Germans tell U.S. ambassador they’re ready to abolish all car tariffs

This particular columnist has not been a fan of the Trump Administration’s trade policies, believing them to be the needless picking of a fight over something that doesn’t produce the economic impact the president thinks it does. The one potential saving grace of a tariff war, theoretically, could be that it incentivizes other nations to come to the table and work out a deal that steeply lowers or even eliminates tariffs altogether.

If that happened, I’d have to say that while the tactics that got us there were ugly and in many ways ill-advised, you’d have to like the end result. Now comes news from Germany that such a development may indeed be in the offing, even if it only starts with one tariff in one European country:

The U.S. ambassador to Germany, Richard Grenell, brought the proposal for a broader industry trade pact to the Trump administration on Wednesday, according to people familiar with the situation. That would mean scrapping the EU’s 10% tax on auto imports from the U.S. and other countries and the 2.5% duty on auto imports in the U.S. As a prerequisite, the Europeans want President Donald Trump’s threat of imposing a 25% border tax on European auto imports off the table. Over the past few weeks, Mr. Grenell has held closed-door meetings with the chiefs of all major German automotive companies, including bilateral meetings with the CEOs ofDaimler AG , BMW AG and Volkswagen AG , which operate plants in the U.S. Overall, Germany’s auto makers and suppliers provide 116,500 jobs in the U.S., according to the Association of German Automotive Manufacturers. During these talks, which the ambassador initiated, the managers said they would back the scrapping of all import tariffs on trans-Atlantic trade in automotive products as the keystone of a broader deal covering industrial goods. The German government is on board and Mr. Grenell promised to support the idea, according to U.S. and German officials.

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The problem here is that Germany doesn’t actually have the power to make its own trade deals, absurd as that sounds. The EU negotiates trade pacts on behalf of all its members, and there are no bilateral deals between, say, Germany and the United States. But clearly, Germany exercises tremendous influence within the EU. It is one of the organization’s largest financial backers and most powerful governing members, and it seems to recognize that a trade war between the U.S. and the EU does no good for either side – even if it can be said that Donald Trump started it. Trump says he would like zero tariffs, but isn’t going to implement that unilaterally. A true free-trade agreement between the U.S. and the EU would be a real coup for Trump and a real economic boon on both sides of the Atlantic. If the Trump tariffs horrify the Europeans so much that they’re willing to come to the table and have serious conversations about really tearing down trade barriers, it will have proven to be a high-stakes gamble that paid off. But the Germans’ willingness to go tariff-free on automobiles, however hopeful a sign, is still a long way from that vision. In the meantime, the tariffs are adding to both production and consumer costs and probably limiting economic growth. Some gamble. We’ll see if it’s worth it.