TRADE WAR: Is Germany ‘taking the American economy for a ride’?

Germany has unexpectedly found itself at the receiving end of President Trump’s unpredictable foreign and economic policy after sanctions on aluminium, steel and Russian business, coupled with the new withdrawal for the controversial Iran nuclear deal added the final nail to the coffin to a deteriorating relationship.

With the US now threatening to punish nations who continue to trade with Iran after sanctions are imposed, Der Spiegel editor Klaus Brinkbäumer claimed this week that Germany’s “current relationship to the US can’t be considered a friendship, or even a partnership”.

And with Germany’s economy heading south according to the Federal Statistics Office data today, DekaBank analyst Andreas Scheuerle said risks to the Germany’s economic outlook have risen following President Trump’s “neo-protectionist aspirations and sanctions policy of the US government”.

The US “sanctions policy” marks the end-game of a growing difference in global outlook that emerged last year.

In May 2017, President Trump tweeted: “We have a MASSIVE trade deficit with Germany, plus they pay FAR LESS than they should on NATO & military. Very bad for US This will change.”

The tweet followed a frosty first meeting between Chancellor Merkel and President Trump back in March 2017, and after the strained early months of relations the obvious difference in global outlook is now hardening.

Tim Focas, director of financial services at Parliament Street told Express.co.uk Mr Trump’s anger with the EU stems from a different view on how to get things done.

With the seemingly moribund US-EU trade deal back on the agenda, Mr Focas said: “Trump is a big fan of bi-lateral, as opposed to complex multilateral trade deals with large political blocks.”

He adds that it took up to seven years for Canada to agree a free-trade deal with the EU, but “this sort of timeframe would be unacceptable for the Trump administration”.

President Trump is also upset by the staggering trade gap between the US and Germany of $67.8 billion – the second largest in the world. Only China, at $310 billion, is above Germany.

Mr Trump’s top economic adviser, Gary Cohn, said at the time that President Trump had complained: “They’re very bad on trade but he doesn’t have a problem with Germany.”

However, Mr Focas adds the antagonism has developed and despite German firms employing hundreds of thousands of workers in the US: “Trump thinks Germany has been taking the American economy for a ride.”

Sounding a warning for the next chapter in relations, he said: “While Trump has yet to officially slap tariffs on Germany, his protectionist rhetoric alone has created uncertainty across the Germany economy and more broadly across European financial markets.“

In May 2017, a Trump administration official claimed that President Trump was aware of the “grossly undervalued” euro giving the bloc an unfair advantage for German goods.

Mr Focas added: “Since adopting the Euro, which was based on the Deutsche Mark, weak economies like Greece and Italy have floundered, while Germany has reaped the rewards of a much weaker currency from an export perspective.”

He adds Germany has found itself in a position of economic strength due to the weakness of other Eurozone members, and that, “in an ideal world, Germany would ramp up consumer demand and increase imports from other Eurozone countries, as opposed to just focusing on its own export power”.

He added: “But one look at Eurozone economies such Italy, and it is not hard to see how Germany has found itself in this position.”

The expert warns that “protectionist policies from one country has a negative effect on everyone involved,” but as talks continue he claims, “when it comes to Trump – expect the unexpected.”