Used BMW luxury automobiles stand outside a Bayerische Motoren Werke AG showroom. (Photographer: Krisztian Bocsi/Bloomberg)

German Carmakers Meet U.S. Envoy Over Trade Threat, Sources Say

(Bloomberg) -- German auto-industry leaders are making the case to the Trump administration that a trade feud with the U.S. will cause irreparable damage to global business.

The chief executive officers of Volkswagen AG, Daimler AG and BMW AG met Wednesday with the U.S ambassador to Germany to discuss looming American duties on car imports from the European Union, according to people familiar with the matter.

The meeting, reported earlier by Handelsblatt newspaper, was aimed at forming a direct link to the administration, said the people, who asked not to be named as the talks were private. The head of parts maker Continental AG also was in attendance, one of the people said.

Ambassador Richard Grenell told participants the U.S. government was seeking talks with the EU and German government with a proposal to reduce tariffs to zero, Handelsblatt reported later. That contrasts with President Donald Trump’s proposal last month for a 20 percent levy on imported EU autos, part of his campaign seeking concessions that would lower the U.S. trade deficit. Carmakers and suppliers, including BMW and Continental, have previously said they would favor a bilateral removal of tariffs.

The automakers’ initiative coincides with new proposals reportedly being considered by EU officials to stave off a worsening global trade war. Trump has ordered a probe into whether imports of cars and car parts damage national security. He’s also engaged in a tit-for-tat escalation with China, which will result in a 40 percent tariff on U.S.-made cars -- many of them German brands -- shipped into the Asian country.

The proposal being weighed by EU officials would cut tariffs between the world’s largest car-exporting nations -- including the U.S., South Korea and Japan, the FT reported Wednesday.

Separately, German Economy Minister Peter Altmaier is traveling to Paris next week to help coordinate a new EU initiative for talks with the U.S. on steel tariffs.

Automakers have responded en masse in June to the proposed U.S. tariffs on foreign cars, saying they would harm the U.S. auto industry along with players abroad.

Click here for more background on Trump’s threat to European carmakers

The EU isn’t allowed under global rules to reduce its 10 percent tariff on American cars unless the bloc either does so for World Trade Organization members as a whole or reaches a bilateral accord with the U.S. that covers “substantially all” two-way trade.

European trade chief Cecilia Malmstrom said last week there is “no way” EU governments would agree to scrap the bloc’s car-import duty for all WTO members, leaving the option of going for a broader commercial deal with the U.S.

The EU unsuccessfully sought a permanent waiver from Trump’s metals tariffs imposed in March. As part of those demands, the EU said it was willing to start negotiations with the U.S. on a relatively narrow trade deal focused on eliminating tariffs on industrial goods including cars. The offer went nowhere, according to European officials.

“This is what we offered the American administration, under the condition of course that they did not impose those steel and aluminum tariffs,” Malmstrom told reporters in Brussels on June 26. “They rejected that offer.”

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