German Finance Minister warns of retaliation if US starts trade war

German Finance Minister Christian Lindner warned Friday that if the United States started a trade war with the European Union, there could be retaliation.

“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.

Lindner suggested that a key question would be what US trade policy might look like if Donald Trump were elected president. “In that case, we need diplomatic efforts to convince whoever enters the White House that it is not in the best interest of the United States to have a trade conflict with [the] European Union. “We would have to consider the possibility of retaliation,” he said. Lindner belongs to the pro-business Free Democratic Party, which is currently in coalition with Chancellor Olaf Scholz’s Social Democratic Party.

The United States’ problem with trade lies with China and not the EU, Lindner said, adding that the EU “should not become a negative side effect” of the US-China dispute.

Trump has floated the idea that, if elected, blanket tariffs of 10% to 20% could be imposed on almost all imports, no matter where they came from.

If the United States implemented that 20% tariff, 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 affect the country more than others.

Earlier this month, the German statistics office, Destatis, said the importance of the United States as Germany’s trading partner has been growing. The agency said that since 2021, the United States has been Germany’s second most important trading partner behind China, but in the first half of 2024, the volume of foreign trade with the United States was larger than that 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 been increasing throughout the year. Both the United States and the EU have implemented higher tariffs on some goods imported from China, citing unfair trade practices.

China, in turn, has also announced temporary higher tariffs on some imports from the EU. Several investigations into each other’s competition, subsidies and other practices are also underway as tit-for-tat measures continue.

After the EU voted to impose tariffs on electric vehicles made in China, Germany’s Lindner urged the union not to start a trade war. Germany had previously advocated against higher tariffs, raising concerns about what they could mean 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.”