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Galina Kolev IW News 26. May 2017

G7 summit: As unpredictable as US President Trump

The heads of state and government of the seven major advanced nations in the world are currently meeting in Sicily. The main topics at the G7 Summit will be free trade, climate protection and migration policy. The positions of the politicians present differ considerably, progress is hardly possible. Also, because US President Donald Trump misconstrues facts.

At the G7 summit in Taormina, much is at stake: the unity of the leading countries is history, goals such as climate protection and free trade are no longer self-evident. The outcome of the meeting is difficult to predict. Decisive is the course of US President Trump – and that could be dangerous.

Free trade particularly is a thorn in Trump’s side. During a meeting with the EU leaders on Thursday, he attacked the German car industry again. In doing so, he ignores the importance of German manufacturers for the American economy: they secure hundreds of thousands of jobs in the United States and export German brands „Made in the USA“ to the whole world. Last year, German car manufacturers produced some 850,000 vehicles in the USA, which were then partially sold on the European market. The largest car exporter from the USA is not General Motors or Ford, but BMW with its corporate seat in Germany.

The fact that world trade today is different than in the textbook, Trump does not take into account in his economic policy course. Countries nowadays are no longer specialized in individual sectors, but in individual production stages. If a product bears the label „Assembled in China“ – as with a well-known smartphone – it does not mean that its production is creating jobs in China alone. The components come from all over the world, the development process takes place in the USA. Instead of reflecting on the strength of the US economy, namely, the development of high technology, Trump wants to turn back clocks and revive traditional industries like the steel and coal industries.

Protectionist measures would therefore be detrimental to global trade, but also to the USA itself. Trade partners, including Germany, will continue to rely on free trade, if necessary without the US, as for example the EU Commission in negotiating a free trade agreement with the Mercosur countries of Brazil, Argentina, Uruguay and Paraguay.

More on the topic

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Samina Sultan at IEP@BU Policy Brief External Publication 17. April 2024

Not so Different?: Dependency of the German and Italian Industry on China Intermediate Inputs

On average the German and Italian industry display a very similar intermediate input dependence on China, whether accounting for domestic inputs or not.


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Jürgen Matthes in Intereconomics External Publication 9. April 2024

China’s Trade Surplus – Implications for the World and for Europe

China’s merchandise trade surplus has reached an all-time high and is likely to rise further. A key driver appears to be a policy push to further bolster Chinese domestic manufacturing production, implying the danger of significant overcapacities.


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