February 13, 2018 / 2:49 PM / in 4 months

German industry sees 'dangerous spiral' from Trump plan for trade tax

BERLIN (Reuters) - Germany’s BDI industry association said on Tuesday the United States risked causing a “dangerous spiral” if it goes ahead with plans suggested by President Donald Trump to impose new taxes on imports from countries that levy tariffs on U.S. products.

Trump said on Monday he would push for a “reciprocal tax” against countries - including U.S. allies - that charge higher tariffs on imports than the United States. He did not specify how such a tax would be structured and officials gave no further details.

“If the USA raises customs barriers, it could lead to a dangerous spiral. Instead of thinking about penalties and new trade barriers, we should further extend transatlantic trade and investment relations,” said BDI President Dieter Kempf in a statement sent to Reuters on Tuesday.

Kempf noted that the United States was Germany’s most important export market after the other countries of the European Union, and the fourth biggest partner for imports.

The head of Germany’s BGA trade association, Holger Bingmann, said Trump’s suggestion signaled a further shift away from the rules-based order of the World Trade Organisation (WTO).

“A departure of the USA from the WTO agreements would be like playing with fire because this would open the door to arbitrary treatment of U.S. products and services by other countries,” Bingmann warned.

“This can’t be in the interest of U.S. companies,” he added.

Instead of imposing unilateral measures, the Trump administration would be better advised to aim for a trade agreement with the European Union, Bingmann said.

Germany’s economy ministry said on Tuesday it was too soon to assess a suggestion from Trump that he wanted a ‘reciprocal tax’ against some trading partners, saying it was unclear if concrete proposals would materialize.

“We have taken note of the announcement by President Trump and are closely watching further developments,” said a spokeswoman for the ministry.

Reporting by Gernot Heller; Writing by Michael Nienaber; Editing by Peter Graff

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