Trump, EU agree to work on lowering tariffs, averting a potential trade war

• President Donald Trump on Wednesday announced that he had secured concessions from Europe, averting a potential trade war.
• The Dow Jones Industrial Average popped Wednesday afternoon, rising more than half a percent on the news.
• The Europeans agreed to lower industrial tariffs and import more U.S. soybeans.

President Donald Trump on Wednesday said the United States and the European Union had launched a "new phase" in their relationship, saying that the two major economies would start negotiations immediately on a number of areas that include working toward "zero tariffs" on industrial goods, and further cooperation on energy issues.

"We agreed today, first of all, to work together towards zero tariffs, zero non-tariff barriers and zero subsidies for the non-auto industrial goods," Trump said at a joint press conference in the White House Rose Garden with European Commission President Jean-Claude Juncker.

Trump did not address whether the two leaders had reached an agreement on car tariffs, though Juncker said that no new tariffs would be assessed as negotiations proceed. Economists have said that, among the major issues under discussion, tariffs on cars could be the biggest threat to the U.S. economy.

Juncker said the two leaders also agreed that as long as negotiations were ongoing, "we'll hold off further tariffs and reassess existing tariffs on steel and aluminum" put in place by the Trump administration. "This was a good, constructive meeting," he added.

Key details of the agreement were still unclear late Wednesday afternoon, but a deal not to impose further tariffs while negotiations are underway would avert a trade war between the United States and Europe. It would also represent a victory for the European Union, which had been bracing for new automobile tariffs as high as 25%.

“All things considered it could have been a hell of a lot worse. They agreed to keep talking. Considering how bellicose Trump was when he said ‘tariffs are great.’ I think this was the best outcome you could have hoped for,” said Greg Valliere, global strategist at Horizon Investments. “The reaction from Republicans on Capitol Hill has been so hostile to Trump’s tariff proposal, that that maybe was a factor in them agreeing to keep talking.”

Valliere said it was telling that auto tariffs were not specifically mentioned. Analysts have said there appears to be disagreement in Europe on the topic, and the Trump administration would like to see Europe drop its tariffs of 10 percent on U.S. cars.

The major averages rallied Wednesday afternoon on early reports of the trade agreements.The Dow Jones Industrial Average popped more than half a percent to a session high Wednesday afternoon. The NASDAQ rose about 1 percent. The euro also rose, hitting a session high against the dollar.

The agreement surprised policy experts in Washington and Brussels, many of whom had been closely monitoring Trump's escalating rhetoric on trade. On Tuesday, Trump wrote a tweet that appeared to dismiss the possibility of a before the meetings had even begun. "The European Union is coming to Washington tomorrow to negotiate a deal on Trade," he tweeted. "I have an idea for them. Both the U.S. and the E.U. drop all Tariffs, Barriers and Subsidies! That would finally be called Free Market and Fair Trade! Hope they do it, we are ready - but they won’t!"

Trump Tweet

Juncker's visit was a bright spot in the increasingly gloomy outlook for U.S.-European relations that have been frayed by Trump's trade wars, his fondness for Russian President Vladimir Putin and his skepticism of multilateral institutions like NATO and the European Union.

In announcing Juncker's visit, the White House said in a statement on July 17 that the two men would discuss "a wide range of priorities, including foreign and security policy, counterterrorism, energy security, and economic growth," with a "focus on improving transatlantic trade and forging a stronger economic partnership."

Trump's own comments about Europe, however, have repeatedly stood in stark contrast to the White House message. "The European Union -- outside of China and a couple of others -- treats us, on trade, as badly as you can be treated," Trump said during a May visit from NATO Secretary General Jens Stoltenberg. "They have trade barriers. Our farmers aren’t allowed, to a large extent, to sell their product into the European Union.”

According to Trump's own Department of Agriculture, however, this is not true. On the contrary, the USDA reported that in 2017, American agricultural exports to the European Union totaled $11.2 billion, making Europe the fifth largest export market in the world for U.S. farmers.

CNBC's Kayla Tausche and Patti Domm contributed to this report.

WATCH: Kayla Tausche reports on Trump-Juncker statement