Trump's EU truce isn't exactly a done deal

When President Donald Trump and European Commission President Jean-Claude Junckner announced their agreement to work toward resolving trade issues, it surprised many given that the show of comity came little more than two weeks after Mr. Trump called the EU a "foe." U.S. stocks rose late Wednesday on the news, reflecting hope the agreement to talk will ultimately halt an escalating trade war sparked by the White House. 

It's a "very big day for free and fair trade," Trump told reporters, later tweeting a photo of himself and Juncker in an embrace, with Juncker kissing his cheek.

However, Wall street analysts, economists and even some government officials viewed the announcement not as a peace treaty, but a good start for now. That's partly because of a lack of specifics. Others worried negotiations could break down like those with China did earlier this year. Mr. Trump recently threatened to slap tariffs on $500 billion in Chinese exports to the U.S., virtually everything it sends to Americans.

Under the Trump-Juncker announcement, the EU said it could buy more products from the U.S., including soybeans and liquefied natural gas. The two sides also agreed to resolve the dispute over steel and aluminum tariffs.

"The news is not uniformly positive," Goldman Sachs Chief Economist Jan Hatzius wrote in a note, calling the announcement an incremental step. He said a lack of specifics could mean discussions "falter at a later stage, as U.S.-China negotiations did earlier this year." It might even "embolden" the White House to try for more concessions from China, raising the risk on that trade war front.

B. Riley analyst Benjamin Salisbury also thinks the announcement may redirect the administration's sights on China.

"Crucially, in our view, the EU agreed to work on the priorities initially laid out by the U.S., including addressing [intellectual property] theft, technology transfer, and other market distortions, which we regard as a thinly veiled re-direction toward China," Salisbury told clients in a report.

China was the U.S.'s biggest trading partner last year, but the E.U. may be its most important market.

The EU and the U.S. generate $5.5 trillion in total commercial annual sales, according to a recent report from the American Chamber of Commerce to the European Union and researchers at Johns Hopkins University. The relationship accounts for as many as 15 million workers in mutually "on-shored" jobs on both sides of the Atlantic, the report said.

It's "important to appreciate this action for what it is -- a step toward a solution -- rather than lauding it for what it isn't -- a solution in and of itself," Height Capital's Clayton Allen wrote in a note, citing few specific and a lack of immediate tariff cuts. The process, "like the North Korean disarmament" may get "bogged down by overly optimistic characterizations," he said.

While Mr. Trump lauded the EU-U.S. agreement in front of an audience of steelworkers in Illinois on Thursday, it was also welcomed by political and business leaders in Germany, the EU's biggest economy. But their optimism was tempered with caution that details have to be firmed up.

"Very demanding and intensive negotiations lie ahead of us," German Economy Minister Peter Altmaier said, vowing that "we will represent and defend our European interests just as emphatically as the U.S. does with its interests."

-- The Associated Press contributed to this report