French-German split Looming US tariffs put strain on EU relations

The threat of US tariffs, despite them being shelved for another month, is causing a worrying rift in Europe. France and Germany look to be pursuing different interests, leaving business worried about a trade war.
The stakes are high.

If Donald Trump is trying to divide Europe with his threat of tariffs on steel and aluminum, it is working. The different responses to Tuesday’s announcement that the US will delay the tariffs by a month — after they were due to come into force on May 1 — showed that cracks are emerging between Germany and France, and Germany and the EU Commission, over how to deal with the issue.

German Economics Minister Peter Altmaier, a close ally of Chancellor Angela Merkel, said the EU should make concessions by offering the US a wide-ranging trade deal with cuts in tariffs for industrial goods.

But France, Germany’s closest ally, made plain that it disagrees with this idea of an ultralight version of the stalled US-European trade deal known as the Transatlantic Trade and Investment Partnership (TTIP).

As a longstanding partner and friend of the US, we will not negotiate under threat. EU Commission statement

French government officials refrained from offering new trade talks. They said any new negotiations should address French access to the US agricultural market and allow European firms to bid for US public contracts — terms Mr. Trump would be unlikely to accept.

French President Emmanuel Macron, whose charm offensive in Washington last week failed to soften Mr. Trump’s combative stance, opposes entering into trade talks just to avert tariffs that EU officials say are in breach of World Trade Organization rules.

According to French officials, Finance Minister Bruno Le Maire and Mr. Altmaier were in constant touch to make sure that Europe shows a common front against Washington. But a look at the differing trade figures explains the rift between Berlin and Paris.

Germany has a €50 billion ($60 billion) trade surplus with the US, while France imports roughly as much from the US as it exports. The volume of French exports to the US, at €34 billion, is less than a third of German exports.

Berlin’s reliance on trade with the US is putting it at odds not just with France but with the EU Commission and many member states. “As a longstanding partner and friend of the US, we will not negotiate under threat,” the Commission said in a statement that called for a permanent exemption for the EU.

The EU fears that Mr. Trump’s real goal is to undermine the WTO in order to assert American interests in bilateral deals. US Commerce Secretary Wilbur Ross has been urging the EU and countries to impose voluntary limits on their aluminum exports to the US.

The EU says such quotas would be unacceptable, claiming that WTO rules do not allow them. Besides, the pure tariff deal being demanded by the US would likely benefit the US more than Europe. Daniel Caspary, a German conservative lawmaker in the European Parliament, said the offer of a tariff deal was a ploy to divide the EU. “Germany could live with it but France would barely be able to,” he said.

German business leaders aren’t happy. “The US president is risking the escalation of a trade dispute on a global scale and a wave of protectionist countermeasures,” warned Dieter Kempf, the head of the BDI Federation of German Industry.

Clemens Fuest, head of the Ifo economic research institute, warned the US would suffer greater losses than Germany even if it ends up imposing tariffs on all imports. But he also urged Germany and France to speak with one voice: “Both countries would be better served by first trying to find a truly common line and then negotiating with the US.”

He added that the US tariffs also posed a wider risk, with the international trading system facing its biggest crisis in decades. “It will become really threatening if more countries are pulled into the trade war, for example China. Then our prosperity will indeed be in danger,” he said.

Handelsblatt editors Till Hoppe, Thomas Hanke, Ruth Berschens and Jens Münchrath all contributed to this story. To contact the authors: [email protected]