President Donald Trump said Wednesday that he and European Commission President Jean-Claude Juncker agreed to work toward eliminating tariffs and barriers on trade, reducing tensions for now in a brewing trade war.
Farmers in the U.S. have been adversely impacted after the Trump administration imposed tariffs on aluminium and steel imports, triggering a trade war with several countries including China, which has announced retaliatory measures against American goods. European Commission President Jean-Claude Juncker is due to meet with Trump on Wednesday after the USA threatened to impose tariffs on auto imports.
Agriculture Secretary Sonny Perdue said he was acting at President Trump's direction to provide a "short-term solution" to farmers and give the administration time to negotiate a longer term trade deal to help agriculture and other sectors hurt by unfair trading practices by China and others.
Administration officials said the aid will ease the pain farmers have felt as America's trading partners slapped tariffs on agricultural exports in response to the Trump administration's tariffs on steel and aluminum.
On Wednesday, Trump and Juncker said they have agreed to work toward "zero tariffs" and "zero subsidies" on non-automotive goods.
"We also will resolve the steel and aluminum tariff issues and we will resolve retaliatory tariffs", said Trump.
Beijing imposed tariffs on $34 billion worth of U.S. products, including soybeans, earlier this month.
While Beijing courted Europe to take its side against the U.S. on the trade front during high-level meetings earlier this month, Europe continues to share United States concerns about Chinese industrial policies such as its "Made in China 2025" plan to leapfrog into a technological superpower, said Julian Evans-Pritchard, senior China economist at London consultancy Capital Economics.
Trump has threatened to place penalty taxes on up to $500 billion in products imported from China, a move that would dramatically ratchet up the stakes in the trade dispute involving the globe's biggest economies. The administration did not need congressional approval for the aid package because they are allowed to take it from the U.S. Treasury under the Commodity Credit Corporation, a Department of Agriculture agency created in 1933.
Lawmakers who went to the White House for a meeting to discuss trade Wednesday were pulled into the drama of his surprise announcement of an agreement with Europe on tariffs.
U.S. President Donald Trump is showing no signs of backing away from using tariffs as a negotiating tool, taking to Twitter early Tuesday morning saying "tariffs are the greatest". The US trade deficit with China in 2017 came in at $375.6 billion, according to Census Bureau data, though adding that figure to this year's data through May comes out to about $528 billion.
USA stocks shot to their highs of the day, with the benchmark S&P 500 Index rising by the most in almost two months to close the day within 1pc of an all-time high.
Juncker said the two sides will not impose any new tariffs as the talks are ongoing.
While the European Union agreements to buy more USA soybeans and energy were tangible, the bigger result of the meeting may have been the retreat from the threat of a full-scale trade war between the two sides.
"This is only a short-term solution", said Agriculture Secretary Sonny Perdue, and is meant to give Trump time to rebalance trade rules worldwide.
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Those affected economies have in turn targeted U.S. agricultural products, including soybeans, dairy, meat, produce and liquor. "Name calling, insults, those kind of things, we don't react well to them, so we certainly can't expect our trade partners to react well to them either" said Kenny.
The Agriculture Department was expected to announce the plan later Tuesday.
Trump also touted the open markets he hoped to reach for Europeans to import food from the U.S.