Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: Now we're going to stay in Washington because that is
Speaker 2: where the IMF Worldbanks Free Meetings are taking place right now.
Speaker 2: And of course, this week we learned that the IMF
Speaker 2: has warned recession risks will increase as long as the
Speaker 2: uncertainty remains. Our very own Lisa Bromwoz is there now
Speaker 2: with the German finance minister. I want to hand things
Speaker 2: off to her.
Speaker 3: Lisa, Hey, Scarlett, thank you so much. I am here
Speaker 3: with Germany's finance minners. Your gookies who is here has
Speaker 3: been here for a number of weeks and said to
Speaker 3: my colleagues this.
Speaker 4: Moment ago, moments ago.
Speaker 3: That you think that it's feasible to get some sort
Speaker 3: of trade deal with the United States within that ninety
Speaker 3: day timeframe. What makes you so optimistic that that can
Speaker 3: be achieved.
Speaker 4: Well, first of all, the European Union is negotiating this
Speaker 4: for us, so Germany has delegated on all the European
Speaker 4: countries have delegated authority to strike trade deals to the
Speaker 4: European level, and we are fully supporting the European Commission
Speaker 4: and the feedback that they are giving to us and
Speaker 4: that's confirmed by the discussions I'm having here in Washington,
Speaker 4: is that the discussions are going very constructively. Of Course,
Speaker 4: the devil is in the detail, and there's still a
Speaker 4: lot of topics that are open and that need to
Speaker 4: be iron out. But there's a willingness on both sides
Speaker 4: to come to an agreement doing.
Speaker 3: A sense of what exactly the demands are from the US.
Speaker 4: Side, well, Europe has said we want industrial tariffs to
Speaker 4: go to zero zero on both sides. The US side
Speaker 4: has responded and said, we also have to talk about
Speaker 4: agriculture and services.
Speaker 1: We also have to talk about non.
Speaker 4: Tariff impediments to trade, and all of those are of
Speaker 4: course fair game and need to be discussed. So those
Speaker 4: are really the issues. And then of course there's some
Speaker 4: sectorial issues, especially in the automotive sector, which is very
Speaker 4: important for Germany, needless to say, but also further sectors.
Speaker 1: That are important. There's a lot to unpack there.
Speaker 3: Are you optimistic you could get to zero zero with
Speaker 3: respect to no tariffs on either side?
Speaker 1: Yeah?
Speaker 4: I mean that would be the ideal outcome, and from
Speaker 4: an economic perspective, it would certainly be the most efficient
Speaker 4: outcome for both sides. Whether we actually get there, and
Speaker 4: whether in the United States, if tariffs are reduced, Congress
Speaker 4: would have to approve. So there's a lot of topics
Speaker 4: that are outside of the control of the direct negotiators.
Speaker 1: But at the end of the day, if it's generally the.
Speaker 4: Direction of travel, were for tariffs to come down instead
Speaker 4: of go up, I think the markets would see that
Speaker 4: as a very positive signal.
Speaker 3: How confident are you that the sectorial tariffs, in particular
Speaker 3: on German auto manufacturers, will come down in a way
Speaker 3: that gives them some breathing room. We've heard some pretty
Speaker 3: dire projections from some of their earnings.
Speaker 1: Yeah.
Speaker 4: Well, of course that is still there's still uncertainty around
Speaker 4: that and it will have to be negotiated.
Speaker 1: As I said, there's still differences in views.
Speaker 4: But if you look at the entire package of the
Speaker 4: goal of reducing tariffs overall, of addressing issues outside of
Speaker 4: the tariffs that impede trade, for example, the topics of
Speaker 4: standardization and what's called homologization in technical terms, which essentially
Speaker 4: means if a car is safe to drive in the
Speaker 4: United States, should it be safe to drive in the
Speaker 4: European Union, and vice versa. It would be a huge
Speaker 4: breakthrough if that were achieved, because it would allow economies
Speaker 4: of scale between the United States and Europe to grow
Speaker 4: and would improve the competitiveness of both of our automotive
Speaker 4: industry against China, for example. So there's a lot of
Speaker 4: elements that sound very positive and that go in the
Speaker 4: right direction, and that would be mutually beneficial. But again,
Speaker 4: the question of can we agree on all of this
Speaker 4: needs to be ironed out in the next ninety days.
Speaker 3: Why do you think there's been such a shift in
Speaker 3: tone from this administration over the past couple of days.
Speaker 4: Well, I mean, first of all, when I was in
Speaker 4: Washington that was immediately after the auto tariffs were announced.
Speaker 4: Everyone I spoke to said, we want to see this
Speaker 4: as a beginning and a starting point of a negotiation,
Speaker 4: and we don't want escalation.
Speaker 1: So I do think it was in a way already.
Speaker 4: Incorporated that after the announcement there could be discussions, and
Speaker 4: I think the European Commission reacted in the absolutely correct
Speaker 4: way by saying Plan A is we want to negotiate,
Speaker 4: and we want to strike a deal that is actually
Speaker 4: mutually beneficial and avoids a race upwards in tariffs, which
Speaker 4: would be mutually negative, but we also have plan B.
Speaker 4: If we don't find an agreement, then of course Europe
Speaker 4: will respond with countermeasures.
Speaker 3: You keep talking about Europe and Europe negotiating as a block.
Speaker 1: How much is Europe negotiating as.
Speaker 3: A block versus each individual country?
Speaker 1: There's no doubt.
Speaker 4: I mean, this is a authority that the European Commission
Speaker 4: has and that all member states have given to the Commission.
Speaker 4: It is completely unified, and the European Commission is doing
Speaker 4: a fantastic job, is coordinating with everyone, is keeping everyone
Speaker 4: up to date. So in that sense, this is a
Speaker 4: completely harmonized policy area. And I do think it increases
Speaker 4: the negotiating power of the Commission if it's not only
Speaker 4: negotiating for one country but twenty seven. Of course it
Speaker 4: increases the power because the European Commission controls the access
Speaker 4: to consumer market of four hundred and fifty million people.
Speaker 3: How much is some of the pressure that President Trump
Speaker 3: is putting on the European Union, bringing the European Union
Speaker 3: together close more closely and giving some fuel to more
Speaker 3: of a cohesion in the Financial Union, as well as
Speaker 3: some of the other measures that has been in contention
Speaker 3: for a while.
Speaker 4: Yeah, but don't forget the European Union has come to
Speaker 4: the recognition that we have to move closer together, far
Speaker 4: before the US election. So the Drogi Report, the Letter Report,
Speaker 4: all of the documents where that challenged us and said
Speaker 4: we are becoming less and less competitive.
Speaker 1: And the biggest asset that we.
Speaker 4: Have, namely an internal market of four hundred and fifty
Speaker 4: million consumers and companies and citizens, isn't there where it
Speaker 4: needs to be. And we're over bureaucratized. We have too
Speaker 4: much red tape, we have too much regulation in some areas,
Speaker 4: and we need to tone down carefully, but we do
Speaker 4: need to become much more efficient in Europe. That all
Speaker 4: of that predates the election the of President Trump. So
Speaker 4: in that sense, the recognition that we have to do
Speaker 4: a better job in becoming more competitive.
Speaker 1: Has already taken place in the middle of the Biden administration.
Speaker 4: So it's clearly not a linkage of oh, all of
Speaker 4: a sudden, a new president comes up in Europe, all
Speaker 4: of a sudden changes everything.
Speaker 3: Feeling like you have to choose some capacity between the
Speaker 3: US and China, especially given that there is a feeling
Speaker 3: right now that China and the UFS are kind of
Speaker 3: at odds, and that China is going to try to
Speaker 3: use Europe to unleash a whole bunch of goods that
Speaker 3: they cannot sell into the United States quite in the
Speaker 3: same way.
Speaker 4: But it's the wrong choice, I think the if you
Speaker 4: just look at the strategy that China has of dual
Speaker 4: circulation China twenty twenty five, they do not want the
Speaker 4: old German business model of manufacturing cars and chemicals and machines,
Speaker 4: putting them on ships and sending them to ports in
Speaker 4: China as finished goods.
Speaker 1: China doesn't want that anymore.
Speaker 4: They want manufacturing to happen locally in China, and therefore
Speaker 4: now believing that China could become an alternative is just naive.
Speaker 4: I mean, Germany exported more goods and services to Poland
Speaker 4: last year than to China, and that trend is not
Speaker 4: going to I don't. I think it would be very
Speaker 4: naive to think, given the clear message from the top
Speaker 4: in China, from the President to the Prime Minister to
Speaker 4: the Trade minister on down, implemented everywhere in China that
Speaker 4: they want the manufacturing base in China to grow and
Speaker 4: become much bigger, to believe that Germany could now instead
Speaker 4: of exporting to the United States all of a sudden,
Speaker 4: go back to the old days, the good old days
Speaker 4: of exporting to China.
Speaker 1: It's naive what would work.
Speaker 4: And I'm convinced that that's the strategy, and we're pushing
Speaker 4: the European Commission to do that.
Speaker 1: That if we were.
Speaker 4: To conclude trade agreements with India, with Indonesia, the already
Speaker 4: signed trade deal with mercoa store in Latin America, to
Speaker 4: get it ratified and finalized, that would be a great alternative.
Speaker 3: Just thirty seconds going forward, how come arregu given that
Speaker 3: there is likely to be some sort of trade deal
Speaker 3: in the next ninety days, that Germany can avoid recession
Speaker 3: this year.
Speaker 1: Well, that is the biggest hurdle that we have.
Speaker 4: The other big hurdle is the economic reform program with
Speaker 4: the fiscal spending and the structural reforms that are agreed
Speaker 4: in the coalition contract. And we are working day and
Speaker 4: night now in the outgoing government so that the incoming
Speaker 4: government can immediately unleash both the fiscal power of the
Speaker 4: military and infrastructure spending and start legislating the economic reform
Speaker 4: program to give a clear message to our businesses and
Speaker 4: consumers that We are serious about economic reform and getting
Speaker 4: back to the growth path, and there's a very high
Speaker 4: chance of doing that because the new majority in the
Speaker 4: Parliament has already signed agreed on a contract to implement
Speaker 4: exactly that and implement it quickly.
Speaker 3: Minister Koukies, thank you so much for being with us.
Speaker 3: That was the foreign minister of Germany.