Forget China, Trump missed key trade war target in Europe, famed economist says

As President Trump says the U.S. and China are close to signing the first phase of a trade deal later this month, one economist says Trump may have had better success starting a trade war with one prominent economy in Europe instead.

During an interview with German newspaper Handelsblatt – as translated by Bloomberg – American economist Paul Krugman suggested Trump should have gone after Germany.

“Maybe the president should have started a trade war with Germany, the prospects would’ve been better,” Krugman said. “Because the pressure on Berlin to change something is certainly low.”

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Krugman went on to say that as the world suffers from “a lack of demand, countries with large trade surpluses are the villains.”

“Germany is first in line, but also the Netherlands and Sweden," Krugman said, according to Bloomberg. "The macroeconomic rogue states of the world economy are primarily in northern Europe.”

The U.S. trade deficit with Germany between January and October of last year was more than $56 billion, according to data from the U.S. Census Bureau. The total trade deficit in 2018 with Germany was $68 billion.

Over the course of the first 10 months of 2019, Germany was the fifth largest trading partner with the U.S., trailing Mexico, Canada, China and Japan. During that timeframe, the U.S. trade deficit with China was more than $294 billion.

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Trump has publicly taken aim at Germany – even threatening last year to impose tariffs on foreign cars sold in the U.S. – over trade deficits. He has pressured automakers like BMW to build more cars in the U.S.

Executives from Germany’s top automakers met with Trump at the White House at the end of 2018.

Krugman also said, however, that if Trump were to start a trade war with the European Union, it would likely be able to take actions that would hurt key states in the upcoming election, questioning whether Trump was “ready for that.”

Trump has also called out Germany for not spending enough on defense – per the NATO agreement – and criticized Chancellor Angela Merkel over her immigration policies.

Meanwhile, Trump says the U.S. and China will sign their phase one agreement on Jan. 15 – which has yet to be confirmed by Beijing.

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