The imbalance of trade has long been a thorn in Trump’s eye, but things are considerably more complicated than the president’s slogans lead one to believe.
The man in the blue pinstripe suit with a white dress handkerchief could hardly be stopped. “The minister’s presence here emphasizes the fact that South Carolina has entered into the global economy, and that’s good for the people of South Carolina, it’s good for the people of Germany. And we look forward to building on our relationship and expanding that relationship in the future,” Henry McMaster, the Republican governor of South Carolina, raved. A German delegation, led by Germany’s federal minister for economic affairs and energy, Brigitte Zypries, had just visited the world’s largest BMW plant in Spartanburg, where 1,500 brand new X-series cars leave the production line daily. McMaster sounded convinced: “In President Trump language, I’d say the relationship is ‘A’ plus.”
The governor was wrong about that. While he was delivering his tribute, Donald Trump piped up on the other side of the Atlantic with a somewhat different message. At a meeting of EU officials, he is said to have blustered, “The Germans are bad, very bad.” The White House indeed qualified later that Trump was referencing not the Germans in general, but their economic policy, and as EU Commission President Jean-Claude Juncker explained, he understood the word “böse” to mean “bad” and not “evil.” However, the main thrust was clear. “See the millions of cars they are selling in the U.S.? Terrible. We will stop this.”
The imbalance of trade has long been a thorn in Trump’s eye. In the past year, German firms exported goods at a value of 107 billion euros (approximately $119 million) to America. The other way around, it was only 58 billion euros (approximately $65 million). The current outburst by Trump could more likely be due to his inability to do something about this in spite of vociferous threats. The initially planned income tariff of 35 percent ran into fierce resistance from American trade chains that fear a drastic rise in the cost of their products. In the meantime, its implementation is considered rather improbable in Congress.
Now an alternative is being feverishly sought in Washington. If Trump would talk to a Republican Party friend like McMaster, he would tell him, in addition, that BMW in Spartanburg is not only employing 8,800 Americans, but securing more than 20,000 further jobs for suppliers in the region. Primarily, 70 percent of the cars produced in Spartanburg are not even sold in the U.S., but instead go to other foreign countries. With that, BMW is the largest auto exporter in the United States.
Things are considerably more complicated than the president’s slogans lead one to believe. The gap between furious rhetoric and political reality is correspondingly large. German Minister Zypries, anyway, received the impression from high-level discussions in Washington that German-American relations are better than some believe. “Everyone knows that we have a great common tradition, and there is no intention that you out there are immaterial to us,” the SPD politician assured.*
Business representatives, too, share the appraisal that the protectionist propaganda has, in the meantime, given way to a somewhat more realistic view. In Western diplomatic circles, word is that the import tariff no longer has an especially high priority in the government. Instead, the U.S. government wants to proceed against actual or perceived unfair trade with rigor. Threatening punitive tariffs against German steel producers is also to be seen in this context. For all intents and purposes, Washington, of course, has the Federal Republic of Germany less in its sights than the considerably larger China.
Zypries showed concern in her talks with, among others, Secretary of Commerce Wilbur Ross, U.S. Trade Representative Robert Lighthizer and influential Republican Speaker of the House Paul Ryan about the possible punitive tariffs. She rebuffed criticism of the German trade surplus. This is dependent upon the price of oil and the dollar exchange rate. Besides, “the Americans need our machines and our plants” at the moment to advance their reindustrialization and renew industry here, said Zypries.
According to statements by the minister, different positions have not yet been eliminated, but an ongoing thread of conversation with the new government in Washington has been established. She judged it to be a positive signal that her counterpart Ross would return the visit and plan to come to Berlin by the end of June.
Knudt Flor, head of the BMW plant in Spartanburg, also demonstrated calmness about the topic of an import tariff. “We’re not speculating,” the manager said. “If it should come so far that we can only serve the local market, we can convert relatively quickly and have the 5 and 3 series come off the assembly line.” And to inquiries, Flor declared with a smile, “Believe me, we can deal with that profitably.”
*Editor’s note: SPD is the acronym for Germany’s Social Democratic Party.