Business

Graeme Wearden



Writing in the New Statesman, Stephen Bush argues that Jean-Claude Juncker outplayed Donald Trump yesterday:
In reality, it’s a remarkable coup for Juncker. The EU is already seeking to buy more gas as part of the Commission’s long-term efforts to wean the continent off Russian energy.
The EU already has zero tariffs on soy in place, and American soybeans are currently at a low price thanks to Trump’s trade war with China making them attractive to European farmers anyway.
But.... that might also threaten the agreement’s viability. The president might rip it up, if he decides he got the rough end of the deal.
One reason why Trump’s White House is so erratic is that the president’s mind changes depending on which advisor is currently in favour: those wanting to avoid a trade war are currently on the up, but that could change.
And that Juncker has conceded very little that the EU hasn’t already conceded in practice may mean that Trump decides he’s been had and that the whole mess is re-opened in the not too distant future.

Britain’s Department for International Trade is hoping that America will soon lift its tariffs on EU steel and aluminium.
In a statement, it says:
“We welcome the agreement by the U.S. and the EU to work together to reduce barriers to trade and to further increase trade and investment,”
“We look forward to progress towards the removal of steel and aluminium tariffs and de-escalation of the tit-for-tat action that could harm businesses and jobs on both sides of the Atlantic.”

US-China trade spat sinks Qualcomm's big deal

The Qualcomm campus in San Diego
Photograph: Mike Blake/Reuters
Overnight, China has escalated its trade dispute with America by thwarting a $44bn takeover deal.
Beijing regulators sunk chipmaker Qualcomm’s attempted takeover of Dutch rival NXP, by declining to approve the deal.
Without a green light from China, the deal expired as the clocks struck midday in Beijing (midnight in New York) - even though eight other regulators around the globe had signed it off.
This makes Qualcomm the biggest casualty yet of the Trump trade wars. It launched its takeover of NXP in October 2016, so the collapse of the deal is a serious blow.
Rickey Gevers (@UID_)
Qualcomm won't buy NXP. This is a direct result of the trade war Trump started. Although China denies this. Remarkable. https://t.co/x5lAzAxzfw
July 26, 2018
Qualcomm CEO Steve Mollenkopf admitted last night that the tensions between America and China were scuppering the deal, telling Bloomberg:
“We didn’t see anything in the near-term that would make it worthwhile to change the timing. There were probably bigger forces at play here than just us.”
It’s a reminder to the White House that China can make things difficult for US companies if president Trump continues to impose tariffs on their imports.
Updated

The Frankfurt stock market is leading the charge this morning, as trade war relief ripples through the trading floors.
The German DAX has jumped by 1.4% this morning, or 172 points, to 12,751 . Automakers are continuing to rally, thanks to Trump’s pledge not to impose tariffs on car imports (in the near future, anyway).
Holger Zschaepitz (@Schuldensuehner)
German carmakers gain as Trump relents on car tariffs. #Germany's Dax index among top performers in Europe today. pic.twitter.com/XouYPhGSkI
July 26, 2018
The Paris market is also upbeat, pushing France’s CAC index up by 0.7%.
Traders are pleased that the Juncker-Trump talk went rather better than expected, says Connor Campbell of SpreadEx:
While there isn’t exactly much substance to what was announced, with the fact the relationship didn’t worsen being more notable than the plans to negotiate, it was enough to lift the spirits of the previously fearful markets.

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Alan Beattie of the Financial Times makes some good points about the EU-US trade announcement in this thread:
Alan Beattie (@alanbeattie)
A few morning-after thoughts on last night's EU-US trade announcement. First up: bold move from the Commission. A big surprise to many including members of Congress and EU member states (and, rather less importantly, me). 1/n https://t.co/dm7NqhcoUf
July 26, 2018
Alan Beattie (@alanbeattie)
Some of the deal can easily be achieved as they are meaningless - the soybean and LNG parts, which the EU is already doing. If Trump continues to believe these are concessions he is v gullible indeed, and hats off to the Commission for fooling him. Let's no-one tell him, eh. 2/n
July 26, 2018
Alan Beattie (@alanbeattie)
Some bits are clearly impossible & will have to be quietly forgotten to make deal work eg ending all non-tariff barriers & non-auto industrial subsidies. This wd mean wholesale dismantling of EU regulation. Zero subsidies also means no cash for Airbus or Boeing. Non-starter. 3/n
July 26, 2018
Alan Beattie (@alanbeattie)
The doable bit that is actually new would be cutting all non-auto industrial tariffs to nil. This had basically already been agreed in TTIP. It's not earth-shattering as they are already low, but it's substantive. 4/n
July 26, 2018
Alan Beattie (@alanbeattie)
However the deal also means the EU breaking own pledges and principles: 1. apparently starting talks despite steel/aluminium tariffs still in place. 2. ignoring its new rule of only agreeing FTAs with signatories to Paris Agreement on climate. 5/n
July 26, 2018
Alan Beattie (@alanbeattie)
3. (slightly more arguably) signing a deal excluding agriculture and cars contravenes the spirit if not the letter of the WTO rule requiring FTAs to cover "substantially all trade". All hypocritical, but maybe EU considers them necessary hypocrisies. It's good at those. 6/n
July 26, 2018
Alan Beattie (@alanbeattie)
Overall it's a deal to avert a trade war, not significantly to advance liberalisation. I'm sceptical it will stick, not least because Trump's agreements on trade have a habit of unravelling rapidly and it's essentially based on conning him. But I've been wrong before. 7/7
July 26, 2018

A combine harvester collecting soybeans in southern Minnesota.
A combine harvester collecting soybeans in southern Minnesota. Photograph: Alamy Stock Photo
Paul Donovan of UBS isn’t convinced by Juncker’s pledge to buy more American soybeans....
US President Trump tweeted that EU officials were going to buy more US soybeans. EU officials cannot do that. The US is already the largest exporter of soybeans to the EU. There are no subsidies, trade taxes or quotas on soybeans in the EU.
Private farmers decide whether to buy more soybeans or not.

Not everyone is cheering the news that America and Europe will co-operate on trade.
Others noted that while the announcement marks a change in tone, it won’t necessarily stop Trump from moving forward with auto tariffs later this year if he changes his mind.
Phil Levy, a senior fellow at the Chicago Council on Global Affairs, has pointed out that Donald Trump reached similar agreements with China in 2017 - only to hit them with tariffs months later.
Levy explained (via Politico) that the agreement is “better than nothing”, but....
“it doesn’t seem to solve any of the problems the president flagged – trade deficits, tariffs, subsidies.”
“It looks a lot like deals struck with China last year, which of course were a prelude to a full-blown trade war.
Megan Cassella (@mmcassella)
Today’s trade detente between the US and EU is being widely welcomed, but it has its limits. In the words of @philipilevy: “It looks a lot like deals struck with China last year, which of course were a prelude to a full-blown trade war.”
Our take: https://t.co/gyC2PYcSWs

July 25, 2018

Car shares jump on tariff relief

Shares in European car makers are jumping sharply, as the threat of punitive tariffs fades away.
Porsche, BMW, Fiat Chrysler and Volkswagen have all surged by at least 4% in early trading.
Investors are relieved that Donald Trump has agreed not to slap any more tariffs on European imports - at least while officials try to hammer out closer trade ties.
Before yesterday’s meeting, manufacturers was bracing for America to impose 20% tariffs on European car imports, which would have made them much less competitive in the US.
The European auto sector this morning
The European auto sector this morning Photograph: Thomson Reuters
Naeem Aslam of Think Markets says the US and EU presidents managed to stave off a transatlantic trade war yesterday.
Traders do have every right to celebrate Juncker and Trump meeting because the tensions were high before the meeting as it was pretty much clear that we are heading towards a real trade war. But thanks to common sense which prevailed last night, and it eased tensions stoked by threats coming from both side.
Under the agreement, both sides would hold off on other tariffs as the negotiation process continues. The joint statement by leaders did look like a fairy tale, both sides agreed to work towards zero tariffs. For Trump it does not matter what the final deal would like, but for now, it is enough for him to show the world that he delivered on his promise and he brought the Europeans to a point where he thinks that things are fair.

European officials were pleasantly surprised by Donald Trump’s attitude last night, reports the Financial Times:
“I think it was another Trump we saw in there,” said one senior EU official. “He was different from the tweets and the noise, different from all that brouhaha. He was focused and engaged and clearly looking for something to help with the markets.”
Another person familiar with the discussions said Mr Trump was eager to find a solution to what had become a growing problem for both sides. “Anyone who knows Donald Trump knows that he wants to make deals,” said the person.

European stock market have opened higher, as traders welcome the warming of relations between Washington and Brussels over trade.
Viraj Patel (@VPatelFX)
A tale of two faceoffs. US equity futures in the red following Facebook earnings miss. European equities starting strong as EU-US trade war tensions ease. Money flowing back to Europe good for $EUR bulls pic.twitter.com/E4wX8pNRs2
July 26, 2018

The Trump-Juncker agreement isn’t really a deal, but it could turn into a game changer.
So says Holger Schmieding of Berenberg Bank, who is reassured that America won’t impose tariffs on EU car imports while negotiations continue.
He writes that the two sides have taken “a step away from the brink”.
The US-EU agreement to talk rather than to slug it out in a tit-for-tat escalation of trade barriers strengthens our base case: despite all the noise, the US will not levy new tariffs on car imports from the EU in the end. Instead, the trade tensions stoked by Trump will ease somewhat as the two sides either strike a deal fast (25%probability) or at least engage in serious negotiations (55% probability). If so, Eurozone business confidence can recover this autumn.
This should allow the Eurozone to overcome its current soft patch with a return to annualised growth rates of around 2% from Q4 2018 onwards.
According to Juncker, he and Trump agreed that the US and the EU should strive in their negotiations to:
  • remove mutual tariffs on industrial goods,
  • reform the World Trade Organization (WTO), and
  • intensify trade in services.
While the EU pledged to import more soybeans and liquefied natural gas from the US, the US will re-assess the tariffs it has already imposed on steel and aluminium imports from the EU. The EU would then lift its retaliatory measures.
However, Trump isn’t “exactly known for consistency”, so the upcoming negotiations could still founder, Schmieding adds.
Updated

The IMF’s managing director, Christine Lagarde, has welcomed Trump and Juncker’s agreement:
“I am pleased to learn that the United States and European Union reached agreement today to work jointly to reduce trade barriers and, together with other partners, strengthen the WTO.
The global economy can only benefit when countries engage constructively to resolve trade and investment disagreements without resort to exceptional measures.”

The agenda: US-EU reach trade truce, with a kiss

US President Donald J. Trump and European Commission President Jean-Claude Juncker last night
US President Donald J. Trump and European Commission President Jean-Claude Juncker last night Photograph: Jim Lo Scalzo/EPA
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
There’s a sense of relief in the markets today, after America and the European Union stepped away from a trade war.
Following talks at the White House, Donald Trump and Jean-Claude Juncker emerged to announce they had agreed to work together towards “zero” tariffs, barriers and subsidies.
Trump declared it was a “very big” day, after Europe agreed to buy more soya beans and natural gas from America. The two sides have also agreed to work together to reform the international rules on trade.
In truth, details are a bit scant -- as we covered in last night’s liveblog, the two sides have mainly agreed to negotiate. But that’s an improvement on threats being fired across the Atlantic over social media.
Importantly, the two sides have agreed not to impose any more tariffs while they keep talking. That removes the threat of new punitive levies on European car imports.
The two men even shared one of Juncker’s famous kisses in the Oval Office - a fitting way to seal the détente.
Donald J. Trump (@realDonaldTrump)
Obviously the European Union, as represented by @JunckerEU and the United States, as represented by yours truly, love each other! pic.twitter.com/42ImacgCN0
July 25, 2018
Donald J. Trump (@realDonaldTrump)
Great to be back on track with the European Union. This was a big day for free and fair trade!
July 26, 2018
Donald J. Trump (@realDonaldTrump)
European Union representatives told me that they would start buying soybeans from our great farmers immediately. Also, they will be buying vast amounts of LNG!
July 26, 2018
Germany’s economic affairs minister, Peter Altmaier, has cheered the move, saying it will save jobs.
Peter Altmaier (@peteraltmaier)
Congrats to @JunckerEU, @realDonaldTrump: Breakthrough achieved that can avoid trade war & save millions of jobs! Great for global economy!
July 25, 2018
Analysts are also optimistic, with Adam Cole of Royal Bank of Canada saying:
This is more positive outcome than many had expected.

Also coming up today

Facebook’s shares will get slammed when Wall Street opened, after the social media giant missed forecasts last night. It also warned that profitability will be hit by the cost of cleaning up its platform and fighting election interference.
Wall Street threw something of a wobbly last night, sending Facebook’s shares plunging in after-hours trading.
TicToc by Bloomberg (@tictoc)
Facebook's $151 billion rout could rewrite history as the biggest stock-market wipeout in the U.S. https://t.co/8o4EZrnmDL pic.twitter.com/dK6SQBb3VJ
July 26, 2018
The European Central Bank is meeting to set monetary policy. No fireworks are expected. The ECB has already agreed a plan to wind down its stimulus programme, and it’s far from ready to raise interest rates.
But still, president Mario Draghi’s press conference could be interesting.
Plus, there are new US trade figures - they might show whether Trump’s tariffs have had an impact.

The agenda

  • 12.45pm BST: ECB interest rate decision
  • 1.30pm BST: ECB press conference with Mario Draghi
  • 1.30pm BST: US trade balance figures