WEBVTT - German Finance Minister Joerg Kukies Talks US/EU Trade 0:00:02.759 --> 0:00:07.240 Bloomberg Audio Studios, podcasts, radio news. 0:00:08.000 --> 0:00:10.000 Now we're going to stay in Washington because that is 0:00:10.000 --> 0:00:13.119 where the IMF Worldbanks Free Meetings are taking place right now. 0:00:13.280 --> 0:00:15.360 And of course, this week we learned that the IMF 0:00:15.360 --> 0:00:18.319 has warned recession risks will increase as long as the 0:00:18.440 --> 0:00:21.840 uncertainty remains. Our very own Lisa Bromwoz is there now 0:00:21.880 --> 0:00:23.920 with the German finance minister. I want to hand things 0:00:23.960 --> 0:00:24.320 off to her. 0:00:24.520 --> 0:00:27.480 Lisa, Hey, Scarlett, thank you so much. I am here 0:00:27.560 --> 0:00:31.840 with Germany's finance minners. Your gookies who is here has 0:00:31.920 --> 0:00:34.680 been here for a number of weeks and said to 0:00:34.720 --> 0:00:35.559 my colleagues this. 0:00:35.560 --> 0:00:37.000 Moment ago, moments ago. 0:00:37.440 --> 0:00:40.080 That you think that it's feasible to get some sort 0:00:40.120 --> 0:00:42.800 of trade deal with the United States within that ninety 0:00:42.880 --> 0:00:46.400 day timeframe. What makes you so optimistic that that can 0:00:46.440 --> 0:00:47.360 be achieved. 0:00:47.479 --> 0:00:50.159 Well, first of all, the European Union is negotiating this 0:00:50.320 --> 0:00:53.040 for us, so Germany has delegated on all the European 0:00:53.040 --> 0:00:56.720 countries have delegated authority to strike trade deals to the 0:00:56.760 --> 0:01:00.520 European level, and we are fully supporting the European Commission 0:01:00.520 --> 0:01:02.400 and the feedback that they are giving to us and 0:01:02.440 --> 0:01:05.240 that's confirmed by the discussions I'm having here in Washington, 0:01:05.680 --> 0:01:08.680 is that the discussions are going very constructively. Of Course, 0:01:08.760 --> 0:01:10.560 the devil is in the detail, and there's still a 0:01:10.560 --> 0:01:13.240 lot of topics that are open and that need to 0:01:13.240 --> 0:01:16.160 be iron out. But there's a willingness on both sides 0:01:16.200 --> 0:01:17.680 to come to an agreement doing. 0:01:17.560 --> 0:01:21.120 A sense of what exactly the demands are from the US. 0:01:20.959 --> 0:01:25.399 Side, well, Europe has said we want industrial tariffs to 0:01:25.400 --> 0:01:28.680 go to zero zero on both sides. The US side 0:01:28.680 --> 0:01:30.839 has responded and said, we also have to talk about 0:01:30.880 --> 0:01:32.200 agriculture and services. 0:01:32.800 --> 0:01:34.600 We also have to talk about non. 0:01:34.400 --> 0:01:38.240 Tariff impediments to trade, and all of those are of 0:01:38.280 --> 0:01:41.480 course fair game and need to be discussed. So those 0:01:41.520 --> 0:01:44.640 are really the issues. And then of course there's some 0:01:44.680 --> 0:01:48.120 sectorial issues, especially in the automotive sector, which is very 0:01:48.120 --> 0:01:52.480 important for Germany, needless to say, but also further sectors. 0:01:52.120 --> 0:01:53.800 That are important. There's a lot to unpack there. 0:01:53.800 --> 0:01:56.080 Are you optimistic you could get to zero zero with 0:01:56.120 --> 0:01:57.680 respect to no tariffs on either side? 0:01:57.920 --> 0:01:58.160 Yeah? 0:01:58.280 --> 0:02:02.120 I mean that would be the ideal outcome, and from 0:02:02.160 --> 0:02:05.000 an economic perspective, it would certainly be the most efficient 0:02:05.120 --> 0:02:10.040 outcome for both sides. Whether we actually get there, and 0:02:10.080 --> 0:02:14.080 whether in the United States, if tariffs are reduced, Congress 0:02:14.080 --> 0:02:16.880 would have to approve. So there's a lot of topics 0:02:16.880 --> 0:02:20.040 that are outside of the control of the direct negotiators. 0:02:21.400 --> 0:02:25.240 But at the end of the day, if it's generally the. 0:02:25.200 --> 0:02:28.079 Direction of travel, were for tariffs to come down instead 0:02:28.120 --> 0:02:30.320 of go up, I think the markets would see that 0:02:30.360 --> 0:02:31.720 as a very positive signal. 0:02:31.840 --> 0:02:35.519 How confident are you that the sectorial tariffs, in particular 0:02:35.680 --> 0:02:39.520 on German auto manufacturers, will come down in a way 0:02:39.960 --> 0:02:42.000 that gives them some breathing room. We've heard some pretty 0:02:42.040 --> 0:02:43.800 dire projections from some of their earnings. 0:02:44.000 --> 0:02:44.400 Yeah. 0:02:44.440 --> 0:02:49.720 Well, of course that is still there's still uncertainty around 0:02:49.720 --> 0:02:51.400 that and it will have to be negotiated. 0:02:51.520 --> 0:02:53.959 As I said, there's still differences in views. 0:02:54.360 --> 0:02:57.400 But if you look at the entire package of the 0:02:57.440 --> 0:03:03.440 goal of reducing tariffs overall, of addressing issues outside of 0:03:03.480 --> 0:03:07.640 the tariffs that impede trade, for example, the topics of 0:03:07.680 --> 0:03:13.399 standardization and what's called homologization in technical terms, which essentially 0:03:13.440 --> 0:03:16.200 means if a car is safe to drive in the 0:03:16.280 --> 0:03:18.760 United States, should it be safe to drive in the 0:03:18.760 --> 0:03:21.680 European Union, and vice versa. It would be a huge 0:03:21.680 --> 0:03:25.280 breakthrough if that were achieved, because it would allow economies 0:03:25.320 --> 0:03:27.880 of scale between the United States and Europe to grow 0:03:28.280 --> 0:03:32.519 and would improve the competitiveness of both of our automotive 0:03:32.520 --> 0:03:35.960 industry against China, for example. So there's a lot of 0:03:36.000 --> 0:03:39.200 elements that sound very positive and that go in the 0:03:39.240 --> 0:03:43.040 right direction, and that would be mutually beneficial. But again, 0:03:43.160 --> 0:03:45.760 the question of can we agree on all of this 0:03:45.960 --> 0:03:47.800 needs to be ironed out in the next ninety days. 0:03:47.840 --> 0:03:49.200 Why do you think there's been such a shift in 0:03:49.240 --> 0:03:52.000 tone from this administration over the past couple of days. 0:03:52.640 --> 0:03:55.720 Well, I mean, first of all, when I was in 0:03:55.880 --> 0:03:59.720 Washington that was immediately after the auto tariffs were announced. 0:04:00.360 --> 0:04:05.360 Everyone I spoke to said, we want to see this 0:04:05.520 --> 0:04:08.240 as a beginning and a starting point of a negotiation, 0:04:08.320 --> 0:04:09.760 and we don't want escalation. 0:04:10.320 --> 0:04:14.160 So I do think it was in a way already. 0:04:15.440 --> 0:04:21.479 Incorporated that after the announcement there could be discussions, and 0:04:21.520 --> 0:04:26.120 I think the European Commission reacted in the absolutely correct 0:04:26.200 --> 0:04:29.599 way by saying Plan A is we want to negotiate, 0:04:29.680 --> 0:04:31.799 and we want to strike a deal that is actually 0:04:31.880 --> 0:04:36.520 mutually beneficial and avoids a race upwards in tariffs, which 0:04:36.560 --> 0:04:42.040 would be mutually negative, but we also have plan B. 0:04:42.160 --> 0:04:44.440 If we don't find an agreement, then of course Europe 0:04:44.480 --> 0:04:46.320 will respond with countermeasures. 0:04:46.400 --> 0:04:49.440 You keep talking about Europe and Europe negotiating as a block. 0:04:49.880 --> 0:04:51.760 How much is Europe negotiating as. 0:04:51.640 --> 0:04:54.839 A block versus each individual country? 0:04:57.000 --> 0:04:57.840 There's no doubt. 0:04:57.880 --> 0:05:01.919 I mean, this is a authority that the European Commission 0:05:02.640 --> 0:05:05.800 has and that all member states have given to the Commission. 0:05:05.839 --> 0:05:09.440 It is completely unified, and the European Commission is doing 0:05:09.480 --> 0:05:12.600 a fantastic job, is coordinating with everyone, is keeping everyone 0:05:12.640 --> 0:05:16.400 up to date. So in that sense, this is a 0:05:16.560 --> 0:05:20.680 completely harmonized policy area. And I do think it increases 0:05:20.720 --> 0:05:23.600 the negotiating power of the Commission if it's not only 0:05:23.640 --> 0:05:26.919 negotiating for one country but twenty seven. Of course it 0:05:27.040 --> 0:05:30.880 increases the power because the European Commission controls the access 0:05:31.240 --> 0:05:34.120 to consumer market of four hundred and fifty million people. 0:05:34.360 --> 0:05:37.479 How much is some of the pressure that President Trump 0:05:37.520 --> 0:05:40.120 is putting on the European Union, bringing the European Union 0:05:40.200 --> 0:05:44.640 together close more closely and giving some fuel to more 0:05:44.680 --> 0:05:48.320 of a cohesion in the Financial Union, as well as 0:05:48.360 --> 0:05:50.440 some of the other measures that has been in contention 0:05:50.520 --> 0:05:51.000 for a while. 0:05:51.160 --> 0:05:56.760 Yeah, but don't forget the European Union has come to 0:05:56.800 --> 0:06:00.840 the recognition that we have to move closer together, far 0:06:01.360 --> 0:06:06.360 before the US election. So the Drogi Report, the Letter Report, 0:06:06.440 --> 0:06:11.040 all of the documents where that challenged us and said 0:06:11.120 --> 0:06:13.080 we are becoming less and less competitive. 0:06:13.520 --> 0:06:15.000 And the biggest asset that we. 0:06:15.040 --> 0:06:17.799 Have, namely an internal market of four hundred and fifty 0:06:17.839 --> 0:06:23.839 million consumers and companies and citizens, isn't there where it 0:06:23.880 --> 0:06:27.160 needs to be. And we're over bureaucratized. We have too 0:06:27.240 --> 0:06:32.080 much red tape, we have too much regulation in some areas, 0:06:32.440 --> 0:06:36.080 and we need to tone down carefully, but we do 0:06:36.200 --> 0:06:39.080 need to become much more efficient in Europe. That all 0:06:39.080 --> 0:06:42.919 of that predates the election the of President Trump. So 0:06:43.000 --> 0:06:45.480 in that sense, the recognition that we have to do 0:06:45.520 --> 0:06:48.479 a better job in becoming more competitive. 0:06:49.880 --> 0:06:52.920 Has already taken place in the middle of the Biden administration. 0:06:53.040 --> 0:06:55.560 So it's clearly not a linkage of oh, all of 0:06:55.600 --> 0:06:57.840 a sudden, a new president comes up in Europe, all 0:06:57.839 --> 0:06:59.080 of a sudden changes everything. 0:07:00.120 --> 0:07:02.640 Feeling like you have to choose some capacity between the 0:07:02.720 --> 0:07:06.800 US and China, especially given that there is a feeling 0:07:06.880 --> 0:07:09.560 right now that China and the UFS are kind of 0:07:09.600 --> 0:07:11.800 at odds, and that China is going to try to 0:07:11.920 --> 0:07:15.480 use Europe to unleash a whole bunch of goods that 0:07:15.520 --> 0:07:17.680 they cannot sell into the United States quite in the 0:07:17.680 --> 0:07:18.080 same way. 0:07:18.360 --> 0:07:21.920 But it's the wrong choice, I think the if you 0:07:22.120 --> 0:07:26.040 just look at the strategy that China has of dual 0:07:26.080 --> 0:07:31.680 circulation China twenty twenty five, they do not want the 0:07:32.040 --> 0:07:38.840 old German business model of manufacturing cars and chemicals and machines, 0:07:39.360 --> 0:07:42.480 putting them on ships and sending them to ports in 0:07:42.600 --> 0:07:44.400 China as finished goods. 0:07:44.920 --> 0:07:46.480 China doesn't want that anymore. 0:07:46.840 --> 0:07:52.040 They want manufacturing to happen locally in China, and therefore 0:07:52.360 --> 0:07:57.679 now believing that China could become an alternative is just naive. 0:07:57.760 --> 0:08:01.240 I mean, Germany exported more goods and services to Poland 0:08:01.360 --> 0:08:05.440 last year than to China, and that trend is not 0:08:05.480 --> 0:08:07.640 going to I don't. I think it would be very 0:08:07.720 --> 0:08:11.680 naive to think, given the clear message from the top 0:08:12.400 --> 0:08:15.040 in China, from the President to the Prime Minister to 0:08:15.080 --> 0:08:19.120 the Trade minister on down, implemented everywhere in China that 0:08:19.200 --> 0:08:23.600 they want the manufacturing base in China to grow and 0:08:23.680 --> 0:08:27.560 become much bigger, to believe that Germany could now instead 0:08:27.560 --> 0:08:29.640 of exporting to the United States all of a sudden, 0:08:29.720 --> 0:08:33.239 go back to the old days, the good old days 0:08:33.320 --> 0:08:34.480 of exporting to China. 0:08:34.520 --> 0:08:36.840 It's naive what would work. 0:08:37.120 --> 0:08:39.920 And I'm convinced that that's the strategy, and we're pushing 0:08:39.920 --> 0:08:41.439 the European Commission to do that. 0:08:41.880 --> 0:08:42.920 That if we were. 0:08:42.760 --> 0:08:49.520 To conclude trade agreements with India, with Indonesia, the already 0:08:49.600 --> 0:08:53.000 signed trade deal with mercoa store in Latin America, to 0:08:53.160 --> 0:08:56.880 get it ratified and finalized, that would be a great alternative. 0:08:57.440 --> 0:09:01.360 Just thirty seconds going forward, how come arregu given that 0:09:01.400 --> 0:09:03.160 there is likely to be some sort of trade deal 0:09:03.200 --> 0:09:06.160 in the next ninety days, that Germany can avoid recession 0:09:06.160 --> 0:09:06.520 this year. 0:09:06.840 --> 0:09:09.640 Well, that is the biggest hurdle that we have. 0:09:09.840 --> 0:09:13.360 The other big hurdle is the economic reform program with 0:09:13.440 --> 0:09:16.880 the fiscal spending and the structural reforms that are agreed 0:09:16.920 --> 0:09:19.800 in the coalition contract. And we are working day and 0:09:19.880 --> 0:09:23.960 night now in the outgoing government so that the incoming 0:09:24.000 --> 0:09:28.360 government can immediately unleash both the fiscal power of the 0:09:28.400 --> 0:09:34.280 military and infrastructure spending and start legislating the economic reform 0:09:34.320 --> 0:09:39.480 program to give a clear message to our businesses and 0:09:39.520 --> 0:09:43.040 consumers that We are serious about economic reform and getting 0:09:43.040 --> 0:09:44.960 back to the growth path, and there's a very high 0:09:45.040 --> 0:09:48.040 chance of doing that because the new majority in the 0:09:48.080 --> 0:09:53.840 Parliament has already signed agreed on a contract to implement 0:09:53.920 --> 0:09:56.000 exactly that and implement it quickly. 0:09:56.320 --> 0:09:58.280 Minister Koukies, thank you so much for being with us. 0:09:58.320 --> 0:10:00.560 That was the foreign minister of Germany.