Time to Talk

Following a three-day delay due to storm Stella, the German Chancellor will arrive in Washington to meet US President Trump tomorrow in a meeting which will be closely watched by the market. Trump has been openly vocal about his stance on Germany which he feels enjoys too large a trade surplus with the US, threatening to apply tariffs to German car-makers who import into the US. Trump has also at times openly criticized Merkel, especially regarding her decision to allow more than a million refugees into the country which he describes as a “catastrophic mistake”.

Relations between Germany and the US have been somewhat strained over recent months due to the change in administration. Trump has been openly vocal about his stance on Germany which he feels enjoys too large a trade surplus with the US, threatening to apply tariffs to German car-makers who import into the US.  The US President has also at times openly criticized Merkel, especially regarding her decision to allow more than a million refugees into the country which he describes as a “catastrophic mistake”.

Trump Criticises Merkel’s Stance on Immigration

Speaking during an interview in October 2015, Trump said that he “always thought Merkel was, like, this great leader” before adding that “what she’s done in Germany is insane”. Trump also forecast that “they’re going to have riots in Germany” in response to the influx in migrants entering the country. In a comment made on Twitter, Trump then declared that Merkel was the “person who is ruining Germany”.

Merkel Returns Fire Over Trump’s Travel Ban

Merkel, who has showed great restraint in not immediately countering any of these remarks from President Trump, has at times criticised him, especially over the imposition of a travel ban on citizens from seven predominantly Muslim countries, explaining to Trump via telephone that as a signatory of the Geneva Convention the US was obliged to take in refugees on humanitarian grounds.

German Elections Create Difficult Environment For Merkel

The meeting between the two leaders comes at a difficult time for Merkel. With a domestic election on the horizon later this year, she will need to avoid to be seen as too friendly with Trump, which might include her political opponents fuel for attack, but will also need to avoid engaging in any outright confrontation with Trump which could ultimately harm German interests.  The US is Germany’s largest trading partner with imports of goods and services worth around 107 billion Euros year while exports just 58 billion Euros’ worth in return.

Merkel Enlists Top German CEOs

To aid her on her visit, Merkel will be accompanied by a group of top German CEO’s such as Harold Krueger of BMW and Joe Kaesser of Siemens who intend to highlight the importance of free trade and the amount of jobs they create in the US. Trump has criticized German businesses for using the weak Euro to undercut US brands and went as far as telling a German newspaper that a tariff on BMW could be necessary.

Despite prior comments and criticism, many are hopeful that Trump will use this meeting to ease tensions between the two nations and not to further fan the flames of conflict. However, with Trump’s flare for speaking off-the-cuff, further conflict cannot be ruled out.

The key areas that the two leaders will discuss are linked to:

• Defence: Trump has previously highlighted the need for Germany to increase its defence expenditure, declaring that Germany must “share the burden” of NATO spending.
• Trade: Trump has previously highlighted the need to reduce America’s $65 billion deficit with Germany which one of Trump’s advisers has said is “one of the most difficult” trade issues facing the US.
• Industry: Trump has warned that his administration might impose a 35% tariff on cars which BMW plan to produce at a new plant in Mexico to be sold into the US.
• Immigration: Trump has been particularly vocal about his stance on immigration and has criticised the Germany leader over hers. This is expected to be one of the most fiercely debated areas of discussion between the two leaders.

These are clearly going to be hard fought areas of discussion and Merkel will need to tread carefully with the temperamental President to avoid damaging the interests of her country.  Germany has now been able to count the US as an ally for nearly 70 years, and Merkel will not want her final legacy being the destruction of that relationship.