Germany: CDU's Merz wants 'positive' Trump trade approach

The conservative Christian Democratic Union (CDU) candidate for chancellor, and apparent frontrunner for early elections in February in Germany, Friedrich Merz, has called for a "positive agenda" on trade with the US and returning 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 on Thursday. 

He even recommended considering renewed attempts at an EU-US free trade deal, after the previous efforts, dubbed TTIP, were put on ice in 2017, early in Trump's first term. 

"A new European-American inititative for joint free trade could prevent a dangerous spiral of tariffs," Merz said. 

Merz expects tougher conditions for EU exporters amid Trump

However, Merz also made clear he did anticipate more difficult conditions for European economies after Trump's January 20 inauguration. 

He said it likely made sense to prepare for the US focusing more on itself and its own perceived interests, for instance via higher import tariffs, as Trump repeatedly said he would during and since the election campaign. 

"But our answer to that should not be: 'Now we'll start with our tariffs too,'" Merz said.

Merz also said that Germany needed to gradually reduce its corporation tax rates towards 25%, with current levels nearer 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 could tell the United States: "Yes, we are ready to face this competition with you as well."

US is Germany's biggest export market, and its biggest direct investment site

The US is Germany's most successful export market at roughly 10% of all its foreign sales or €157.9 billion (roughly $163.5 billion) in 2023. The figure continued rising in 2024, based on partial data.

Tariffs could therefore have serious implications for 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 — accounting for about 7% of German imports, or €94.7 billion. 

This means Germany has a record annual trade surplus with the US of a little over €63 billion that has been rising slightly in the past few years.

One statistic absent from this count, however, is the US also being the most common site for direct investment by German companies. 

Trump has often lamented this imbalance in bilateral trade, particularly during the election campaign. In several interviews he recalled supposed conversations with previous Chancellor Angela Merkel where he had complained about how few US cars were sold in Germany, for instance, compared to German ones in the US. 

msh/wd (dpa, Reuters)