Merkel floats tougher stance in trade row with U.S.

By Thomas Escritt and Michelle Martin

BERLIN (Reuters) - German Chancellor Angela Merkel hinted at a new front in the trade row with the United States on Friday, warning that Europe's strategic interests rode on the future of Europe's car industry and hinting at competition probes of U.S. internet giants.

Just as President Donald Trump had given national security as a reason for threatening punitive tariffs on German cars, "We should think about the strategic significance of the auto industry for the European Union so we can prepare an exchange with the U.S.," she said.

Trump has repeatedly criticised Europe, and Germany in particular, for running large trade surpluses over the U.S., promising to put an end to what he saw as the continent free-riding on U.S. prosperity.

Speaking at an event to mark 70 years of Germany's "social market" economic model, she said the market dominance of giant U.S. internet platforms also posed a challenge to Europe's social model.

"The platform economy is a big problem," she said. "It challenges both our competition authorities and the EU's, and raises the question of whether they need to get involved in the matter of the big concentration of big platforms from the U.S."

This week, Merkel pushed strongly against Trump's view of the U.S.-EU trade relationship, saying that, if the repatriated European profits of U.S. internet giants were included, then the U.S. ran a current account surplus.

But, despite hinting at retaliatory measures that might be in the offing if the U.S. stuck to its hard line on trade, she stressed that she would prefer to stick to a multilateral path.

"You could of course say that in time of disruptive change, completely different methods are needed," she said. "But the outcome of this approach is so uncertain, and so much is at stake, that we have to at least attempt multilateral deals."

(Reporting by Thomas Escritt; Editing by Michelle Martin and Matthew Mpoke Bigg)