April 26, 2018 / 10:34 AM / 3 months ago

UPDATE 2-Ahead of Merkel trip to U.S., Germany downbeat on trade tariffs

* Merkel to meet Trump on Friday, after Macron visit

* German officials say ties need nurturing

* As of now, expect U.S. steel tariffs to kick in May 1

* Stress Iran deal must remain intact

* Defend Nord Stream 2 pipeline project (Adds BDI reaction, details)

By Madeline Chambers and Paul Carrel

BERLIN, April 26 (Reuters) - Germany expects U.S. tariffs on European steel and aluminium products to kick in on May 1, a senior government official said before Chancellor Angela Merkel travels to Washington to meet U.S. President Donald Trump on Friday.

Trade will be a major topic for discussion at the meeting, before an exemption from U.S. tariffs on steel and aluminium imports granted to the European Union expires on May 1.

"From today's point of view, one has to expect that the tariffs will come on May 1," the official said, stressing Germany would continue to negotiate to try to get a broad package including other industries. The tariffs would hit Germany's powerful auto sector especially hard.

"I think the chancellor would prefer a broad dialogue with the Americans. The government is open to extending the package to other duties and trade barriers," said the official.

"Whether we succeed on that, we don't know. For that to happen, we would first need the exemption to be delayed for the long term," he said.

Germany's BDI industry association is banking on an agreement with Trump.

"The threatened tariffs are an acid test for the transatlantic relationship," said BDI President Dieter Kempf, adding one in four jobs in Europe's biggest economy depends on exports.

The official argued that as well as exporting vehicles, German firms operate plants in the United States which provide jobs and export cars around the world.

Merkel's one-day working trip follows a three-day state visit to Washington by French President Emmanuel Macron.

Cautious Merkel has failed to establish as strong a rapport with Trump as she did with Barack Obama and the mood music of her visit is likely to contrast sharply with that of Macron's "bromance" with the U.S. president.

IRAN, RUSSIAN GAS

Macron called on the United States not to abandon a multinational Iran nuclear deal as Western envoys said Britain, France and Germany were nearing a package that seeks to persuade Trump to save the pact.

Trump has threatened to wreck the 2015 accord, under which Iran agreed to curb its nuclear activities in return for the lifting of economic sanctions, by reimposing U.S. penalties next month unless the three European allies agree to fix its "flaws".

"The premise of Macron's proposal is that the agreement remains in its existing form and additional elements come on top," another German government official said. "In our view this agreement should be maintained."

He said add-ons could include issues such as Iran's ballistic missile programme and its role in the region.

Trump may try to seize on a planned Russian gas pipeline running under the Baltic Sea to Germany as a bargaining chip.

The United States sees the Nord Stream 2 gas pipeline, which would double the existing pipeline's annual capacity of 55 billion cubic metres, as a threat to Europe’s energy security.

Despite increased tensions between the West and Moscow in the last few weeks, Merkel appears committed to the project. She has, however, conceded that there are political as well as economic factors at stake and has sought to reassure Ukraine which is worried it will lose gas transit revenues.

The German officials argued that Germany, which gets 37 percent of its gas from Russia, was not making itself more dependent on Moscow and that it was trying to get foreign investors to help Ukraine by investing in its pipeline.

"Our analysis is ... that does not make us more dependent on Russia," one of the two officials said. (Editing by Janet Lawrence)

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