Trade

Germanys transatlantic peaceniks feel Trump trade burn

Germanys idealistic transatlanticists have learned the hard way that they need to gird up for a trade war with Donald Trump.

Over recent months, Berlin has been the main proponent of a peace deal with the U.S. president, much to the chagrin of France and the European Commission, which have been calling for a tough response to Washingtons tariff threats.

In part, Germanys fears about a trade war spilling over into its talismanic car sector have inspired Berlins conciliatory stance toward Trump. But this push for détente also has deep historical foundations. Chancellor Angela Merkel and her Economy Minister Peter Altmaier hail from the transatlanticist wing of the Christian Democrats that views the relationship with Washington as the basis of the nations geopolitical identity.

It is, therefore, a seismic political shift when even Merkel and Altmaier accept that the EU will have to close ranks and hit back hard against Trump, as the French insisted from the outset. Realizing that high new car tariffs are in the cards, even the German peaceniks are signalling that its time to retaliate.

Germanys new stance was on full display when Merkel spoke in a TV interview on Sunday night, shortly after returning from a G7 summit in Canada that ended in chaos after Trump withdrew his support from a communiqué endorsing free trade.

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“We dont let ourselves be taken advantage of again and again,” Merkel said, adding that Trumps behavior at the summit had been “sobering and a bit depressing.”

Merkel had first expressed her fears that Trump was smashing the old certainties after last years G7 summit. Speaking shortly afterwards at an election rally in a Munich beer tent, she said: “The era in which we could fully rely on others is over to some extent.”

On Sunday, she confirmed those suspicions. “As Europeans, we do need to take our fate into our own hands … We cant hope any longer, as weve maybe done a bit carelessly over many decades, that America will take care of it.”

Back to TTIP

When Trump announced in March that he would impose additional tariffs of 25 percent on steel and 10 percent on aluminum, the Germans bet that the real estate tycoon in the White House was out to strike a deal. Merkel and Altmaier ran a gauntlet of criticism from EU allies — and even German industry — to propose a quick transatlantic trade accord, a sort of TTIP lite.

Last month, the Germans landed a coup by convincing EU leaders to agree to rally behind their diplomatic flirtations with Washington.

They only found out shortly afterwards that Trump was still charging ahead with his steel duties.

“Trump acts often very unpredictably, but at the same time has a consistent line when it comes to claiming that America has been ripped off by its friends and allies,” said Ulrich Speck, a senior visiting fellow at the German Marshall Fund of the United States. He added that “despite everything that Merkel has tried, the Germans are particularly in his crosshairs.”

As if to prove that point, Trump has twisted the knife in linking his trade grievances to Germanys failings as a military ally. “Germany pays 1% (slowly) of GDP towards NATO, while we pay 4% of a MUCH larger GDP. Does anybody believe that makes sense?” he tweeted Monday.

Its a sore point. “For geopolitical and security reasons, Germany depends much more on the United States than France does, for example,” said Speck.

Although Merkel and Altmaier, in principle, still say they are ready to talk with the U.S., they now emphasize the need for European unity and firmness in dealing with Trump. Last week, the Commission adopted a €2.8 billion retaliation list against the steel tariffs — with clear backing from Germany.

“Its important that we Europeans continue to act in unison and that we make clear we are only ready to engage in fair and legitimate negotiations,” Altmaier said Monday, adding that “at this moment, it doesnt look like an agreement [with the United States] is in reach in the short term.”

Hes almost beginning to sound French.

Sum of all German fears

Germanys nightmare scenario is a 25 percent tariff on car imports. Last month, the president instructed his Commerce Department to launch a probe into imposing those duties.

Over recent weeks and months, Germany has been insisting that such an escalation would be irrational.

Germanys influential Association of the Automotive Industry (VDA) has warned that a trade war in the auto sector would make little sense because the 265 U.S. plants owned by German carmakers and automotive parts manufacturers created 110,000 jobs in America. Half of those depend on the export business.

U.S. President Donald Trump speaks with IMF chief Christine Lagarde, next to German Chancellor Angela Merkel | Ludovic Marin/AFP via Getty Images

But despite this, a gloomy Merkel accepted that the car war could still be coming.

“We are trying to see if we can prevent that from happening — but I cant predict this, so I dont want to raise any false hopes,” she said Sunday.

Merkel added that a united European front against Trumps trade offensive is a German priority. Should Trump push ahead with his car tariffs, “then the European Union will hopefully act, united again, as it has done now,” the chancellor said.

Stefan Rouenhoff, a leading trade lawmaker from Merkels CDU, reiterated that it is a crucial moment for Europeans to stick together. “Today its perhaps car tariffs, tomorrow its maybe products from other countries,” he said. “At the moment, it seems quite difficult to get through [to the Americans] with reasonable arguments.”

He argued that a coordinated European response would hurt Trump.

“We are a market of 500 million consumers. We can bring a lot of influence to bear.”

Jakob Hanke contributed reporting.

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