Europe

'Bad Germans' And Other Trump Blunders

Trump's Brussels trip displayed a now familiar disregard for the facts.

Made in the U.S.A.

Photogaper: Ariana Lindquist/Bloomberg

During his first foreign trip since he was elected, President Donald Trump didn't look too out of place in Saudi Arabia or even in the Vatican. In Brussels, however, he was a befuddled elephant in a china shop, doing his best to convince European leaders that the U.S. was clueless on key cooperation issues.

It was bad enough that he shoved aside Montenegro Prime Minister Dusko Markovic to be in the front row during a North Atlantic Treaty Organization photo opportunity; Markovic, whose country has just been welcomed into NATO, graciously said that the U.S. president belonged out front. It was awful enough that he used a memorial opening ceremony to make a politically contentious speech in which he railed against NATO members' low defense spending and, unlike any of his predecessors, avoided explicitly affirming NATO's pledge of mutual defense -- the very Article 5 of the treaty that the memorial was supposed to commemorate.

One would expect a novice political leader in his first six months since being elected to climb a steep learning curve; instead Trump appeared to demonstrate a persistent unwillingness to learn. Despite having been told repeatedly that NATO member states had pledged to spend 2 percent of economic output on defense individually, not to pay that amount into some common pool, Trump repeated the canard that under-spenders "owe massive amounts of money from past years and not paying in those past years." There appears to be no way to explain to him that no NATO member is in arrears to the military bloc's budget. 

"I never once asked what the new NATO headquarters cost," Trump said. "I refuse to do that." The number is published on NATO's website: 1.12 billion euros ($1.26 billion), an amount comparable with NATO's common budget for 2017 (1.5 billion euros) but contributed separately by the member states in proportion to the size of their economies. Besides, each country paid for the offices to be occupied by its mission.

At the meeting with top EU officials, Trump tore into Germany's trade surplus, showing a similar disregard for facts. "The Germans are bad, very bad," he said, according to Der Spiegel. "Look at the millions of cars they sell in the U.S. Horrible. We're going to stop that."

German carmakers don't sell millions of cars in the U.S. Last year, the total unit sales of Volkswagen, BMW and Daimler reached 1.3 million (not counting Lamborghinis). At the same time, the German companies produce about a million vehicles in the U.S. For example, BMW made 32,659 sports utility vehicles in Spartanburg, South Carolina, in April 2017; it churns out 1,400 a day, most of them for export. The relatively few BMW X5s on German roads are made in Spartanburg, too: It makes sense for BMW to make the large cars closer to their main market.

Daimler made a total of 300,000 Mercedes cars in Tuscaloosa, Alabama, in 2016. The plant is the state's biggest exporter. VW's Chattanooga, Tennessee, operation has a 150,000-vehicle production capacity and also is export-oriented.

The U.S. does have an auto trade deficit with Germany. According to the U.S. Census Bureau, it exported $2 billion worth of cars, trucks, buses and parts to Germany (including those BMW X5s) in the first three months of 2017, and imported $7 billion worth. But it's with Mexico and Japan that the U.S. has the biggest vehicle trade shortfalls.

Are These Producers Also "Very Bad"?

U.S. vehicle trade deficit (including cars, trucks, buses and parts) with major trading partners in the first quarter of 2017

Source: U.S. Census Bureau

If Trump is intent on making sure Americans buy more U.S.-made cars, he should be the biggest lobbyist for German car manufacturers. They bring jobs to the U.S. and work to reduce the country's trade deficit. The stocks of all three major carmakers fell following Trump's remark -- but the drops weren't dramatic. Investors may be betting that someone will give Trump better information and he'll change his tune. As his NATO "debts" comments show, that is unlikely.

Trump refuses to understand things that go against his deep convictions. He wants to tailor reality to them, which may mean he'll actually try to impose punitive taxes on German-made vehicles. That may bring the price of a Mini, not made in the U.S., close to that of an  SUV made by BMW, playing havoc with the firm's North American sales structure -- but the German Big Three will, of course, adapt to it, just as VW has absorbed the enormous costs of the U.S.-generated diesel scandal.

European NATO members, too, need to adapt. That will mean grim patience for the next few years, but also stepped-up at European military cooperation outside NATO.

Europe reluctantly rolled out the red carpet for Trump for his Brussels visit. He would have acquitted himself better had he roller-bladed down it in his birthday suit. Europeans will be watching keenly for what comes next, fearing that the Trump presidency is becoming a menace to European trade and security interests. Maybe that threat will produce the cooperation from each other that is sorely lacking from Washington.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

(Corrects reference to the number of unit sales from the three German carmakers in paragraphs 6 and 8. Corrects the full name of NATO in the second paragraph.)

    To contact the author of this story:
    Leonid Bershidsky at lbershidsky@bloomberg.net

    To contact the editor responsible for this story:
    Therese Raphael at traphael4@bloomberg.net

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