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Chancellor Friedrich Merz is “delusional” in his expectation that Germany’s automobile trade can be spared from US tariffs, in keeping with EU officers concerned in commerce talks with the Trump administration.
Merz has been urgent the European Fee, which manages commerce coverage on behalf of the EU’s 27 member states, to signal a “framework” cope with Washington aping the US-UK settlement signed earlier this month, which included a particular dispensation for vehicles.
However Brussels officers have privately informed Berlin that such an association wouldn’t be doable, as lowering German automobile imports is a giant focus for US President Donald Trump, two individuals briefed on the discussions informed the Monetary Instances.
Merz earlier this week criticised the fee for main “too sophisticated” negotiations and stated a deal ought to deal with 4 to 5 key industries, together with automotive, metal and prescribed drugs, the place Trump has already threatened sectoral tariffs.
However fee officers say these are the toughest to take away as a result of Trump needs to reshore these industries within the US and scale back imports.
EU negotiators imagine that vehicles are “the toughest aspect” of any cope with the White Home and have to be dealt with after simpler facets have been agreed first to construct belief, the individuals stated.
Berlin was “delusional” to imagine Trump would conform to concessions for German automakers as a primary step, one of many officers stated.
The disconnect between the EU govt and the bloc’s greatest economic system got here to fore at a leaders’ summit in Brussels on Thursday, the place they had been set to debate the US commerce relationship. Fee officers had been hoping leaders would again a “credible menace” of retaliation to get the deal completed by a July deadline.
“I assist the Fee to rapidly come to a commerce cope with the US,” Merz stated as he arrived on the summit.
Trump has threatened 50 per cent “reciprocal” tariffs on EU imports if no deal is struck by July 9.
In the meantime so-called sectoral tariffs of 25 per cent for vehicles and automobile components, and 50 per cent for metal and aluminium, are nonetheless in place — and so is a ten per cent tariff on most different imports.
A number of nations are cautious of constructing too many concessions to get a fast deal. Referring to the UK-US settlement, one senior EU diplomat stated that the bloc “ought to nonetheless hope that the EU with its 450mn individuals would have extra commerce energy than the UK”.
A UK-style carve-out could be sophisticated for the sector if it includes a quota system. Trump agreed to chop a 27.5 per cent tariff on British vehicles to 10 per cent for the primary 100,000 automobiles shipped from the UK. The same deal for the EU would go away member states combating over the allocation of the quota.
One other senior EU diplomat stated that “the mandate we gave to the fee . . . was to go to the bottom tariffs doable”. They added that “10 per cent isn’t the mandate we gave,” referring to the UK, which accepted the ten per cent levy on most items to stay in place.
If the deal is “not balanced”, the diplomat stated, the EU could be “able to implement” counter tariffs.
The bloc has already agreed however suspended the applying of retaliatory tariffs on €21bn of US items and is making ready an extra package deal focusing on €95bn price of American merchandise.
Germany’s economic system relies on exports and has been hit notably laborious by the tariffs. ACEA, the automobile trade physique, stated that carmakers had been shedding “single-digit tens of millions” per day in consequence. The German automobile trade accounts for about 5 per cent of the nation’s GDP.
The US is the second-largest marketplace for EU automobile exports after the UK. In 2024, greater than 750,000 vehicles had been exported, valued at €38.9bn. The US exported 169,000 to the EU of €7.8bn worth, in keeping with ACEA.
Amongst German carmakers, BMW is especially bullish that the US slashes its 25 per cent tariff from July. BMW chief govt Oliver Zipse informed traders in mid-Might that the corporate was capable of negotiate with the Trump administration from a place of “energy” as the biggest US automotive exporter by worth final yr, transport 225,000 automobiles price greater than $10bn, from its plant in Spartanburg.
BMW, Mercedes-Benz and different European carmakers have pushed the US to permit an obligation disadvantage programme, which might assist them get refunds on import tariffs if they’re additionally exporting automobiles from America.
Senior executives from the highest three German carmakers met Trump on the White Home in mid-April. Merz additionally broached the automobile difficulty with Trump once they met within the Oval Workplace earlier this month.
“I stated that I drive an American automobile with a German model,” Merz stated after the assembly, by the use of explaining to the US president that many German carmakers together with BMW produced automobiles within the US earlier than exporting them again to Europe.
Whereas Merz has pressed the EU to succeed in a cope with the US as quickly as doable, some German carmakers are much less optimistic. “It’s a blended bag in the intervening time,” one automotive official stated. “On the finish of the day, it’s the EU that’s negotiating with the US.”
One other particular person at a German carmaker stated: “Negotiations appear to be a bit caught. It’s irritating . . . that the EU is letting time go.”
