German Finance Minister Christian Lindner warned on Friday that if the United States initiates a trade conflict with the European Union, the EU could retaliate.

“There are no winners in trade disputes, only losers,” Lindner stated in an interview with CNBC’s Karen Tso during the International Monetary Fund’s annual meeting in Washington, D.C.

Lindner suggested that if Donald Trump were elected president, U.S. trade policy could become a crucial issue. “In that situation, we would need diplomatic efforts to convince any incoming U.S. administration that a trade conflict with the EU is not in America’s best interest. Retaliation might be necessary,” he noted. Lindner is part of the pro-business Free Democratic Party, which is currently in coalition with Chancellor Olaf Scholz’s Social Democratic Party.

The real trade issue for the U.S. lies with China, not the EU, Lindner argued, adding that the EU “should not suffer as collateral damage” from U.S.-China trade disputes.

Trump has suggested that, if elected, he might impose broad tariffs of 10% to 20% on nearly all imports, regardless of origin.

According to a study by the German economic institute IW, if a 20% tariff were enacted by the U.S., Germany and the EU would likely see a decline in their GDP over the coming years, as trade is a critical component of the German economy, making it especially vulnerable to tariffs and rising tensions.

Earlier this month, Germany’s statistics agency Destatis highlighted the growing importance of the U.S. as a trading partner for Germany. Since 2021, the U.S. has been Germany’s second-largest trade partner after China, but in the first half of 2024, trade volume with the U.S. surpassed that with China. In 2023, nearly 9.9% of German exports went to the U.S., according to Destatis.

Trade tensions between the U.S. and China, and the EU and China, have been increasing throughout the year. Both the U.S. and EU have raised tariffs on certain Chinese imports, citing unfair trade practices.

China, in response, imposed temporary tariffs on select imports from the EU. Investigations into trade practices, subsidies, and competition are underway, adding to the cycle of retaliatory actions.

Trade conflicts will be “costly for everyone,” warned IMF’s Gopinath.

Following the EU’s decision to impose tariffs on Chinese-made electric vehicles, Lindner urged the EU to avoid provoking a trade war, as Germany had previously opposed increased tariffs, concerned about their potential impact on its auto industry.

Earlier this week, IMF Deputy Managing Director Gita Gopinath told CNBC that escalating trade and tariff tensions between the U.S. and China would have significant economic costs for all parties involved.