(Bloomberg) -- Germany is struggling to figure out what it needs to do to get Donald Trump to back off.
Trump ramped up his threats against Berlin on Wednesday, floating the possibility of sanctions against a new gas pipeline to Russia and a withdrawal of some U.S. troops. Then there’s still the prospect of U.S. tariffs on its auto exports, and issues over U.S. access to Europe’s gas market.
As German officials try to work out where they stand, their reference point is a secret White House meeting on May 21. Successive encounters between Trump and Chancellor Angela Merkel have exposed a fundamental disconnect between the two teams and last month’s talks again showed them failing to read each other.
At stake is Germany’s relationship with one of its largest export markets. An auto tariff would be a punch in the belly for Europe’s dominant economy and for some of its major brands, such as Daimler AG, Volkswagen AG and Bayerische Motoren Werke AG. Transatlantic spats leading to more expensive energy would also be a blow to Germanic competitiveness.
At the meeting, the U.S. officials didn’t indicate any concessions that would make the auto tariffs go away, leaving their counterparts trying to read between the lines, according to two German officials with knowledge of the talks.
One said they sensed the U.S. wanted something for Trump to claim a public victory. He said he thought boosting imports of U.S. natural gas might work. A U.S. official said it was made clear that the only way to stop the tariffs was to include European agriculture in trade talks. A White House press officer declined to comment.
The result is that German officials are fumbling in the dark as they search for a way to stabilize their relationship with the Trump administration.
Adding to the confusion, neither of the possible concessions raised are even in Berlin’s power to give -- both trade policy and energy policy are controlled by the European Commission in Brussels.
Watching developments in Mexico may provide little to go on for Berlin strategists. Just this month, the U.S. president said he would hit Mexico with massive tariffs only to reverse course a week later after receiving modest concessions.
A Win for Trump?
Trump has set his own mid-November deadline to decide if he’ll impose tariffs on imported vehicles and parts from the European Union, Japan and other nations, which would signal a dramatic escalation in international tensions and would open another front in his global trade war.
Last month’s White House meeting included U.S. Trade Representative Robert Lighthizer and economic adviser Larry Kudlow as well as senior officials from the German chancellery and the finance ministry. Ivanka Trump, the president’s daughter and adviser, also dropped in at one point, according to the two officials.
One of the German officials concluded that the U.S. was looking for something that Trump could portray as a win without imposing specific demands.
Lighthizer and Kudlow are among the more moderate trade advisers in the White House and there’s no guarantee that any plan they drew up would get the backing of the president.
The Germans are hoping that last July’s agreement between Trump and European Commission President Jean-Claude Juncker could provide a model. Then, the U.S. agreed to withhold new tariffs while trade talks progressed and the EU pledged to increase imports of soybeans and liquefied natural gas.
The U.S. and the EU have agreed to a general framework for talks meant to reduce tariffs on industrial goods and to eliminate regulatory hurdles. Yet no meaningful progress has been made and official negotiations have yet to begin.
But the Juncker-Trump agreement also highlights the pitfalls of deal-making in the Oval Office. The aftermath of that meeting was marred by disputes about exactly what was agreed.
U.S. officials insisted that Juncker had also agreed to open up discussions about including European agriculture in any potential trade deal. That’s a red line for the French in particular and something that Juncker denied.
What’s more, the mandate the 28 EU members have already given Juncker’s commission to negotiate with the U.S. doesn’t include agriculture. Putting European farm produce on the table would require going back to member states for a new authorization and the idea of opening EU markets to U.S. farmers would likely meet with considerable resistance.
A 25% U.S. levy on foreign cars would add roughly 10,000 euros ($11,000) to the sticker price of EU vehicles imported into the country, according to the European Commission. Such tariffs could prompt a tit-for-tat escalation. The EU plans to hit as much as 20 billion euros of U.S. goods with tariffs should Trump impose duties on European cars and auto parts, the commission said in January.
--With assistance from Shawn Donnan and Richard Bravo.
To contact the reporters on this story: Birgit Jennen in Berlin at firstname.lastname@example.org;Nick Wadhams in Washington at email@example.com;Patrick Donahue in Berlin at firstname.lastname@example.org
To contact the editor responsible for this story: Ben Sills at email@example.com
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