The prospect of a full-blown trade war grew on Friday after Angela Merkel warned of the economic damage of US tariffs even as Donald Trump said he was ready to impose duties on $500bn of Chinese imports. The US president escalated tensions with trading partners in a series of attacks on social media and TV, accusing China and the EU of manipulating currencies to hurt the US on trade. The latest salvo came as Jean-Claude Juncker, president of the European Commission, prepares to travel to Washington next week for talks aimed at cooling trade tensions.
“For years, we’ve been losing $150bn with the EU . . . and they’re making money easy,” Mr Trump told CNBC, adding that he was prepared to step up the trade war with China because it “was the right thing to do for our country”. Speaking at her annual summer press conference in Berlin on Friday, the German chancellor outlined possible responses to the threat of US tariffs on European cars but said that they represented “a real danger for the prosperity of many people in the world”. The imposition by the US of tariffs on EU exports of automobiles may contravene World Trade Organization rules, she added, saying the EU was working on “countermeasures” to the potential tariffs, but that this was “by far the worst solution”.