Bundesregierung
World News /05 May 2018
05.05.18

The Bitter Reality of U.S.-German Relations

On 27 April 2018, Angela Merkel visited the White House, preceded by the visit of French President Emmanuel Macron. While many were quick to argue that Macron’s visit embarked the turning point in the relationship between the U.S. and France. Merkel’s visit, in contrast, resembled that of bitterness and divergence on key issues that are critical to respective country’s foreign policy. High on the agenda were issues relating to European exemption from the U.S. steel and aluminum tariffs, which are set to come into force from May 1 and the Iran nuclear deal, which President Trump has hinted he would most certainly withdraw from and renegotiate.

U.S.-German relationship has been strained for quite some time. The primary issue concerns the nature in which the two countries perceive their national interest and foreign policy. The German Chancellor has been critical of President Trump’s statement over NATO and the demand for each country to meet the 2 percent budget requirement for shared NATO expenses, the intervention in Syria and, moreover, the imposition of protectionist U.S. trade policies. On the other hand, Berlin faces criticism over the refugee policy, limited military support in Syria and Iraq, trade surplus and a complex economic relationship with Russia over the Nord Stream 2 gas pipeline.

Finding a common ground on critical policy issues is going to be a tough task. For instance, on the matter of trade and economic interest. Germany’s economic rise in Europe has a lot to do with its ability to export German products because it produces much more than it consumes. To sell the surplus, it needs markets. The free trade agreement with the EU countries provides Berlin with the advantage of selling its surplus to the common European markets. However, following the 2008 economic crisis, and an uneven economic impact in some EU member states, demand for German products declined, as southern European economies, for instance, Greece, Italy, Spain, Cyprus and Portugal struggled to keep their economies afloat. The United States along with Asian countries like China, Korea and India have become the major demand centers for German goods. In fact, in 2016 the United States overtook France as Germany’s biggest export market. The absorption of German products by the U.S., in many ways, cocooned the German economy from the global economic shocks of 2008-09.

However, that is not the case now. The U.S. government under President Trump has embarked on the mission of America First, which includes, reducing trade deficits with major U.S. trading partners. Even under former President Barak Obama, the government was critical of the growing German trade surplus. In fact, in 2016, just as the U.S. became the biggest market for German exports, the U.S. Treasury put Germany on the new currency monitoring list along with China, Japan and South Korea. The U.S. Treasury’s concern related to the current account surplus, which accounted for the bulk of the euro area’s surplus and pushed the surplus of the euro zone to over 3 percent of GDP.

Germany’s current account surplus and President Trump’s protectionist trade policies have brought the two countries to a crossroads of a brewing trade war. Trump’s determination on eliminating America’s trade deficits threatens the business interest of major German companies, primarily automobile. Indeed, in both the countries, the domestic support of the working middle class, forms the crux of the popularity for both of the leaders. In this regard, Merkel’s failure, to persuade Trump to exempt EU from punitive U.S. tariffs on steel and aluminum, can be seen as a major setback at home. The three largest economies of Europe, France, Germany and the United Kingdom, have agreed on the need to respond to Trump’s challenge in the form of their own punitive tariffs on key U.S. goods. What course of action the current relationship between Germany and the U.S. takes will depend on not just the economic parameters but also on matters of security.

(Bundesregierung)

On security, German-U.S. interest differ as much as their economic priorities. For instance, the case of Syria. Berlin’s strategy rests on its pacifist foreign policy of avoiding direct military involvement and finding a peaceful solution to the conflict. Moreover, the objective for Berlin is to achieve stability in Syria in order to contain terrorism in Europe and facilitate the return of refugees, both of which have become a cause of political concern, given the rising popularity of the Alternative for Germany (AFD) party among the electorate.

This is diametrically opposite in the United States. President Trump’s popularity and foreign policy towards Syria stems from the effective use of military force, not just to defeat the Islamic State but also as a show of strength against Russia over its increasing support for the Assad regime. The recent air strikes carried out by the U.S. along with the UK and France, over the alleged use of chemical weapons in the town of Douma was credited to political messaging to Russia over its support of the Syrian government rather than for any strategic or tactical gain.

Iran is also an issue. Time and again, President Trump has made it clear that the U.S. will withdraw from the Joint Comprehensive Plan of Action agreement negotiated between P5+1 and Iran. Germany and the European allies have been critical of Trump’s statements over the Iran deal. For Berlin, interest in Iran rests on two factors; economic and energy policy. Germany’s primary interests in Iran are, first, to promote stability in the Persian Gulf region which continues to be vitally important for global oil supplies; and, second, to resolve the conflicts in the Middle East, in order to prevent further refugee movements toward Europe.

Germany’s energy demands are highly dependent on Russia and Moscow supplies the bulk of the energy exports to Europe. The completion of the Nord Stream 2 pipeline will further increase Berlin’s energy dependence on Moscow. Iran, on the other hand, can be an alternative option to reduce dependency on Russian energy. The Joint Comprehensive Plan of Action provides the perfect opportunity for Berlin to rationalize its commercial and political ties with Iran under the auspices of change through trade and rapprochement policies, similar to the Ostpolitik policy adopted with Russia.

However, Trump’s tough stance on the deal poses significant challenges to both German economic interests and foreign policy. It puts Berlin in a precarious position whether to side with the U.S. over the renegotiation of the nuclear deal or to formulate a separate EU policy independent of the U.S. The former would mean, subjugation of the core business interests until the terms of the new nuclear deal are negotiated and finalized, the later would result in the further tension among the transatlantic partners over matters of security similar to the situation as seen with Russia.

In fact, Germany’s complicated economic engagement with Russia elucidates the nature of the relationship between Berlin and Washington. The U.S. approach towards Russia hardened since the end of the ‘reset policy’ under President Barack Obama. The Ukrainian crisis, the Russian meddling in the U.S. election, the use of information warfare and the divergent interests in Syria have resulted in an all time between the two countries which has led to debates over a renewed Cold War. While the U.S. has been strong in its response towards Russia, resulting in the imposition of economic sanctions since the annexation of Crimea, the German Chancellor has been pragmatic enough to not hinder business interests in response to collective security measures.

Germany’s dubious policy towards Moscow has resulted in criticism from not just the U.S. administration but also from key Eastern European countries like Poland, Romania and the Baltic States all of whom demand a tougher stance on Russia. Eastern Europeans are further alienated over the issue of Berlin’s economic dominance in Europe and the imposition of liberal principles which are not well received, especially in countries like Poland and Hungary, both of whom are critical of Merkel’s shared refugee settlement plan and heavy handedness in the functioning of their governments. The divide between the interests of Eastern European countries and Germany means further alienation of German interests on key European issues and a more closely aligned Eastern European partnership with the U.S. At a time when Berlin is finding it difficult to do business as usual, the changing nature of U.S. policy under President Trump represents a direct threat to German interests.

If you're interested in writing for International Policy Digest - please send us an email via submissions@intpolicydigest.org