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Chancellor Friedrich Merz is “delusional” in his expectation that Germany’s automobile business shall be spared from US tariffs, based on 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” take care of 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 attainable, as lowering German automobile imports is a giant focus for US President Donald Trump, two folks briefed on the discussions informed the Monetary Instances.
Merz earlier this week criticised the fee for main “too sophisticated” negotiations and mentioned a deal ought to deal with 4 to 5 key industries, together with automotive, metal and prescription 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 desires to reshore these industries within the US and cut back imports.
EU negotiators imagine that vehicles are “the toughest aspect” of any take care of the White Home and should be dealt with after simpler features have been agreed first to construct belief, the folks mentioned.
Berlin was “delusional” to imagine Trump would conform to concessions for German automakers as a primary step, one of many officers mentioned.
The disconnect between the EU government and the bloc’s greatest economic system got here to fore at a leaders’ summit in Brussels on Thursday, the place they have been set to debate the US commerce relationship. Fee officers have been hoping leaders would again a “credible menace” of retaliation to get the deal finished by a July deadline.
“I help the Fee to rapidly come to a commerce take care of the US,” Merz mentioned 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 creating too many concessions to get a fast deal. Referring to the UK-US settlement, one senior EU diplomat mentioned that the bloc “ought to nonetheless hope that the EU with its 450mn folks would have extra commerce energy than the UK”.
A UK-style carve-out can be sophisticated for the sector if it entails 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 depart member states combating over the allocation of the quota.
One other senior EU diplomat mentioned that “the mandate we gave to the fee . . . was to go to the bottom tariffs attainable”. They added that “10 per cent will not be 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 mentioned, the EU can be “able to implement” counter tariffs.
The bloc has already agreed however suspended the appliance of retaliatory tariffs on €21bn of US items and is making ready an extra package deal concentrating 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 business physique, mentioned that carmakers have been shedding “single-digit thousands and thousands” per day because of this. The German automobile business accounts for about 5 per cent of the nation’s GDP.
The US is the second-largest marketplace for EU car exports after the UK. In 2024, greater than 750,000 vehicles have been exported, valued at €38.9bn. The US exported 169,000 to the EU of €7.8bn worth, based on ACEA.
Amongst German carmakers, BMW is especially bullish that the US slashes its 25 per cent tariff from July. BMW chief government Oliver Zipse informed buyers in mid-Could that the corporate was in a position to negotiate with the Trump administration from a place of “power” as the biggest US automotive exporter by worth final yr, delivery 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 downside 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 challenge with Trump once they met within the Oval Workplace earlier this month.
“I mentioned that I drive an American automobile with a German model,” Merz mentioned after the assembly, by means 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 take care of the US as quickly as attainable, some German carmakers are much less optimistic. “It’s a combined bag in the mean time,” one automotive official mentioned. “On the finish of the day, it’s the EU that’s negotiating with the US.”
One other individual at a German carmaker mentioned: “Negotiations appear to be a bit caught. It’s irritating . . . that the EU is letting time go.”
