The United States is the most important export markets for German goods. It is therefore not surprising that German companies are worried about many aspects of Trump's economic program. In principle, German companies in the United States could benefit from corporate tax cuts and public investment in infrastructure as well as reductions in the bureaucracy. If the U.S dollar continues its upward trend, this will favour exports from the Eurozone – and thus from Germany – to the United States. As a result, investments and exports of Germany companies to the United States could be given a boost through Trump’s policies.
Protectionism and Mercantilism
If Trump, on the other hand, fulfilled his election campaign to protect U.S. companies against foreign competition, this would serve a severe blow to German business. Many German companies are heavily invested in Mexico. Additional U.S. tariffs on imports from Mexico, as Trump has threatened, would severely disrupt regional supply chains. For example, around 65 per cent of exports of German companies in Mexico are bound for the United States. Tariffs on intermediate goods put a burden on companies and, ultimately, make the end product more expensive. A border adjustment tax, proposed by Republicans in the U.S. House of Representatives, could disrupt trade relations and global value chains by making imports more expensive. New “Buy American” Rules would further discriminate against foreign bidders. In addition, President Trump’s Executive Order, ordering a report on the causes for the U.S. trade deficit and targeting specific countries like China and Germany, challenges the notion that trade is win-win-proposition. Finally, the notion that the United States might not have to follow and implement WTO rulings could undermine the global trading system.
The Future of Transatlantic Relations
Relations between the EU and the United States are bound to become more rocky. President Trump supports Brexit and believes that other Member States will leave the EU. Trump is sceptical regarding plurilateral and multilateral agreements. He will thus likely try to strengthen the relationship with individual EU members – not with the EU as a whole. However, trade is a clear EU competency. TTIP negotiations have been conducted by the EU Commission on behalf of EU member states. Bilateral trade deals with the United States and EU member states would therefore be incompatible with EU treaties.
The Trump administration will present a challenge for the EU, which will have to assume more responsibility in the future for the shaping of the global order.
To provide some direction, the BDI has identified ten cornerstones of strong transatlantic economic relations. Foremost, U.S. involvement in international institutions and forums such as the WTO, the OECD, the G7 and the G20 is of crucial importance for a rules based, inclusive and future-oriented global economy. Furthermore, market access of German companies in the United States should be fully maintained, while worker mobility is very important for internationally integrated companies and should be further strengthened. In addition, the negotiations on the Transatlantic Trade and Investment Partnership (TTIP) should be kept on the agenda, even if the future of that agreement remains uncertain at present.
Click here to read about all 10 cornerstones.