President Donald Trump’s latest executive orders on foreign trade have irked Chancellor Angela Merkel’s government, prompting tough talk from Berlin.

On Friday, President Trump signed two orders seeking to identify trade abuse and other malpractices carried out by foreign governments in order to lower the U.S. trade deficit. Merkel’s second-in-command, German Vice Chancellor Sigmar Gabriel, described Trump’s moves as unlawful, claiming that he wants to “favour American companies, even if it contradicts international law.”

Germany’s Economy Minister Brigitte Zypries said that President Trump was taking the U.S. in  “completely the wrong direction” and “moving away from free trade” by signing those executive orders. Minister Zypries had previously threatened to take the U.S. to court if the Trump administration were to impose import duties on German products.

In the next 90 days, the Trump administration hopes to produce a country-by-country, product-by-product report to identify foreign governments that subsidize their exports — making their products below-market price. The current U.S. trade deficit stands at around $500 billion, with Germany accounting for some $65 billion of that deficit, nearly doubling its share during President Obama’s tenure.

Earlier this year, Trump’s top trade advisor Peter Navarro accused Germany of using a “grossly undervalued” Euro to “exploit” the US and its trade partners. Navarro also called the growing U.S. trade deficit a “risk to American security and prosperity.”

German public broadcaster Deutsche Welle reported the Merkel government’s reaction:

Following US President Donald Trump’s executive orders signed on Friday to review causes of US trade deficits, Germany’s Economy Minister Brigitte Zypries said US President Donald Trump is signaling policy decisions that would send the country in “completely the wrong direction.” […]

The orders that Trump signed will look into why it has trade deficits with some of its most important partners, including China, Canada and Germany.

Trump repeated on Friday claims that he made throughout his campaign about seeking to bring back industrial jobs to the US. Before signing the orders, he said it was time to “correct” bad agreements with other countries and claimed that “thousands of factories have been stolen from our country.” […]

The US obviously wants to move away from free trade and trade agreements,” Zypries said in an interview with the German weekly “Welt am Sonntag,” adding, “We must seek constructive dialogue and explain that the reasons for the US trade deficit are not just abroad.” […]

Germany’s Vice Chancellor and Foreign Minister Sigmar Gabriel has said he shares Zypries’ concerns. Gabriel told German newspaper “Rheinische Post” that Trump’s executive orders signaled the US government “is ready to favor American companies, even if it contradicts international law.” [DW News, March 3, 2017]

Statements coming from Berlin make it clear that Merkel’s government is heading for a showdown with the Trump administration on the issue of trade. Merkel, however, does not want to fight this battle alone. Merkel instead wants the E.U. to do to her bidding and challenge Trump on trade.

Ahead of Merkel’s last month’s U.S. visit, leading German magazine Der Spiegel had formulated Merkel government’s stance towards policies advocated by Trump. The magazine had cautioned U.S. readers in its English edition that if Trump sticks to his ‘America First’ policy, the E.U. was ready to “brace for [a] trade war”:

But what happens in the likely event that Trump sticks to his “America First” plans? If that happens, then Merkel is expected to push for a united EU front to blockade Washington. [Der Spiegel, March 10, 2017]

Merkel is shoring up her defenses by teaming up with China, the number one source of the U.S. trade deficit. Beijing is a willing ally in Merkel’s trade jihad. China is posing as a fervent advocate of free trade ever since Trump announced his intent to reduce $350 billion worth of trade deficit with the Asian giant.

On the day Merkel headed for Washington, she issued a joint statement with the Chinese President Xi Jinping, stressing the “importance of open markets”. It was a well-timed salvo against Trump’s America First policy.

Despite tough talk coming from Berlin, Merkel lacks the political courage to have a go at it on her own. Merkel, however, is very deft at building unprincipled coalitions. That’s how she has ruled Germany and ran the E.U. for over a decade. On the other hand, Trump is a negotiator and likes to deal with partners face to face.

Trump’s trade advisor Peter Navarro has already made it clear to Berlin that U.S. wants to negotiate bilateral trade issues ‘outside of European Union’. And with Merkel’s own political future in limbo as her country heads for polls later this year, it’s unlikely that other European leaders would risk their political capital to back Merkel’s in any possible trade conflict.

Video: Treasury Secretary Steven Mnuchin in Germany, U.S. had no desire for “trade wars” [March 2017]:

[Cover image courtesy Phoenix TV, YouTube]


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