German Mittelstand warns: "Biden also has protectionist traits"

Friday 11th December 2020

German middle class warns
"Biden also has protectionist traits"

The US citizens have voted: Joe Biden is to become the new president in January. Does this mean a radical economic reorientation? Are punitive tariffs and trade wars a thing of the past? Marc S. Tenbieg, executive chairman of the German Mittelstands-Bund (DMB), counts on it, hopes – and warns.

ntv.de: Mr. Tenbieg, the US presidential election is over, according to current counts, Joe Biden narrowly prevailed against incumbent Donald Trump in the end. What does this election result mean for the German economy in general?

Marc S. Tenbieg: Basically, this is initially a positive signal for the German economy. With Biden there are considerable hopes of strengthening the transatlantic partnership. It should bring more reliability and stability back into the White House – and that is important for investments. I assume that Biden will enter into dialogue with the European Union and also with Germany.

The US Congress could make it difficult for him …

Yes, the Democrats have a majority in the House of Representatives. The Senate is currently in Republican hands. It will not be until January, with the Senate election in Georgia, ultimately, whether anything will change in this area.

What can German medium-sized companies expect from US President Biden?

The USA is Germany's most important trading partner. According to the Federal Statistical Office, goods worth around 119 billion euros were exported to the USA in 2019. The role of the US sales market for German medium-sized companies is correspondingly large. The German middle class is relying on a closer partnership with the USA.

Keyword closer partnership: Trump threatened punitive tariffs on German cars, also an important issue for the numerous medium-sized suppliers. Are the trade restrictions off the table with a US President Biden?

That is a difficult question. In the past, punitive tariffs were an instrument that was used only rarely and with caution. Under Trump they have become the rule and therefore socially acceptable. Biden is certainly a beacon of hope for the German economy. But Biden will also see how he can help the battered American market on its feet. In this situation he could lose his fear of punitive or protective tariffs. You have to wait and see what happens. Biden cannot be denied certain protectionist traits.

Could Biden even introduce new punitive tariffs?

I think that's unlikely. Sticking to existing tariffs, I think that's more likely.

Will trade relations between the US and China change? After all, these are the two largest economies in the world.

The relationship between the two global superpowers has been considered tense for a long time. That is why I do not assume that political and economic relations will change from now on. In the medium term, however, I expect a certain relaxation – due to a guided dialogue. The relationship between the US and China was badly battered during Trump's tenure. It takes a little time.

Trump has also unilaterally terminated the nuclear deal with Iran. Could it come back on the negotiating table now?

We hope, also for the German middle class, that the topic will be revived. As Vice President, Biden was part of the US administration of Barack Obama, at the time he was involved in negotiating the nuclear agreement under the leadership of John Kerry. As a result, Biden has a strong connection to the nuclear deal. This means that there is definitely the possibility – in the long term – that the agreement will be revived and adapted.

In the short term, Biden has other topics on his agenda, such as the coronavirus pandemic. But he has also announced the return to the Paris Climate Agreement: That plays into the hands of German SMEs …

Germany and the EU have made it their mission to be leaders in climate protection. The fact that Biden has announced that he wants to invest massively in renewable energies benefits all companies, including German and German medium-sized companies. Biden wants to make the US climate neutral by 2050 and drive the transformation of the economy with two trillion dollars. Even if the Senate blocks it or cuts investment, there will be a huge amount of money invested in the US economy.

So German SMEs can only benefit from this?

German companies have a world market share in the field of environmental protection technology and resource efficiency of 14 percent. If you simply offset the investments announced by Biden, you can see what a huge opportunity this opens up – also for medium-sized companies.

That doesn't necessarily sound like Trump's "America First" …

Trump managed to unite a little more than 70 million US voters. He has also achieved this with his protectionist trade and economic policy. This also increases the pressure on Biden to go in this direction. In addition, Biden has always written on his flags: "Buy American". That means: strengthening the American domestic market and domestic production. This indicates that we will probably not be out of the misery of protectionism yet.

What remains of the Trump presidency in the end?

Under Trump, the US has become an unreliable partner in the world. You lost a lot of trust. In addition, the political climate became brutalized and the culture of debate was completely lost. Trump courted protectionism and questioned the world community – and in the end, many states followed Trump and his negative example. Inhibitions have fallen. The times under Trump were very turbulent.

So things can only get better under Biden?

Something like that is said quickly. But I'm more skeptical about that. Biden has at least a lot of work ahead of him: politically, economically, socially. In the end, however, there could be a more reliable trade policy and, ideally, a clear realignment of the US economy.

Thomas Badtke spoke to Marc S. Tenbieg