German minister, autos lobby call for urgent EU-US talks over tariffs

BERLIN (Reuters) - Germany's economy minister and its autos association slammed Donald Trump's newly-announced 25% tariff on imported vehicles to the U.S. as bad for European and U.S. economies, calling for urgent negotiations to ward off a spiralling trade war.

Shares in Volkswagen, the most exposed among German carmakers to tariffs because of its large supply base in Mexico and lack of U.S. production for its Audi and Porsche brands, dropped 5.1% in pre-market trade.

Other autos stocks including Mercedes-Benz, BMW, and Daimler Truck dropped around 3.5%, with autos supplier Continental down 2.9%.

"The EU must now give a firm response to the tariffs - it must be clear that we will not back down in the face of the USA," Economy Minister Robert Habeck said.

Germany's VDA car lobby called the new levies a "fatal signal" for free, rules-based trade, warning they would harm companies as well as global supply chains.

"The German automotive industry is calling for immediate negotiations between the U.S. and the EU on a bilateral agreement," VDA president Hildegard Mueller said in a statement.

Still, research by the IfW economic institute found that Germany would not be the hardest-hit economy by U.S. tariffs, the FAZ newspaper reported.

The institute estimates that German gross domestic product will be 0.18% weaker in the first year after the introduction of the tariffs in real terms, compared with a 1.81% hit in Mexico and a 0.6% blow in Canada.

"Overall, the export losses are limited, as cars are often produced close to the sales market," IfW trade economist Julian Hinz said in comments carried by FAZ.

(Reporting by Gdansk newsroom. Writing by Rachel More in Berlin. Editing by Thomas Seythal and Mark Potter)