After negotiations with Trump: "Fatal signal": German business criticizes tariff deal with the USA

Following the announcement of the trade deal between the EU and the US, there was applause on the ground. German business representatives viewed the agreement much more critically. Many saw it as an existential threat. But many also saw something positive.

German business is critical of the European Union's trade agreement with the United States. The agreement sends a fatal signal because the EU is willing to accept painful tariffs, said Wolfgang Niedermark of the Federation of German Industries (BDI), commenting on the deal reached. "Even a tariff rate of 15 percent will have immense negative effects on the export-oriented German industry."

On the upside, at least, a further escalation spiral has been averted for the time being. Wolfgang Große Entrup, CEO of the German Chemical Industry Association (VCI), agrees: "Anyone expecting a hurricane is grateful for a storm." Nevertheless, the agreed tariffs are too high. "Europe's exports are losing competitiveness."

After weeks of negotiations between the EU and the US, US President Donald Trump and EU Commission President Ursula von der Leyen agreed on a trade agreement at a meeting in Scotland over the weekend. This agreement provides for a US tariff of 15 percent on most EU imports – including cars, which currently face a tariff of 27.5 percent, as well as semiconductors and pharmaceutical products, for which much higher tariffs had been considered. The tariff on steel and aluminum remains at 50 percent.

A "painful compromise"

Von der Leyen said the EU had achieved the abolition of tariffs on a number of strategic products on both sides – for example, certain aircraft parts, chemicals, and agricultural goods. Some details of the agreement still need to be clarified in the coming days and weeks, the head of the EU Commission said.

The German Foreign Trade Association called the tariff agreement with the US a "painful compromise." Every percent of tariff is one percent too much, explained Dirk Jandura, president of the German Federal Association of German Trade and Commerce (BGA). "The tariff surcharge represents an existential threat for many of our retailers." Even if there is now initial certainty about the terms of trade, supply chains will change and prices will rise. "The agreement with the US will have noticeable effects here in the country. It will cost growth, prosperity, and jobs."

The Federation of German Industries (BDI) criticized the continued high tariffs on steel and aluminum, calling them an additional blow. "This puts further pressure on a key industry that is already facing enormous challenges in international competition and due to transformation," Niedermark explained. The EU must now demonstrate that it is more than a single market. "We need a strategy for a competitive and resilient economy, as well as the political will to confidently play a role in the global power structure."

Is there peace now?

The director of the German Economic Institute, Michael Hüther, warned against further disruptive fire from Washington. "One cannot rely on calm now," he told the Funke Media Group newspapers. "Trump will never completely take the tariff threat off the table." This is another reason why a more forceful negotiating strategy from the EU would have been sensible.

DIHK Executive Director Helena Melnikov sees things somewhat more positively. According to her, the German economy can "breathe a sigh of relief for now" after the agreement. The danger of an escalation in the trade dispute with the US has been averted. "For many companies, this is a much-needed respite." With the agreement, the EU prevented worse. "But the deal comes at a price, and this price also comes at the expense of the German and European economy." Many details remain unclear. "The agreement creates short-term stability, nothing more. It is only a first step."

The EU must now continue negotiations with the US "and work on a comprehensive, fair, and forward-looking trade agreement." At the same time, the German government and the EU Commission are called upon "to draw the right conclusions: We need competitive business conditions, reliable policies, targeted investment incentives, and, above all, more speed and further free trade agreements." The Mercosur agreement must finally be ratified, and negotiations with India, Indonesia, and Australia must be vigorously pursued. "An export-oriented economy like Germany needs open markets more than ever, not new hurdles."