President Donald Trump and European Commission President Jean-Claude Juncker announced that the two sides have agreed to terms to simmer down a potential trade war that is already taking place between China and America.

But let’s take a deep breath and look closer before we pop the champagne.

Juncker, Trump Talks

From ABC NEWS:

“We agreed today, first of all, to work together toward zero tariffs, zero nontariff barriers and zero subsidies on non-auto industrial goods,” Trump said during his remarks in the Rose Garden as he stood next European Commission President Jean-Claude Juncker. “We will also work to reduce barriers and increase trade and services, chemicals, pharmaceuticals, medical products as well as soybeans. Soybeans is a big deal. And the European Union is going to start almost immediately to buy a lot of soybeans.”

Trump also indicated that the U.S. will enable the European Union to import more liquefied natural gas from the United States and the creation of a dialogue on standards meant to reduce barriers to trade. As part of the agreement, the U.S. will move to end some of the retaliatory tariffs relating to steel and aluminum.

“We also will resolve the steel and aluminum tariff issues and we will resolve retaliatory tariffs. We have some tariffs that are retaliatory and that will get resolved as part of what we are doing,” Trump said.

Juncker said the EU will delay any future tariffs as the bloc works with America on trade.

The biggest news out of this has to be soybeans, which has caused a headache for the administration and farmers. Trump approved tariffs valued about $50 billion on products from China like electronic goods and machinery. He also passed 10% tariffs on aluminum and 25% tariffs on steel from Canada, EU, and Mexico.

China responded with tariffs on over $34 billion on American products, which include agriculture products. Those Chinese tariffs forced the administration to prepare a plan to provide $21 billion in aid to farmers.

Now it looks like the EU will buy “‘a lot of soybeans’ in the coming weeks as a goodwill gesture in their ongoing trade talks.” Yet:

Trump said that Wednesday “was a very big day for free and fair trade.”

Juncker told Politico’s Brussels Playbook that the two men “get along well, surprisingly,” which helped the meeting between them. He noted that the president “appreciates that I challenged him twice at G7 meetings, hard at it but polite in tone. He doesn’t like those who beat around the bush.”

Analysis

This appears to be a win for Trump trade policy, but actions do speak louder than words. That’s all this meeting was…words. We need to see some action before I celebrate.  I still don’t like the idea of using tariffs as a negotiating tool because of the risk. China called our bluff and look what happened. I’m not the only one:

CATO’s Scott Lincicome (you should follow him on Twitter) offered his analysis on this deal to Haley Byrd at The Weekly Standard. There are seven points in the article, but I found the last one most intriguing:

“On the bright side, there is a clear de-escalation of rhetoric and that’s good, but the devil will be in the details,” Scott Lincicome, a trade lawyer and adjunct scholar at the libertarian Cato Institute, says. “And this provides almost no details. Meanwhile, all the tariffs implemented so far remain in force.”

(7) “We also want to resolve the steel and aluminum tariff issues and retaliatory tariffs.”

So, the steel and aluminum tariffs, and those the E.U. imposed on American industries in response, remain in place, even though the parties want to resolve the tariffs. (“Well, I want a Porsche,” Lincicome responds. “And a pony.”)

On this point, he observes that the statement makes no mention of national security in relation to steel and aluminum imports. Trump used Section 232 of the Trade Expansion Act in the spring to impose tariffs of 25 percent and 10 percent on those products, claiming they represent a threat to the United States. The fact that Wednesday’s joint statement indicates the steel and aluminum tariffs could be removed in response to developments completely unrelated to national security issues adds to a growing pile of evidence that the White House’s official justification for the tariffs is simply a pretense.

Lincicome concluded that the agreement between Juncker and Trump “represents ‘a step backwards in terms of ambition’ from the Transatlantic Trade and Investment Partnership, a bilateral effort that was largely abandoned when Trump took office.”

Lincicome stressed that Trump “could have actually achieved far broader liberalization had he just vigorously committed to picking up the T-TIP baton 18 months ago.” If Trump did this, America could have “avoided all sorts of economic and diplomatic headaches caused bu his own national security tariffs.”

Bloomberg reported what investors said about the meeting:

Commerzbank: “Does that mean the market can breathe a sigh of relief as the trade war is over? I am skeptical and fear that this is also a question of political calculation. It is positive that no new tariffs between the EU and the U.S. are going to be imposed despite the fact that the EU will maintain its 10% tariffs on U.S. cars which was a thorn in Trump’s side and that the EU and U.S. want to work on reducing existing trade restrictions. However, I can hardly imagine that the issue has been solved thanks to a few EU imports of soy beans and liquid gas.”

Sylvain Goyon, head of strategy at Oddo & Cie: While the initial reaction for risky assets is positive, no effective decision has been taken and the negotiation process has just started. He adds that “volatility linked to this topic is here to stay” and “differences” over auto and car parts aren’t resolved yet, while the steel and aluminum tariffs are still ongoing. The outcome is “an encouraging sign” that needs to be confirmed by some similar decisions on U.S./China, which seems unlikely in the short term.

Evercore ISIS: Developments are “a strong short-term market positive” though remaining alert “to the non-trivial possibility that negotiations fall apart.” On the auto front, this is a very positive while noting that first comments were “non-auto industrials” and broad bilateral agreements can take years. No immediate EU/U.S. tariffs is “a good thing” with the market pricing in 50%-60% probability of trade-war in autos as of yesterday. “All negative earnings aside, we would expect the broad sector to bounce today given negative positioning.”