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Tariffs

EU Officials Slam German Chancellor's Expectations on US Tariffs

Strategic Insights

— 2 min read

German Chancellor Friedrich Merz is being seen as delusional by EU officials involved in trade talks with the US, who believe that he is underestimating the difficulties of securing a deal that would spare the country's car industry from US tariffs. EU officials have privately told Berlin that such an arrangement would not be possible, as reducing German car imports is a key focus for US President Donald Trump.

EU officials have been holding back from making concessions to the US, citing the precedent set by the UK-US agreement, which included a special dispensation for cars. Brussels officials believe that such an arrangement would be complicated and might lead to a quota system, which would be a contentious issue among EU member states. Germany's economy is heavily dependent on exports, and the tariffs have already caused significant losses for the country's carmakers.

Key Takeaways:

  • EU officials believe that German Chancellor Friedrich Merz is underestimating the difficulties of securing a deal with the US that would spare the car industry from tariffs.
  • The US has threatened 50% "reciprocal" tariffs on EU imports if no deal is struck by July 9, in addition to sectoral tariffs of 25% for cars and car parts.
  • A UK-style carve-out for German carmakers would be complicated and might involve a quota system.
  • Germany's economy is heavily dependent on exports, and the tariffs have already caused significant losses for the country's carmakers, with single-digit millions lost per day.
  • The EU car industry body, ACEA, has reported that EU vehicle exports to the US in 2024 were valued at €38.9 billion, while US exports to the EU were valued at €7.8 billion.

Statistics:

  • 50%: the reciprocal tariffs threatened by the US on EU imports if no deal is struck by July 9.
  • 455 million: the population of the EU.
  • €38.9 billion: the value of EU vehicle exports to the US in 2024.
  • €7.8 billion: the value of US exports to the EU in 2024.
  • 5%: the proportion of Germany's GDP accounted for by the car industry.
  • 169,000: the number of cars exported by the US to the EU in 2024.
  • 750,000: the number of cars exported by the EU to the US in 2024.
  • 10%: the tariff on British cars agreed to by Trump as part of the UK-US agreement.
  • 25%: the sectoral tariff for cars and car parts.
  • 50%: the sectoral tariff for steel and aluminium.
  • July 9: the deadline set by Trump for a trade deal with the EU.

Sources:

  • Financial Times: "EU officials mock Merkel's bid to avoid US tariffs"
  • Financial Times: "EU diplomats say UK-US trade deal sets bad precedent"
  • ACEA: "EU car exports to the US: 2024 data"
  • Financial Times: "Germany's car industry hits hard by US tariffs"

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