German finance minister calls for strong response to US tariffs

German Economy Minister Robert Habeck said on Thursday that it was crucial for the European Union to have a unified response to US trade tariffs.

“Europe’s strength is our strength. We have the largest single market in the world. We must utilise this strength,” Habeck said in a statement.

Meanwhile Germany’s finance minister said on Thursday that the European Union needs to react strongly to US tariffs but the trade bloc remains open to seek an agreement.

“It would be naive to think that if we just sit there and let this happen, things will get better, so I’m expecting a strong response by the European Union,” Joerg Kukies told the BBC World Service radio, adding that the door to negotiations remains open.

Far-reaching tariffs announced by the US administration will deal a major blow to the German industry, a major exporter to the world’s top economy, leading sector representatives said.

“To be very honest with you: we will feel it,” Dirk Jandura, president of Germany’s BGA association representing importers and exporters. “We will have to translate the tariffs into price increases, and in many cases that means a drop in sales.”

The comment came after US President Donald Trump announced sweeping duties on most global trading partners, including a 20 per cent tariff on products from the European Union, while there is a separate 25 per cent tariff for car imports.

The move marks the rejection of “the rules-based global trade order - and thus turning away from the basis for global value creation and corresponding growth and prosperity in many regions of the world,” said Hildegard Mueller, president of the German auto industry association VDA.

“This is not America first, this is America alone,” she said, adding the blow from the tariffs would be felt globally and cost jobs.

The US was Germany’s biggest trading partner in 2024, according to the statistics office, with 253 billion euros ($277 billion) worth of goods exchanged between them.

Tariffs announced by the US administration under Donald Trump will weigh on global economic growth and hit jobs, German auto industry association VDA said, urging Europe to seek free-trade agreements quickly.

The move marks the rejection of “the rules-based global trade order - and thus turning away from the basis for global value creation and corresponding growth and prosperity in many regions of the world,” said VDA President Hildegard Mueller.

“This is not America first, this is America alone.”

US President Donald Trump will buckle under pressure from Germany and Europe in an escalating trade war, German Economy Minister Robert Habeck said on Thursday.

“That is what I see, that Donald Trump buckles under pressure, corrects his announcements under pressure, but the logical consequence is that he must also feel the pressure, and this pressure must now be exerted from Germany, from Europe,” Habeck said in a news conference.

Meanwhile the Euroarea government bond yields dropped and markets increased their bets on future European Central Bank rate cuts on Thursday as the US tariff announcement by President Donald Trump boosted fears of a trade war which would hurt global growth.

ECB Vice President Luis de Guindos said on Thursday that economic uncertainty required extreme prudence, because trade barriers could toggle inflation in both directions.

Francois Villeroy de Galhau, an ECB policy maker, had said on Wednesday that the US administration’s tariff hikes should not derail an ongoing decline in inflation in Europe, and a recent fall boosted the case for a fresh interest rate cut.

But some experts were still worried about the impact on inflation: “While markets on both sides of the Atlantic are primarily concerned with growth risks right now, the implementation of tariffs poses a significant threat by pushing inflation upward,” said Massimiliano Maxia, senior fixed income specialist at Allianz Global Investors.

Germany’s 10-year yield, the euro area’s benchmark, fell 6 bps to 2.67 per cent, after hitting 2.625 per cent, its lowest since March 4.

On March 5, German yields recorded the biggest daily rise in decades as German parties reached an agreement for a massive ramp-up in fiscal spending on infrastructure and defence.

“We continue to see US tariffs as a disinflationary shock for Europe, even with retaliation,” said economists at Citi, adding that Ireland, Germany and Italy seem the most negatively exposed within the euro area countries.

“We expect a period of acrimonious relations, where retaliation is both more likely and more likely to escalate.”

Analysts said that uncertainty about trade policies already weighed on growth.

German 2-year yields, more sensitive to the ECB policy rates, dropped 7.5 bps to 1.97 per cent. It hit 1.924 per cent, its lowest since December 12.