German Chancellor Angela Merkel. Picture: REUTERS/HANNIBAL HANSCHKE
German Chancellor Angela Merkel. Picture: REUTERS/HANNIBAL HANSCHKE

Munich — German Chancellor Angela Merkel has warned "nobody will win" a global trade conflict after US President Donald Trump approved tariffs on foreign steel and aluminium.

With Germany in Trump’s sights for its trade surplus, Merkel signaled on Friday that her government will support EU retaliation if necessary, though she prefers reviving talks on an EU-US trade pact to lower tariffs and defuse the conflict.

"I don’t want to use martial language — that doesn’t help us get any further," Merkel told reporters in Munich after meeting the heads of leading German business groups. "It would ultimately be detrimental to everyone. No one would win such a competition."

Trade conflict with the US is the first big challenge of Merkel’s fourth term as she prepares for her re-inauguration on Wednesday. The US was German manufacturers’ biggest export market in 2017 and the country with which Germany — Europe’s largest economy — has its biggest trade surplus.

Deputy government spokesperson Georg Streiter said earlier on Friday that Germany views Trump’s tariffs as illegal. Merkel said the only way forward was to keep working for an EU trade agreement with the US despite Trump’s protectionist moves. "We’ll make very, very clear in our talks that that is our ultimate goal," she said.

Trump has singled out Germany, with its automotive-heavy export economy, as taking advantage of its trade surplus with the US, saying during a meeting last year in Washington that the US had been treated "very, very unfairly".

Dieter Kempf, head of the Federation of German Industries, said the country’s business leaders agree with Merkel. The trade spat could be resolved through World Trade Organisation rules, he said alongside Merkel in Munich, noting, "We should keep calm."