German Finance Minister Christian Lindner cautioned on Friday that a trade war initiated by the U.S. against the European Union could lead to retaliatory actions. Lindner emphasized that in trade disputes, there are no winners, only losers. He made these remarks to CNBC’s Karen Tso during the International Monetary Fund’s annual meeting in Washington, D.C.
Lindner highlighted the significance of U.S. trade policy in the event of Donald Trump becoming president. He stressed the need for diplomatic efforts to persuade the incoming administration that engaging in a trade conflict with the European Union would not be in the best interest of the U.S. In case of such a scenario, Lindner mentioned that retaliation would have to be considered. He is a member of the pro-business Free Democratic Party, which is currently in a coalition with Chancellor Olaf Scholz’s Social Democratic Party.
According to Lindner, the U.S.’ trade concerns primarily revolve around China rather than the EU. He expressed the view that the EU should not suffer as a consequence of tensions between the U.S. and China. Trump had proposed imposing blanket tariffs of 10% to 20% on nearly all imports if he were to be elected.
If the U.S. were to implement a 20% tariff, a study by the German economic institute IW indicated that the GDP of the EU and Germany would decline in the following years. Trade plays a crucial role in the German economy, implying that increased tensions, uncertainty, and tariffs would have a more severe impact on the country compared to others.
Recent data from the German statistics office, Destatis, revealed that the U.S. has become an increasingly important trading partner for Germany. The U.S. surpassed China as Germany’s second-largest trade partner in the first half of 2024. In 2023, approximately 9.9% of German exports were destined for the U.S.
Trade tensions have been escalating between the U.S., China, and the EU throughout the year. Both the U.S. and EU have imposed higher tariffs on certain Chinese imports, citing unfair trade practices. In response, China has announced temporary tariff increases on some EU imports. Reciprocal investigations into competition, subsidies, and other practices are ongoing as retaliatory measures persist.
Following the EU’s decision to impose tariffs on Chinese-made electric vehicles, Lindner urged against instigating a trade war. Germany had previously cautioned against elevated duties, expressing concerns about the potential impact on its struggling automotive industry.
Gita Gopinath, the IMF’s deputy managing director, cautioned earlier in the week that an escalation of trade tensions and tariffs between the U.S. and China would have negative repercussions for all parties involved.
