Trump, EU leader agree to talks on lowering trade barriers - will hold off on further tariffs, for now

U.S. President Donald Trump said on Wednesday the United States and the European Union were kicking off talks aimed at lowering trade barriers as officials looked to head off a brewing trade war.

'We are starting the negotiation right now but we know very much where it's going,' says Trump

President Donald Trump and European Commission president Jean-Claude Juncker speak in the Rose Garden of the White House, Wednesday in Washington. (Evan Vucci/Associated Press)

U.S. President Donald Trump said on Wednesday the United States and the European Union were kicking off talks aimed at lowering trade barriers as officials looked to head off a brewing trade war.

"This was a very big day for free and fair trade, a very big day indeed," Trump told reporters at the White House after meeting with European Commission President Jean-Claude Juncker.

"We are starting the negotiation right now but we know very much where it's going."

Speaking with Juncker at his side, Trump said they had agreed in talks to "work together toward zero tariffs, zero non-tariff barriers, and zero subsidies on non-auto industrial goods."

The agreement to pull together a "high-level working group" to negotiate tariff, subsidy and non-tariff barrier reductions could reduce the risk of an escalating transatlantic trade war launched by Trump's tariffs on steel and aluminum and a threat to impose a 25 per cent tariff on imported cars and auto parts.

"We will also work to reduce barriers and increase trade in services, chemicals, pharmaceuticals, medical products, as well as soybeans. Soybeans is a big deal," he said, adding that Europe would also step up purchases of liquefied natural gas from the United States.

"They are going to be a massive buyer of LNG."

Trump said the talks would "resolve" both the hefty tariffs the United States had placed on imports of steel and aluminum from the EU and the tariffs Europe had slapped on U.S. goods in response.

Foreign Affairs Minister Chrystia Freeland welcomed the news but said she wanted further details.

"Any acts taken by the U.S. administration to pull back from imposing 232 tariffs, I think, is a really good thing," Freeland told reporters during a conference call from Mexico City, referring to tariffs Trump imposed on steel and aluminum imports under a rarely-used clause of the Trade Expansion Act of 1962 which gives the president the power to cite 'national security' to justify tariffs. Freeland is in Mexico holding trade talks with the outgoing Mexican president, Enrique Peña Nieto, and President-elect Andres Manuel Lopez Obrador.

"I really commend everyone involved for pulling back from an action ... that not only is unjustified and illegal under WTO and NAFTA rules, but actually has the potential to be really devastating for the global economy," Freeland said. "So we need to look at it more closely, but it sounds certainly like some positive news."

'A good and constructive meeting'

It was not clear whether the two sides made any progress on the contentious issue of possible U.S. tariffs on imports of  automobiles from Europe.

But Juncker said they had agreed not to impose any new tariffs while talks were taking place.

"This was a good and constructive meeting," Juncker said.

Trump has threatened to impose 25 per cent tariffs on auto imports, a move that would hit European car makers like BMW and Volkswagen hard, as well as Japanese and South Korean car companies.

The Commerce Department could recommend new tariffs as early as September following an investigation into whether car imports posed a risk to U.S. national security.

'Scepticism remains'

Meanwhile, the agreement between Juncker and Trump to hold talks was being hailed as a major success by EU officials and other European governments.

"Breakthrough achieved that can avoid trade war and save millions of jobs! Great for global economy!" tweeted German Chancellor Angela Merkel's Economy Minister Peter Altmaier as news of the Washington deal broke late in the evening in Europe.

Brussels had been playing down expectations before the meeting that the EU chief executive could dissuade Trump from imposing new tariffs on European — notably German — cars.

The plan had been to lay out a threat of EU retaliation on U.S. goods that the EU said could wipe $50 billion off U.S. national income in the coming years, while also renewing offers to resume talks on lowering barriers to transatlantic trade.

In the end, Trump agreed to resolve arguments over the steel and aluminum tariffs he introduced to European dismay earlier this year, to scrap any other planned penalties and to join in a dialogue with Brussels on enhancing trade. The EU will work to ease U.S. imports, including soybeans and natural gas.

The DIHK group, a top German industry group, said it was up to the United States now to rebuild a basis of trust with Europe and remove the illegal tariffs.

"The proposed solutions move in the right direction, but a significant portion of scepticism remains," the group said in a 
statement, adding the meeting had at least demonstrated that  Europe would not let itself be divided.

With files from CBC News