Economy - Politics

Germany and China Sign Massive Trade Deal in Opposition to Trump’s Trade Policies

Published on July 9, 2018 by Athena Pallas

Increasingly, countries are reacting to President Trump’s outdated protectionist trade policies and unilateral, punative decision-making by going around the United States to make trade deals with other major players in global trade. The latest example of this is an otherwise unlikely alliance between Germany and China, which today signed a set of trade agreements worth more than $23 billion.

The move comes as both China and Germany (as part of the EU) face tariffs from Trump that have kicked off a trade war. Trump issued steel and aluminum tariffs of 25% and 10%, respectively, yet somehow expected countries not to retaliate. Trump has been wrong in every case, as the EU, China, Canada, and Mexico have all responded with retaliatory tariffs equal in financial impact to Trump’s metals tariffs. Trump has already begun to retaliate for that retaliation, sparking a trade war. Of course having a common enemy, as these countries do on trade in the form of Donald Trump, tends to unite the effected countries, and that is exactly what is happening here as Germany and China work to affirm the value of free trade and the World Trade Organization (WTO) rules which Trump is ignoring. According to Reuters:

Germany and China signed a raft of commercial accords worth some 20 billion euros ($23.51 billion) on Monday, with their leaders reiterating commitments to a multilateral global trade order despite a looming trade war with the United States…“We both want to sustain the system of World Trade Organisation rules,” Chancellor Angela Merkel said at a news conference she gave alongside Chinese Premier Li Keqiang. “It’s a multilateral, interdependent system that at its best involves a plurilateral, win-win situation if we all stick to the rules,” she added. Underlining the extent that the two countries, rivals in manufacturing exports, are allies when it comes to trade liberalization, Li said China would further open its economy to foreign investment. China, he said, is prepared to open up its insurance and bond markets to foreign investors and has in place intellectual property guarantees to ensure that German companies need not fear losing proprietary technologies if they operate there…“We are against unilateralism – we are in favor of free trade,” Li said.

In a similar move Mexico and the EU in April made an agreement in principle for free trade between the two sides with almost no tariffs. The deal was worked out with the involvement of Mexican President Enrique Peña Nieto and German Chancellor Angela Merkel. The emphasis on free trade from both sides was a direct repudiation of President Trump’s protectionist policies.

President Trump believes he is making the United States stronger with his protectionist policies, part of his America First agenda, but farmers and manufacturers are already suffering financially as a result of retaliatory tariffs (and increased costs for manufacturers directly from Trump’s metals tariffs, as foreign steel and aluminum becomes more expensive). Also, these policies from Trump have alienated many of our key allies, which weakens the position of the U.S. in the world, both economically and diplomatically. Increasingly countries are just going around the United States to make large trade deals with alternative countries. That, too, is weakening the position of the United States, not strengthening it, and the fault for that lies squarely with Donald Trump.

Featured image via Wikimedia Commons.