Why EU capitals are irate at German car swap scheme to swerve US tariffs
Driving through
The German car industry has been pushing hard for a quick trade deal to win tariff relief from Trump — but the effort is backfiring as other member states fear they will pay the price, writes Andy Bounds.
Context: The EU is nearing an “agreement in principle” with Washington that would leave most tariffs in place while talks continue.
But Berlin is pushing hard to get a deal on cars, which currently are covered by tariffs of 27.5 per cent, thanks to the extra 25 per cent Trump imposed on “national security” grounds in March.
Advised by carmakers, whose bosses have been to see Trump in person, Germany has devised an innovative scheme — described as “delusional” by an unnamed commission official.
European carmakers would be allowed to export one car tariff-free to the US for each car they make on American soil and export.
The beneficiaries would be BMW and Mercedes-Benz, which export some US production to the EU. But many carmakers from other member states, such as France and Slovakia, do not.
Several member states in a meeting on Monday expressed doubts about the move which would penalise their companies, according to three people briefed on the discussions. They also said it would incentivise businesses to move production to the US, costing jobs.
“Between the commission and member states, there’s lots of anger at the German car industry for undermining negotiations,” one EU diplomat said. Member state representatives are meeting again to discuss the issue today.
Germany, the biggest exporter to the US, is very exposed to tariffs. The German car industry accounts for about 5 per cent of the country’s GDP.
ACEA, the car industry body, said that carmakers were losing “single-digit millions” daily. German auto exports to the US fell by 13 per cent in April and 25 per cent in May from the same months the previous year, German industry body VDA said this week.
German Chancellor Friedrich Merz is still pressing the commission to do a quick deal, which leaves 10 per cent tariffs across the board in place, even after Trump extended a talks deadline from July 9 to August 1.
“Time is money,” his spokesperson said on Monday.