by Staff Writers
Washington (AFP) Jan 31, 2017
A top economic advisor to US President Donald Trump bashed Germany for exploiting an undervalued euro to take advantage of its trading partners, the Financial Times reported Tuesday.
The public rebuke of a major trading partner is the latest example of the brash tactics that have become a feature of the new US administration, with Trump himself using public attacks and Twitter to criticize businesses and allies, including Mexico.
Peter Navarro, who advised Trump during the campaign and heads the White House's new National Trade Council, said in an interview with the FT that Germany "continues to exploit other countries in the EU as well as the US with an 'implicit Deutsche mark' that is grossly undervalued."
Trump later said the United States also should take advantage of devaluation as a trade strategy.
"Our country is run so badly we don't know anything about devaluation," Trump told a group of pharmaceutical executives at a White House meeting.
"You look at what China is doing and what Japan has done over the years, and they played the money market and the devaluation market and we sit there like a bunch of dummies."
During the campaign Trump repeatedly threatened to take action against China on his first day in office due to its currency policies, by declaring the country a "currency manipulator."
But economists argue that view is several years out of date.
China for years was accused of intervening in currency markets and buying billions of dollars in US Treasury debt to keep its currency undervalued, in order to promote its exports.
But in recent years weak economic conditions have kept the yuan depressed and the Chinese central bank instead has been intervening to support the currency and keep it from devaluing further.
- 'Serious risk' to world trade -
The criticism of Germany is not new, as the country has large trade and current account surpluses, and the International Monetary Fund, for example, has repeatedly urged the country to increase spending so as to boost consumption and sluggish economic growth in the EU.
Germany is an export powerhouse and gains a trade advantage by being part of the eurozone where the currency value is held down due to the weak economies in the union, like Greece, Spain and Italy, economists say. Were Germany to operate outside the currency union, the Deutsche mark value would be much higher, making the country's exports more expensive and less competitive.
However, it is highly unusual to conduct these discussions over policy differences in newspapers rather than behind closed doors.
France's Finance Minister Michel Sapin hit back at the Trump White House, saying "the decisions of the new US administration pose a serious risk to the world trade order."
He warned that "history reminds us that protectionist retreats are the worst of solutions," and said neither France nor Europe "will be able to watch helplessly what might risk being a dislocation of our economic institutions."
German Chancellor Angela Merkel, speaking in Stockholm, deflected the criticism from Navarro, saying the currency value is the responsibility of the European Central Bank.
"As far as the question of the euro and its assessment is concerned, Germany is a country that has always promoted the European Central Bank to make an independent policy, as did the Bundesbank when there was no euro," Merkel said.
"Therefore, we will have no influence over the choices made by the ECB. So I cannot either, in the situation as it is, and I do not want to change anything."
There has been no comment so far from the ECB.
Navarro, a hardliner on trade and especially China's rise, also said the planned trade deal between the United States and European Union -- the Trans-Atlantic Trade and Investment Partnership -- was dead.
He repeated Trump's statements that the administration will pursue bilateral agreements that favor the United States.
Navarro also reiterated that the Trump administration will focus on bringing manufacturing and production back to the US shores.
"It does the American economy no long-term good to only keep the big box factories where we are now assembling 'American' products that are composed primarily of foreign components," he said in the FT.
"We need to manufacture those components in a robust domestic supply chain that will spur job and wage growth."
The US had a $60 billion trade deficit with Germany for the first 11 months of 2016 -- nearly identical to the trade deficit with Mexico -- while the deficit with the whole European Union was $134 billion.
Global Trade News
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