The German government warned on Monday that a transatlantic trade war would harm both Europe and the U.S., urging Washington not to take a “wrong path” after a weekend of aggressive rhetoric.
“A trade war would not be in German, European or American interests,” Chancellor Angela Merkel’s spokesman Steffen Seibert told reporters in Berlin after President Donald Trump at the weekend threatened to impose tariffs on car imports from the European Union. “Closing oneself off and protectionism are the wrong path,” Seibert said. “Such measures would inflict pain on international trade flows and our industry, but above all hurt workers and consumers on both sides of the Atlantic.”
Last week, Brussels raised the specter of a tit-for-tat trade war with the U.S., saying it would slap a border tax on items like motorcycles, orange juice and jeans if Trump went ahead with a promised tariff on steel and aluminum imports into the U.S.
E.U. Budget Commissioner Guenther Oettinger told news agency DPA the bloc would take “proportionate measures” in response to U.S. tariffs. “The measures must have an impact on the American market without provoking an excessive reaction and thereby an escalation,” he said.
Brussels’ proposed response matches similar moves during a 2003 “steel war” unleashed by George W. Bush’s administration—which prompted the U.S. to back down before the E.U. carried out its threat.
This time, if the E.U. implements the plans “we will simply apply a tax on their cars which freely pour into the U.S.,” Trump tweeted on Saturday. That new threat followed a declaration by the president on Friday that “trade wars are good, and easy to win” in response to the initial uproar at his plans for a metals tariff.
Along with close partner France, other E.U. capitals and the Commission, Berlin will “watch very closely what the U.S. government implements this week and then evaluate the correct reaction,” Seibert said. “We will defend open markets, free markets,” he added.
The automobile industry is Germany’s largest sector, employing roughly 800,000 people across the country and many thousands more around the world.
Tariffs could cost big groups like Daimler, BMW or the world’s largest carmaker Volkswagen up to 10 percent of their annual profits, analyst Ferdinand Dudenhoeffer of Germany’s CAR research center estimated. “In such a trade war, there would only be losers on all sides,” said Bernhard Mattes, president of Germany’s VDA auto industry federation, in a statement.
The VDA noted that while German manufacturers exported almost 500,000 cars to the U.S. last year, they also built 804,000 on U.S. soil, exporting around half of them back out of the country.
German carmakers employ 36,500 people in the U.S. and component makers a further 80,000. “This offers advantages to both sides that should not be gambled with,” Mattes said.