German finance minister warns of retaliation if US starts trade war

German Finance Minister Christian Lindner during a meeting with US Treasury Secretary Janet Yellen, not pictured, during the annual meetings of the IMF and World Bank in Washington, DC, USA, Thursday, October 24, 2024 .

Ting Shen | Bloomberg | Getty Images

German Finance Minister Christian Lindner warned on Friday that if the United States starts a trade war with the European Union, retaliation could occur.

“The trade controversy never sees winners, only losers,” Lindner told CNBC's Karen Tso on the sidelines of the International Monetary Fund's annual meeting in Washington, DC.

What U.S. trade policy might look like if Donald Trump were elected president is a key question, Lindner suggested. “In this case, we need diplomatic efforts to convince anyone who enters the White House that it is not in the best interests of the United States to have a trade conflict with [the] European Union. We will have to consider retaliation,” he said. Lindner belongs to the business-friendly Liberal Democratic Party, which is currently in coalition with Chancellor Olaf Scholz's Social Democratic Party.

The U.S. trade problem concerns China rather than the EU, Lindner said, adding that the EU “should not become a negative side effect” of the U.S.-China controversy.

Trump has floated the idea that, if elected, blanket tariffs of 10 to 20 percent could be imposed on almost all imports, regardless of their origin.

If such a 20% tariff were implemented by the United States, the gross domestic product of the EU and Germany would fall in the coming years, Reuters reported on Thursday, citing a study by the German Economic Institute IW. Trade is one of the main pillars of the German economy, suggesting that increased tensions, uncertainty and tariffs would hit the country harder than others.

Earlier this month, Germany's statistics office Destatis said the importance of the United States as Germany's trading partner was growing. The agency said that since 2021, the United States has been Germany's second largest trading partner behind China, but in the first half of 2024, foreign trade turnover with the United States was more than the one with China. In 2023, around 9.9% of German exports were destined for the United States, according to Destatis.

Trade tensions between the United States and China, and between the EU and China, have intensified throughout the year. The US and EU have implemented higher tariffs on some products imported from China, citing unfair trade practices.

China, in turn, also announced temporary higher tariffs on some imports from the EU. Several inquiries and investigations into each other's competition, subsidies and other practices are also underway as reciprocity measures continue.

After the EU voted to impose tariffs on Chinese-made electric vehicles, Germany's Lindner urged the union not to start a trade war. Germany had previously spoken out against increasing tariffs, raising concerns about their consequences for the country's struggling automakers.

Earlier in the week, Gita Gopinath, deputy managing director of the IMF, told CNBC that an escalation of trade and tariff tensions between the United States and China would be “costly for everyone.”

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