A freight train carrying iron ore travels over the Atlantic Ocean. (Photographer: Dado Galdieri/Bloomberg)

Rift Opens Between Germany and France Over U.S. Tariffs

(Bloomberg) -- Germany is willing to offer the U.S. concessions to stop President Donald Trump from slapping tariffs on European steel and aluminum, exposing a divide with France on how to avert a trade war.

Germany is ready to discuss with the European Union in every respect measures to counter the U.S. threat to impose tariffs, according to a government official in Berlin. That flexible approach to protecting Germany’s export-led industry risks alienating other EU countries including France, which according to a French government official doesn’t want the bloc to make any concessions.

With little more than four weeks until a temporary U.S. moratorium on steel and aluminum tariffs runs out, the EU is still trying to identify a common approach to Trump. At stake is potential disruption to a relationship involving total EU-U.S. trade worth some $640 billion in 2016.

Germany is in favor of any EU deal covering new rules on tariffs for a series of products including cars, machinery, foodstuffs and pharmaceuticals, the first official said. That stance is not shared by France, which wants to focus on pressuring China over issues such as subsidies and overcapacity in the steel industry, the second official said. Both government officials asked not to be named discussing internal strategy.

Chancellor Angela Merkel’s government is already sounding out the German car industry on whether it would support a reduction in the 10 percent EU tariff on autos to avoid a trade dispute, the Sueddeutsche Zeitung reported on Tuesday. Carmakers responded positively to the idea, the newspaper said, citing industry sources.

“Dialogue with the U.S. must continue at the highest political level,” the VDA German car industry body said in a statement when asked about the report. “We advocate sustainable and reliable agreements that are WTO-compliant. In the interests of fair and free trade, it is necessary to dismantle each other’s trade barriers and to agree a new framework.”

To see a tweet from President Trump on trade talks, click here.

German Economy Minister Peter Altmaier, who met last week with U.S. Commerce Secretary Wilbur Ross, told reporters that he made no offers to the U.S. to secure an exemption, then denied a report in Handelsblatt on Monday that he had suggested lowering car tariffs.

“It is only the EU which negotiates, united and together. I have neither made any offers nor any promises,” he tweeted. A spokeswoman for his ministry added that he had kept EU Trade Commissioner Cecilia Malmstrom fully informed on his discussions in the U.S. She declined to comment on the Sueddeutsche report.

Trump spoke on Tuesday with both Merkel and French President Emmanuel Macron, according to separate statements from the White House.

He and Merkel “discussed joining forces to counter China’s unfair economic practices and of intellectual property,” as well as “leveling the playing field on tariffs,” the White House said. Macron reminded Trump that European steel and aluminum exports are not a security threat to the U.S., and that the rules of international trade need to be “reinforced” to ensure such a level playing field, according to the French president’s office.

While Trump favors bilateral agreements with certain states, Merkel insists on a common EU approach on the basis of World Trade Organization rules, which do not allow for tariffs for individual products and countries to be lowered. Under those rules, members can offer market access to one another that is more preferential than the WTO standard as long as such agreements cover “substantially all” commerce between the parties to the deal.

The average European Union tariff on goods imported from around the world is 3 percent, while the average U.S. duty on foreign products is 2.4 percent, according to the WTO.

©2018 Bloomberg L.P.

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