The EU is buckling on trade:

Trump’s hard ball negotiating tactics appear to be bearing some fruit, with Politico reporting that Brussels is willing to scrap tariffs on all industrial products, including cars, in trade talks with the United States, EU trade chief Cecilia Malmström said Thursday.

“We said that we are ready from the EU side to go to zero tariffs on all industrial goods, of course if the U.S. does the same, so it would be on a reciprocal basis,” Malmström told the European Parliament’s trade committee. Sending the ball in the Trump’s court, she said that “we are willing to bring down even our car tariffs down to zero … if the U.S. does the same,” adding that “it would be good for us economically, and for them.”

While the EU’s car tariff of 10% is higher than the general U.S. auto tariff of 2.5%, America imposes a 25% duty on light trucks and pick-ups.

The European gambit may be a non-starter, as during a first meeting in Washington last week, an EU proposal for including cars in the discussions was rejected by the U.S. Brussels and Washington are holding preparatory trade talks to define the scope of a potential future agreement.

Malmström’s comment goes beyond what was agreed in July in the joint statement between European Commission President Jean-Claude Juncker and U.S. President Donald Trump, which only mentioned eliminating tariffs, non-tariff barriers and subsidies for “non-auto industrial goods.”

Malmström insisted that the discussions were not about “restarting TTIP” but aiming for “a more limited trade agreement.” Furthermore, Agriculture would not be in the agreement, nor public procurement as it looks to today, she said.

Following the report, European automakers jumped to the top of the Stoxx 600, which pared declines along with the DAX pared some declines amid hope of improving trade tensions with the U.S., with most names rising over a percent: Ferrari +1.5%, Fiat Chrysler +1.6%, BMW +1.6%, Volkswagen +1.4%, Daimler +1%.

Other assets mirrored the improvement in risk sentiment – bund and Treasury futures pulled further back from day highs, and EUR and CNH trimmed declines.

But as Bloomberg notes, any trade progress depends on a positive response from the U.S. And with frictions remaining on Nafta and China talks, any trade pact will continue to be shrouded in uncertainty. The conclusion: “fon’t expect a sustainable uplift from this news.”

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  1. Leonard Jones says:

    The Energizer Bunny keeps going and going. The recent agreement with
    Mexico proves a point I made a while back. You cannot kill an economy if you
    never intend to actually impose tariffs. When Trump started threatening to
    impose tariffs, a little bird told me it was just a bargaining chip for his goal
    of negotiating better trade deals. Soon, the Canucks will fold as well.

    Just when I thought nothing would surprise me, a recent poll of public
    sector union members shows that 1/3 of those polled would consider leaving
    the union. I do not know how this in any way relates to President Trump,
    but the good news is happening so fast I cannot keep up with it all. Can
    anyone tell me that any of this would be happening if the communist
    lesbian in the Mao Jacket had won?

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