During the Presidential campaign Trump promised to get tough on trade. Mexico was the focus of much of his rhetoric, but that isn’t the only trading relationship the new administration is looking to renegotiate. The FT reports that the Trump administration wants to have a sit-down with Germany on the country’s massive trade surplus. Germany’s membership in the euro-area keeps its currency undervalued and provides it with a meaningful trading advantage. If the Germans brought back the Deutsche mark, most economists estimate it would appreciate significantly vis-à-vis the euro thereby eliminating Germany’s trading advantage.
One of President Donald Trump’s top trade advisers has called for bilateral negotiations with Berlin to reduce the US trade deficit with Germany, accusing Europe’s top economic power of hiding behind its membership of the EU.
The comments by Peter Navarro, head of the White House’s new National Trade Council, who also depicted US bilateral trade deficits as a national security issue, highlight a likely source of friction between Mr Trump and Angela Merkel as the German chancellor prepares to visit Washington next week.
“Germany is one of the most difficult trade deficits that we are going to have to deal with,” Mr Navarro told a group of economists after giving a speech. “We are thinking long and hard about that and I know that Angela Merkel is coming here soon and perhaps we’ll be having some discussions about how we can improve the US-German economic relationship.”
Mr Navarro, one of an influential band of economic nationalists in Mr Trump’s White House, drew Ms Merkel’s ire last month when he claimed in an interview with the Financial Times that Germany was exploiting a “grossly undervalued” euro to take advantage of the US and other trading partners.
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