Auto Tariff Truce With EU Said to Be Pitched by U.S. Ambassador

(Bloomberg) -- U.S. Ambassador to Germany Richard Grenell plans to relay the support of Germany’s top automakers for the elimination of all tariffs on automobiles shipped between the U.S. and European Union, a person familiar with the matter said.

Grenell will deliver the message to Trump administration officials following meetings he held with major German carmakers including Daimler AG, BMW AG and Volkswagen AG, the person said. The framework seeks for President Donald Trump to refrain from slapping a threatened 25 percent import duty on autos made in Europe in exchange for the European Union dropping the bloc’s 10 percent levy on cars and light trucks imported from the U.S., the person said.

The U.S., the second-largest auto market worldwide, is one of BMW, Mercedes-Benz and VW’s largest sources of sales, a majority of which are imported. Each automaker also has a significant manufacturing and export footprint in the U.S.

While not a formal proposal by European authorities, the offering represents an olive branch from Germany’s carmakers, a second person familiar with the matter said. It’s intended to acknowledge and allay Trump’s concern about uneven duties on vehicles between the trading partners and U.S. trade deficits on autos, the person said.

The U.S. levies a 2.5 percent tariff on imported passenger cars and SUVs compared to the E.U.’s 10 percent.

The Wall Street Journal reported on Grenell’s plan earlier Wednesday.

In a statement, the German automakers’ European trade association said there is "close dialogue" with U.S. officials on these issues but cautioned that no formal proposal is on the table for either the U.S. or EU, or both, to dismantle their existing vehicle duties.

“Trade barriers can only be reduced on both sides,” the German automakers’ association, the VDA, said in an emailed statement. “A WTO-compliant transatlantic agreement encompassing industrial tariffs could be a possible way forward. The basis for future agreements between the EU and the U.S. must be the rules of the WTO. There is no proposal for unilateral concessions or the mutual dismantling of car duties exclusively.”

The German Economic Ministry declined to comment.

©2018 Bloomberg L.P.