Trans-Atlantic Tensions

Germany Prepares for Trade War with U.S.

  • Why it matters

    Why it matters

    Tensions between Berlin and Washington over Germany’s trade surplus risk boiling over into an outright trade war.

  • Facts

    Facts

    • U.S. President Donald Trump’s trade advisor, Peter Navarro, has characterized the U.S. trade deficit as a threat to national security and singled out America’s $65-billion deficit with Germany “one of the most difficult” trade issues.
    • The Trump administration is considering introducing a 20-percent border-adjustment tax, which would hit German exporters hard.
    • Germany is considering capital controls as a possible retaliatory measure. Berlin and Brussels are also mulling filing a suit before the WTO if the United States makes good on its threat.
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    Audio

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America first comes with a price. Picture source: Bloomberg

For just a moment, officials in Germany’s finance ministry breathed a collective sigh of relief. The Trump administration, it seemed, had finally come to its senses on trade.

An adviser to U.S. President Donald Trump indicated that, from an American perspective, it made little sense to impose protectionist measures against Germany, Europe’s largest economy and a close partner.

Officials in Berlin, however, gave their hopes up too soon. The administration walked back the adviser’s message and Peter Navarro, the president’s top trade official, went on a rhetorical offensive.

Mr. Navarro characterized the U.S. trade deficit as a threat to national security and singled out America’s $65-billion deficit with Germany as “one of the most difficult” trade issues. Germany and the United States should hold bilateral discussions on trade outside of the European Union, he said.

The administration’s hard-line rhetoric has escalated tensions between Germany and the United States ahead of Chancellor Angela Merkel and President Trump’s first meeting in Washington on Tuesday.

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