Germany may sue US over border tax

Mr Trump and Dr Merkel were to meet yesterday in Washington.
Mr Trump and Dr Merkel were to meet yesterday in Washington.PHOTOS: AGENCE FRANCE-PRESSE
Mr Trump and Dr Merkel were to meet yesterday in Washington.
Mr Trump and Dr Merkel were to meet yesterday in Washington.PHOTOS: AGENCE FRANCE-PRESSE

Berlin takes firm line over Trump's aim to tax German cars made in Mexico

BERLIN • Germany could file a suit against the United States at the World Trade Organisation (WTO) over President Donald Trump's proposed border tax, Berlin said yesterday, ahead of a meeting between the leaders of the two countries later in the day.

Mr Trump has warned that the US will impose a border tax of 35 per cent on cars that German automaker BMW plans to build at a new plant in Mexico and export to the American market.

Asked how Germany would react to the proposed tax, Economy Minister Brigitte Zypries told Deutschlandfunk public radio it was very difficult because of the complexities of such a tax system. "I'm betting partly on reason and partly on the courts" to prevent a damaging trade war, she said.

If a US border tax is found to breach WTO rules, "it wouldn't be the first time that Mr Trump has failed before the courts", Ms Zypries quipped, referring to repeated rejections by US judges of the President's executive orders banning immigration from majority-Muslim countries.

The minister's combative stance comes ahead of Chancellor Angela Merkel's first meeting with Mr Trump in Washington and a gathering of Group of 20 finance ministers in Baden-Baden, western Germany, set to be dominated by the US President's "America First" policy.

Dr Merkel is likely to press Mr Trump for assurances of support for a strong European Union and a commitment to fight climate change, while he is expected to seek her support for his demand that Nato nations pay more for their defence needs.

Amid the heightened rhetoric, Economy Minister Brigitte Zypries acknowledged that a lot was at stake (at Dr Merkel's meeting with Mr Trump yesterday), while calling for clarity and "creating a reliable base" for relations to reduce the "poisonous" uncertainty clouding the economic outlook.

Ms Zypries predicted that Mr Trump's advisers would warn him "the Americans would be cutting off their nose to spite their face if they slap such taxes on imports".

Amid the heightened rhetoric, she acknowledged that a lot was at stake at the leaders' meeting, while calling for clarity and "creating a reliable base" for relations to reduce the "poisonous" uncertainty clouding the economic outlook.

Germany's €49 billion (S$74 billion) trade surplus with the US has been a source of tension between Washington and Berlin. Last year, the US was Germany's biggest export customer, importing €107 billion of goods while selling back just €58 billion worth.

"We know ourselves that that's a problem and we're working on it," Ms Zypries said.

"The Americans need our machines and our plants... and the other point is that we only have an export surplus in the machines and plants sector; in the service sector it's the other way round" due to big Internet companies in the US, she added.

AGENCE FRANCE-PRESSE, REUTERS

A version of this article appeared in the print edition of The Straits Times on March 18, 2017, with the headline 'Germany may sue US over border tax'. Print Edition | Subscribe