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

U.S. President Donald Trumpsaid on Wednesday the United States and the European Union werekicking off talks aimed at lowering trade barriers as officialslooked to head off a brewing trade war.

"This was a very big day for free and fair trade, a very bigday 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 verymuch where it's going."

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

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 transatlantictrade war launched by Trump's tariffs on steel and aluminum anda threat to impose a 25 per cent tariff on imported cars and autoparts.

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

Trump said the talks would "resolve" both the hefty tariffsthe United States had placed on imports of steel and aluminumfrom the EU and the tariffs Europe had slapped on U.S. goods inresponse.

Foreign Affairs Minister Chrystia Freelandwelcomed 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," Freelandtold reporters during a conference call from Mexico City, referring to tariffs Trump imposed on steel and aluminum imports under a rarely-used clause of theTrade Expansion Act of 1962which gives the president the power to cite 'national security' to justify tariffs. Freelandis in Mexico holding trade talks with the outgoingMexican president,Enrique PeaNieto,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 onthe contentious issue of possible U.S. tariffs on imports of automobiles from Europe.

But Juncker said they had agreed not to impose any newtariffs 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 BMWand Volkswagen hard, as well as Japaneseand South Korean car companies.

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

'Scepticism remains'

Meanwhile, the agreement between Junckerand Trump to hold talks was being hailed asa majorsuccess by EU officials and other European governments.

"Breakthrough achieved that can avoid trade war and savemillions of jobs! Great for global economy!" tweeted GermanChancellor Angela Merkel's Economy Minister Peter Altmaier asnews of the Washington deal broke late in the evening in Europe.

Brussels had been playing down expectations before themeeting that the EU chief executive could dissuade Trump fromimposing new tariffs on European notably German cars.

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

In the end, Trump agreed to resolve arguments over the steeland aluminum tariffs he introduced to European dismay earlierthis year, to scrap any other planned penalties and to join in adialogue with Brussels on enhancing trade. The EU will work toease 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 torebuild a basis of trust with Europeand remove the illegaltariffs.

"The proposed solutions move in the right direction, but asignificant 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.