Subtle Pressure

EU-German split over Trump tariffs

Eu, Trump, trade
The strong arm of the EU may be too tough on trade. Source: Reuters

As the White House prepared to impose hefty tariffs on steel and aluminum imports, a divide is opening up between the European Union and Germany about how to respond. While the EU has angrily threatened reciprocal taxes on US goods, Berlin is urging the EU to de-escalate the conflict before it gets out of hand.

US Treasury Secretary Stephen Mnuchin left no doubt Wednesday that the tariffs were imminent. “We are definitely going to end up with these tariffs, and we’re going to roll these out very, very quickly,” he said in a television interview. The Wall Street Journal reported that White House aides were drafting a presidential proclamation on the tariff question and that it was likely to be issued on Thursday.

In Brussels, EU Trade Commissioner Cecilia Malmström said that peanut butter, orange juice, bourbon were on a long list of US exports that the European Union will tax in response to steel tariffs in Washington. While she said Europe did not want a trade war with the US, it was now a question of “protecting our economy and our workers from serious threats.”

“We don’t want something like a trade war.”

German government spokesman

Donald Tusk, the president of the European Commission, joined the fray, warning in a tweet that “the truth is trade wars are bad and easy to lose. (The) EU’s goal is to keep world trade alive and if necessary to protect Europeans by proportionate responses.” That was in apparent response to Mr. Trump’s assertion that trade wars are good and easy to win.

Some German executives also worried about the long-term effect of US tariffs on their business. “The steel tariffs will have drastic consequences for companies in Germany and Europe,” said Hans Jürgen Kerkoff, president of the Wirtschaftsvereinigung Stahl, the economic policy association of the steel industry at a conference on the Future of Steel organized by Handelsblatt.

But other German executives were worried that tough talk at this juncture could cause the situation to quickly get out of control. Mr. Trump has already threatened to put import taxes on German cars if Europe retaliates for the steel tariffs.

Holger Bingmann, president of the German Federation of Wholesale and Foreign Trade, said it would be a fatal mistake for Europe to hit back immediately. They should leave the role of provocateur to the White House, he added.

“We are in favor of a clear response,” Mr. Bingmann told Handelsblatt, “But Europeans must avoid using the same measures as Mr. Trump.”

German government officials were attempting to de-escalate the conflict. One official told Handelsblatt that officials found the threat of retaliation issued by EU Commission President Jean-Claude Juncker as “very direct,” an implied criticism. They were especially upset when Mr. Juncker called the proposed tariffs “stupid,” and then added, “We can do stupid too.”

A spokesman for Chancellor Angela Merkel said the German government was trying not to aggravate the situation. “Certainly we don’t want something like a trade war,” the spokesman said. “That cannot be in anyone’s interest.”

Rather than responding with retaliatory tariffs, said Bernd Lange, a German member of the European Parliament’s trade committee, Europe should “deliberately exert pressure” in the US on American politicians, making it hard for Mr. Trump to act. For example, the proposed targets of European tariffs include Harley-Davidson motorcycles, whose headquarters is in Wisconsin, the home state of Speaker of the US House of representatives Paul Ryan.

“Together with international partners, the EU should lodge a complaint with the WTO and make its mark with countermeasures at short notice,” said Martin Wansleben, CEO of the German Chambers of Commerce and Industry.

Germany had a $64.2 billion trade surplus with the United States in 2017, a fact that Mr. Trump has made clear he wants to reverse. But Germany has not put forward any proposals that would help increase the purchase of US goods or scale back German exports.

Mr. Trump announced last week that he was imposing 25 percent tariffs on steel imports and a 10 percent tax on imports of aluminum. He acted under a half-century-old law that allows the president to protect domestic industries that are deemed essential to national security.

Handelsblatt correspondents Moritz Koch, Till Hoppe, Torsten Riecke, Thomas Sigmund and Klaus Stratmann contributed to this report. It was adapted into English by Charles Wallace, an editor with Handelsblatt Global in New York. To contact the author: c.wallace@extern.handelsblatt.com

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