Germany Considers Delaying a $4 Billion Tariff Strike on the U.S.

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Germany is seeking to mend transatlantic trade relations and is mulling a more conciliatory approach that would see the European Union delay tariffs set to hit $4 billion of American products as soon as Tuesday, according to a senior official familiar with the government’s thinking.

Germany will raise the issue on Monday at a meeting of the EU’s trade ministers, where they’ll support rekindling the bloc’s relationship with the U.S. rather than escalating the 16-year-old trade conflict, which is over illegal subsidies provided to Boeing Co. and rival Airbus SE, said the official, who asked not to be identified because the discussions are private. Without intervention, the duties will likely be triggered on Tuesday.

The possible change in strategy comes at a delicate moment for the EU, which has instituted new lockdowns to contain the spread of Covid and is struggling out of the worst recession in history. A tit-for-tat trade battle with the U.S., which has already hit the EU with tariffs on $7.5 billion of exports over the dispute, couldn’t come at a worse time for the bloc.

“Until the inauguration of a new president there are measures, no matter what kind, that aren’t sensible,” Johann Wadephul, deputy leader and foreign policy expert in Merkel’s CDU-led caucus group, told Bloomberg News last week. “A new administration ought to be given time to organize internally and formulate its own policy.”

German Foreign Minister Heiko Maas said over the weekend that his government would make “concrete proposals” to Washington on how to improve the relationship and that a “new deal” was needed.

For the past year, the EU has faced U.S. tariffs after Washington won a World Trade Organization case over unlawful aid given to Toulouse, France-based Airbus. That ruling led the Trump administration to impose 15% tariffs on Airbus aircraft and 25% levies on an array of European exports including French wine, Scotch whisky and Spanish olives.

Trump has pledged to counter-retaliate and “strike much harder” if the EU follows through with its own tariff threat. The WTO gave the 27-nation bloc the green light last month to move ahead with the levies due to improper subsidies given to Chicago-based Boeing.

Businesses in Germany, which does $252 billion in bilateral trade with the U.S. on a yearly basis, called on the government of Chancellor Angela Merkel to avoid intensifying the issue after a bruising four years with Trump.

“We hope that in this phase of uncertainty, there will be no political escalation with the U.S.,” Dieter Kempf, the president of Germany’s industry lobby group BDI, told journalists before a Nov. 4 meeting with German Economics Minister Peter Altmaier in Berlin. “In this situation, political escalation would be poison.”

‘A New Start’

Not all EU members agree with Germany’s position. France, which has been suffering under American tariffs since last year, is pushing for a quick retaliation. French Finance Minister Bruno Le Maire said over the weekend that a Joe Biden administration would likely take a less aggressive stance in the Boeing dispute, but that Europe should not drop its guard.

“Let’s not kid ourselves: the geopolitical realities will not change,” Le Maire said in the French newspaper Journal Du Dimanche. “The U.S. remains in a confrontation with China, and Europe must therefore assert its economic and political sovereignty in this power game.”

U.S. Trade Representative Robert Lighthizer believes the U.S. has the upper hand in such talks and said the EU has “no valid basis to retaliate” because the U.S. has already withdrawn its improper subsidies. “Any imposition of tariffs based on a measure that has been eliminated is plainly contrary to WTO principles and will force a U.S. response,” Lighthizer said in a statement last month.

To date, the U.S. has refrained from applying the maximum tariff level in the $7.5 billion damages award from the WTO last year. A lame duck Trump administration could raise those import taxes to 100%, which for many European products would effectively block their entry into the U.S. marketplace.

“We need a restart of the transatlantic relationship with the U.S.,” BDI’s Kempf said. “We hope that the current uncertainty will soon be over and that we can then move toward a new start in our relationship with the U.S.”

— With assistance by Raymond Colitt, Jonathan Stearns, and Zoe Schneeweiss

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