BERLIN (Reuters) - Germany sees the danger of an “escalating spiral” in the trade dispute between the United States and Europe, a government spokesman said on Wednesday following the resignation of the top White House economic adviser.
The departure of Gary Cohn, seen as a bulwark against U.S. President Donald Trump’s economic nationalism, unsettled allies and markets alike as investors saw an increased likelihood of tit-for-tat trade measures that would hurt global growth.
“The situation is serious,” German Economy Minister Brigitte Zypries said about Trump’s decision to impose hefty tariffs on metals and the departure of Cohn, who was seen as a moderating voice in the White House.
Germany is closely coordinating its next steps with other European Union member states, Zypries said, adding that Europe would respond in an appropriate manner if the U.S. decided to impose tariffs on steel and aluminum.
But she also said Germany still hoped to avoid a trade conflict. “I hope Trump changes his mind,” Zypries said.
Germany’s BGA trade association said Europe must resist the temptation to give tit for tat in the trade dispute.
“Rather than thinking about retaliation, we should use the time to convince the U.S. administration that the U.S. president’s plans are nonsensical and would cause massive damage on both sides of the Atlantic,” BGA President Holger Bingmann said in a statement.
Bingmann added that any counter-measures by the European Union would have to be in line with the rules of the World Trade Organization (WTO).
Germany’s industry body BDI said it supported the EU in warning Trump against imposing U.S. steel and aluminum tariffs, cautioning that they were a risk to trade and to the economy.
“U.S. President Donald Trump should come to his senses before it’s too late to avoid trade conflicts and unnecessary job losses in the USA and around the world,” BDI President Dieter Kempf said.
Germany’s transatlantic coordinator urged the European Union to take a common line in responding to proposed U.S. tariffs.
After visiting Washington, Juergen Hardt - a member of Chancellor Angela Merkel’s Christian Democrats - told the RND group of newspapers that an escalation of the conflict with the United States was not in Europe’s interests.
Europe would stick to a “rule-based world order”, Hardt said, adding: “It’s important that the European Union does not let itself become divided.”
Zypries said she was convinced that trade ensured prosperity for all if it was based on mutual understanding.
“It’s very important that there are advocates for this in the White House,” Zypries said in a reference to Cohn. “That’s why I’m worried about the latest signals coming from the USA.”
Trump said in a tweet on Tuesday night he would decide soon who would replace Cohn. White House officials said the tariffs dispute contributed to Cohn’s decision to leave but that it was not the sole reason.
Trump has also warned the EU it would get hit with a “big tax of 25 percent on their cars” for not treating the U.S. well when it comes to trade.
Trump’s trade threats have alarmed German carmakers who have urged policymakers to avoid a trade war with the United States “at all costs”.
The United States is the second-biggest export destination for German auto manufacturers after China, while vehicles and car parts are Germany’s biggest source of export income.
Analysts fear a full-blown trade war between the United States and Europe could cut growth in Germany, the biggest European economy, by up to 1 percentage point.
Additional reporting by Michelle Martin and Madeline Chambers; Editing by Matthew Mpoke Bigg
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