German finance minister warns of retaliation if U.S. kicks off trade war

German Finance Minister Christian Lindner on Friday warned that if the U.S. kicked off a trade war with the European Union, there could be retaliation.

“Trade controversy sees never winners, only losers,” Lindner told CNBC’s Karen Tso on the sidelines of the International Monetary Fund’s annual meeting in Washington, D.C.

What U.S. trade policy could look like if Donald Trump were elected as president is a key issue, Lindner suggested. “In that case we need diplomatic efforts to convince whoever enters the White House that it’s not in the best interest of the U.S. to have a trade conflict with [the] European Union. We would have to consider retaliation,” he said. Lindner belongs to the pro-business Free Democratic Party which is currently in coalition with Chancellor Olaf Scholz’s Social Democratic Party.

The U.S.’ problem with trading lies with China rather than the EU, Lindner said, adding that the EU “should not become a negative side effect” of controversy between the U.S. and China.

Trump has floated the idea that, if he were elected, blanket tariffs of 10% to 20% could be imposed on almost all imports, no matter where they came from.

If such a 20% tariff were implemented by the U.S., the EU’s and Germany’s gross domestic product would fall in the coming years, Reuters reported Thursday citing a study by German economic institute IW. Trade is one of the main pillars of the German economy, suggesting heightened tensions, uncertainty and tariffs would hit the country harder than others.

Earlier this month, the German statistics office, Destatis, said that the U.S.’ importance as a trading partner for Germany has been growing. The agency said that since 2021, the U.S. had been the second-most important trade partner for Germany behind China, but in the first half of 2024, foreign trade turnover with the U.S. was higher than that with China. In 2023, around 9.9% of German exports went to the U.S., according to Destatis.

Trade tensions between the U.S. and China, and the EU and China, have been rising throughout the year. Both the U.S. and EU have implemented higher tariffs and on some goods imported from China, citing unfair trade practices.

China in turn has also announced higher temporary tariffs on some imports from the EU. Several probes and investigations into one another’s competition, subsidy, and other practices are also ongoing as the tit-for-tat measures continue.

After the EU voted to impose tariffs on Chinese-made electric vehicles, Germany’s Lindner urged the union not to start a trade war. Germany had previously advocated against higher duties, raising concerns about what they could mean for the country’s struggling carmakers.

Earlier in the week, Gita Gopinath, deputy managing director of the IMF, told CNBC that an escalation of trade and tariffs tensions between the U.S. and China would be “costly for everybody.”