Customs compromise between EU and USA: Reactions from politics and business

Berlin. The EU and the US are celebrating their agreement in the tariff dispute as a breakthrough, but more cautious tones are emerging from industry.

According to EU Commission President Ursula von der Leyen, reducing the tariff rate on European car exports to the US to 15 percent is the best possible deal. "We shouldn't forget where we come from," said von der Leyen after the agreement with US President Donald Trump to end the months-long tariff dispute.

Currently, and since April, car tariffs of 27.5 percent have been in effect in the US, which also burden the German auto industry. The tariffs are generally paid by the importer, who can either pass on the increased costs to end customers or save money elsewhere. VW, for example, recently stated that it paid €1.2 billion in import tariffs in the US in the second quarter.

From 27.5 percent, it will now go down to 15 percent, said von der Leyen. 15 percent is not to be underestimated, but it is also the best that could have been achieved. Before Trump introduced his extra tariffs, the tariff rate for the auto industry was 2.5 percent.

Chancellor Friedrich Merz welcomed the agreement in the tariff dispute between the European Union and the United States. "With this agreement, we have succeeded in averting a trade conflict that would have hit the export-oriented German economy hard," the CDU politician explained. This applies particularly to the automotive industry, where current tariffs would be almost halved from 27.5 percent to 15 percent.

Merz emphasized that it was good that an unnecessary escalation in transatlantic trade relations was avoided. "The unity of the European Union and the hard work of the negotiators have paid off." The Chancellor thanked Commission President Ursula von der Leyen and Trade Commissioner Maros Sefcovic. "The European Commission has my full support in the upcoming negotiations on the details of the agreement." He emphasized that further work must be done to strengthen trade relations with the United States.

Merz added that Europe had been able to safeguard its core interests, even though he would have certainly welcomed further facilitation of transatlantic trade. "Everyone benefits from stable and predictable trade relations with market access for both sides – on both sides of the Atlantic, businesses and consumers alike."

Federal Finance Minister Lars Klingbeil (left) and Chancellor Friedrich Merz

Source: IMAGO/Future Image

Federal Finance Minister Lars Klingbeil (SPD) also expressed satisfaction with the agreement reached in the tariff dispute between the EU and the US, but believes that the specific consequences still need clarification. "We have always relied on a negotiated solution. This has now been achieved, and that is a good thing for now," the Vice Chancellor explained. The outcome of the negotiations and the impact on the economy and jobs in Germany will now be evaluated by the Federal Government. It is important that Europe has defended its interests.

Klingbeil emphasized: "Fundamentally, my conviction remains: tariffs harm the economy on both sides of the Atlantic. We need low tariffs and open markets. We will continue to focus on good trade relations. To achieve this, we will build new global partnerships alongside the USA." The conflict has shown that we need to position ourselves more independently.

The Green Party strongly disagrees. Their party leader, Franziska Brantner, criticized the agreement as detrimental to Europe and places some of the blame squarely on Chancellor Merz: "This customs deal is at the expense of the EU," Brantner told the RedaktionsNetzwerk Deutschland (RND). "The EU was unable to sufficiently leverage its considerable market power in the negotiations—partly due to Friedrich Merz's public pressure for a quick agreement and his simultaneous refusal to build up further threat potential, for example, via a digital levy," the Green Party member said.

Instead of thinking long-term, Merz publicly put pressure on Commission President Ursula von der Leyen to reach a quick agreement, Brantner criticized. "This clearly weakened her position," she said.

In addition, Merz should have followed his Minister of State for Culture, Wolfram Weimer, and advocated for a digital levy on the large US tech companies, "which continue to rake in billions in tax-free profits in Europe," said the Green Party leader.

Franziska Brantner, Federal Chairwoman of Alliance 90/The Greens.

Source: Carsten Koall/dpa

The planned counter-deal with the USA is also problematic: "If the EU enters into long-term import contracts for climate-damaging LNG gas, this will undermine European climate goals."

Brantner criticized the EU for being too accommodating: "With appeasement, Trump is learning that his blackmail methods work – we have to assume he will continue to do so," she told RND. "The bill is now being paid by those who are fighting daily for their competitiveness and future viability. That's bitter, because our industry is already under enormous pressure."

Tariffs of up to 50 percent on European steel and aluminum are a massive problem, especially for Germany. "Instead of relief, new burdens are now being added."

The German export industry, however, has described the agreement in principle to defuse the tariff conflict between the European Union and the United States as a painful compromise. "The tariff surcharge represents an existential threat for many of our retailers," said the German Federal Association of Wholesale, Foreign Trade, and Services (BGA) in Berlin. Even though there is now initial certainty regarding trade conditions, supply chains will change and prices will rise. The agreement with the United States will also cost growth, prosperity, and jobs in Germany.

The chemical industry association VCI described the agreement with the words: "Anyone expecting a hurricane is grateful for a storm." The Federation of German Industries (BDI) also had harsh words. "The agreement is an inadequate compromise and sends a fatal signal to the closely intertwined economies on both sides of the Atlantic." The EU is willing to accept painful tariffs, because even a rate of 15 percent would have immense negative effects.

"The only positive aspect of this agreement is that a further spiral of escalation has been averted for the time being," commented the Federation of German Industries (BDI). What is now crucial is that the agreement becomes binding. Companies on both sides of the Atlantic need planning security for supply chains and investments. An "additional blow" is that there is now no agreement on steel and aluminum exports.

Holger Schwarnecke, Secretary General of the German Crafts Association (ZDH), said the compromise would "burden the competitiveness of the German economy and thus also affect the skilled trades." He warned of a drop in sales for companies that are integrated as suppliers in the value chain of the German export industry.

It is therefore essential to further strengthen the attractiveness of Germany as a business location, said Schwarnecke. "Structural reforms are the decisive lever here to guarantee the competitiveness of the German economy and thus make it more resilient," he demanded.

RND/dpa/bab/jap