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German finance minister warns of retaliation if U.S. kicks off trade war

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Christian Lindner, Germany’s finance minister, during a meeting Janet Yellen, US treasury secretary, not pictured, at the annual meetings of the IMF and World Bank in Washington, DC, US, on Thursday, Oct. 24, 2024.

Ting Shen | Bloomberg | Getty Images

German Finance Minister Christian Lindner on Friday warned that if the U.S. kicked off a trade war with the European Union, there could be retaliation.

“Trade controversy sees never winners, only losers,” Lindner told CNBC’s Karen Tso on the sidelines of the International Monetary Fund’s annual meeting in Washington, D.C.

What U.S. trade policy could look like if Donald Trump were elected as president is a key issue, Lindner suggested. “In that case we need diplomatic efforts to convince whoever enters the White House that it’s not in the best interest of the U.S. to have a trade conflict with [the] European Union. We would have to consider retaliation,” he said. Lindner belongs to the pro-business Free Democratic Party which is currently in coalition with Chancellor Olaf Scholz’s Social Democratic Party.

The U.S.’ problem with trading lies with China rather than the EU, Lindner said, adding that the EU “should not become a negative side effect” of controversy between the U.S. and China.

Trump has floated the idea that, if he were elected, blanket tariffs of 10% to 20% could be imposed on almost all imports, no matter where they came from.

If such a 20% tariff were implemented by the U.S., the EU’s and Germany’s gross domestic product would fall in the coming years, Reuters reported Thursday citing a study by German economic institute IW. Trade is one of the main pillars of the German economy, suggesting heightened tensions, uncertainty and tariffs would hit the country harder than others.

Earlier this month, the German statistics office Destatis said that the U.S.’ importance as a trading partner for Germany has been growing. The agency said that since 2021, the U.S. had been the second most important trade partner for Germany behind China, but in the first half of 2024, foreign trade turnover with the U.S. was higher than that with China. In 2023, around 9.9% of German exports went to the U.S., according to Destatis.

Trade tensions between the U.S. and China, and the EU and China, have been rising throughout the year. Both the U.S. and EU have implemented higher tariffs and on some goods imported from China, citing unfair trade practices.

China in turn has also announced higher temporary tariffs on some imports from the EU. Several probes and investigations into one another’s competition, subsidy, and other practices are also ongoing as the tit-for-tat measures continue.

Trade tariffs escalating would be 'costly for everybody,' IMF's Gopinath says

After the EU voted to impose tariffs on Chinese-made electric vehicles, Germany’s Lindner urged the Union not to start a trade war. Germany had previously advocated against higher duties, raising concerns about what they could mean for the country’s struggling carmakers.

Earlier in the week, Gita Gopinath, deputy managing director of the International Monetary Fund, told CNBC that an escalation of trade and tariffs tensions between the U.S. and China would be “costly for everybody.”

Economics

America really could enter a golden age

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Maybe you are in the habit of applying a hefty discount to claims by Donald Trump; no one could blame you. But he really does have the chance to lead America into the golden age he proclaimed in his second inaugural address. Historic circumstances, political dynamics and his own audacity could also enable him to achieve the legacy he wants as “a peacemaker and a unifier”. His party has fallen into lockstep; his adversaries at home are confounded and enervated, and America’s opponents abroad are preoccupied with their own troubles. Mr Trump has battled for ten years against anyone he perceived to have crossed him. His most formidable adversary still standing is probably himself.

As he assumes office again, Mr Trump has embarked on a marketing offensive, a familiar routine, albeit this time with a twist: rather than having to persuade people something is grander than it is—that the Trump Tower in Manhattan has 68 floors rather than 58—he has to assign himself credit for things that are truthfully better than Americans may yet realise. America’s economy is the envy of the world. America is already exporting record amounts of gas and oil, and its biggest obstacle to pumping more is global demand. But Mr Trump’s declaration in his inaugural address of a “national energy emergency” may help him vault to the head of the kind of parade celebrating American glory that poor President Joe Biden lacked the wherewithal to summon.

Similar gamesmanship explains Mr Trump’s inaugural commitment that Americans would now “be able to buy the car of your choice”, which was equally true under Mr Biden (and equally untrue for those who chose a Ferrari but could not afford one), and his pledge to use troops to “repel the disastrous invasion of our country” at the southern border, where arrests for illegal crossings are below the level when Mr Trump left office.

Yet Mr Trump’s initial executive orders are meant to do more than gild the lily. In some cases they call for drastic action, particularly on immigration. As with Mr Trump’s promises of tariffs and his exhumation of “manifest destiny”, no one knows how far he may go with his deportation initiative. But there is also a bigger, more hopeful possibility: Could his showy crackdown be part of a grand plan for the golden age?

In Mr Trump’s first term some of his aides saw the potential of linking enhanced border security to broader reform of America’s immigration system. For all his harsh oratory about immigrants, Mr Trump has sometimes sounded sympathetic, particularly about people brought as children. Last October, he told the editorial board of the Wall Street Journal he had a practical reason for his tough talk about illegal immigration: “The nicer I become, the more people that come over illegally.” (The Biden administration learned that lesson to its sorrow.) But, Mr Trump said, “We have a lot of good people in this country, and we have to do something about it.” In general, said Mr Trump, who is married to an immigrant, and not for the first time, “I want a lot of people to come in, but I want them to come in legally.”

Mr Trump tries to win over any room he walks into, and that may explain his comments to the Journal editors. But he may also recognise that he has amassed more credibility with immigration hardliners than any president in memory, and thus has an opening to achieve what his recent predecessors could not. Comprehensive immigration reform has eluded presidents since 1986, when Ronald Reagan signed into law heightened border security along with amnesty for almost 3m people in America illegally.

Other grand, bipartisan bargains are possible for Mr Trump. He has not displayed interest in the kind of far-reaching tax reform that Reagan achieved, but in his first term he showed a flash of ambition for the sort of gun-safety legislation that polls show a majority of Americans want. “It’s not going to be talk like it has been in the past,” he told grieving parents and students after a 19-year-old gunman killed 17 people at a Florida high school in 2018. “It’s been going on too long, too many instances, and we’re going to get it done.” He scolded Republican lawmakers for being “scared” of the National Rifle Association (but then, after talking to NRA officials himself, backed off).

Such deals at home would realise Mr Trump’s vision of being a unifier. His opportunities to prove himself a peacemaker, extending America’s golden aura beyond its shores, await not in Panama but in Eastern Europe and the Middle East, where war may have wearied America’s allies but has surely weakened its adversaries, Russia and Iran. The test for Mr Trump is whether he can insist on fair deals for Ukraine, and for the Palestinians.

With malice toward some

From Abraham Lincoln to Franklin Roosevelt to Reagan, presidents who accomplished great things appear more as unifiers in the eyes of history than they did in those of their contemporaries. They were all dividers, too. They were also subjected to vicious criticism and even violent attack.

But Mr Trump has yet even to hint at the grandeur of spirit that those presidents brought to the job. The petty partisanship of his inaugural address, along with his pardons of even violent January 6th convicts, bode poorly for the chances he will ever overcome the weaknesses likely to cast a shadow over what could be a golden age: self-pity, a flickering attention span, a vulnerability to flattery and a reverence for strongmen. “Trump’s sense of aggrievement reinforced his penchant for seeking affirmation from his most loyal supporters rather than broadening his base of support,” General H.R. McMaster concludes in “At War With Ourselves”, his memoir about his time as Mr Trump’s national security adviser during the first term. “Trump’s indiscipline made him the antagonist in his own story.” And in America’s.

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Economics

To end birthright citizenship, Trump misreads the constitution

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IN HIS INAUGURATION speech, Donald Trump promised that in his administration, “we will not forget our constitution.” The promise did not last long. Before the day was over, Mr Trump had signed an executive order that, if implemented, would apparently end birthright citizenship, which is guaranteed by the 14th Amendment to the constitution. According to the plain text of the amendment, “all persons born or naturalised in the United States, and subject to the jurisdiction thereof, are citizens of the United States”. It doesn’t mean what it appears to mean, Mr Trump claims.

Under Mr Trump’s order, from next month the federal government will refuse to issue “documents recognising American citizenship” (presumably passports) to newborns unless they have one parent who is either a citizen or a permanent resident of the United States. The children of unauthorised immigrants born in America would thus be excluded. But so too would those of around 3m people living in America on tourist, work or student visas.

Relatively few rich countries automatically extend citizenship to everyone born on their territory (though Canada does, as do most countries in Latin America). America started doing so at the end of the Civil War. The constitution was amended then to overturn the Dred Scott decision of 1857, which held that black people were not Americans. The 14th Amendment ensured that freed slaves and their children would henceforth be citizens.

Mr Trump’s argument is that the 14th Amendment “has never been interpreted to extend citizenship universally to everyone born within the United States”. Narrowly speaking, this is true. The American-born children of foreign diplomats, who have immunity from prosecution, have always been excluded from American citizenship, under the clause about jurisdiction. Until the passage of the Indian Citizenship Act in 1924, so too were some native Americans who belonged to sovereign tribes. But Mr Trump seems to think the jurisdiction clause allows him to exclude the children of even some legal immigrants from birthright citizenship.

To justify this he draws on fringe thinking, which has gained adherents on the right since the early 1990s. Republican representatives in Congress have repeatedly introduced laws ending birthright citizenship, though none has got out of committee, notes Peter Spiro, an expert in citizenship at Temple University in Philadelphia. The argument made is that when the framers of the amendment wrote “jurisdiction” what they in fact meant was “allegiance”. As argued by Hans Spakovsky, of Heritage, a right-wing think-tank, the children of temporary residents and undocumented migrants are “subject to the political jurisdiction (and allegiance) of the country of their parents”, and so not that of the United States. The argument “just looks reversed-engineered onto the text”, says Mr Spiro.

Since 1898, when United States v Wong Kim Ark was decided by the Supreme Court, American law has held that birthright citizenship applies to the children of foreigners, says Alison LaCroix, of the University of Chicago’s law school. In that case, the child of Chinese migrants in San Francisco sued because he was refused entry into America after traveling, as an adult, to China to visit his parents. “That’s been the consistent treatment” ever since, says Ms LaCroix. A president cannot overturn over a century of precedent about how to interpret a constitutional amendment with an executive order. Had it been applied in the 1960s Mr Trump’s rule would have stopped Kamala Harris, the former vice-president, from becoming a citizen.

And, although work visas and the like are nominally meant to be temporary, in reality, many people have them (legally) for decades, and start families during that time. In particular, because of a federal cap on the number of green cards available to citizens of any one country, people from India and China find it almost impossible to convert to permanent residency. Now their children may be excluded from citizenship, too. Indeed, it is unclear what legal status those children would have. In effect, some legal immigrants would give birth to undocumented “immigrants”.

For all these reasons Mr Trump’s order seems unlikely to survive legal challenges, even with a friendly Supreme Court. But even if it does, implementing it would be difficult. When applying for passports Americans now have to submit only a birth certificate to prove their citizenship; these do not now record the citizenship or legal status of parents. Birth certificates are also issued by local governments, and so that is unlikely to change soon, at least in Democratic states. To exclude foreigners’ children, everyone would have to provide documentation proving their status, notes Muzaffar Chishti, of the Migration Policy Institute, a think-tank.

The effect of ending birthright citizenship, combined with America’s current immigration law, would be to create a growing class of second-class residents–non-immigrants who can never become citizens. Fortunately, Mr Trump probably lacks the power to bring that about.

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Donald Trump cries “invasion” to justify an immigration crackdown

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AN “INVASION”. On the campaign trail, that’s how Donald Trump described the millions of migrant encounters at the southern border during Joe Biden’s presidency. During his inaugural address the 45th, and now 47th, president echoed the same sentiment, but this time with a note of triumphalism. “For American citizens, January 20th, 2025 is Liberation Day,” he crowed.

The notion that America is being invaded has become the defining theme of Mr Trump’s immigration policy. Hours after his inauguration the president issued ten executive orders on immigration and border enforcement “to repel the disastrous invasion of our country”. This is despite the fact that encounters at the border are the lowest they have been in four years, thanks to increased enforcement by Mexico and asylum restrictions implemented last year. The executive actions generally fall into three categories: the rescission of Mr Biden’s policies and reinstatement of Mr Trump’s first term plans, flashy things meant to project toughness, and more extreme measures that range from probably illegal to flagrantly unconstitutional.

In the first group Mr Trump issued a sweeping order modelled on one from his first term that aims to increase detention, force countries to take back their citizens, enlist local police to help with immigration enforcement and punish sanctuary cities by withholding federal funds, among other things. He intends to bring back Remain in Mexico, a policy introduced in 2019 that forced migrants to wait on the other side of the border while their asylum claims were adjudicated. But because Claudia Sheinbaum, Mexico’s president, has to agree to that—and she has already registered her opposition—the order is more of a signal of intent than an immediate policy change. Mr Trump promised during the campaign to shut down CBP One, a government app set up by the Biden administration that allowed migrants to schedule an appointment to apply for asylum. Migrants waiting for those appointments on the Mexican side of the border found their meetings abruptly cancelled as soon as Mr Trump took the Oath of Office.

During his first term, the number of refugees relocated to America plummeted. This time he has completely suspended all refugee resettlement for at least four months. According to Reuters, soon after Mr Trump was inaugurated nearly 1,700 Afghans who were cleared to be resettled in America had their flights cancelled. Another order increases vetting for migrants and directs agencies to identify countries from which travel should be banned, something that will sound eerily familiar to those who remember the travel ban Mr Trump implemented on mostly Muslim-majority countries almost exactly eight years ago.

Next consider the policies that sound tough but may not change very much. The same order that discontinued CBP One also demands physical border barriers, detention and deportation. That is “just calling for enforcing laws that are already on the books”, says Julia Gelatt of the Migration Policy Institute, a think-tank. Additionally, Mr Trump declared a national emergency at the southern border, which allows the secretary of defence to send troops to help secure the frontier with Mexico. This is hardly unprecedented. George W. Bush (Operation Jump Start) and Barack Obama (Operation Phalanx) did something similar. Federal law limits soldiers’ roles in domestic affairs to non-law enforcement activities such as transportation and logistical support, rather than actually arresting migrants. Mr Trump’s order suggests that he doesn’t plan to cross that line. The national emergency also unlocks construction funds from the Department of Defence for the fortification of the border wall, a move the president also made in 2019.

That leaves the most extreme orders. The new president kickstarted the lengthy process of classifying drug cartels as foreign terrorist organisations by arguing that they “threaten the safety of the American people, the security of the United States, and the stability of the international order in the Western Hemisphere”. Some Republicans have wanted that for more than a decade. The worrisome bit of that order directs top officials to prepare for the possibility that Mr Trump will invoke the Alien Enemies Act. This law is the only piece of the Alien and Sedition Acts, passed in 1798 when America was feuding with France, that was not repealed or allowed to lapse. It permits the president to summarily detain and deport citizens of countries with whom America is at war. It was last invoked to detain Germans, Italians and Japanese during the second world war—hardly a proud moment in American history. Yet America is not at war, and drug gangs are not sovereign nations, even if they do control some territory.

This is where Mr Trump’s talk of an “invasion” becomes more than rhetorical bombast. Framing the cartels as terrorist organisations invading America is meant to legitimise his use of the law—though it is doubtful the courts will see it that way. And because America is being invaded, Mr Trump argues, he can block anyone from crossing the border, in effect suspending asylum until he decides that the invasion is over.

Mr Trump also decided that the meaning of the 14th Amendment to the constitution, which says that “all persons born or naturalised in the United States, and subject to the jurisdiction thereof, are citizens of the United States”, is up for debate. He declared that from next month, children born to parents who are neither citizens nor permanent residents would be denied passports. The order applies not only to the children of unauthorised immigrants but also to those of people living in America on work or student visas. To justify this, Mr Trump argues that all foreigners are not in fact “subject to the jurisdiction” of its government. Since the passage of the Indian Citizenship Act in 1924, which gave citizenship to Native Americans belonging to sovereign tribes, only foreign diplomats have been considered immune from American law under that clause.

This executive order seems extremely unlikely to survive in the courts. But it could be intensely disruptive for new parents in the meantime. If implemented, in effect American-born children will become illegal “immigrants” on exit from the womb. American birth certificates do not include information on the citizenship of parents, and so it is unclear exactly how Mr Trump expects officials to gather the information necessary to refuse passports. Still, it is exactly what the president promised he would do.

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