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Germany’s New Approach to Global Trade · Trumponomics

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Speaker 1: Bloomberg Audio Studios. Podcasts. Radio. News.
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Speaker 2: I'm Stephanie Flanders, Head of Government and Economics at Bloomberg,
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Speaker 2: and this is Trumponomics, the podcast that looks at everything
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Speaker 2: in the economic world of Donald Trump. It's Wednesday, 21st
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Speaker 2: of October, and I'm in Germany for the Berlin Global
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Speaker 2: Dialogue of Business Leaders and Policymakers. Our super loyal listeners
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Speaker 2: may remember I was here a couple of years ago,
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Speaker 2: and then I got to interview on stage President Emmanuel
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Speaker 2: Macron of France. We actually put that rather wide-ranging conversation
0:44
Speaker 2: on the future of Europe on this podcast. This time,
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Speaker 2: I had a slightly shorter onstage chat with the German Chancellor,
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Speaker 2: Friedrich Merz, in what has been a pretty tough few
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Speaker 2: days for Europe, with violence on the streets of Paris
0:58
Speaker 2: at the weekend, followed by curfews. And on the face
1:01
Speaker 2: of it, a just as shocking turn in US policy
1:05
Speaker 2: towards Ukraine, firmly in Russia's direction. Now, in my conversation,
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Speaker 2: which you're going to hear a bit later with Chancellor Mertz,
1:13
Speaker 2: he stuck to a hard line against Russia, talking up
1:16
Speaker 2: the risk that President Putin posed to European democracies. But
1:21
Speaker 2: as you'll hear, on the subject of Chinese imports, he sounded,
1:24
Speaker 2: at least to my ears, shockingly like Donald Trump. So
1:29
Speaker 2: I wanted to get a little scene setting in with
1:32
Speaker 2: Antonio Barroso, our senior geoeconomics analyst, temporarily in London. Antonio,
1:37
Speaker 2: thank you very much for joining us.
1:39
Speaker 1: Pleasure to be here.
1:40
Speaker 2: And I should mention that you also moonlight as an
1:42
Speaker 2: adjunct professor at Sciences Po in Paris, and you co-launched
1:47
Speaker 2: the geopolitical risk unit for the consulting firm Teneo. Now, Antonio,
1:52
Speaker 2: the last time that I was on that same stage
1:55
Speaker 2: of the Berlin Global Dialogue, when I was talking to
1:58
Speaker 2: President Macron... I actually ended, I think, by saying, could
2:02
Speaker 2: it be the best thing for Europe to have the
2:05
Speaker 2: re-election of Donald Trump, which of course we didn't know
2:07
Speaker 2: what was going to happen then. And he kind of
2:09
Speaker 2: admitted that it would wake everyone up and maybe galvanize
2:13
Speaker 2: the much needed reforms in Europe. It certainly had a
2:19
Speaker 2: galvanizing effect. But on the ground, how much has changed
2:23
Speaker 2: in Europe?
2:24
Speaker 1: So I'm going to give you a very Macron answer.
2:27
Speaker 1: He likes to say yes and no. And yes, he
2:31
Speaker 1: has galvanized Europe, for example, in the area of defense,
2:34
Speaker 1: because the uncertainty around the security provision, the historical arrangement
2:39
Speaker 1: that the U.S. had with Europe has significantly increased that uncertainty,
2:43
Speaker 1: and that has led to a material increase in defense spending.
2:47
Speaker 1: We see the numbers. Countries such as Germany are spending
2:50
Speaker 1: way more money in defense. Ukraine is having some financing difficulties,
2:53
Speaker 1: but even on that front, European member states were able
2:57
Speaker 1: to agree to actually issue more common debt to support Ukraine, right?
3:01
Speaker 1: So there have been a couple of areas where President
3:03
Speaker 1: Trump and his rhetoric has definitely galvanized Europe into action.
3:07
Speaker 1: But I said yes and also no, because it's not
3:10
Speaker 1: like Trump has given a massive impulse to European integration.
3:13
Speaker 1: And actually, when you think about the reaction of European
3:16
Speaker 1: decision makers to some important episodes, It was much more
3:20
Speaker 1: a timid reaction. So, for example, in the trade confrontation
3:23
Speaker 1: with the US after the famous liberation of the tariffs,
3:27
Speaker 1: the EU ended up having to accept a very lopsided
3:30
Speaker 1: trade deal instead of actually pushing back, right? So we
3:33
Speaker 1: can say that, yeah, on certain areas, it has galvanized
3:35
Speaker 1: European into action, but it's not like European integration has
3:39
Speaker 1: experienced a massive push as a result of Trump's policies.
3:42
Speaker 2: One of the things that I talked about with Chancellor
3:44
Speaker 2: Mertz was How much has he really managed to push
3:47
Speaker 2: through the domestic reforms? But I guess the other thing
3:50
Speaker 2: that has changed significantly in the last two years is
3:53
Speaker 2: that we've seen a rise in the extreme parties and
3:56
Speaker 2: particularly support for the far right in many countries and
4:01
Speaker 2: not least in Germany where we had some pretty historic
4:05
Speaker 2: results in the last few weeks.
4:07
Speaker 1: Absolutely. I mean, even during the current year, you had
4:11
Speaker 1: five state elections and the far right alternative for Germany party,
4:15
Speaker 1: the AFD, did exceedingly well. It actually won in two
4:18
Speaker 1: of them, right? So historic result. Now, I think the
4:20
Speaker 1: most important thing here when we think about the far
4:22
Speaker 1: right is true that it's rising across Europe. But normally,
4:26
Speaker 1: the far right, when you look at the actual electoral
4:30
Speaker 1: weight that they have, it tends to be around a
4:32
Speaker 1: third of the electorate, right? So Yes, it's true that
4:35
Speaker 1: it's an important force, but I will actually zoom out
4:37
Speaker 1: and look at what one of the main problems is
4:39
Speaker 1: when it comes to Europe decision-making, which is fragmentation. If
4:42
Speaker 1: you look at the five state elections in Germany, what
4:45
Speaker 1: you can see is really fragmented regional parliaments that actually
4:48
Speaker 1: complicate the formation of governments and complicate decision-making. And you're
4:52
Speaker 1: seeing this all over Europe, even in France, for example,
4:55
Speaker 1: that has a semi-presidential system with a very majoritarian electoral system.
4:59
Speaker 1: You have a very fragmented parliament. that is really complicating
5:03
Speaker 1: even the adoption of budgets, right? So, as I said, yes,
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Speaker 1: the rise of the far right is a complication for
5:09
Speaker 1: European decision-making, but really is in tandem with the massive
5:12
Speaker 1: fragmentation of political party systems.
5:15
Speaker 2: That's a very interesting point. Someone pointed out to me
5:17
Speaker 2: that Mertz, before he was leader, I think eight years ago,
5:20
Speaker 2: he said he vowed he would cut the AFD's vote
5:24
Speaker 2: And then people were quite quick to point out in
5:26
Speaker 2: that recent election, at least the Saxony unheld one, that
5:30
Speaker 2: it was the Christian Democrats share of the vote that
5:32
Speaker 2: had halved. And actually, the AFD got almost as much
5:35
Speaker 2: as all the other parties together, and it was 44%.
5:37
Speaker 2: So at least there, it was even greater. But I
5:41
Speaker 2: think people are just waking up to the fact that
5:43
Speaker 2: we have a string of elections coming down the track
5:47
Speaker 2: for the next 12 months. The one that we probably
5:50
Speaker 2: have paid most attention to and is in people's minds
5:53
Speaker 2: is the French presidential election. How much could things have changed?
5:57
Speaker 1: You mentioned the mother of four elections, which is the
5:59
Speaker 1: French election, right? Even though you do have a string
6:02
Speaker 1: of elections over the course of the next 12, 13 months,
6:05
Speaker 1: for example, in very large European countries such as Spain
6:08
Speaker 1: in November, but also Italy and Poland, right? So the
6:11
Speaker 1: equilibrium of power in Europe could change significantly, but really
6:15
Speaker 1: the one that matters the most here is France because
6:18
Speaker 1: nothing gets done in the European Union without France. Marine
6:21
Speaker 1: Le Pen is leading all opinion polls and at this
6:24
Speaker 1: point is her election to lose. Now, there is still
6:27
Speaker 1: a lot of time left before the election. If you
6:30
Speaker 1: look at the date of the last election, around one
6:33
Speaker 1: third of the electorate decided their vote in the week
6:36
Speaker 1: leading up to the election. So things can change significantly. Also,
6:41
Speaker 1: the landscape of presidential candidates can change still because the
6:44
Speaker 1: center is still divided across a couple of candidates. So
6:48
Speaker 1: a lot of stuff can happen between now and the election.
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Speaker 1: But if Le Pen wins, I think there are two
6:52
Speaker 1: main questions. The first one is, how radical will she be?
6:55
Speaker 1: And secondly, How much of her program could she implement?
6:59
Speaker 1: On the first question, I think people underestimate sometimes, you know,
7:02
Speaker 1: they think, well, but look at Giorgia Meloni, the prime
7:04
Speaker 1: minister of Italy. She moderated her stance. I've been very
7:07
Speaker 1: clear on this. Marie Le Pen is no Meloni. I
7:09
Speaker 1: think particularly on the European Union, she doesn't want to
7:11
Speaker 1: leave the European Union anymore for France to leave the bloc.
7:15
Speaker 1: But she really wants to stop decision making in the EU,
7:17
Speaker 1: cut the French contribution, budget contribution to the EU. So
7:20
Speaker 1: that will really create a problem. But it will all
7:23
Speaker 1: depend on what type of majority she can get in Parliament,
7:25
Speaker 1: because it's not a given that after the presidential election,
7:28
Speaker 1: a subsequent legislative election will give her a Parliament majority.
7:31
Speaker 1: And she needs a majority in Parliament to implement her policies.
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Speaker 2: One thing you've pointed out, things could change very much
7:37
Speaker 2: in the last few weeks, if memory serves, at this
7:41
Speaker 2: stage in the... presidential election where Emmanuel Macron was ultimately
7:47
Speaker 2: elected for the first time, he wasn't even a candidate. So,
7:49
Speaker 2: you know, things can change very quickly. But I think
7:51
Speaker 2: it's a fair bet that over the next year and
7:54
Speaker 2: a half, we will be paying much more attention to
7:56
Speaker 2: not just the far right in these big economies, but
8:00
Speaker 2: also the differences between them. And that was really brought
8:03
Speaker 2: home to me. I mean, the fascinating interview actually by
8:05
Speaker 2: my friends, Annie Misenbello, the editor of The Economist this week,
8:08
Speaker 2: of the AFD leader, Alice Fidel. I mean, They are
8:12
Speaker 2: not the same, these far-right parties, whether it's Maloney or
8:16
Speaker 2: the Rassemblement National in France or the AFD. The policy
8:21
Speaker 2: shifts that they would represent would be distinctive in quite
8:25
Speaker 2: a few areas.
8:26
Speaker 1: Absolutely. And I think one area of European politics that
8:30
Speaker 1: people normally don't pay attention to on the member state
8:34
Speaker 1: level is European Parliament. You can see actually how far-right
8:37
Speaker 1: parties have behaved in the European Parliament in And it's
8:40
Speaker 1: not like they're all together in the same political groups. Actually,
8:43
Speaker 1: they are divided. This actually has to do with the
8:45
Speaker 1: different positions on things like Russia, on things like economic policy.
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Speaker 1: And I completely agree regarding, for example, the EFT. I mean,
8:51
Speaker 1: the EFT right now has a way more radical program
8:55
Speaker 1: that's somewhat like Meloni in Italy, that's somewhat like Vox
8:57
Speaker 1: in Spain. In the case of Marine Le Pen, the
9:00
Speaker 1: main problem is that, unlike the EFT, which, for example,
9:03
Speaker 1: has a flooded idea of actually Germany leaving the euro system,
9:07
Speaker 1: leaving the euro and going back to the Deutsche Mark,
9:09
Speaker 1: Le Pen doesn't want to do that, but at the
9:11
Speaker 1: same time, there are doubts about what her economic policy
9:15
Speaker 1: will be. Even when they try to moderate, to appeal
9:17
Speaker 1: to a wider basis of support of voters, it's unclear
9:21
Speaker 1: whether they actually have the numbers to back those proposals
9:24
Speaker 1: that they are actually floating.
9:36
Speaker 2: Antonio, we should touch on the big topic of the week,
9:39
Speaker 2: I guess, second only to Ukraine, which is trade. And
9:43
Speaker 2: the Europeans really, finally, you could say, grappling with the
9:48
Speaker 2: challenge of the flood of Chinese imports. I mean, when
9:51
Speaker 2: I was here two years ago, the Chinese cars were
9:55
Speaker 2: about 2% of the EU market, and now it's 9%.
10:00
Speaker 2: and keeps growing. There was a lot of discussion around
10:04
Speaker 2: this at the EU summit a week ago. What did
10:07
Speaker 2: they agree?
10:09
Speaker 1: So actually, most of the important action happened before the
10:12
Speaker 1: summit because the European Commission was in negotiations with the
10:16
Speaker 1: Chinese government for many weeks over the summer. And it
10:19
Speaker 1: agreed several concessions, but the most important one was for
10:22
Speaker 1: the Chinese to restrict the export of hybrid vehicles into
10:26
Speaker 1: the European Union, right? And the summit was essentially the
10:29
Speaker 1: confirmation of the validation of the Commission's approach to the negotiations,
10:34
Speaker 1: but also potentially even a stronger tool to basically push
10:38
Speaker 1: back against unfair trade practices. So overall, I think EU
10:41
Speaker 1: member states interpreted their approach as the correct one to follow.
10:45
Speaker 1: And I think it was key that There was a
10:47
Speaker 1: Franco-German letter that was sent by the main leaders to
10:51
Speaker 1: the commission and to member states saying, you know, we
10:54
Speaker 1: need to pursue a much more forceful approach towards China
10:56
Speaker 1: and proposing mechanisms. I think that was a signal to
10:59
Speaker 1: the Chinese government that Europe had changed, that it was
11:01
Speaker 1: ready to push back. So I think that's the approach
11:04
Speaker 1: that they're going to continue implementing. For me, the key
11:06
Speaker 1: question is, okay, let's just say that they extend safeguards
11:09
Speaker 1: to other sectors. What does the Chinese government do? Is
11:12
Speaker 1: the concession on the hybrid a one-off concession or on
11:16
Speaker 1: it's actually, you know, they're willing to give more concessions,
11:18
Speaker 1: because if not, you could well be into a trade
11:21
Speaker 1: war in some weeks or months time. And remember that
11:24
Speaker 1: the Chinese have a very powerful weapon is the weaponization
11:27
Speaker 1: of the supply of critical minerals, right? So I think
11:29
Speaker 1: that's the main question going forward.
11:31
Speaker 2: And we've talked about that on this program before, also
11:33
Speaker 2: the fact that the Chinese now have an informational advantage
11:36
Speaker 2: that they know exactly which European companies need which rare earths,
11:40
Speaker 2: what flexibility they have, something that often the governments themselves
11:43
Speaker 2: have struggled to get their hands around. You'll hear in
11:46
Speaker 2: the conversation with the Chancellor. But I mean, for me,
11:50
Speaker 2: it's a very striking change of tone and policy from Germany.
11:56
Speaker 2: I mean, France has often reached first for protectionist tools.
12:01
Speaker 2: But even just a few years ago, Germany and Chancellor Scholz,
12:05
Speaker 2: as there was, was opposing the tariffs on Chinese EVs.
12:11
Speaker 2: And now Germany just feels a kind of existential challenge
12:15
Speaker 2: to its car industry and is really on side with France.
12:20
Speaker 1: Absolutely. And I think this has to do with the
12:21
Speaker 1: fact that, look, Germany did or made three geopolitical bets
12:25
Speaker 1: that sustained the prosperity of its economy. It was cheap
12:29
Speaker 1: Russian gas or cheap Russian energy. open markets based on
12:33
Speaker 1: multilateral institutions, and security provision by the U.S. You can
12:36
Speaker 1: claim that one of them, cheap energy, is gone, and
12:39
Speaker 1: then two of them are being challenged, right? And essentially,
12:43
Speaker 1: it's not that Germany is going to change its economic
12:45
Speaker 1: model from one day to the other. It's an export-oriented model.
12:48
Speaker 1: Maybe it might benefit from a little bit more of
12:49
Speaker 1: domestic consumption, but still, that's the core economic model. So
12:53
Speaker 1: it has to adapt it for it to survive. And
12:56
Speaker 1: I think that's what Mercer realized. Right now, China is
12:58
Speaker 1: producing things that they used to produce, but particularly higher-value products.
13:02
Speaker 1: So I think at this point, Mercer realized that it
13:05
Speaker 1: needed to act in order to preserve that model. And
13:07
Speaker 1: this is exactly what we're seeing these days.
13:09
Speaker 2: Before I let you go, the other area the world
13:12
Speaker 2: has changed is the relationship with the U.S. And we've
13:16
Speaker 2: talked in the past, Antonio, about how Chancellor Mertz, you know,
13:21
Speaker 2: he's got very good English. When he came in, he
13:23
Speaker 2: was felt to be, you know, someone who was, you know,
13:26
Speaker 2: who's worked in the US, was someone who might find
13:29
Speaker 2: it easier to talk to the administration. He's talked about
13:34
Speaker 2: the old order being gone, but he's trying to be
13:37
Speaker 2: quite pragmatic about managing the relationship with Donald Trump. It's
13:41
Speaker 2: quite a test of that, this shift from the US
13:46
Speaker 2: on the approach to Russia that we've just seen in
13:48
Speaker 2: the last week or two. And we're going to see
13:52
Speaker 2: the Chancellor continue to have to keep up that balancing
13:54
Speaker 2: act at the G20 in Miami.
13:57
Speaker 1: I think he doesn't have any other option because I
13:59
Speaker 1: think when you're confronting Trump as a leader of a country,
14:02
Speaker 1: you have two options. The Mark Carney route, the Prime
14:05
Speaker 1: Minister of Canada, you push back trying to gain respect,
14:08
Speaker 1: but at the same time, you need to be willing
14:11
Speaker 1: to contend with the negative effects of such an approach,
14:14
Speaker 1: meaning in terms of the economic costs of actually pushing back,
14:18
Speaker 1: or you try to please Trump. And I think European
14:20
Speaker 1: leaders have opted for the second route. They're trying to
14:23
Speaker 1: please Trump. But that creates a problem in itself is
14:26
Speaker 1: that in every single summit where you have to deal
14:28
Speaker 1: with him, it all becomes about making sure that Trump
14:32
Speaker 1: doesn't get angry and he doesn't start threatening tariffs on
14:35
Speaker 1: removing military support from Europe and so on. So I
14:39
Speaker 1: think he doesn't have many options. And I think the
14:41
Speaker 1: longer term question is clearly European leaders are increasingly talking
14:45
Speaker 1: about being more independent from the U.S., while at the
14:47
Speaker 1: same time trying to please Trump. So this could mean
14:50
Speaker 1: two things. It could mean that basically they are buying
14:53
Speaker 1: time for Europe to develop capabilities so it can really
14:56
Speaker 1: be independent and try not to anger the US too much.
14:59
Speaker 1: Or it could be that they're just expecting for the
15:01
Speaker 1: next administration to be possibly a Democrat that will be
15:04
Speaker 1: much more friendly to the EU, right? I think at
15:07
Speaker 1: the end of the day, if he's the first one
15:08
Speaker 1: and they're trying to gain time, that's the main problem
15:10
Speaker 1: that the European Union has right now is that history
15:13
Speaker 1: is going a little bit too fast for the European Union, right?
15:16
Speaker 2: Everything goes faster than the European Union.
15:18
Speaker 1: Everything indeed. You know, one could argue that, you know,
15:21
Speaker 1: it's an advantage, the fact that you have that system
15:23
Speaker 1: of 27 member states, because every single decision has more buy-in, right,
15:27
Speaker 1: from such a diverse constituency. But one could also ask legitimately,
15:32
Speaker 1: is the current rhythm of history and geopolitics, actually, is
15:35
Speaker 1: that system fit for where we are right now? And
15:37
Speaker 1: the answer is probably not.
15:39
Speaker 2: Well, I'm sure we're going to come back to this,
15:41
Speaker 2: but I appreciate the sort of whistle-stop tour of some
15:43
Speaker 2: of the issues facing Europe and a good way to
15:47
Speaker 2: talk us into the conversation I had with Chancellor Mertz.
15:51
Speaker 2: I started by quoting back to him a line from
15:54
Speaker 2: the speech he'd just given at the dialogue. We won't
15:57
Speaker 2: pursue our security by shutting ourselves off. Because it seemed
16:00
Speaker 2: to me that for the survival of the car industry,
16:04
Speaker 2: he had accepted the need to cut Europe off from
16:07
Speaker 2: Chinese imports.
16:12
Speaker 3: Well, first of all, I mentioned our debate which we
16:15
Speaker 3: had last Thursday in Brussels. We didn't mention one country
16:19
Speaker 3: in specific. There are some, and there is one in
16:23
Speaker 3: this group, which is really increasing their, from their side,
16:29
Speaker 3: their trade surplus towards Europe fundamentally. And I give you
16:35
Speaker 3: a simple number. In the meantime... Not one single member
16:40
Speaker 3: state of the European Union still has a trade surplus
16:46
Speaker 3: with China. We all are having deficits. And accumulated, this
16:51
Speaker 3: deficit is up to far more than 300 billion euros
16:57
Speaker 3: a year. That means almost 1 billion every day. And
17:03
Speaker 3: this is something which is, of course, due to competitiveness, strength,
17:09
Speaker 3: R & D successes in this country. For sure. And
17:13
Speaker 3: we have to respect that. But this is as well
17:16
Speaker 3: due to overcapacities, high subsidies on the automotive sector and others, and,
17:27
Speaker 3: as I said, an artificially undervalued currency. And this has
17:31
Speaker 3: to be addressed. I know that the responsible commissioners was
17:36
Speaker 3: in China last weekend. The talks there were relatively successful.
17:42
Speaker 3: China agreed to reduce the number of cars imported to
17:46
Speaker 3: the European Union at a first step. So we are
17:50
Speaker 3: making progress, but we are taking the responsibility for our own,
17:55
Speaker 3: for our industry, and for a balance in trade. And
17:59
Speaker 3: that is our goal. Not a conflict, but to have
18:01
Speaker 3: a new balance in trade with China, which is a
18:06
Speaker 3: reliable partner, which is an important partner for many companies
18:09
Speaker 3: in Germany and beyond. So we are not looking for
18:12
Speaker 3: a conflict, but we are taking account of our own interests.
18:29
Speaker 2: You told my colleague Francine on Monday that you didn't
18:34
Speaker 2: want a trade war. But if we think about the
18:37
Speaker 2: measures that you've just mentioned, some of the tools that
18:42
Speaker 2: were agreed on last week, plans for maybe broader caps,
18:49
Speaker 2: we already have a trade war, don't we?
18:51
Speaker 3: No, we don't have it. And we are not looking
18:54
Speaker 3: for that. The right opposite is true. We are looking
18:57
Speaker 3: for a fair trade with China. Our conviction is and
19:03
Speaker 3: remains open markets, In a rules based order. So China
19:09
Speaker 3: has become member of the WTO in 2001. We all
19:13
Speaker 3: have to play by the rules. And that is what
19:15
Speaker 3: we are looking for. And we are having instruments. We
19:18
Speaker 3: are opening the toolbox. We are showing the toolbox. But
19:22
Speaker 3: we don't want to make use of our toolbox. So
19:26
Speaker 3: this is. how we are ready to defend ourselves against
19:30
Speaker 3: unfair practices. And the dialogue has already begun. It's more
19:35
Speaker 3: deepened than ever before. And this is one of the
19:38
Speaker 3: effects of our discussion and our proposal, which we tabled
19:42
Speaker 3: last Thursday. And as I said, was unanimously agreed by
19:46
Speaker 3: all the members of the European Union, because we are
19:48
Speaker 3: all faced with a change. the same challenges on this.
19:52
Speaker 2: So what does Beijing need to do to prevent those
19:56
Speaker 2: tools from being brought out.
19:58
Speaker 1: Of the box?
19:58
Speaker 3: Well, the head of the Eurogroup and the president of
20:03
Speaker 3: the ECB have already started a dialogue on currency and
20:08
Speaker 3: exchange rates, which is the right way to do Second
20:11
Speaker 3: point is we have to discuss over capacities and imports
20:16
Speaker 3: to the European Union. We have to discuss subsidies. So
20:20
Speaker 3: we want to have a fair trade with China in
20:25
Speaker 3: our joint and mutual interest. That is our goal, not
20:30
Speaker 3: to create a conflict. But at the same time, we
20:33
Speaker 3: have to be ready to defend ourselves, to defend our industry.
20:38
Speaker 3: And as far as I can see, we are getting
20:40
Speaker 3: a lot of public support, a lot of support from
20:44
Speaker 3: the industry, that they are saying this is overdue, that Germany,
20:48
Speaker 3: France and the entire European Union now come to the
20:51
Speaker 3: point where they are ready to defend their interests, and
20:55
Speaker 3: that's what we are doing.
20:56
Speaker 2: Forgive me, Chancellor, but as an economist, I find this
20:59
Speaker 2: a very... You sound very much like Donald Trump now
21:03
Speaker 2: in talking about... Trade balances. Stay with me. No, because
21:08
Speaker 2: those of us who study economics.
21:11
Speaker 3: Everybody's waking up in this room now.
21:15
Speaker 2: We had many years where we would have a lesson,
21:17
Speaker 2: sometimes from German chancellors, from others, that you don't judge
21:21
Speaker 2: the fairness of trade by the size of a surplus
21:24
Speaker 2: or the deficit. That was a reflection of the competitiveness
21:27
Speaker 2: of industry. I seem to remember even Germany explaining the
21:31
Speaker 2: massive size of its trade surplus... by the efficiency of
21:35
Speaker 2: its industry, and yet now the goal seems to be
21:38
Speaker 2: we should have a balance, just like Donald Trump talks
21:40
Speaker 2: about trade balance.
21:41
Speaker 3: No, well, trade balance is not the only point we
21:46
Speaker 3: refer to. The critical point is we had a surplus
21:51
Speaker 3: from Germany to the world for decades, but this was
21:54
Speaker 3: the case because our competitiveness was so overwhelming. Our R &
21:59
Speaker 3: D was great. Our companies were and are still Great.
22:04
Speaker 3: And they can compete. But what we are seeing now
22:07
Speaker 3: is currency undervaluation. We are seeing subsidies. We are seeing
22:16
Speaker 3: overcapacities in a dimension which is not just meant for
22:22
Speaker 3: a global market, but what is meant as an unfair
22:26
Speaker 3: competition to those who are producing under normal circumstances. And
22:31
Speaker 3: that's the reason why we are starting a new debate.
22:35
Speaker 3: This is no more. We are starting a new debate.
22:39
Speaker 3: We do not close our markets. This is the opposite
22:42
Speaker 3: from what the US is doing. The US market is
22:45
Speaker 3: closed for most of the Chinese companies and products. This
22:50
Speaker 3: is not the case in Europe. We are open and
22:53
Speaker 3: we want to remain open. We want to keep on
22:57
Speaker 3: having open markets and trade, but fair trade under the
23:02
Speaker 3: same Conditions and that's a difference between Europe and the
23:06
Speaker 3: US but.
23:07
Speaker 2: One of those tools that you're talking about is to
23:09
Speaker 2: shut off access Completely and there are some sources of
23:13
Speaker 2: greater competitiveness of China not least a low cost of
23:16
Speaker 2: energy which comes from Enormous investment in infrastructure, which has
23:21
Speaker 2: not happened in Europe. So it isn't all there are
23:24
Speaker 2: some real advantages.
23:25
Speaker 3: You're completely right. And that's the reason why two-thirds of
23:28
Speaker 3: my speech was an own competitiveness and German competitiveness, European competitiveness.
23:35
Speaker 3: We have to do our homework. We are far away
23:39
Speaker 3: from being competitive enough to these global challenges. We are
23:45
Speaker 3: doing our homework. But we are seeing at the same
23:48
Speaker 3: time unfair practices. And we have to talk about that.
23:52
Speaker 3: That's the reason because we presented our proposal on Thursday.
23:56
Speaker 3: This is not the beginning of a war, of a
24:00
Speaker 3: trade war with China. We are looking for peaceful solutions,
24:05
Speaker 3: but the level for that is fair trade.
24:09
Speaker 2: So you've been very clear on that. One of the
24:11
Speaker 2: things that's happened in the last few years, and we're
24:13
Speaker 2: about to run out of time, but obviously the big
24:15
Speaker 2: change in the political environment is a rise in the support,
24:19
Speaker 2: even greater rise in the support for the extremes, particularly
24:22
Speaker 2: the AFD. In retrospect, do you think that the centre
24:26
Speaker 2: parties have overcorrected in wanting to listen to concerns around
24:32
Speaker 2: immigration and other cultural and social issues and not focused
24:36
Speaker 2: and not on the economic roots of that support. If
24:39
Speaker 2: you think about even in Berlin, the housing crisis is
24:42
Speaker 2: what's really driving that support.
24:43
Speaker 3: This is true. But it's true that you've overcorrected. Well,
24:49
Speaker 3: we have to listen at least more carefully to the people,
24:52
Speaker 3: what they are faced with in their daily life. We
24:57
Speaker 3: are seeing that consumer prices are rising. We are seeing
25:02
Speaker 3: that housing is becoming more costly. So we are addressing
25:06
Speaker 3: all these issues. And I very much hope that in
25:10
Speaker 3: the longer perspective, people will see that this government in
25:14
Speaker 3: the center of our political scene is able to resolve
25:19
Speaker 3: the problems and to meet the challenges. And that is
25:22
Speaker 3: the proof we have to deliver. We have to deliver.
25:26
Speaker 3: And that's the reason why we are so engaged. We
25:29
Speaker 3: are very intensively at work. And at the very end
25:33
Speaker 3: of the period of legislation, we have to come to
25:38
Speaker 3: results and then to elections. And that's the reason why
25:40
Speaker 3: I'm not nervous, but I'm engaged, committed, and really optimistic
25:47
Speaker 3: that we will achieve those goals who are laid down
25:50
Speaker 3: in our coalition agreement.
25:52
Speaker 2: Finally, Chancellor, where you didn't sound optimistic, and I think
25:56
Speaker 2: this was also echoed in your comments on Monday, we
26:00
Speaker 2: were quite struck by the strength of your language on Russia.
26:06
Speaker 2: Should we be worried, given the strength of your words,
26:10
Speaker 2: that you are seeing things and hearing in your security
26:13
Speaker 2: briefings things that we do not yet see in terms
26:17
Speaker 2: of the hybrid warfare of Russia and the other forms
26:20
Speaker 2: of threat?
26:22
Speaker 3: Frankly, there is no secret about the threats we are
26:27
Speaker 3: faced with from Russia. I mentioned that in my speech.
26:31
Speaker 3: This information is in this country here every day. By
26:37
Speaker 3: the way, powered and fueled by one party which is
26:42
Speaker 3: strong in the German Bundestag as well. We are seeing
26:46
Speaker 3: attacks on our infrastructure. We had this drone attack on
26:50
Speaker 3: our airport in Leipzig. So this is happening daily. Interferences
26:56
Speaker 3: in our internet system and our communication systems every day.
27:04
Speaker 3: So that's the reason why I said on Monday in
27:08
Speaker 3: your studio that my biggest concern at the moment is
27:12
Speaker 3: not our economy, is not the European Union, is not America,
27:17
Speaker 3: is not China. My biggest concern is the impact of
27:22
Speaker 3: Russia on our society and how they are succeeding to
27:27
Speaker 3: destabilize our societies. And we have to do more on
27:32
Speaker 3: that to come back to a country which is resilient
27:38
Speaker 3: enough against these attacks. And these attacks are happening every day.
27:43
Speaker 3: This is not... something which I know from intelligence. This
27:47
Speaker 3: is something what you can read every day in the newspapers.
27:52
Speaker 3: And my view is that our people are still underestimating
27:58
Speaker 3: this big threat on our society. And this is not
28:01
Speaker 3: just a war in Ukraine. This is a fundamental attack
28:05
Speaker 3: against the entire political order we achieved after 1990.
28:09
Speaker 2: It's the biggest risk, you say, in your mind. You
28:13
Speaker 2: mentioned the G20. There is no prospect of that featuring
28:20
Speaker 2: prominently in the discussion or the communique from the G20
28:23
Speaker 2: in Miami, surely?
28:25
Speaker 3: Frankly, I don't know yet. There was a meeting in
28:29
Speaker 3: Oslo last night with Zelensky, with Witkow, with our representatives
28:36
Speaker 3: from Europe, and we've made some progress on this debate.
28:42
Speaker 3: And we are always ready to talk. And we are
28:45
Speaker 3: not giving support to Ukraine to prolong this war. We
28:50
Speaker 3: are doing that to bring this war to an end
28:53
Speaker 3: as fast as possible. But this is a surrender or
28:58
Speaker 3: even an unconditional surrender. Surrender for Ukraine is not an
29:03
Speaker 3: option because this were a surrender of all of us.
29:06
Speaker 3: And that's the reason why I'm giving so strong support
29:09
Speaker 3: to Ukraine. This is in our own interest. This is
29:12
Speaker 3: in our entire own interest.
29:15
Speaker 2: Chancellor, thank you very much and good luck in Miami.
29:25
Speaker 2: Thanks for listening to Trumponomics from Bloomberg. It was hosted
29:28
Speaker 2: by me, Stephanie Flanders. I was joined by our senior
29:31
Speaker 2: geoeconomics analyst, Antonio Barroso, and by, of course, the German Chancellor,
29:37
Speaker 2: Friedrich Merz. Trumponomics was produced by Summer Sardin. Moses Andam,
29:41
Speaker 2: and Jennifer Seeley, with editorial guidance from Megan O'Neill from
29:45
Speaker 2: Bloomberg Economics. Sound design was by Blake Maples and Kelly Gary.
29:49
Speaker 2: Amy Keene is executive producer of Talk Podcasts, and Cheryl
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