The EU is buckling on trade:
“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.”