Starting today, European Commission President Jean-Claude Juncker and Donald Trump will be holding talks in Washington related to current trade battle between both blocs. As a reminder, the US announced early March tariffs measures of 25% and 10% on steel and aluminum for its trading partners while the EU retaliated by imposing tariffs on popular US goods for a total of USD 3.2 billion. Both trade sanctions are currently effective. Following EU retaliation, Trump threatened to impose further tariffs of 20% on EU imported vehicles, a step that would impact a total of USD 58.2 billion of auto products. The EU says it is currently drawing up a new list of products it could potentially tax in retaliation.
Contrarily to Trump’s complaint about unfair trade practices, it appears that average tariffs between both partners remained historically low, at 3%, while EU goods trade surplus to the US of USD 150 billion (USD 101 billion incl. services) confirms that the US economy is in good shape rather than being related to a bad trade deal.
Therefore, today’s trade talks remain crucial for both blocs, as further tariffs measures are underway. However, the odds of both parties finding a common agreement that is deemed to be fair is rather low, as EU diplomats are rather less optimistic. The first meeting is expected to remain a first exchange of primary views above all.
EUR/USD sideways price action started in 23. July 2018 along 1.1690 is maintained for the time being. We expect current trend to change tomorrow during ECB’s monetary policy decision, which should push the pair to the upside.
By Vincent Mivelaz
