Car shares jump after US and EU agree trade war truce – business live | Business
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.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.
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.
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
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.
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.
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).
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.
If everyone who reads our reporting, who likes it, helps fund it, our future would be much more secure. For as little as $1, you can support the Guardian – and it only takes a minute. Make a contribution. - Guardian HQ
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.
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.
Car shares jump on tariff relief
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.
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.
“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.
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”.
However, Trump isn’t “exactly known for consistency”, so the upcoming negotiations could still founder, Schmieding adds.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:
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.
- remove mutual tariffs on industrial goods,
- reform the World Trade Organization (WTO), and
- intensify trade in services.
“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
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.
Germany’s economic affairs minister, Peter Altmaier, has cheered the move, saying it will save jobs.
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 todayFacebook’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.
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.
- 12.45pm BST: ECB interest rate decision
- 1.30pm BST: ECB press conference with Mario Draghi
- 1.30pm BST: US trade balance figures