Merkel Braces for the Backlash as Trump Re-Election Bid Wobbles

Between a global pandemic, the deepest economic collapse since World War II and the U.K.’s departure from the European Union, German Chancellor Angela Merkel has had a difficult 2020.

And she’s preparing for things to get a lot worse.

As President Donald Trump’s political situation grows increasingly unpredictable in the run-up to November’s U.S. election, Merkel is preparing to face more curveballs from her American counterpart, according to officials familiar with her thinking.

Already this month, Trump has, without warning, announced the withdrawal of U.S. troops from Germany, sidelined the chancellor in negotiations between Serbia and Kosovo, and pulled the plug on efforts to settle a dispute over taxing internet giants. He threatened again to put tariffs on European cars — a not-so-veiled shot at Germany.

With the U.S. contending with mass protests over police brutality, more than 100,000 Americans dead from Covid-19 and the president’s poll numbers sagging, officials in Berlin are worried that could be just the start of the trouble heading their way. Merkel even cited the U.S. election as a risk factor for the EU on a videoconference with her fellow leaders on Friday, according to one official.

The Germans fear that as Trump tries to revive his campaign, he may appeal to his base with provocative policy actions that cause massive problems for them, another official said, asking not to be identified because discussions are private. Potential flash points include a move to dramatically ramp-up trade barriers or efforts to disrupt the western security alliance. Trump’s ambivalence about NATO has been a longstanding source of concern for European leaders.

With ties between the U.S. and Germany on a steep downward trajectory, Trump has also started threatening again to hit German car exports with tariffs and warned of sanctions over a new gas pipeline. Merkel may have triggered the latest barrage of provocations when she helped scuttle Trump’s effort to host a Group of Seven meeting at Camp David this month by saying she wouldn’t attend.

Allegations that the American president has mixed policy with personal interests gained new currency with a tell-all memoir from former National Security Advisor John Bolton set for release this week. Bolton writes that Trump directly linked trade talks with China to his re-election chances, and asked Chinese President Xi Jinping during a 2019 meeting to buy more American farmgoods, saying it would help him win in 2020.

A Trump campaign spokesman, Tim Murtaugh, said in an interview on Bloomberg Television that Bolton’s allegation Trump sought Xi’s intervention in his re-election is “absurd.”

Trade Escalation

Heightened trade tensions may pose the most immediate threat to Berlin, with one of the officials saying that it was possible Washington could use this as a campaign theme. Earlier this month Trump, raised the prospect of targeting Germany’s automobile sector to force the EU to lower its levies on American lobster exports.

“The European Union has ripped this country off so much, it’s unbelievable, and it’s so easy to solve,” Trump told fishing-industry representatives in Maine who complained about European market barriers. “If they don’t change, we’re going to put a tariff on their cars until they change. And they’ll change right away.”

The tariffs would be a financial disaster for Germany’s car industry, potentially affecting vehicle sales valued at 23 billion euros ($28 billion), according to Bloomberg Intelligence estimates. A 25% U.S. levy on foreign cars would add 10,000 euros to the sticker price of EU vehicles imported into the country, according to the Brussels-based European Commission, the bloc’s executive arm.

The EU has said that if Washington follows through with the threat, it would impose tariffs on 35 billion euros of American imports, an escalation that would likely spiral into a full-fledged trade war.

The impact of trade war between the U.S. and the EU would likely dwarf the fallout from Trump’s conflict with China last year.

— With assistance by Birgit Jennen, and Viktoria Dendrinou

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