Trump eases car tariff threat as U.S., EU launch talks to quell trade tensions

WASHINGTON (Reuters) - In what the EU chief called a “major concession,” U.S. President Donald Trump agreed on Wednesday to refrain from imposing car tariffs while the two sides launch negotiations to cut other trade barriers, easing the threat of a transatlantic trade war.

After a meeting at the White House, Trump and European Commission President Jean-Claude Juncker said the talks would also seek to “resolve” U.S. tariffs on steel and aluminum and Europe’s retaliatory duties - marking a step back from Trump’s signature import protections for American metals producers.

Europe has agreed to increase purchases of U.S. liquefied natural gas and lower trade barriers to American soybeans, aiding U.S. farmers and the energy sector, Trump said.

“Soybeans is a big deal. And the European Union is going to start, almost immediately, to buy a lot of soybeans,” Trump told reporters after the meeting.

Trump later tweeted that work on documents was “moving along quickly,” adding that the meeting with Juncker had “great warmth.”

“A breakthrough has been quickly made that nobody thought possible!” Trump wrote, marking a turnaround from July 15, when he called the 28-nation European Union a “foe” on trade.

Juncker said the two sides agreed that as long as they were negotiating on trade, they would hold off on further tariffs, including potential U.S. tariffs on cars and auto parts.

He later told reporters that was a “major concession” on Trump’s part and that he expected the U.S. president to follow through on it.

U.S. import tariffs of 25 percent on steel and 10 percent on aluminum imposed in March will remain in place during the talks, but Juncker added: “It is the first time that the Americans agreed to reassess the measure that they have taken in the steel and aluminum sector.”

European governments and EU officials hailed the Trump-Juncker agreement as a major success.

“Breakthrough achieved that can avoid trade war and save millions of jobs! Great for global economy,” tweeted German Chancellor Angela Merkel’s economy minister, Peter Altmaier.

The late-afternoon news that the meeting had eased transatlantic trade tensions fed a powerful late rally on Wall Street.

U.S. stocks shot to their highs of the day, with the benchmark S&P 500 Index .SPX rising by the most in nearly two months to close the day within 1 percent of an all-time high. The dollar .DXY fell, led by a surge in the euro EUR=, which has been pressured by the deteriorating trade relations with the EU's largest trading partner.

U.S. Treasury prices also eased and the 10-year note’s yield US10YT=RR ended the day at a one-month high near 2.98 percent. Steelmakers’ shares fell, with United States Steel (X.N) falling more than 5 percent in extended trading, and AK Steel Holdings (AKS.N) sliding 2 percent.

The Alliance of Automobile manufacturers, a trade group representing both domestic and foreign-brand automakers, welcomed the agreement to hold talks instead of impose tariffs, saying the announcement “demonstrates that bilateral negotiations are a more effective approach to resolving trade barriers, not increasing tariffs.”