Donald Trump and the European Union struck an unexpected deal and averted an all-out trade war on Wednesday night.
Following a meeting at the White House with Jean-Claude Juncker, the European Commission president, Mr Trump said there was a “new phase” in relations, and it was a "very big day for free and fair trade".
He said the US and the EU had agreed to work toward "zero tariffs" on industrial goods, apart from cars.
The US president said: "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."
Mr Juncker said there would be no further tariffs, including on cars, while they negotiate, and that existing US tariffs on European steel and aluminum would be re-examined.
He said: "I had the intention to make a deal today. And we made a deal today."
The United States and the European Union have a $1 TRILLION bilateral trade relationship – the largest economic relationship in the world. We want to further strengthen this trade relationship to the benefit of all American and European citizens… pic.twitter.com/4zlmEEtCpG
— Donald J. Trump (@realDonaldTrump) July 25, 2018
Wall Street was boosted by the deal with the S&P 500 closing at its highest level since January 29, while MSCI’s broadest index of Asia-Pacific shares outside Japan edged up 0.1 percent.
Mr Trump exempted cars from the agreement and he is believed to still be considering in the future putting 25 per cent tariffs on nearly $200 billion in car imports, which would particularly harm Germany.
European officials had warned before the White House meeting that they would respond to car tariffs by putting similar duties on $20 billion (£15 billion) of US goods, including agricultural, hi-tech and other machinery.
Mr Trump has repeatedly expressed frustration that the EU imposes a 10 per cent tariff on imported US cars, while the US tariff on European cars is only 2.5 per cent.
Obviously the European Union, as represented by @JunckerEU and the United States, as represented by yours truly, love each other! pic.twitter.com/42ImacgCN0
— Donald J. Trump (@realDonaldTrump) July 25, 2018
The DIHK, a group representing German industries, gave a cautious welcome, pointing out that car tariffs were still on the table.
A spokesman said: "The proposed solutions move in the right direction, but a significant portion of scepticism remains."
Earlier this year Mr Trump introduced a 25 per cent tariff on steel imports, and 10 per cent on aluminium.
The EU responded to that by imposing tariffs on over $3 billion of US goods, including iconic brands of whiskey and motorcycles.
US bosses warn on trade war dangers as Trump’s tariffs bite
Ahead of their meeting Mr Trump told Mr Juncker: “Hopefully, we can work something out. We expect something very positive to take place.
“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”.
He added: “We represent half of the world’s trade. We have to work together. We have to talk to each other, not at one another, and that’s what we do today.
"We have to focus on reducing tariffs not increasing them, that’s our job.”
Every time I see a weak politician asking to stop Trade talks or the use of Tariffs to counter unfair Tariffs, I wonder, what can they be thinking? Are we just going to continue and let our farmers and country get ripped off? Lost $817 Billion on Trade last year. No weakness!
— Donald J. Trump (@realDonaldTrump) July 25, 2018
The US president has faced criticism over his tariffs policy from Republicans in Congress, who accused him of abandoning free trade principles and risking damage to the US economy.
Seeking to quell the dissent within his own party Mr Trump wrote on Twitter: “When you have people snipping at your heels during a negotiation, it will only take longer to make a deal, and the deal will never be as good as it could have been with unity.
"Negotiations are going really well, be cool. The end result will be worth it!"
Larry Kudlow, Mr Trump’s chief economic adviser, said: "This is all not of Mr Trump’s making. This is something he inherited. There’s a swamp for the world trading system and hes trying to drain it."
Senior Republicans welcomed the deal. Paul Ryan, the Republican House Speaker, said he was "encouraged by this progress with our European allies". Joni Ernst, a Republican senator from Iowa, thanked Mr Trump for "working toward a win for the US." She added: "Soybeans are a big deal in Iowa."