Last week European Commission chief Jean-Claude Juncker and United States President Donald Trump appeared to come to a landmark agreement that had the potential to calm down trade tensions between the two economic giants.
Both sides pledged to cease retaliatory tariffs. President Trump vowed to back down from his threat to impose tariffs on European autos while Juncker pledged that Europe would ramp up its purchases of U.S. soybeans and liquefied natural gas.
The meeting lacked substantive figures which means that investors should not leap for joy just yet, but there is no question it is a positive step forward. Germany, the economic engine of Europe, will be especially pleased with the results. Its auto industry would have borne the brunt of the 25% tariff that the Trump administration had floated.
The iShares MSCI Germany ETF (NYSE:EWG) was up 0.24% in early afternoon trading on July 30. The ETF has dropped 3% in 2018 so far as German and European markets have broadly been negatively impacted by rising trade tensions. Shares of Volkswagen, Porsche, and other German automakers spiked on the news.
Should investors jump into this ETF? Not just yet. The Trump administration has produced public relations successes in the past that have flamed out and investors should not buy the rumour without any substantive path forward in this case. Still, the de-escalation makes this German-focused ETF worth monitoring as we head into the latter months of 2018.
