German carmakers in talks with US over possible tariff deal, sources say

BERLIN (Reuters) -Germany's leading automakers are in talks with Washington over a possible import tariff deal, seeking to use their U.S. investments and exports as leverage to soften any blow, three people familiar with the matter said.

BMW, Mercedes-Benz and Volkswagen hope that the talks with the U.S. Department of Commerce could result in a deal in June, one of the people said, but this would be contingent on companies pledging substantial investments that would sway the U.S. administration.

The automakers have signalled some plans for U.S. expansion since President Donald Trump began making tariff threats.

Mercedes-Benz will add its best-selling GLC SUV to its Alabama plant lineup from 2027, BMW is considering adding shifts at its Spartanburg plant and Volkswagen's Audi is planning to produce some models in the United States, although the brand says that plan pre-dates the Trump administration.

BMW, which has urged the European Union to cut tariffs on vehicle imports from the U.S. to 2.5% from 10%, is the largest U.S. car exporter by volume. Mercedes-Benz also exports heavily from its Alabama plant, its centre of production for SUVs.

EXPORT CREDITS

Under the proposals being discussed, German carmakers would get credits for cars they export from the United States, which could then be deducted from tariffs, a second source said.

The talks were first reported by Handelsblatt.

Volkswagen, Mercedes-Benz and BMW declined to comment on any talks with the U.S. government. The carmakers have previously said they were holding talks with the U.S. government over tariffs.

The U.S. is the fifth-largest source of car imports for the EU, after China, Japan, Britain, and Turkey, according to EU figures.

The European Commission, which oversees trade policy for the 27-nation bloc, is stepping up efforts to secure a deal with Washington to end U.S. import tariffs on EU goods, or at least prevent any increases.

Brussels has asked the EU's leading companies and CEOs for details of their U.S. investment plans as leverage for negotiations.

Still, the Commission is also preparing for retaliation should talks fail, with motor vehicles and motor vehicle products among the highest value items on a list published by the Commission earlier this month of products that could be hit with counter-measures.

Shares in the carmakers got a boost from news of the talks, with BMW up 3.3% and Mercedes up 2.6%. Volkswagen's shares initially rose 2.2% before returning to their previous value.

Trump's tariff strategy has added to the pressure on a German car industry already struggling with weak European demand and stiff competition.

(Reporting by Christina Amann, Victoria Waldersee and Ilona Wissenbach. Writing by Rachel More and Christoph Steitz. Editing by Madeline Chambers, David Holmes and Mark Potter)