Bloomberg Audio Studios, podcasts, radio news.
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.
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.
Moment ago, moments ago.
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.
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, 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.
A sense of what exactly the demands are from the US.
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.
We also have to talk about non.
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.
That are important. There's a lot to unpack there.
Are you optimistic you could get to zero zero with respect to no tariffs on either side?
Yeah?
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.
But at the end of the day, if it's generally the.
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.
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.
Yeah.
Well, of course that is still there's still uncertainty around that and it will have to be negotiated.
As I said, there's still differences in views.
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 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
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.
Why do you think there's been such a shift in tone from this administration over the past couple of days.
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.
So I do think it was in a way already.
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 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.
You keep talking about Europe and Europe negotiating as a block.
How much is Europe negotiating as.
A block versus each individual country?
There's no doubt.
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 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.
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.
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.
And the biggest asset that we.
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 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.
Has already taken place in the middle of the Biden administration.
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.
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.
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, putting them on ships and sending them to ports in China as finished goods.
China doesn't want that anymore.
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 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, go back to the old days, the good old days of exporting to China.
It's naive what would work.
And I'm convinced that that's the strategy, and we're pushing the European Commission to do that.
That if we were.
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.
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.
Well, that is the biggest hurdle that we have.
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 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.
Minister Koukies, thank you so much for being with us. That was the foreign minister of Germany.