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U.S. And Europe Take Important Step Away From Confrontation On Trade

AUDIE CORNISH, HOST:

So now that the U.S. and the European Union have just avoided a trade war, as we just heard, President Trump and European Commission President Jean-Claude Juncker announced that they had reached an agreement to work toward eliminating tariffs on industrial goods.

David Wessel is director of the Hutchins Center on Fiscal and Monetary Policy at the Brookings Institution. He joins us now. Hey there, David.

DAVID WESSEL: Hi.

CORNISH: So it appears as though the U.S. and Europe took an important step back from confrontation. What do you make of this announcement?

WESSEL: Yeah. I think what the basic news here is that they took a step away from confrontation, which of course is welcome, which is why the stock market rose so much as the rumors and then the press conference that the president had with his European counterpart - I don't think we know very much. And the president has a habit of saying we're going to work this out, and then a few days later you find out it's not so worked out. But it definitely is a step away from confrontation, and that's a big deal.

CORNISH: The president was only just recently saying, look; be patient with my trade policies. Is he kind of vindicated here? He brought someone to the table.

WESSEL: No, I don't think so. I mean, basically he'll argue that the tariffs he imposed on steel and aluminum, which he did not promise today to waive, and the threats of tariffs on European cars brought Europe to the table. But at the same time, as Mara pointed out, a lot of what they're talking about is very similar to the so-called T-TIP negotiations that broke down under President Obama. And also, I think there was strong pressure from Republicans in Congress and the business community that was weighing on the president that he may have figured out that he had gone too far.

CORNISH: What are the odds of this deal being worked out holding together?

WESSEL: Well, I think - I don't think we - there is a deal. I mean, President Juncker of the European Commission referred to it as a deal, but basically it's an agreement to talk. And if both sides are willing to compromise and they can work stuff out, then there's a good chance of success. And perhaps the president has realized that it wasn't wise to have a multi-front war. And if he can make peace with the Europeans on trade, that does free him up to pursue a more aggressive case against China, where he has a lot more support both within the American business community and with our trading partners.

CORNISH: David Wessel, why are you so skeptical? If the European Commission leader says, yeah, we pretty much have a deal and President Trump says, yeah, we have a deal, why not give them the benefit of the doubt?

WESSEL: I don't know. I guess I'm just a skeptical reporter.

CORNISH: (Laughter).

WESSEL: But, I mean, what they said - because there is no agreement that we can look at. President Juncker said we agreed to establish a dialogue on standards. President Trump said we will resolve retaliatory tariffs. I guess I want to see what they've actually agreed to and see them stand up and give us a piece of paper and say, this is what's changing rather than words. But I don't - I really do think it's important that today the president and one of our major trading partners are being nice to each other rather than beating each other over the head with baseball bats.

CORNISH: Is there any way that these negotiations become any sort of template in terms of dealing with China?

WESSEL: I think that's a really good question and an interesting one that we can't fully answer. On one hand, the president seems happy when our trading partners offer to buy more stuff, as the Europeans did - more liquefied natural gas and soybeans. And we know the Chinese have floated something like this. So it could be a template. But it also may free the president to be more aggressive with China, which has - does a lot of things that are unfair - considered unfair by most economists that are not things that Europe does.

CORNISH: David Wessel is director of the Hutchins Center on Fiscal and Monetary Policy at the Brookings Institution. David, thank you for speaking with ALL THINGS CONSIDERED.

WESSEL: You're welcome. Transcript provided by NPR, Copyright NPR.