On Wednesday, President Trump and European Commission President Jean-Claude Juncker announced that they had agreed to a deal on trade that would avert damaging tariffs and further escalation of the U.S.-led trade war. While they offered reassurances, nice-sounding joint press conferences are often just that: words.
In this case, Trump’s trade deal is really just a deal to keep talking about a trade deal – not an actual agreement itself.
The agreement that was shared at the White House was itself big on feel good promises and agreements, but lacked many specifics. For example, they promised to “resolve the steel and aluminum tariff issues and retaliatory tariffs” but didn’t offer any details on just how such a pledge might play out.
Trump also said that the EU had agreed to purchase more U.S. soybeans and liquefied natural gas. At first, this sounds great. The trade war with China, the biggest importer of soybeans, has squeezed U.S. producers and the U.S. would like to sell more liquefied natural gas to European markets.
But really, these are things that Juncker, for all of his agreements with Trump, can’t promise. Purchases of soybeans and natural gas depend on private purchases and market conditions. Juncker pointed this out, but Trump still claimed victory.
Especially with soybeans, it might seem that Europe did indeed decide to purchase more. But an uptick in European purchases would be driven not by Trump’s agreement, but by the fact that since China has started importing soybeans from Brazil because of U.S. tariffs. As a result, Brazilian soybeans that once went to the EU have become more expensive, pushing importers to look to the United States.
Finally, while both leaders can agree to work towards zero tariffs and no subsidies, that couldn’t happen overnight. In trade agreements, the details matter, and just how those play out is not as simple as a shared goal in reduced tariffs. For example, for the EU to import more liquefied natural gas would likely require new infrastructure such as ports that could accept shipments.
To be clear, the talk did produce good outcomes. Both sides agreed to continue negotiations on issues ranging from tariffs to WTO reform and, perhaps more significantly, they also agreed that they would not impose new tariffs as long as these negotiations were on going.
