Car Imports

Germany wants to make Trump a trade offer he can’t refuse

Peter Altmaier
The dealmaker: Peter Altmaier, economics minister. Source: DPA

When dealing with Donald Trump, advisors say the main thing is positivity. Why not make him an offer, they suggest. Germany’s new economic affairs minister seems to be taking that advice to heart. Peter Altmaier is pushing for a cut in European tariffs on American cars in the hopes of stopping the US from imposing tariffs on European products, Handelsblatt has learned.

The EU currently imposes a tariff of 10 percent on US car imports, while the United States has an equivalent tariff of just 2.5 percent. After holding talks in Washington last week, Mr. Altmaier is said to look favorably on Washington’s demand that American carmakers be given better access to European markets.

However the strategy also risks causing a split within the European Union, where many favor holding a firmer line against what they regard as US bullying. Donald Trump, after all, was threatening to impose a tax on German cars before his presidency even began.

The European Commission says it will not be forced into concessions.

The German government has sounded out German car manufacturers on the issue, who are broadly supportive of Mr. Altmaier’s initiative. They don’t see US imports as a threat to them on the European market and would much rather prefer to avoid any further escalations in a trade war.

But Mr. Altmaier’s proposal has a lot less support elsewhere. Even some German government sources have doubts whether a major concession should be made on trade. They feel it would reward Mr. Trump’s confrontational style, encouraging him to make even more threatening demands that might include access to European agricultural markets. European politicians should not be going to Washington as supplicants, they suggest.

The US government has postponed the implementation of tariffs on European steel and aluminum, but only until May 1. That gives all involved very little time to resolve the dispute. Ultimately the responsibility for trade negotiations affecting the EU’s 28 member states lies with the European Commission. It says it is prepared to hold talks but will not be forced into concessions. It also insists that Mr. Trump’s proposed tariffs are based on a false pretext of national security.

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Brussels regards lower EU tariffs on imported cars as a powerful bargaining chip that shouldn’t be treated lightly. Instead it should be used to extract other concessions. For example, EU firms have long demanded better access to the US’ public tenders.

There are other problems with cutting EU car tariffs. According to World Trade Organization rules, the EU wouldn’t be able to cut US tariffs alone. It would have to cut tariffs for all WTO members. That would open the European market up to cheap Chinese imports, at a moment when Chinese e-car production is set to accelerate.

The EU already has trade deals with Japan and South Korea, two of the world’s biggest car manufacturing nations, but those complex deals took years of negotiations to arrive at. In addition, given the current “America First” mood in the United States, the Trump administration may simply refuse to respond with concessions of its own.

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Another problem: There is little enthusiasm in France for Mr. Altmaier’s play-nice strategy, although Paris has yet to make a direct statement on the idea. At Friday’s EU summit, French President Emmanuel Macron said he was happy to negotiate with the United States, but refused to do so “while under time pressure or with a gun to our heads.” In other words, Mr. Trump must withdraw his tariff threats before substantive trade talks can begin.

Mr. Macron will face a dilemma when he travels to Washington in April. On the one hand, he is keen to preserve his good personal relationship with Mr. Trump. But he has taken a hard line on the trade dispute, insisting that any American tariffs must be answered by immediate European counter-measures. On this issue, France has less to lose than Germany – it has an overall trade deficit with the United States, and exports very few cars to that country.

Given member states’ divergent interests in trans-Atlantic trade, it is important that the EU maintain its unity above all. “It would be a fantastic gift for Trump if Europe let itself be divided,” warned one high-ranking EU official in Berlin for recent talks.

Thomas Hanke is Handelsblatt’s correspondent in Paris. Till Hoppe is a Handelsblatt correspondent in Berlin, primarily reporting on German foreign policy. Moritz Koch was Handelsblatt’s Washington correspondent between 2013 and 2017. Since the summer of 2017, he has been a political editor in Berlin. Thomas Sigmund is the bureau chief in Berlin, where he directs political coverage. To contact the authors: hanke@handelsblatt.com, t.hoppe@vhb.de, koch@handelsblatt.com, sigmund@handelsblatt.com

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