German business group fears trade war with U.S.

The skyline of the banking district is pictured in Frankfurt

By Gernot Heller

BERLIN (Reuters) – U.S. President Donald Trump’s protectionist approach to trade has the potential to ignite a trade war, the German DIHK Chambers of Commerce warned on Tuesday, adding that German companies were among the biggest job creators in America.

Germany is concerned that the U.S. administration’s push to fix the causes of U.S. trade deficits and to clamp down on countries that abuse trade rules could hurt its exporters.

“We live in a world where a trade war cannot be ruled out,” said Volker Treier, who heads DIHK’s foreign trade unit.

Divisions on trade are expected to cloud the G20 summit that Chancellor Angela Merkel will host in Hamburg this week, attended by Trump and President Xi Jinping of China, whose cheap steel exports the U.S. administration wants to target.

U.S. officials have lamented their country’s trade deficit with the United States which has nearly doubled in the past 10 years from some 28.8 billion euros in 2006 to 49 billion euros in 2016.

Trump has warned he will impose a border tax of 35 percent on cars that German carmaker BMW plans to build at a new plant in Mexico for export to the U.S. market.

Merkel has said she would seek a compromise with Trump on trade but major differences remain, notably over Trump’s decision to withdraw from the landmark 2015 Paris global agreement to fight climate change.

DIHK said on Tuesday a record high of 50 percent of the 4,000 firms operating abroad named political risks as a top threat to their business over the next 12 months in a new survey. Britain’s divorce negotiations with the European Union, U.S. trade policies and protectionism were seen as major risks.

Still, some 56 percent said they expected better business over the next 12 months and more than a third said they expect the economies in their host countries to improve.

DIHK’s Treier said German companies are expected to create 200,000 jobs abroad this year, including 40,000 in the United States.

(Writing by Joseph Nasr; Editing by Richard Balmforth)