If the U.S. initiates a trade war, the German finance minister threatens retaliation.

• If the U.S. initiates a trade war with the European Union, there could be retaliation, as warned by German Finance Minister Christian Lindner on Friday.
• According to Lindner, who spoke to CNBC's Karen Tso at the International Monetary Fund's annual meeting in Washington, D.C., trade controversy always results in losers, with no winners.
• The U.S. is one of the most crucial trading partners of Germany, which heavily relies on trade as a vital component of its economy.

If the U.S. initiates a trade war with the European Union, there could be retaliation, as warned by German Finance Minister Christian Lindner on Friday.

According to Lindner, who spoke to CNBC's Karen Tso at the International Monetary Fund's annual meeting in Washington, D.C., trade controversy always results in losers, with no winners.

If Donald Trump were elected as president, what U.S. trade policy could look like is a crucial question, according to Lindner. He suggested that diplomatic efforts are necessary to convince whoever enters the White House that it's not in the best interest of the U.S. to have a trade conflict with the European Union. Lindner, who belongs to the pro-business Free Democratic Party currently in coalition with Chancellor Olaf Scholz's Social Democratic Party, emphasized the need for retaliation if such a conflict were to occur.

According to Lindner, the issue with trading for the U.S. is with China, not the EU. He emphasized that the EU should not be viewed as a negative consequence of the controversy between the U.S. and China.

If elected, Trump could impose blanket tariffs of 10% to 20% on almost all imports, regardless of their origin.

If a 20% tariff were imposed by the U.S., the EU and Germany's GDP would decline in the near future, according to a study by the German economic institute IW, which was reported by Reuters on Thursday. Since trade is a crucial component of the German economy, the impact of tensions, uncertainty, and tariffs would be more severe on Germany than on other countries.

Since 2021, the U.S. has been the second most important trade partner for Germany behind China, but in the first half of 2024, foreign trade turnover with the U.S. was higher than that with China. In 2023, around 9.9% of German exports went to the U.S., according to the German statistics office Destatis.

The trade tensions between the U.S. and China, as well as between the EU and China, have intensified this year. In response to perceived unfair trade practices, both the U.S. and EU have imposed higher tariffs on certain goods imported from China.

The EU and China have reciprocated each other's tariffs on imports, and both sides are conducting investigations into each other's business practices.

The EU imposed tariffs on Chinese-made electric vehicles, prompting Germany's Lindner to urge the Union not to initiate a trade war. Germany had previously opposed higher duties, fearing their impact on the country's struggling carmakers.

Gita Gopinath, the deputy managing director of the International Monetary Fund, stated on CNBC that an intensification of trade and tariffs conflicts between the U.S. and China would be detrimental to all parties involved.