June 13, 2018 - Chancellor Angela Merkel said the U.S. runs a trade surplus with Europe when services are included, marshaling a rebuff to President Donald Trump’s sustained criticism of German manufacturing exports.
In a speech in Berlin, Merkel said the topic was discussed at last week’s tumultuous Group of Seven summit, where a U.S.-Canadian trade dispute caused Trump to renege on his support for the leaders’ concluding statement.
“Trade surpluses are still calculated in a pretty old-fashioned way, based only on goods,” Merkel told a business conference of her Christian Democratic Union party on Tuesday evening. “But if you include services in the trade balance, the U.S. has big surplus with Europe.”
Merkel and fellow leaders are still struggling to adapt to an unpredictable U.S. president who seems to delight in challenging allies on issues from security to exports while lauding traditional rivals and enemies in Russia and North Korea. German Foreign Minister Heiko Maas is due to hold a speech in Berlin on Wednesday on how Europe should react to Trump’s challenges.
Merkel didn’t expand on her trade claim, which doesn’t match U.S. data. According to the Census Bureau, the European Union had a $101 billion trade surplus in goods and services with the U.S. last year and a $30.3 billion surplus in the first quarter of 2018.
Merkel indicated she lobbied Trump to refrain from slapping tariffs on U.S. vehicle imports from Europe, a measure that threatens to hit German carmakers the hardest. She said she proposed a study of the car industry’s “strategic importance” on both sides of the Atlantic, followed by talks with the goal of avoiding unilateral measures.
Trump said on Twitter in March that if the EU drops its “horrific barriers & tariffs on U.S. products going in, we will likewise drop ours,” but that he would otherwise “tax cars.”
Three months into her fourth term, Merkel also faces renewed domestic strife over migration. Her Bavarian party allies are demanding she allow German authorities to turn back refugees at the border if they’re already registered in another EU country, a measure Merkel is resisting.
EU disunity over migration risks becoming an existential threat to the EU, she said in her speech.
Domestic Critics
“The question whether we can tackle illegal migration within the European Union is maybe the most fateful question for Europe’s cohesion,” Merkel said. “The common market will only continue to exist—and the common market is the very basis for the European Union—if we’re able to defend our external borders.”
The warning reflects Merkel’s growing sense of urgency about resolving intra-EU policy clashes, including over migration and the euro area, so Europe can stand up to a U.S. administration that’s picking fights with its partners.
The chancellor’s parliamentary caucus urged her on Tuesday to end a cabinet standoff over refugee policy with Interior Minister Horst Seehofer, an immigration hard-liner who heads Bavaria’s ruling Christian Social Union party.
The clash revives a conflict between Merkel and Seehofer, a prominent domestic critic of her open-borders policy since Europe’s migration crisis peaked in 2015 and 2016, sending more than 1 million refugees to Germany.
“We have agreed that we’ll keep talking,” Merkel said Tuesday when asked about the standoff at a news conference with Austrian Chancellor Sebastian Kurz, who won power last year on an anti-immigration platform.
Source: Bloomberg
