Germany waking up to Trump agenda

Chancellor Angela Merkel speaks with President Barack Obama outside the Elmau castle in Kruen near Garmisch-Partenkirchen, Germany.
Michael Kappeler | Reuters

German business leaders caught off guard by the election of Donald Trump are facing the prospect of a new U.S-German trade relationship.

As uncertainty looms over President-elect Trump's White House priorities, German companies are holding out hope free trade will win over protectionist policies in the West Wing. Businesses expressed skepticism over Trump's anti-globalization rhetoric on the campaign trail, saying the future president is more likely to take a balanced approach to trade relations with Germany, its crucial economic and political ally. But some worried Trump's "America-first" promise could infiltrate the alliance.

"Everybody hopes that we will see better decisions from now on from Trump than in the election campaign," said Thilo Brodtmann, executive director of VDMA, Germany's engineering federation representing more than 3,000 companies. "If you believe in what has been said during the campaign…that would be of very harmful."

Germany shipped more goods to the U.S. than any other country in 2015 with exports increasing 73 percent since 2010, according to the Munich-based Ifo Institute for Economic Research. Top exports include automobiles, machinery, and electrical goods. German Chancellor Angela Merkel reinforced the necessity of a strong U.S.-German trade relationship in a joint press conference with President Barack Obama Thursday in Berlin.

"Our bilateral relations are very good, they are very close in the areas of business, of the economy," Merkel said. "The European Union and the United States of America are the big important economic areas for us, which is why I always have come up strongly in favor of concluding a trade agreement with the United States of America."

The irony is that deteriorating U.S.-German relations might actually jeopardize German manufacturing investments in the U.S. and thereby pose a threat to the very jobs Trump has said repeatedly that he wants to boost.
Jacob Funk Kirkegaard
Senior fellow, Peterson Institute for International Economics
Obama: Merkel has been an outstanding partner

Multinationals like Germany-based chain saw maker Andreas Stihl AG & Co. have exported more than their products to the United States. The company brought German-style workforce training and advanced manufacturing to its U.S. headquarters in Virginia Beach, Virginia.

"We're very proud of the fact that our products are German engineered but also built in America and the fact that we add so much value over here," said Bjoern Fischer, president of the company's U.S. subsidiary Stihl Inc.

Fischer said he was optimistic about Stihl's growth prospects in the U.S., citing the company's long-term business strategy. He said operations in both the U.S. and Germany will continue to take advantage of a global manufacturing environment under president-elect Trump.

"Both countries are obviously very strong countries with very large markets," he said. "That cooperation will continue and I'm sure we'll find solutions."

Fischer pointed to possible benefits for business under a Trump administration, including lower corporate tax rates and reduced business regulations. He said there were "two sides of a coin" from a stronger dollar in the U.S., which has appreciated since the election.

"All the components that we buy overseas are benefiting from a stronger dollar so that helps us, but a strong dollar overseas makes our product more expensive to other parts of the world," he said.

Increased trade barriers would likely pose problems for German industrial companies with large footprints in the U.S., said Jacob Funk Kirkegaard, a senior fellow at the Peterson Institute for International Economics. He said German multinationals might not be able to produce or sell their goods in the U.S. as easily as before.

"The irony is that deteriorating U.S.-German relations might actually jeopardize German manufacturing investments in the U.S. and thereby pose a threat to the very jobs Trump has said repeatedly that he wants to boost," Kirkegaard said.

He added disagreements between Trump and Merkel over climate change could further deteriorate the U.S.-German business relationship. Kirkegaard said efforts to fight climate change within Germany are "completely uncontested," and Merkel does not want to defend her country's position to the United States as she gears up for the 2017 German elections.

"If Donald Trump goes ahead and does what he said he would do during the campaign and takes the United States out of the international climate agreement, then I would predict that the political and economic response from Germany would be very negative," he said.

German industry leaders insist they will continue to push business initiatives like TTIP, a bilateral trade agreement between the United States and the U.S. The proposed legislation has met opposition on both sides of the Atlantic.

"German industry will continue to work towards a fair TTIP with good regulations for both sides," said Ulrich Grillo, president of the Federation of German Industries (BDI) in a statement.

Grillo pointed to more than 5,000 German companies represented in the U.S., saying the country must continue to honor its responsibilities as a global leader. An estimated 1.5 million jobs in Germany depend on trade with the U.S., according to the Ifo Institute.

"The United States must continue to support open markets," Grillo said in the statement. "Everything else would be poison for the economy."

Other industry leaders were skeptical Trump would follow through on trade restrictions, dismissing his anti-trade language as fiery campaign rhetoric.

"We hope that there will be some learning curve when answering the question of free trade and the necessity for trade," VDMA's Brodtmann said. "It will show quite quickly that any kind of protectionism will harm the macroeconomic data of the U.S. as well as elsewhere."