Germany is willing to offer the U.S. concessions in order to stop President Donald Trump from imposing tariffs on European steel and aluminum, exposing a divide with France on how to avert a trade war.
Germany is pressing within the European Union to lower tariffs on goods including cars to try and reach a deal with the U.S., a government official said. That 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. Automakers 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."
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, and 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.
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.