German Chancellor Angela Merkel on Wednesday warned U.S. President Donald Trump against unleashing an all-out trade war after he threatened to impose steep tariffs on cars from the European Union.
In a speech to the Bundestag federal parliament, Ms. Merkel said both sides were effectively locked in a “trade conflict” since Mr. Trump’s decision to slap punitive tariffs on steel and aluminium imports.
“It is worthwhile to prevent this conflict from becoming a real war,” she said, adding, however, that this “would require both sides” to take steps.
Mr. Trump on Sunday charged that Europe is “possibly as bad as China” on trade, as he reiterated that he is mulling import taxes of 20% on EU cars.
The EU has slapped tariffs on iconic U.S. products, including bourbon, jeans and Harley-Davidson motorcycles, as a symbolic tit-for-tat response to the metals duties.
Taking aim at Mr. Trump over his complaint that the EU, and, in particular, economic powerhouse Germany, is running a massive trade surplus against the U.S., Ms. Merkel said that his calculation is skewed as it is based only on goods, not services.
“If you include services like the digital services, then you have a completely different trade balance sheet, with the U.S. showing a surplus against the EU,” she noted. “It is almost old-fashioned to only calculate goods and not include services.”
Ms. Merkel has previously voiced backing for a “digital tax” that would target multinationals like Amazon, Facebook or Google, which have come under fire for shifting earnings around Europe in order to pay lower taxes.
But the EU is divided over the proposal, as countries, including Luxembourg and Ireland, are loath to see U.S. tech giants head for the exit.
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