Germany said to be at odds with France over tariffs on US cars

Berlin

GERMANYis willing to offer the US concessions in order to stop President Donald Trump from imposing tariffs on European steel and aluminium, 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 US, 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 US moratorium on steel and aluminium tariffs runs out, the EU is still trying to identify a common approach to dealing with President Trump. At stake is potential disruption to a relationship involving a total EU-US trade worth some US$640 billion in 2016.

Germany is in favour 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 per cent 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 US 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 on a new framework."

German Economy Minister Peter Altmaier, who met last week with US Commerce Secretary Wilbur Ross, told reporters that he made no offers to the US 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 spokesman for his ministry added that he had kept EU Trade Commissioner Cecilia Malmstrom fully informed on his discussions in the US. She declined to comment on the Sueddeutsche report.

While Mr Trump favours bilateral agreements with certain states, Mrs 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. BLOOMBERG