April 24, 2025 • 10 mins
A trade deal that would see the European Union and the US zero out tariffs on industrial products would be the best way to resolve the current tensions, according to German Finance Minister Joerg Kukies. He expands on this with Bloomberg's Lisa Abramowicz
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Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:08):
Now we're going to stay in Washington because that is
where the IMF Worldbanks Free Meetings are taking place right now.
And of course, this week we learned that the IMF
has warned recession risks will increase as long as the
uncertainty remains. Our very own Lisa Bromwoz is there now
with the German finance minister. I want to hand things
off to her.
Speaker 3 (00:24):
Lisa, Hey, Scarlett, thank you so much. I am here
with Germany's finance minners. Your gookies who is here has
been here for a number of weeks and said to
my colleagues this.
Speaker 4 (00:35):
Moment ago, moments ago.
Speaker 3 (00:37):
That you think that it's feasible to get some sort
of trade deal with the United States within that ninety
day timeframe. What makes you so optimistic that that can
be achieved.
Speaker 4 (00:47):
Well, first of all, the European Union is negotiating this
for us, so Germany has delegated on all the European
countries have delegated authority to strike trade deals to the
European level, and we are fully supporting the European Commission
and the feedback that they are giving to us and
that's confirmed by the discussions I'm having here in Washington,
is that the discussions are going very constructively. Of Course,
(01:08):
the devil is in the detail, and there's still a
lot of topics that are open and that need to
be iron out. But there's a willingness on both sides
to come to an agreement doing.
Speaker 3 (01:17):
A sense of what exactly the demands are from the US.
Speaker 4 (01:20):
Side, well, Europe has said we want industrial tariffs to
go to zero zero on both sides. The US side
has responded and said, we also have to talk about
agriculture and services.
Speaker 1 (01:32):
We also have to talk about non.
Speaker 4 (01:34):
Tariff impediments to trade, and all of those are of
course fair game and need to be discussed. So those
are really the issues. And then of course there's some
sectorial issues, especially in the automotive sector, which is very
important for Germany, needless to say, but also further sectors.
Speaker 1 (01:52):
That are important. There's a lot to unpack there.
Speaker 3 (01:53):
Are you optimistic you could get to zero zero with
respect to no tariffs on either side?
Speaker 1 (01:57):
Yeah?
Speaker 4 (01:58):
I mean that would be the ideal outcome, and from
an economic perspective, it would certainly be the most efficient
outcome for both sides. Whether we actually get there, and
whether in the United States, if tariffs are reduced, Congress
would have to approve. So there's a lot of topics
that are outside of the control of the direct negotiators.
Speaker 1 (02:21):
But at the end of the day, if it's generally the.
Speaker 4 (02:25):
Direction of travel, were for tariffs to come down instead
of go up, I think the markets would see that
as a very positive signal.
Speaker 3 (02:31):
How confident are you that the sectorial tariffs, in particular
on German auto manufacturers, will come down in a way
that gives them some breathing room. We've heard some pretty
dire projections from some of their earnings.
Speaker 1 (02:44):
Yeah.
Speaker 4 (02:44):
Well, of course that is still there's still uncertainty around
that and it will have to be negotiated.
Speaker 1 (02:51):
As I said, there's still differences in views.
Speaker 4 (02:54):
But if you look at the entire package of the
goal of reducing tariffs overall, of addressing issues outside of
the tariffs that impede trade, for example, the topics of
standardization and what's called homologization in technical terms, which essentially
means if a car is safe to drive in the
(03:16):
United States, should it be safe to drive in the
European Union, and vice versa. It would be a huge
breakthrough if that were achieved, because it would allow economies
of scale between the United States and Europe to grow
and would improve the competitiveness of both of our automotive
industry against China, for example. So there's a lot of
elements that sound very positive and that go in the
(03:39):
right direction, and that would be mutually beneficial. But again,
the question of can we agree on all of this
needs to be ironed out in the next ninety days.
Speaker 3 (03:47):
Why do you think there's been such a shift in
tone from this administration over the past couple of days.
Speaker 4 (03:52):
Well, I mean, first of all, when I was in
Washington that was immediately after the auto tariffs were announced.
Everyone I spoke to said, we want to see this
as a beginning and a starting point of a negotiation,
and we don't want escalation.
Speaker 1 (04:10):
So I do think it was in a way already.
Speaker 4 (04:15):
Incorporated that after the announcement there could be discussions, and
I think the European Commission reacted in the absolutely correct
way by saying Plan A is we want to negotiate,
and we want to strike a deal that is actually
mutually beneficial and avoids a race upwards in tariffs, which
(04:36):
would be mutually negative, but we also have plan B.
If we don't find an agreement, then of course Europe
will respond with countermeasures.
Speaker 3 (04:46):
You keep talking about Europe and Europe negotiating as a block.
Speaker 1 (04:49):
How much is Europe negotiating as.
Speaker 3 (04:51):
A block versus each individual country?
Speaker 1 (04:57):
There's no doubt.
Speaker 4 (04:57):
I mean, this is a authority that the European Commission
has and that all member states have given to the Commission.
It is completely unified, and the European Commission is doing
a fantastic job, is coordinating with everyone, is keeping everyone
up to date. So in that sense, this is a
completely harmonized policy area. And I do think it increases
(05:20):
the negotiating power of the Commission if it's not only
negotiating for one country but twenty seven. Of course it
increases the power because the European Commission controls the access
to consumer market of four hundred and fifty million people.
Speaker 3 (05:34):
How much is some of the pressure that President Trump
is putting on the European Union, bringing the European Union
together close more closely and giving some fuel to more
of a cohesion in the Financial Union, as well as
some of the other measures that has been in contention
for a while.
Speaker 4 (05:51):
Yeah, but don't forget the European Union has come to
the recognition that we have to move closer together, far
before the US election. So the Drogi Report, the Letter Report,
all of the documents where that challenged us and said
we are becoming less and less competitive.
Speaker 1 (06:13):
And the biggest asset that we.
Speaker 4 (06:15):
Have, namely an internal market of four hundred and fifty
million consumers and companies and citizens, isn't there where it
needs to be. And we're over bureaucratized. We have too
much red tape, we have too much regulation in some areas,
and we need to tone down carefully, but we do
(06:36):
need to become much more efficient in Europe. That all
of that predates the election the of President Trump. So
in that sense, the recognition that we have to do
a better job in becoming more competitive.
Speaker 1 (06:49):
Has already taken place in the middle of the Biden administration.
Speaker 4 (06:53):
So it's clearly not a linkage of oh, all of
a sudden, a new president comes up in Europe, all
of a sudden changes everything.
Speaker 3 (07:00):
Feeling like you have to choose some capacity between the
US and China, especially given that there is a feeling
right now that China and the UFS are kind of
at odds, and that China is going to try to
use Europe to unleash a whole bunch of goods that
they cannot sell into the United States quite in the
same way.
Speaker 4 (07:18):
But it's the wrong choice, I think the if you
just look at the strategy that China has of dual
circulation China twenty twenty five, they do not want the
old German business model of manufacturing cars and chemicals and machines,
(07:39):
putting them on ships and sending them to ports in
China as finished goods.
Speaker 1 (07:44):
China doesn't want that anymore.
Speaker 4 (07:46):
They want manufacturing to happen locally in China, and therefore
now believing that China could become an alternative is just naive.
I mean, Germany exported more goods and services to Poland
last year than to China, and that trend is not
going to I don't. I think it would be very
(08:07):
naive to think, given the clear message from the top
in China, from the President to the Prime Minister to
the Trade minister on down, implemented everywhere in China that
they want the manufacturing base in China to grow and
become much bigger, to believe that Germany could now instead
of exporting to the United States all of a sudden,
(08:29):
go back to the old days, the good old days
of exporting to China.
Speaker 1 (08:34):
It's naive what would work.
Speaker 4 (08:37):
And I'm convinced that that's the strategy, and we're pushing
the European Commission to do that.
Speaker 1 (08:41):
That if we were.
Speaker 4 (08:42):
To conclude trade agreements with India, with Indonesia, the already
signed trade deal with mercoa store in Latin America, to
get it ratified and finalized, that would be a great alternative.
Speaker 3 (08:57):
Just thirty seconds going forward, how come arregu given that
there is likely to be some sort of trade deal
in the next ninety days, that Germany can avoid recession
this year.
Speaker 1 (09:06):
Well, that is the biggest hurdle that we have.
Speaker 4 (09:09):
The other big hurdle is the economic reform program with
the fiscal spending and the structural reforms that are agreed
in the coalition contract. And we are working day and
night now in the outgoing government so that the incoming
government can immediately unleash both the fiscal power of the
military and infrastructure spending and start legislating the economic reform
(09:34):
program to give a clear message to our businesses and
consumers that We are serious about economic reform and getting
back to the growth path, and there's a very high
chance of doing that because the new majority in the
Parliament has already signed agreed on a contract to implement
exactly that and implement it quickly.
Speaker 3 (09:56):
Minister Koukies, thank you so much for being with us.
That was the foreign minister of Germany.
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:08):
Now we're going to stay in Washington because that is
where the IMF Worldbanks Free Meetings are taking place right now.
And of course, this week we learned that the IMF
has warned recession risks will increase as long as the
uncertainty remains. Our very own Lisa Bromwoz is there now
with the German finance minister. I want to hand things
off to her.
Speaker 3 (00:24):
Lisa, Hey, Scarlett, thank you so much. I am here
with Germany's finance minners. Your gookies who is here has
been here for a number of weeks and said to
my colleagues this.
Speaker 4 (00:35):
Moment ago, moments ago.
Speaker 3 (00:37):
That you think that it's feasible to get some sort
of trade deal with the United States within that ninety
day timeframe. What makes you so optimistic that that can
be achieved.
Speaker 4 (00:47):
Well, first of all, the European Union is negotiating this
for us, so Germany has delegated on all the European
countries have delegated authority to strike trade deals to the
European level, and we are fully supporting the European Commission
and the feedback that they are giving to us and
that's confirmed by the discussions I'm having here in Washington,
is that the discussions are going very constructively. Of Course,
(01:08):
the devil is in the detail, and there's still a
lot of topics that are open and that need to
be iron out. But there's a willingness on both sides
to come to an agreement doing.
Speaker 3 (01:17):
A sense of what exactly the demands are from the US.
Speaker 4 (01:20):
Side, well, Europe has said we want industrial tariffs to
go to zero zero on both sides. The US side
has responded and said, we also have to talk about
agriculture and services.
Speaker 1 (01:32):
We also have to talk about non.
Speaker 4 (01:34):
Tariff impediments to trade, and all of those are of
course fair game and need to be discussed. So those
are really the issues. And then of course there's some
sectorial issues, especially in the automotive sector, which is very
important for Germany, needless to say, but also further sectors.
Speaker 1 (01:52):
That are important. There's a lot to unpack there.
Speaker 3 (01:53):
Are you optimistic you could get to zero zero with
respect to no tariffs on either side?
Speaker 1 (01:57):
Yeah?
Speaker 4 (01:58):
I mean that would be the ideal outcome, and from
an economic perspective, it would certainly be the most efficient
outcome for both sides. Whether we actually get there, and
whether in the United States, if tariffs are reduced, Congress
would have to approve. So there's a lot of topics
that are outside of the control of the direct negotiators.
Speaker 1 (02:21):
But at the end of the day, if it's generally the.
Speaker 4 (02:25):
Direction of travel, were for tariffs to come down instead
of go up, I think the markets would see that
as a very positive signal.
Speaker 3 (02:31):
How confident are you that the sectorial tariffs, in particular
on German auto manufacturers, will come down in a way
that gives them some breathing room. We've heard some pretty
dire projections from some of their earnings.
Speaker 1 (02:44):
Yeah.
Speaker 4 (02:44):
Well, of course that is still there's still uncertainty around
that and it will have to be negotiated.
Speaker 1 (02:51):
As I said, there's still differences in views.
Speaker 4 (02:54):
But if you look at the entire package of the
goal of reducing tariffs overall, of addressing issues outside of
the tariffs that impede trade, for example, the topics of
standardization and what's called homologization in technical terms, which essentially
means if a car is safe to drive in the
(03:16):
United States, should it be safe to drive in the
European Union, and vice versa. It would be a huge
breakthrough if that were achieved, because it would allow economies
of scale between the United States and Europe to grow
and would improve the competitiveness of both of our automotive
industry against China, for example. So there's a lot of
elements that sound very positive and that go in the
(03:39):
right direction, and that would be mutually beneficial. But again,
the question of can we agree on all of this
needs to be ironed out in the next ninety days.
Speaker 3 (03:47):
Why do you think there's been such a shift in
tone from this administration over the past couple of days.
Speaker 4 (03:52):
Well, I mean, first of all, when I was in
Washington that was immediately after the auto tariffs were announced.
Everyone I spoke to said, we want to see this
as a beginning and a starting point of a negotiation,
and we don't want escalation.
Speaker 1 (04:10):
So I do think it was in a way already.
Speaker 4 (04:15):
Incorporated that after the announcement there could be discussions, and
I think the European Commission reacted in the absolutely correct
way by saying Plan A is we want to negotiate,
and we want to strike a deal that is actually
mutually beneficial and avoids a race upwards in tariffs, which
(04:36):
would be mutually negative, but we also have plan B.
If we don't find an agreement, then of course Europe
will respond with countermeasures.
Speaker 3 (04:46):
You keep talking about Europe and Europe negotiating as a block.
Speaker 1 (04:49):
How much is Europe negotiating as.
Speaker 3 (04:51):
A block versus each individual country?
Speaker 1 (04:57):
There's no doubt.
Speaker 4 (04:57):
I mean, this is a authority that the European Commission
has and that all member states have given to the Commission.
It is completely unified, and the European Commission is doing
a fantastic job, is coordinating with everyone, is keeping everyone
up to date. So in that sense, this is a
completely harmonized policy area. And I do think it increases
(05:20):
the negotiating power of the Commission if it's not only
negotiating for one country but twenty seven. Of course it
increases the power because the European Commission controls the access
to consumer market of four hundred and fifty million people.
Speaker 3 (05:34):
How much is some of the pressure that President Trump
is putting on the European Union, bringing the European Union
together close more closely and giving some fuel to more
of a cohesion in the Financial Union, as well as
some of the other measures that has been in contention
for a while.
Speaker 4 (05:51):
Yeah, but don't forget the European Union has come to
the recognition that we have to move closer together, far
before the US election. So the Drogi Report, the Letter Report,
all of the documents where that challenged us and said
we are becoming less and less competitive.
Speaker 1 (06:13):
And the biggest asset that we.
Speaker 4 (06:15):
Have, namely an internal market of four hundred and fifty
million consumers and companies and citizens, isn't there where it
needs to be. And we're over bureaucratized. We have too
much red tape, we have too much regulation in some areas,
and we need to tone down carefully, but we do
(06:36):
need to become much more efficient in Europe. That all
of that predates the election the of President Trump. So
in that sense, the recognition that we have to do
a better job in becoming more competitive.
Speaker 1 (06:49):
Has already taken place in the middle of the Biden administration.
Speaker 4 (06:53):
So it's clearly not a linkage of oh, all of
a sudden, a new president comes up in Europe, all
of a sudden changes everything.
Speaker 3 (07:00):
Feeling like you have to choose some capacity between the
US and China, especially given that there is a feeling
right now that China and the UFS are kind of
at odds, and that China is going to try to
use Europe to unleash a whole bunch of goods that
they cannot sell into the United States quite in the
same way.
Speaker 4 (07:18):
But it's the wrong choice, I think the if you
just look at the strategy that China has of dual
circulation China twenty twenty five, they do not want the
old German business model of manufacturing cars and chemicals and machines,
(07:39):
putting them on ships and sending them to ports in
China as finished goods.
Speaker 1 (07:44):
China doesn't want that anymore.
Speaker 4 (07:46):
They want manufacturing to happen locally in China, and therefore
now believing that China could become an alternative is just naive.
I mean, Germany exported more goods and services to Poland
last year than to China, and that trend is not
going to I don't. I think it would be very
(08:07):
naive to think, given the clear message from the top
in China, from the President to the Prime Minister to
the Trade minister on down, implemented everywhere in China that
they want the manufacturing base in China to grow and
become much bigger, to believe that Germany could now instead
of exporting to the United States all of a sudden,
(08:29):
go back to the old days, the good old days
of exporting to China.
Speaker 1 (08:34):
It's naive what would work.
Speaker 4 (08:37):
And I'm convinced that that's the strategy, and we're pushing
the European Commission to do that.
Speaker 1 (08:41):
That if we were.
Speaker 4 (08:42):
To conclude trade agreements with India, with Indonesia, the already
signed trade deal with mercoa store in Latin America, to
get it ratified and finalized, that would be a great alternative.
Speaker 3 (08:57):
Just thirty seconds going forward, how come arregu given that
there is likely to be some sort of trade deal
in the next ninety days, that Germany can avoid recession
this year.
Speaker 1 (09:06):
Well, that is the biggest hurdle that we have.
Speaker 4 (09:09):
The other big hurdle is the economic reform program with
the fiscal spending and the structural reforms that are agreed
in the coalition contract. And we are working day and
night now in the outgoing government so that the incoming
government can immediately unleash both the fiscal power of the
military and infrastructure spending and start legislating the economic reform
(09:34):
program to give a clear message to our businesses and
consumers that We are serious about economic reform and getting
back to the growth path, and there's a very high
chance of doing that because the new majority in the
Parliament has already signed agreed on a contract to implement
exactly that and implement it quickly.
Speaker 3 (09:56):
Minister Koukies, thank you so much for being with us.
That was the foreign minister of Germany.
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