German middle class warns: "Trump has gambled away trust"

The US has a choice: it can confirm US President Trump in office or replace him with Democrat Biden. Both have consequences for the economy. The German middle class is looking closely at the choice. Marc S. Tenbieg, managing director of the German Association of SMEs, takes stock of the four years of Trump's presidency in an interview with ntv.de: "Extremely sobering."

ntv.de: Mr. Tenbieg, US President Donald Trump wants to be confirmed in his office on November 3rd. Four years ago, his election slogans were "America First" and "Make America Great Again". How has German SMEs fared with their trading partner USA under President Trump since then?

Marc S. Tenbieg: First of all, the election of Donald Trump as US President was a big shock for us. Although you knew him from television, you didn't know how he ultimately governs, how he deals with the power and responsibility of office itself. In the end, we had to adjust very quickly to the fact that with Trump we had a president of a different kind. Nevertheless, the USA has remained our most important trading partner in recent years. Overall German exports to the USA have even increased further – by six percent between 2017 and 2019, with a strong participation of SMEs.

So much ado about nothing?

That would be an exaggeration, because the growing imports quickly became a thorn in Trump's side, he preferred more domestic production and began to levy punitive tariffs and threaten to take wide-ranging measures. Without Trump's protectionism, we would certainly be talking about better trade numbers now.

So protectionism. Trump's predecessor Barack Obama, on the other hand, relied on free trade and multilateralism. The nuclear deal with Iran, which Trump promptly unilaterally terminated and imposed sanctions, also falls during his term of office. German companies were also affected by this – also from medium-sized companies?

First of all, something fundamental: the nuclear agreement came about with immense political efforts, primarily under the leadership of Germany and the EU. That was a milestone, economically and politically, keyword: world security. Then Trump comes and wants Iran to bleed to death. This decision hit the German middle class at the time, because Trump put the pistol on the chest of companies according to the motto: Either you continue to trade with Iran or with the USA. In one fell swoop, the long and laborious economic relations between German companies and Iran were destroyed. The result in figures: According to the DIHK, German exports to Iran then fell by 50 percent in 2019, to 1.2 billion euros.

The larger sales market has simply won in the end?

Correct. Although Germany and Iran traditionally had good economic relations and some political attempts were made by Berlin or the EU, in the end the companies came to exactly this point – and mostly opted for their larger trading partner, the USA.

What other measures by the Trump administration do you rate as negative for your industry? Which were the most drastic?

There are quite a few, but all of them are based on Trump's protectionist economic policy. German SMEs have been particularly affected by the punitive tariffs and the trade disputes with China and the EU. Germany's economy thinks globally and lives from exports. But if China, one of the largest sales markets and trading partners, is attacked, it also leaves its mark on the German economy and thus also on medium-sized companies.

From a US perspective, it sounds like Trump did some things right …

Yes, from the US perspective that may be true, but it is too short-sighted. Trump has focused on the domestic economy, but the upswing, which began under his predecessor Obama, was the longest in US history. At least Trump didn't stop him, that was the corona virus.

A "but …" sounds out …

Yes, but Trump's problem is sustainability. How dearly did he buy this upswing? Tax reform, "America First" foreign trade policy and the significantly increased government spending brought short-term successes. But how sustainable these effects are, with all the trust that has been lost internationally – I put a very big question mark behind this question. Trump's politics have gambled away trust and nothing is worse than that: a trading partner whose word you cannot rely on. This broken relationship of trust cannot be repaired overnight either, it will take a lot of time.

With his corporate tax reform, Trump played into the hands of large corporations in particular. In your opinion, how have small and medium-sized US companies fared?

These too have of course benefited from the sustained upswing, but on a much smaller scale. Their tax savings were not as high as with the corporations, and the investments they made were correspondingly lower. Other G7 countries have followed suit, but Germany has not yet. In the end, it can be said that Trump's policies primarily targeted companies as such, but did not involve society as such. There was no such impulse for society as a whole, it did not materialize – on the contrary.

It is said: Trump leads the US economy, after all the world's largest economy, like a company. Did it work? Can that even work?

An entrepreneur primarily makes sure that his company is doing well. The management of a country is more complex: It is not just the performance of Wall Street or how many followers you have on Twitter that plays a role. It's about diplomacy, international relations, trade partnerships, reliability, trust. Trump has neglected all of this with his narrow-minded policy of wanting to run the country like a company. The US economy benefited from this in the short term. In the long term, however, I have my doubts because of the protectionist approach.

Now it's Donald Trump or Joe Biden. In some of the surveys, Biden is clearly ahead. How do you expect the election to turn out?

Difficult. Even in the last US presidential election, the opinion polls were wrong. So I'm careful with a prognosis. But I tend to see Biden ahead.

Assuming Biden wins, becomes the new US President, replaces Trump. Would that mean something fundamentally changed for trade relations between the USA and Germany, maybe even improved?

First of all, regardless of whether Trump or Biden, youthful dynamism is not to be expected from either of them. I also believe that a Biden won't change the world overnight. Of course, Biden is a popular figure, especially in Europe and especially in comparison with Trump. But: Biden will not make a political turnaround of 180 degrees. Economically, he will perhaps turn a few screws, but only to a small extent, as the election campaign already suggests. But what will change with Biden is the political style! I think that under him the USA will again become more of a reliable partner in the world, regardless of whether it concerns economic, social or political issues.

In the election campaign, Biden propagates the fight against climate change, an improvement in the health system and higher corporate taxation. Does that sound positive at first for smaller companies, also for German medium-sized companies?

It sounds as if more justice could find its way into the economic system. I assume that if Biden brings the USA back into the Paris Climate Agreement and the topic of renewable energies plays a more important role in the USA than under Trump, then German, medium-sized companies will also benefit from it. Climate-friendly technologies are more important in this country and are more developed than in the USA. Should Biden therefore focus on the issue of climate protection and climate neutrality, the corresponding machines and technology from Germany should play an important role. In this respect, German SMEs could benefit from a climate-friendly President Biden.

Trump or Biden: What are you hoping for the next US president?

First of all, Trump's record is extremely sobering. So, regardless of who wins, I would like a little more political calm and serenity as well as a clear commitment to the transatlantic relationship. I would like the next US president to see Europe as a partner, the dismantling of trade barriers and thus the abandonment of protectionism. Instead, more multilateralism and planning security for corporate investments.

Thomas Badtke spoke to Marc S. Tenbieg