The European Trade Wars Begin: Trump Trade Advisor Accuses Germany Of Using "Grossly Undervalued" Euro

Tyler Durden's picture

The Trump administration just fired the first shot in the US-European currency, and thus trade, wars when Trump's top trade advisor Peter Navarro accused Germany of using a “grossly undervalued” euro to "exploit the US and its EU partners", the FT reported noting the comments are "likely to trigger alarm in Europe’s largest economy." News of the statement sent the EURUSD surging and the dollar tumbling to fresh 2 month lows.

Navarro, the head of Mr Trump’s new National Trade Council, told the Financial Times the euro was like an “implicit Deutsche Mark” whose low valuation gave Germany an advantage over its main partners. While not necessarily novel - Germany has often been accused of being the biggest winner from a weak euro at the expense of peripherla Europe - his views suggest the new administration is focusing on currency as part of its hard-charging approach on trade ties, according to the FT. Furthermore, virtually assuring a deterioration in US-German relation, and in a departure from past US policy, Navarro also called Germany one of the main hurdles to a US trade deal with the EU and declared talks with the bloc over a Transatlantic Trade and Investment Partnership dead.

“A big obstacle to viewing TTIP as a bilateral deal is Germany, which continues to exploit other countries in the EU as well as the US with an ‘implicit Deutsche Mark’ that is grossly undervalued,” Mr Navarro said. “The German structural imbalance in trade with the rest of the EU and the US underscores the economic heterogeneity [diversity] within the EU — ergo, this is a multilateral deal in bilateral dress.”


The comments highlight a growing willingness by the Trump administration to antagonise EU leaders and particularly Angela Merkel, the German chancellor. Besides publicly supporting Mrs May’s government in its negotiations with the EU over the terms of its exit, Mr Trump called the EU a vehicle for Germany, and Nato an obsolete alliance. 


Mr Navarro’s intervention follows a visit to Washington last week by Theresa May, the British prime minister, in which she and Mr Trump discussed ways to launch negotiations for a US-UK trade deal.

“Brexit killed TTIP on both sides of the Atlantic even before the election of Donald Trump. I personally view TTIP as a multilateral deal with many countries under one ‘roof’,” Mr Navarro wrote in emailed responses to FT questions. Trump last week also withdrew from a 12-country Pacific Rim deal negotiated by Mr Obama.

In further bad news for globalists, Navarro said one of the administration’s trade priorities was "unwinding and repatriating the international supply chains on which many US multinational companies rely, taking aim at one of the pillars of the modern global economy."

“It does the American economy no long-term good to only keep the big box factories where we are now assembling ‘American’ products that are composed primarily of foreign components,” he said. “We need to manufacture those components in a robust domestic supply chain that will spur job and wage growth.”

As the FT also notes, Navarro effectively endorsed an import tax plan pushed by Republican leaders in the House of Representatives that has split the US business community. The proposal would eliminate companies’ ability to deduct import costs from their taxable revenues while making any export revenues tax-free. It drew attention last week when the White House pointed to it as one way in which it could pay for a wall on the Mexican border. Navarro rejected the argument that US consumers would end up paying the cost of such a tax change. That was “an old and tired argument the globalist wing of the offshoring lobby has used for years to put Americans out of work and depress wages by shipping our jobs offshore”.

The proposal has seen mixed reactions among the US corporate community. Exporters such as General Electric have hailed the switch to a “border adjustable” system as putting them on an equal footing with international competitors that are able to claim value added tax refunds on their exports. Retailers such as Walmart and other import-dependent businesses, however, say that what would amount to 20 per cent tax on imports would raise consumer prices and hurt their businesses.

A bigger implication of a border tax, however, would be a potential surge in the dollar. As we reported on many occasions before, analysts argue that at least some of the impact on consumers would be absorbed by a one-time appreciation in the dollar which could push the USD as much as 15%. That in turn could also impact on US export competitiveness and lead to a widening of the US trade deficit with the world, which the Trump administration has vowed to reduce. Navarro, however, said he was not concerned about the possibility of a stronger dollar and its impact on US exports. 

“I worry about the actual impact America’s trade deficit in goods is having on our rates of economic growth and income growth.”

It was not immedately clear how Navarro's easy stance on a stronger dollar due to BAT would reconcile with his accusations that the EUR is being held artificially weak which implies that if anything the Trump administration should be seeking policies that weaken the dollar. So far it has failed to reconcile this fundamental FX/trade quandary.

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BritBob's picture

UK - EU 

There is a trade imbalance in favour of the European Union so it is in the interest of the EU to make amicable arrangements with the United Kingdom. What's more, the UK can do its own trade deals on a one-to-one basis instead of having the EU to deal 27 member states before it makes a trade deal.

The UK has opted for a hard Brexit especially when one country (or part of a country in Belgium) can stall negotiations for so long. Spain could act in a similar fashion over Gibraltar and has the cheek to maintain its Gibraltar sovereignty claim. Claim?

Gibraltar - Some Relevant International Law:

So it looks like a quick hasta luego !


StackShinyStuff's picture

Currency War => Trade War => Shooting War.  Stay tuned...

Cassandra.Hermes's picture

"I'm dumb with Trump!!!!" sounds much better

UndergroundPost's picture

This is precisely how you kill Globalism: shatter their fake "free" trade deals, demolish the autocratic structures that pillage other nations and call them out on their blatent hypocrisy.

ilion's picture

65% of retail FX traders are currently short the EUR/USD according to Tickmill UK and they see the short position being accumulated. Most likely the Euro is bound to continue moving up.

Déjà view's picture

Germany subsidizes their HIGH cost industrial jobs with $$$$$$$$$$$$$$$$$$$$$$$$ saved by U.S. Dept. Of Offense immunization protecting infecting 'Germs' from BEAR they are agitating so very much!

VinceFostersGhost's picture



I can't take all this winning!!!

froze25's picture

Nice he is using divide and conquer, and using true info as well German is totally benefiting on the weak currency at the expense of other EU members.

petar's picture

With Real deals US would have to pay with Real money!

JRobby's picture


Not hard to see Germany has enjoyed the greatest benefits of the (theoretically) diluted Euro values.

Other refusing to hold it up vs The Franc, the Swiss are of course neutral...........

jus_lite_reading's picture

ZH was one of the only financial sites to discuss this in great detail many years ago -- the EU exists for the sole purpose to make Germany powerful again.

TheGardener's picture

Never mind the German nationals of Germanic descent got struck by this one on the losers side. Those outsourced formerly great industrial assets had their benefits reduceds to nothing, and forced to sweep the forrest in make work schemes and worse. Lesser EU nationals could do their jobs eleswhere, as intended.

Now millions of unentiteled illegals get all the benefits without any those strings attached.

BigFatUglyBubble's picture

The petro dollar pillages other nations.  It's a big global pillage fest and the bankers always win.

UndergroundPost's picture

Banksters may have met their match

hoyeru's picture

Trump the Dumb I call him. His actions prove it.

MFL5591's picture

The Euro was undervalued by the Tribe on wall Street!  Where is Schumer and Warren??

Got The Wrong No's picture

This is nothing new. the BRIC nations have been pushing for this for years. The IMF is moving the world in that direction with the use of the SDR. Part of the OWO game plan. 

VinceFostersGhost's picture



Push this up there......move that over there.


OK.....we're good!

VinceFostersGhost's picture



Goes without always want to watch that.

new game's picture

apply the same principle to where the real estate is (over)valued the most-think left coast and york town...

geez, exploit that labor already. globalization produces absolute winners. real struggle is in the halls of power where this advantage lies.

now the lies will flow...and they in themselves will reveal the truth.

thx peter, keep the truth coming...

Ghordius's picture

BritBob: "... it is in the interest of the EU to make amicable arrangements with the United Kingdom"

indeed, yes. now, I wonder, how amicable does the UK wish to do that? it takes two to tango

back to the article: there is a firm that I have to scrutinize for business reasons, and it's in one of the small EU countries that are never mentioned. what does it do? "pieces". for assembly in more famous products, including cars "Made in Germany"

how much of a typical product, including a car "Made in Germany" is made out of components made in other EU Countries? you would be amazed

behold, the EU, i.e. the thing that is constantly misrepresented. it is both somewhat/moderately protectionistic... for outsiders and free trade for the insiders

now, behold the UK. currently sheltered in the EU, soon exiting it

to boldly venture into the new world of bilateral trade arrangements, headed by Mr. Trump, who sees himself (or is depicted) as protectionistic

fun. I predict a huge lot of fun

Singelguy's picture

I think it is a bit severe to label Trump a protectionist. He is a big believer in FAIR trade, not free trade. The USA cannot have free trade with another country that has the advantage of a weaker currency, much lower wage costs, little or no health care or pension protection for its workers, and a much weaker regulatory environment. The USA loses that game from the get go. Those advantages need to be balanced out to create an even playing field such that both parties benefit from the deal. That is what Trump is trying to do.

TheLastTrump's picture

"Free Trade" is of course a big fat lie promulgated by the media. You dissected it well, thank you.


I'm so sick of turning on the media & hearing twisted non sensical crap like this....Oh we had free trade but Trump is going to ruin it all! Oh teh noes.


I think there's a lot of people that have been making BANK off of Americas DEMISE that are frantic about losing the income stream.

floomby's picture

This is why (IMHO) the best "trade" policy Trump could pursue is less regulation and less taxes.

For example the EPA is holding up a project which my father's company has done the design because it *might* not be environmental hunky dory and then cut off communication channels with the contractor and the designers leaving them in a quandary. Now the party paying for the project has gotten lawyers involved... The way the project is being done was fine a year a couple years ago, and really has had no apparent problems environmentally.This type of stuff is stupid and wastes everybody's time and consequently costs money.

spiral galaxy's picture

That and add reduction in taxes and government subsides. So in total, the trade playing field is tilted at about a 45 degree angle against the USA.

Damn, so much winning I feel like Warren Buffet investing in a Fed manipulated market. :-)

highly debtful's picture

Fair trade, with the US dollar as the world's reserve currency? The dollar is our currency, but your problem, remember? Trump cannot have it both ways. The way he's handling things right now, he's likely to speed up the death of the US dollar as the world's main currency. And when that happens: unintended consequences, here we come. Look, I understand were he's coming from, but I sure hope he's thinking through all the short-, middle- and long-term consequences of his bold decisions. 

TheGardener's picture

"The USA cannot have free trade with another country that has the advantage of a weaker currency, much lower wage costs, little or no health care or pension protection for its workers, and a much weaker regulatory environment. The USA loses that game from the get go"


Wonder what all those upvotes where for as none of the above applies to trade enemy Germany.  ", and a much weaker regulatory environment. The USA loses that game from the get go". Are we on a fake news site ? No! Germany is overtaking the left in her own zoo (social democrats) from the very left with positions deemed far left a mere 15 years ago as on gender or immigration and yet some losers feel left out by freaking Germany ?


EddieLomax's picture

Trump is partly protectionist, but not when it comes to equals.  The UK is close enough in living standards to the US to not be a drain on jobs.

And I totally agree, the EU is essentially protectionist regarding anything outside the EU.  But consider France who's cars are all sold on price, how will they sell to the UK when faced with a 12% tariff?  And add then in the nightmare, it is in both the UK and US interests to have no tariffs on cars, Jaguars are a huge source of export revenue for the UK (because they are actually built from UK components rather than just assembled from Japanese ones like the Japanese cars).  

And the US is keen to sell its mainstream cars in the UK, with a zero percent tariff they would take all the market share from French ones, and reduce Volkswagens and other cars sold on price.  With luxury cars also facing price hikes there could be a good market for Lexus and other premium non-EU cars.

The nightmare continues too, outside of the EU the EU food exports could face a 40% tariff, which would make it impossible to compete against New Zealand or US food at a zero percent tariff.

A hard brexit will cause a lot of dislocation which is always bad in the short term, but long term the winners are likely to be the US and non-EU countries displacing EU exports to the UK.  And their exports will drive UK imports into their home market because the money has to go somewhere (they will want to spend the pound sterling they earn from exports).

I predict a depression in France and a recession maybe depression (with 1 million unemployable Muslims with more arriving all the time) in Germany, and that will cause the EU to collapse.

Sandmann's picture

Renault owns Nissan which manufactures in UK. A 12% Tariff is no problem when you sell cars on credit.

The biggest factor in EU food exports to UK is Diesel prices plus Ferry charges. Food from NewZealand does not need trucking across Europe. Anyway the Uk could be self-sufficient in Milk, Eggs, Pork, Lamb, Beef, Chicken, Turkey, Potatoes, Cabbages, Apples if it wanted. It always imported Wheat because it uses Canadian wheat for its bread. It could import sugar from cane producers rather than overpriced sugar beet.

In Europe, France is the biggest producer of sugar beet; producing 30% of the European total, Germany with 20%, and Poland with10% are number 2 and 3. The country block lost its influence on the sugar market after imposing quotas and restructuring minimum beet prices in 2006. In 2017 these restrictions will be lifted and expectations are that the sugar output will increase by 20% as a result. These changes will have a large influence on sugar prices because Europe is expected to become a major sugar exporter once more. A report by the European union showed sugar beet prices on the continent could fall by as much as 23% because of the measure. Europe still has stiff import duties to protect internal sugar prices. Sugar refineries in Europe that rely on imports of raw materials will struggle to compete with local supply when import tariffs stay in place.

Amicus Curiae's picture

thanks for those links

the pricing n controls info is...informative

its basically globalised controls n white "oil" dealings

rather bitter info

Sandmann's picture

Ghordius we all know Slovenia's role in car sub-assemblies and Bosnia. We know Prevent Group. We know UK makes engines at Hams Hall for 3-series BMW. So what ?

Long before UK joined EU it made Minis with Innocenti in Italy. Ford ran an operation making Taunus in Germany and Cortina in UK and Escort in both. GM made Opel Ascona in Germany and Vauxhall Cavalier in UK.

You make it sound as if international operations only started with the EU. There was a huge Singer factory in Podolsk, Russia in 1902 and parts were brought in from Glasgow. Siemens had huge operations in Russia.

The world was run by entrepreneurs not committee men and that created dynamism

The breakup of AT&T, IBM, brought a wave of new companies and dynamism in the US which was snuffed out by Wall Street consolidating corporate power again and destroying growth. BreXit and Trump are the means to revitalise the sclerotic Western Model before Karl Marx is proven right

GreatUncle's picture

Might be better phrased ... you want change ... you can have your change :-)

The world is going mad.

New rule, no point in negotiating with a left wing libtard globalist no more they do not accept outcomes of votes only cause as much unrest as a spoilt child wanting their own way.


kellys_eye's picture

Ghordius - how amicable does the UK wish to do that? [sic]

I don't recognise Germany's amiability in any negotiations relating to the UK or Germany's overlording of the EU.  I haven't heard any words of compromise over free movement or the single market from the EU.

I certainly don't recognise the benefits of open door immigration or centralised trade negotiations.  SEVEN years to get an agreement with Canada???!!!

As you say - it takes two to tango - but the EU can foxtrot off if they think their rules are the only rules.


JohnGaltUk's picture

The EU is just a few more rapes and murders from breaking apart.

piratepiet2's picture

Hey Ghordius, 

I recently attended a meeting in Brussels with Jürgen Stark and Bernd Lucke among the speakers. (yes, I am an outsider trying to get some inside knowledge)

It was alledged, from what I understood, that if Italy wants to exit the euro, it has to cough up about 300 billion euros in freshly printed liras.  (I believe it is 380 billion).  On the other hand, if Germany leaves the eurozone, it loses the 750 billion surplus that is somewhere on the books at the ECB (Target 2 balance?).

Can you confirm this?  

cahadjis's picture

Spain has all sorts of ridiculous claims at Ceuta and Melilla, which point to its hypocricy. But I doubt very much they would hasta luego, they do benefit massively by being in, especially the Costa del Sol and other tourist areas, which wasn't so much the case with UK.

OverTheHedge's picture

It has become apparent that you are a bot, but are you an Autobot, or a Decepticon?


hoyeru's picture
hoyeru (not verified) BritBob Feb 1, 2017 1:43 AM

no there isnt. Triffin dilemma. Read it learn it, know it.

And here I thought. ZHers are economcis savy. Turnes out they operate just like on other sites: 95% trolls and shills posting BS.

Haus-Targaryen's picture

Sigh, another person confuses the concepts of "benefits" with "hurt the least."

FinMin's picture

Hahaha Mutti will be furious.

Ghordius's picture

why do you think so?

for the average German it looks like Mr. Trump is bashing Dr. Merkel, Germany, the EUR, NATO and the EU

now Trump supporters seem to like this stance. good for their relationship

but the average German usually likes at least three of those mentioned five items

further, Mr. Trump is kind of promising trade wars

now, the average German understands that the EU is a trade alliance

imagine the Persian King of King explaining Leonidas that his alliance with Athens is not in the best interests of Sparta. but wait, that's exactly what he did

of course, Chancellor Merkel could quip back that the next EU trade deal will be with California, but again, the average German voter would not like her to do such things

meanwhile, Angie Merkel will enter the election campaign with a kind of inofficial motto: "Germans never had it better". just to highlight where she and the CDU think that the middle ground of voters is

perhaps a reminder: you all know that the EU countries are poorer then the US, that the average European is way poorer then the average American, don't you? and consumes half as much oil

EddieLomax's picture

Germany has not had it better, but like most countries that "live it up" Germany is squandering it for future generations.

They have a miliion and growing number of unemployable Muslims, these people have a toxic culture, no education and no skills, they are just a large cost for the government budget.

And then their two biggest markets are closing to them, the UK is going to be outside the EU tariff wall severely reducing German exports to the UK.  And now the US is making noises about the artificially low value of the Euro, the last time they did this was to Japan and look where that went.

The German budget surpluses are going to turn into deficits without any action from Trump due to immigration and brexit, any action from the US will turn a recession into a depression.

And a depression coupled with multiculturalism is a recipe for social strife, when the prosperity ends there is a nasty tendency for ethnic, cultural and racial divides to be widened.  It happened in the Austria-Hungarian balkans, the Weimar republic and I expect it will one day in the UK when we face hard times.

Sandmann's picture

the average German understands that the EU is a trade alliance


NOT so ! Otto Normalverbraucher knows that Hartz IV and Wage Freezes have made life very very expensive with soaring rents and taxes and EEG Umlage raising energy prices. He knows Capitalists are generating Supernormal Returns and he is not.

He knows that Germany racks up trade surpluses but it brings nothing to him. He spends Euros throughout the EU Zone and finds he can only afford to shop in Poland, Czech, and how much lower food and petrol prices are. The "Teuro" has raised consumer prices and made exports profitable for Capitalists so the Workers have seen huge transfers of real spending power from Workers to Capitalists via the Export Sector.

It has sucked Demand from the European economy and destroyed German retail which is why Merkel had to import 1 million consumers in 2015 but will now have to raise payroll taxes to fund their consumption

GCT's picture

Ghordi good post.  The Germans do indeed see it as a trade alliance and yes trade wars be coming in my small mind.

The Germans are indeed the biggest winners with the use of the Euro.  If Germany was on the DM still things would be alot different.  Before Germany started using the Euro, Germany was not doing so well as their fiat went from 2.5 to 1.54 DM to a dollar and times were hard in Germany.  I know I lived in Germany for the five year period before they adopted the Euro.

Germany now calls the shots in the EU and EMU because they hold all the cards.  France just holds onto Germany's coat tails because they too are not a manufacturing powerhouse.  The only reason France is even relevent is because they own nukes and nothing more. 

The EU and EMU are really no longer viable because Germany now calls the shots.  Disagree with Merkel and your screwed. 

GreatUncle's picture

The EU and EMU are really no longer viable because Germany now calls the shots.  Disagree with Merkel and your screwed.

... and why it became time to leave the party = BREXIT, only a German future in staying and as I feel the economy turns upside down with no moderation it will become a tyranny of millions. 

On its way, they will do everything, sell everyone out, debase the whole economic structure to preserve themselves.

HenryKissingerChurchill's picture

Mutti is under allied occupation of UK and the USA, which keep Germany's Gold...

and has no army...

syzygysus's picture

Moar talking heads.  Maybe we'll get some WTI chatter today, its been awhile.