Merkel Says Weak Euro Isn't Her ‘Problem’ in Stand on Trump

  • She says exchange rate isn’t to blame for German trade surplus
  • Trump has suggested German cars have an unfair edge in U.S.

German Chancellor Angela Merkel said the euro has a “valuation problem” that’s beyond her control and questioned President Donald Trump’s suggestion that the German luxury cars in his New York neighborhood reflect an unfair trade advantage.

Merkel said the euro’s exchange rate does contribute to Germany’s trade surplus, though that’s because European Central Bank’s needs to set monetary policy that responds to disparate economic performances across 19 nations. The euro reached a 14-year low of $1.0388 in December and closed at $1.0616 on Friday.

“If we still had the deutsche mark, it would be valued differently than the euro is now,” Merkel said in response to a question about Germany’s current-account surplus at the Munich Security Conference on Saturday. “But that’s an independent monetary policy over which I as chancellor have zero influence.”

The comments are her most expansive response yet to criticism from the Trump administration that a depressed euro gives Germany an unfair trade edge. Peter Navarro, the head of Trump’ s National Trade Council, this month blasted Germany for benefiting from a “grossly undervalued” single currency.

The U.S. comments triggered a trans-Atlantic spat as the administration picks fights over trade and currency manipulation. ECB President Mario Draghi also rejected Navarro’s comments, saying the Frankfurt-based central bank hadn’t intervened in foreign exchange markets since 2011. He attributed Germany’s surplus to productivity gains.

“Germany has a significant bilateral trade surplus with the U.S., a material current account surplus, but it has not engaged in persistent one-sided intervention in the foreign exchange market,” Draghi told the European Parliament on Feb. 6.

Made in Germany

Merkel also came to the defense of Germany’s export prowess, adopting a familiar line on the quality of Germany’s manufacturing might. She hit back on Trump’s claim in January about an abundance of Daimler AG’s Mercedes-Benz cars on Fifth Avenue, where Trump Tower is located. Merkel retorted by noting the number of Apple Inc. iPhones used by the crowd in Munich, which included U.S. Vice President Mike Pence.

“We’re proud that we have good products, just as the Americans are proud that they have good products,” Merkel said. “If you look around in this room at how many iPhones and Apples there are, then the vice president can be absolutely happy –- and Fifth Avenue is still not exactly overflowing with German cars.”

Merkel said other elements factored into the debate over Germany’s surplus, including an aging society that affects saving habits. She cited German investment in the U.S., “which you have to look at just as much as the question of the trade surplus.”

Just before a one-on-one meeting with Pence, the highest-level meeting yet between Merkel’s government and the Trump administration, Merkel said trade issues will take up much of the agenda between the two governments.

“You see that we have much to talk about at all levels,” said Merkel, who is presiding over the Group of 20 economies this year.

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