Germany Supports Lowering EU Car Import Tariffs, Says Merkel

All of the EU would need to agree before the trade bloc would consider lowering tariffs.

via Getty Images

As automakers rally together in an attempt to denounce President Donald Trump's threats to levy additional tariffs on vehicle imports, one European country has shaky hands amongst its peers. On Thursday, German Chancellor Angela Merkel reportedly noted that she would support lowering tariffs on cars imported from the U.S. to European Union countries.

After a threat from Trump to impose a 20-percent tariff on foreign automobiles imported into the United States, both domestic and foreign automakers have been reaching out to the Department of Commerce in an attempt to explain how these tariffs would be damning to the U.S. economy. The White House and EU are both playing with a loaded deck that risks both jobs and profits on each side of the Atlantic, effectively making the situation land at a stalemate until one of the sides plays its next card. It seems Germany is feeling the weight of the EU's risk by noting that the country would be open to reducing EU-imposed tariffs on vehicles imported from the U.S.

“When we want to negotiate tariffs, on cars for example, we need a common European position and we are still working on it,” said Merkel, reaffirming the EU's stance on trade bargaining taking place as a bloc rather than independent countries forming their own agreements, “I would be ready to support negotiations on reducing tariffs, but we would not be able to do this only with the U.S.”

via Getty Images

U.S. President Donald Trump and German Chancellor Angela Merkel speak at the G7 summit.

Should the EU remove the tariffs on the United States, Merkel confirmed that the U.S. would be required to reduce the number of vehicles imported from other countries in order to conform with standards set in place by the World Trade Organization, something which had taken place previously during the Reagan administration as a protectionism measure, and as a result, effectively hiked up the price of Japanese cars.

In June, President Trump imposed high import duties on foreign metals imported to the United States in a familiar Reagan-era protectionism tariff after he began a myriad of Tweets revolving around the auto industry. One tweet in particular referred to the current imbalance of tariffs imposed by foreign countries on vehicles imported from the U.S. as "stupid trade." Shortly after, both Canada and the EU retaliated with tariffs of their own, bringing forth taxes on American products like peanut butter, tobacco, whiskey, and even motorcycles.

Much like the auto manufacturers warned, some American businesses affected by the tariffs like Harley-Davidson have already begun the process to cut its U.S. workforce and move overseas amid the tariff turmoil. Should BMW follow suit and move its South Carolina plant, which employs nearly 9,000 local workers and produces 40 percent more BMWs annually than Americans purchase in a year's time, the domino effect on manufacturers down the supply chain could be responsible for tens of thousands of American jobs being lost.

Several countries including Canada, China, India, Mexico, Norway, Russia, and the EU bloc, have called out Trump's tariffs as being against regulations set in place by the WTO and filed formal complaints. The WTO became the sovereign body to govern trade agreements after the General Agreement on Tariffs and Trade (GATT) was mutually abolished in 1995. Its intent was to handle trade disputes and create a fair trading environment between member countries. Complaints allege that the tariffs imposed by Washington go against the Agreements on Safeguards established by member countries, making the formerly open-trade environment between the countries spiral towards a fiercely competitive trade war-esque scenario.

Historically, Trump has not been a fan of German cars. In fact, he has even been quoted for bragging that he would maintain his stance on his trade policy "until no more Mercedes rolled on Fifth Avenue." The ongoing auto tariff battle between the U.S. and Germany dates back to the Lyndon B. Johnson administration when the infamous "chicken tax" tariff was imposed. Masked as a response to West Germany's tax on the import of American chicken products, the administration's 25 percent duty fees on light duty trucks that still exists today, it wasn't until later that the tariff was revealed to have passed in an attempt to appease the United Automobile Workers Union and avoid a strike during an election year. As a result, Volkswagen was the hardest hit with the import of its infamous Type 2 van that was configured for any sort of "light duty" work. The following year, VW's value of imported Type 2s dropped by nearly two thirds.

The protectionist approach toward industry tariffs through multiple U.S. presidential administrations has not improved the open trade climate for U.S. consumers, effectively limiting which vehicles are imported to the States (which could be the reason behind the lack of an Amarok or Atlas pickup in the market). Now, with U.S. manufacturing jobs on the line, the clash could prove to be problematic should neither side concede to demands, questioning the future economic forecast of the global automotive market.

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