Trump Should Stop Before He Loses Germany
(Bloomberg Opinion) -- If President Donald Trump acts on the likely conclusion of a report by Commerce Secretary Wilbur Ross – that German car imports are a threat to national security – he could bring the U.S.-German relationship to a post-World War II nadir. Presumably, for Trump, that would be less of a security threat than Mercedes-Benzes and BMWs.
The content of the report hasn’t yet been made public. But Trump has previously threatened to impose a 25 percent tariff on foreign-made cars, and Ross’s report may offer him a justification. Germans and their partners in the European Union expect the worst, even if some of them have tried to make light of it. (“As a cyclist, I admit, I somewhat sympathise with @realDonaldTrump assessment of (German) cars being a security challenge,” Ralf Beste, director of policy planning at the German Foreign Office, tweeted on Monday.)
At the Munich Security Conference on Saturday, Chancellor Angela Merkel spoke as though she knew what was in the Ross report:
The largest BMW plant is in South Carolina – not in Bavaria, but in South Carolina. South Carolina delivers to China. If these cars, which are built in South Carolina, as well as those built in Bavaria, suddenly pose a threat to the national security of the United States of America, then that frightens us.
What’s frightening here isn’t just the implication that, 30 years after the fall of the Berlin Wall, Germany may once again be considered a threat to U.S. national security. It’s that a 25 percent tariff could erase much of Germany’s economic growth, which is expected to reach a mere 1 percent this year. According to a 2018 Oxford Economics report, the tariffs would shave 0.2 percentage point off that growth, and perhaps twice as much due to heightened uncertainty and reduced investment.
Last week, the Leibniz Institute for Economic Research at the University of Munich reported that the punitive tariff would cost Germany 7.7 percent of its car exports and 4.9 percent of total car sales. It would cut value-added in the auto industry by some 7 billion euros ($7.9 billion) and reduce Germany’s economic output by 5 billion euros, or about 0.1 percent.
With the German economy already slowing, the tariffs could well bring on a recession.
Even more than recent U.S. pressure on other fronts – the Iran nuclear deal, the Nord Stream 2 natural-gas pipeline, Chinese equipment for 5G mobile networks – this would amount to hostile action, comparable in effect to sanctions the U.S. has imposed on Russia, an adversary, not an ally. One could forgive Germans for wondering about the real-life difference between an alliance with the U.S. and hostile relations with it.
In fact, they’re already wondering. A number of recent polls have shown a deep German dissatisfaction with how the relationship with the U.S. is going. According to a survey commissioned by Germany’s pro-U.S. lobby, Atlantik-Bruecke, 85 percent of Germans evaluate the relationship as “rather negative” or “very negative,” and 58 percent say Germany needs to distance itself more from the U.S. This survey and another one, DeutschlandTrend, show Germans consider China a more reliable partner than the U.S. Yet another poll found that Germans consider the U.S. the biggest threat to world peace, ahead of North Korea and Russia.
Nothing could reinforce these perceptions more effectively than inflicting economic damage on one of the most potent symbols of German pride, the car industry. Trump may think he’s just being unfriendly to Merkel, who has been unable to hide her distaste for him, but instead, he’s well on the way to alienating the whole country. The Atlantik-Bruecke survey shows that voters of all major German parties are united in their negative assessment of German-American relations.
The Trump administration should take a step back and consider whether it wants to go further down this road. The German polls show that the U.S. is no longer merely undermining an old alliance; it’s ruining its image in Europe’s most powerful country and making Germans reassess a seven-decade legacy of accepting U.S. direction in rooting out Nazism. Nothing good can come of such a reassessment.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Leonid Bershidsky is Bloomberg Opinion's Europe columnist. He was the founding editor of the Russian business daily Vedomosti and founded the opinion website Slon.ru.
©2019 Bloomberg L.P.