US-Germany Trade War: Merkel Proposes ‘Balancing Regulation’ in Auto Industry

A new proposal in the tariff dispute between the US and the EU was put forth by German Chancellor Olaf Scholz. “Now we must try to find a balancing rule or something like that,” Scholz stated on June 6 at the Family Business Day in Berlin, referring to the automotive industry. The chancellor adopted a suggestion previously made by BMW and Mercedes groups. As reported by Handelsblatt, they had proposed that the US simply balance imported and exported vehicles from manufacturers. Scholz mentioned that he extensively discussed tariffs with US President Donald Trump on June 5. He pointed out that Germany’s auto industry exports approximately 400,000 cars annually to the US. However, German companies also produce over 400,000 cars in the US, which are then exported globally. A balancing regulation could reconcile the number of cars imported to and exported from the US to avoid punitive tariffs threatened by Trump. Volkswagen suggested it should be favored due to its high investment level in the US if tariffs were to rise. Trade policy remains the responsibility of the EU, Scholz emphasized. While discussing his visit with Ursula von der Leyen, Scholz agreed with Trump that two representatives should now intensively discuss German-American trade relations within a European framework. The situation in the trade dispute with the US is complex partly due to last-minute tariff announcements from Washington, according to Economy Minister Katherina Reiche. A good agreement is urgently needed as the trade war harms both sides. Industrial tariffs on vehicles and steel from Europe have been particularly painful. Meanwhile, the European Union has declared willingness to reduce tariffs on US food imports during trade negotiations with the Trump administration. However, food safety standards will not be compromised to reach an agreement, said EU Agriculture Commissioner Kristof Hansen to Reuters.