The political rollercoaster of Donald Trump’s presidency took another wild turn this week as a high-level Washington meeting between Trump and Jean-Claude Juncker, the president of the European Commission saw the pair announcing that they would now work together to resolve differences over trade. This comes just shy of two weeks after Trump labelled the “EU” a foe over its trade policies with the US which have created a $151 billion deficit for the US.
Trump Announces A “New Phase”
Speaking during the press conference at the Rose Garden, Trump announced there was a “new phase” in the relationship between the two economies and declared it a “very big day for free and fair trade”. Commenting on the discussions between the two leaders, Trump said that the US and EU agreed to strive towards “zero tariffs” on industrial goods excluding cars, saying “we agreed today, first of all, to work together toward zero tariffs, zero non-tariff barriers and zero subsidies on non-auto industrial goods.
“We will not go against the spirit of this agreement unless either party terminates the negotiation. We’re starting the negotiation right now but we know very much where it’s going.” Trump added that the EU agreed to purchase “a lot of soybeans almost immediately,” as well as “massively” increasing imports of liquefied and natural gas from the US.
US & EU In Love
Taking to Twitter following the meeting, Trump wrote, “Obviously the European Union, as represented by @JunckerEU and the United States, as represented by yours truly, love each other!”
In a more reserved tone, commenting on the outcome of the meeting, Juncker said “I had the intention to make a deal today. And we made a deal today”. This comes after comments made by Juncker ahead of the meeting where he said that, regarding his hopes for the meeting, “hopefully we can work something out. We expect something very positive to take place.”
Juncker also said “We just want it to be a level playing field for our farmers, for our manufacturers, for everybody. And, we also want a big beneficiary, frankly, to be the European Union.” Mr. Juncker said the US and EU were “close partners and allies, not enemies”.
Is Trump Genuine?
The move has been interpreted by some as a political bid by Trump to regain the support of those Republicans that have been opposed to Trump’s recent maneuvers which have included creating hostility between the US and the EU, a traditional ally of the US as well as seeming to take a warmer approach to Russia. Following the debacle with Trump’s press conference with Putin and subsequent attempt at a U-Turn, Trump had come under heavy and open criticism from across the board, including areas within his own party which typically support the President no matter what.
Regardless of what Trump’s motivations behind the meeting were, what is clear is that Trump’s behaviour is becoming even more unpredictable as he oscillates between aggressive bullying tactics and silver-tongued camaraderie.
Following months of escalating trade tensions between the US and China and the US and the EU, the market was relieved to hear the news that the US and EU will now work together to improve trade relations once again with boh US and European equities rising. While the outlook is, of course, difficult to gauge, given Trump’s unpredictability, it seems that for now, investors are happy to take a more risk on approach in light of the meeting.
Having broken out of the contracting triangle pattern which had framed price action since late last year, US equities are now surging higher with the 2016 high in clear sight. The broken 2802. 85 level (which was the prior 2018 high) should now act as support if tested for continued upside.
The Dax was equally strong in reaction to the meeting. Focus is now on the possible testing of the next key technical resistance around the 12960 level which is the June 2017 high and the bearish trend line of the large contracting triangle pattern currently framing price.