Friedrich Merz, the conservative Christian Democratic Union (CDU) candidate for chancellor and an obvious contender in Germany’s early elections in February, has called for a “positive agenda” on trade with the US and withdrawal from President Donald Trump.
“We need a positive agenda with the US that benefits American and European consumers alike,” Merz said in an interview with the German dpa news agency published Thursday.
He also recommended considering renewed efforts at an EU-US free trade agreement after previous efforts, known as TTIP, were shelved in 2017, at the start of Trump’s first term.
“A new European-American initiative for joint free trade could stop a dangerous cycle of tariffs,” Merz said.
Merz expects tougher conditions for EU exporters amid Trump
However, Merz also made clear that he anticipated more difficult conditions for European economies after Trump’s January 20 inauguration.
He said it is possible for the US to prepare for a greater focus on itself and its perceived interests, for example through higher import tariffs, as Trump has repeatedly said during the election campaign and since. .
“But our response to that should not be: ‘Now we will start with our tariffs too,'” Merz said.
Merz also said Germany needed to gradually reduce its corporation tax rates to 25%, from the current level closer to 30%. He said this would tackle non-wage labor costs and make the country an attractive place to do business again.
Then, he said, Germany can say to the United States: “Yes, we are also ready to face this competition with you.”
The US is Germany’s largest export market, and its largest direct investment destination.
The US is Germany’s most successful export market, accounting for about 10% of total foreign sales or €157.9 billion in 2023 (about $163.5 billion). Based on partial data, this figure continued to increase in 2024.
The tariffs could therefore have a serious impact on the German economy, or at least parts of it.
Meanwhile, the US is the third most common source for German imports – well behind China, and slightly behind the neighboring Netherlands – at around 7% of German imports, or €94.7 billion.
This means that Germany has a record annual trade surplus with the US of just over €63 billion, which has been increasing slightly over the past few years.
However, one statistic missing from this calculation is that the US is the most common site for direct investment by German companies.
Trump has often lamented this imbalance in bilateral trade, especially during the election campaign. In several interviews he recalled an alleged conversation with former Chancellor Angela Merkel, where he complained about how fewer American cars were sold in Germany, for example, than German cars in the US.
msh/wd (dpa, Reuters)
