The Cable

Trump Trade Expert Rips Germany for ‘Manipulating’ Euro

Peter Navarro finds a fresh currency manipulator, and rails against the supply chains that made the global economy.


In his first week in office, U.S. President Donald Trump withdrew the United States from the Trans-Pacific Partnership, thereby dealing a massive blow to U.S. trade relations with allies and partners in Asia. For week two, Team Trump has set its sights on wrecking U.S. trade with Europe.

In an interview with the Financial Times, Trump’s top trade adviser Peter Navarro accused Germany of using a “grossly undervalued” euro, which he called an “implicit Deutsche Mark,” to steal an advantage on the United States in trade.

On Tuesday, German Chancellor Angela Merkel pushed back against Navarro’s claims during a press conference. “We won’t exercise any influence over the European Central Bank, so I can’t and I don’t want to change the situation as it is now,” Merkel said, speaking during her visit to Stockholm. “Beyond that, we strive to trade on the global market with competitive products in fair trade with all others.”

But Trump echoed Navarro’s claims on Tuesday. “Other countries take advantage of ours [pharmaceutical industry] with their money and their money supply and devaluation,” he said, referring after a meeting with pharmaceutical executives. He did not reference Germany in his accusation, but rather another important U.S. trading partner, Japan. “You look at Japan. They play the money market, they play the devaluation market, while we sit here like a bunch of dummies,” Trump said.

To be fair, Navarro’s currency claims are usually a good few years out of date. His beef with China — that Beijing keeps the yuan cheap — hasn’t been true since about 2011. And the Bundesbank, whatever its influence in the past, isn’t running the European Central Bank now.

“Anyone claiming that the euro is an ‘implicit Deutsche Mark’ has missed 5 years of ECB policies shaped against the will of the Bundesbank,” Maxime Sbaihi, a Europe economist for Bloomberg, said, referring to the German Federal Bank.

Brexit helped “kill” the Transatlantic Trade and Investment Partnership (TTIP) — a massive proposed free trade deal between the EU and United States — even before Trump was elected, Navarro said. But he said Trump would kill it dead, in favor of bilateral deals, which take as long or longer to negotiate, but which deliver fewer benefits. “This is a multilateral deal in bilateral dress,” Navarro said.

Trump and Navarro’s “America First” approach to business (except for all the textiles Trump companies make overseas with cheap foreign labor) also apparently means repatriating global supply chains for U.S. companies, an effort to reverse decades-long economic trends that have helped create the modern global economy and dramatically boosted manufacturing output.  

“It does the American economy no long-term good to only keep the big box factories where we are now assembling ‘American’ products that are composed primarily of foreign components,” Navarro said. (The competitiveness of U.S. manufacturers depends, in fact, in large part on the efficiencies within the supply chain that Navarro wants to erase.)

With the U.S. turning its trade policy inwards, experts are left wondering if China will the driver’s seat of global trade.

“If the EU and the United States fail to clinch an accord on TTIP,” Carnegie Europe’s Judy Dempsey wrote, “then the chances are that they will have ceded to China the responsibility for setting trading rules, as Beijing seeks to replace the United States as the world’s biggest and most important economy.”

Photo credit: Sean Gallup/Getty Images


Robbie Gramer is a diplomacy and national security reporter at Foreign Policy. Twitter: @RobbieGramer

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