Home Market European car makers gain after Trump’s EU ‘trade deal’

European car makers gain after Trump’s EU ‘trade deal’

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Shares in European car makers jumped this morning after President Donald Trump said the trade relationship between the EU and the US was “back on track”, soothing fears of punitive tariffs on vehicle exports.

Renault, Volkswagen, Peugeot and BMW all saw their share prices rise by as much as two per cent, while Fiat Chrysler shares gained more than four per cent at the time of writing.

Trump met European Commission president Jean-Claude Juncker in Washington to discuss trade after threatening to impose significant tariffs on EU car exports, a move which many economists saw as a potential declaration of a trade war.

However, Trump reportedly agreed to act to resolve the issue of steel and aluminium tariffs, which he imposed on the EU earlier this summer, as well as scrapping other potential penalties, including possible tariffs on the EUs massive car industry.

After the meeting Trump early this morning said it was a “big day for free and fair trade” and added the EU will start to import soybeans and liquefied natural gas.

Lee Hardman, a currency analyst at MUFG, said the rapprochement “supports the optimistic view that President Trumps tough negotiating stance on trade is more likely to lead to “freer and fairer trade” rather than a full blown global trade war.”

However, he added that a significant risk of a breakdown remains. Relations between Trump and China had previously soured after appearing to be positive, with the threat of a larger trade war with the worlds second-largest economy still looming over markets.

The EU joint statement said the countries will “work together toward zero tariffs, zero non-tariff barriers, and zero subsidies on non-auto industrial goods”. It also signalled that the two powers will work together on “unfair trading practices, including intellectual property theft, forced technology transfer, industrial subsidies, distortions created by state owned enterprises, and overcapacity” – all issues raised by the Trump administration with regard to China.

European political leaders and business groups welcomed the potential for a thaw in relations.

"This is not yet the result we are aiming for but it has made a positive result in the whole discussion… on free trade or protectionism more likely than before," German foreign minister Heiko Maas told a news conference in Seoul, according to Reuters.

Germanys car industry association, the Association of the Automotive Industry (VDA), said in a statement the “signal of de-escalation is important”. There is now a “real chance of avoiding additional tariffs or even a trade war between the USA and the EU”, it said.

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