Is the EU and US trade deal just a temporary ceasefire?

A lot more talking needed to reach deal on cutting tariffs and other trade barriers

The agreement between US president Donald Trump and European Commission President Jean-Claude Juncker on trade is welcome in that it leads to a truce, at least for now, in what was threatening to become a nasty trade war.

However this is not a trade “deal” – it is an agreement to discuss reducing tariffs and other barriers to trade. Most importantly, for now, it seems to avert the risk of a tit-for-tat imposition of further tariffs by both sides, which had threatened to spark a serious trade war. For now, there is a ceasefire.


Of course, with President Trump you never know where this will go next. Prior to the meeting he had declared that tariffs were “ great”. After the meeting he promised to work with the EU to reduce them.

Who knows what he will be saying next week? But it would be a mistake to declare that this is all sorted.. A lot more talking will now be needed to reach any deal on actually cutting tariffs and other trade barriers, a notoriously complicated and tricky area and one with huge political sensitivities. All the two sides came up with in Washington were a few woolly goals. The devil, in trade talks, is in the detail.


Trump and Juncker agreed to start talks to reduce tariffs and other trade barriers related to all industrial goods, other than cars. As part of this, Trump has said he would put on hold threatened tariffs on the EU, notably on car imports from Europe.

This had troubled Germany, which feared the impact on companies such as BMW and Mercedes and is part of what brought Juncker to Washington DC.

These threatened tariffs – or special tariffs on imports – were part of a story that started when Trump imposed levies on steel and aluminium imports and the EU responded with tariffs on a range of products, including bourbon, US jeans and Harley Davidson motor bikes.

So why has Trump changed course? A hint might be the trouble in the US farming sector, where soyabean producers were hit by tariffs in a separate trade dispute between the US and China, requiring the American government to promise special supports.


After the meeting with Juncker, Trump said that the EU would “ almost immediately” staring buying a large amount of US soyabeans. It remains to be seen how this will work out.

The EU and US said they would try to find solutions to the steel and aluminium issue and the EU duties imposed in response. But for the moment they remain in place.

At least for now it does not appear that the war will get any worse, as many had feared the significant economic damage could result from further imposition of tariffs on a wider range of goods. Share prices rose as a result and one senior official was quoted by the Financial Times saying: "I think it was another Trump we saw in there. 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."

Besides eliminating tariffs on industrial goods, the two sides agreed to begin discussions on standards and easing the trade in chemicals, pharmaceutical and medical products among others.

This could be good news for Ireland, giving the large scale of pharma exports from US companies here back to the US market. There was even a nod to working to reform the WTO, the body which oversees world trade at which Trump has fired many pot-shots.

Trump has brought a different approach to trade, arguing that countries with which the US has trade deficits are acting “ unfairly”.

His actions towards the EU and China – and the WTO – appeared to threaten the free trade order. Economists were in no doubt that, whatever the short-term political advantage, this would cut growth and hit jobs overall.

For now, the problems in US agriculture and the threat to German car exports seem to have encouraged both sides to sign a ceasefire. But there is a long way to go before we can declare that the war is over.