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If Trump goes low, Europe should go high

January 10 2018 Washington DC United States U S President Donald Trump during a cabinet meet
Can't see that button. Source: Imago

If there is any lesson to be learned from US President Donald Trump’s first year as commander in chief, it is that he likes to gamble. The benefits he reaps from sharing off-the-wall opinions, namely the publicity and feeding his own vanity, are more important to him than the long-term consequences of these policies.

For Mr. Trump, simply demonstrating power means more than knowing to what end he is using it for. And it really does matter who has the “bigger button on his desk.” The nuclear dispute with Kim Jong-un, the North Korean dictator, once again offered us a peek into the US president’s soul.

When it comes to trade, there is little doubt that Mr. Trump has the bigger button. Or at least it’s bigger than the button belonging to a mostly-divided EU. As such, Mr. Trump is poised to do incredible damage to the world trade system first established by his own country after the World War II.

By holding the presidential office, Mr. Trump is granted a great deal of leeway in foreign policy matters and can wield that power however he deems fit, especially when Mr. Trump uses “national security” to justify his decisions.

Striking back in kind would be doing Mr. Trump a favor.

Which brings us to the pressing question of how Europe should respond to Mr. Trump’s imposing duties on steel and aluminum imports, and threatening to impose a 25 percent penalty on European cars, should Europeans have the audacity to defend themselves against the tariffs.

It is no secret that Mr. Trump’s furor is directed primarily at Germany, with its gigantic trade surplus of around €250 billion ($310 billion). The US President explicitly named Daimler and BMW as targets of his possible attack.

But Mr. Trump’s outrage over the US’ trade policy position, which ultimately harms US economic interests, is justified, as is the Europeans’ thirst for revenge. Although revenge, in the form of retaliatory measures against US companies, may be sweet, it is not a wise policy.

Striking back in kind would be doing Mr. Trump a favor: It would enable him to portray himself as a bold champion of the interests of American citizens – no matter the costs.

From the European, and especially the German standpoint, the better approach would be to make a virtue out of necessity: The EU could, for example, offer to reduce tariffs on American-made cars, which are at 10 percent, while EU cars on the US market are only charged from 2.5 percent to zero. Or why not take things a step further and reinvigorate the TTIP negotiations, which failed not least because of the chlorine-washed chicken in order to remove reciprocal trade barriers?

Angela Merkel, well-versed in dealing with the world's great egos on the international stage, is the best qualified to put an end to this absurd conflict.

Mr. Trump would be baffled. And Europe should grin and bear it when he is celebrated as the winner of the transatlantic dispute. They should do anything to ensure this conflict does not escalate. Besides, retaliatory tariffs have never worked well, and it certainly won’t work with Mr. Trump.

It is up to Germany, more than other EU member states, to contain the damage to the transatlantic relationship — not only because the United States is its largest trading partner. Chancellor Angela Merkel, well-versed in dealing with the world’s egomaniacs on the international stage, is the best qualified to put an end to this absurd conflict with her sober and balanced manner – not least by curbing the forces demanding retaliation in Brussels and in other countries, like France.

Of course, Europe must defend itself against Mr. Trump’s unabashed protectionism, if he does decide to up the ante. But the best approach would be coordinated action between EU countries that falls within the framework of the WTO – if only to send out a signal of confidence in a rules-based, world trade order.

This case shows that the free exchange of goods is anything but self-evident. But we cannot forget that there have always been trade conflicts, in which Europe has also played the aggressor, as the US is doing now. Europe is by no means as exemplary on trade issues as it likes to pretend.

The difference this time around is that an American president is questioning the world trade system, a far from perfect system, for the first time since World War II. The WTO, as Mr. Trump rightly criticizes, has allowed a mercantilist China to break its rules for years. But it is the best system we have at present and it is hard to imagine maintaining it without the US.

Germany has always wavered between anti-Americanism and romanticizing America. What we need now is realism when it comes to America. America is not Mr. Trump. And if there is even the slightest chance of preventing Mr. Trump from his trade harakiri, it should be taken. A confrontational approach, however, stands to do much damage to Mr. Trump’s eventual successor that – even if they were a professed multilateralist – they would face a steep uphill battle to normalize the transatlantic relationship.

To reach the author: muenchrath@handelsblatt.com

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