Trump’s protectionism is an opportunity for Germany

In an increasingly connected world closing borders and trade routes is essentially self-defeating. German officials have suggested to their government that this is a classic watershed moment to invest in deepening the country’s trade ties with Asia and South America.

In a newspaper interview, Brigitte Zypries, Germany’s Economic Minister has stated that the policy decisions of U.S. President Donald Trump are going in “a totally wrong direction,” warning that protectionism is likely to cut jobs as well as trim growth in both countries.

The German economy is at the forefront of the world’s trading nations with its exports accounting for nearly 45% of its gross domestic product. For the first time since 1961, in 2015, the US became Germany’s top trading partner and overtaking France.

When asked to comment on Trump’s policy decisions since he has taken the oath of office, German news daily Bild reported Zypries as saying, “What we are witnessing over the past 10 days is alarming and irritating. This is going in a totally wrong direction.”

Zypries underlined the fact that only 10% of German exports were headed to the United States while 60% went to other European countries. Nevertheless, a protectionist U.S. trade policy will still be “bad for the German economy and therefore also for jobs”.

“We have to talk, talk, talk. Such a isolationist policy, which Donald Trump apparently plans to implement, is hurting all sides – also the American economy,” said Zypries when asked how Germany was planning to react to Trump’s move.

Significantly, Zypries noted that some of the measures announced by Trump before taking office, were in violation of the basic rules of the World Trade Organisation (WTO). She did not elaborate on this matter.

Pointing out that a protectionist trade policy would ultimately backfire, Zypries said U.S. companies are dependent on high-quality, cross-border supply chains.

Her comments come in the wake of the head of the BDI industry stating that the German economy would be significantly affected by Trump’s protectionist trade policies.

Last week, Trump signed an executive order which withdrew the United States from the TPP. Further, he has also threatened to impose a 35% border tax on vehicles imported to the U.S. market. German car manufacturers will be affected by this proposed penalty.

Peter Navarro, Trump’s top trade adviser has accused Germany of using a “grossly undervalued” euro to gain a competitive edge.

His remarks were scoffed at by German Chancellor Angela Merkel who pointed out that the euro exchange rate was linked to the European Central Bank’s monetary policy. The German government had no influence on the decisions taken by the ECB vis-à-vis exchange rates.

Instead of lamenting Trump’s protectionist tendencies, German officials have suggested that the government should instead deepen its trading ties with Asia and South America.

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