Don Anniversaire

A year on, Germany learns to live with Trump

Pictures of the Year: U.S. Politics
You're gonna do what?! Source: Reuters

Donald Trump started as he meant to go on. A year ago, on Capitol Hill in Washington DC, the newly coined US president made an abrasive inauguration speech in the mold of his combative “America First” campaign promises. “Together we will make America strong again, we will make America wealthy again, we will make America proud again, we will make America safe again. And, yes, together we will make America great again,” was the message.

Then, of course, came the other sort of Trump bluster: the untruths about his less-than-massive inauguration crowd, followed by the coining of the Orwellian phrase “alternative facts.”

Over the course of 2017, the world became less and less surprised by the shoot-from-the-hip tweets, ignorance and aggression of the US leader. But for German political and business leaders, Mr. Trump’s first 12 months have presented a particularly steep learning curve and, at times, an emotional roller-coaster, as he set about dismantling international free-trade arrangements, of which Germany was one of the main beneficiaries.

Other nations quickly adapted to the style of the new inhabitant of the White House. Early in the year, the Saudis charmed the new president with a sword dance and some shrewd donations to charities associated with his daughter Ivanka. On his visit to Beijing, the Chinese shut down the Forbidden City in his honor. French President Emmanuel Macron left Mr. Trump spellbound with a big military parade in Paris followed by dinner at the top of the Eiffel Tower.

The mood among German politicians is largely one of resignation and resolve.

Such wooing left the Germans cold. Mr. Trump is fond of sycophancy and spectacle, hardly the German way. And the president is no fan of Berlin’s sober, pragmatic methods, nor Angela Merkel’s cautious and rather distant personal style. To make things worse, soon after Mr. Trump was elected, the American press declared the German chancellor the new “leader of the free world”: just the kind of snub that Mr. Trump tends not to forget.

In diplomatic terms, the first year of the Trump administration has left German-American relations in the deep freeze. Cooperation continues in many areas: diplomats work together and talks are held in a constructive atmosphere. But the Washington end of relations is shrouded in mystery. No one really knows what Mr. Trump thinks, or how decisions are made. Even his closest colleagues are unsure about their mercurial, tantrum-prone boss.

Over the year, it became clear that Mr. Trump was no flash in the pan: his emergence confirmed radical shifts in trans-Atlantic relations. Writing in Handelsblatt, former German foreign minister Joschka Fischer observed that “Mr. Trump’s presidency has cast doubt on both the American security guarantee and the shared values that had linked Europe and America.”

As a result, the mood among German politicians is largely one of resignation and resolve. No one in Berlin expects Mr. Trump to change, or to grow into office. There is little patience left, after he sabotaged global efforts on climate change, undermined the Iran nuclear deal and squandered America’s moral authority. And there is more desire to navigate autonomy than to restore past close relations. Germany and Europe are increasingly making their own way in the world.

For a small minority of German politicians, this autonomy meant the hope of closer ties to Russia. Others contemplated better relations with China, whose president, Xi Jinping, became an unlikely champion of free-trade. But for the vast majority, responding to Mr. Trump meant building a stronger Europe. In May, Ms. Merkel made global headlines when she said Germany could no longer rely on the United States, and called on Europeans to “take our fate into our own hands.” Later in the year, Mr. Macron stepped forward to push that European vision, while Germany was mired in post-election doldrums.

Among the German business community, Mr. Trump’s inauguration was marked by genuine anxiety. His threats to impose tariffs on non-American goods and to clamp down on imports from Mexico threatened to hit German carmakers hard. In the first weeks of the presidency, many German business leaders publicly emphasized their companies’ contribution to the US economy, as if to say, “please don’t hurt us, Mr. Trump!”

In May, during Germany’s presidency of the G20 group of leading economies, the country’s three main business organizations co-sponsored the “B20,” a high-profile conference in Berlin meant to show support for free trade and climate protection. Few participants condemned Mr. Trump by name, but the adversary was clear.

 

19 p12 The US after one year of Trump-01

CEOs played an understandably cautious game. Joe Kaiser, the high-profile Siemens boss, spoke out against Mr. Trump’s protectionist policies, but also played gracious host to Ivanka Trump on her visit to Berlin, showing her around Siemens’ state-of-the-art training facilities.

Now, at the end of Mr. Trump’s first year, many business’ concerns have lessened. While protectionism remains a distinct worry, there is a new sense that Mr. Trump’s bark may be worse than his bite. In spite of the president’s direct threats to increase duties on the likes of BMW and Mercedes, sales of German cars in the US increased this year. And as before, Mexico continues to be a key site for German car production for export to the US market.

In addition, many large German companies will do spectacularly well from Mr. Trump’s taxation reform, passed in December. The cut in US corporation tax from 35 to 21 percent will mean windfalls for German firms including Deutsche Telekom, Daimler and Siemens. BMW expects a boost in its profits of up to €1.5 billion ($1.84 billion).

There is a catch though: Accounting rules mean the new tax rates will bring short-term losses to some German firms with US operations. Adidas is set to lose around €160 million in expected tax write-offs, while Deutsche Bank will have to swallow as much as €1.5 billion in extra charges. However, even companies badly affected expect future benefits from the Trump tax bill.

Some observers suggest Mr. Trump’s tax cuts could eventually have a knock-on effect in Germany, where combined federal and local corporate tax rates are now higher than in the US. Tax competition could put pressure on Germany’s domestic tax regime, in particular the expensive and bureaucratic local business tax, driving down rates.

For all the ups and downs of Mr. Trump’s first year, one industry in particular has benefitted. As in the rest of the world, German satirists and comedians have enjoyed an excellent 12 months at the US leader’s expense, with no shortage of material and very high demand. It will be interesting to see who has the last laugh.

 

Handelsblatt journalists Martin Greive, Donata Riedel, Ulf Sommer, Moritz Koch, Torsten Riecke and Jens Münchrath, and Handelsblatt Global editor Brían Hanrahan, contributed to this report. To contact the authors: greive@handelsblatt.com

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