LDN - Business

Germany says U.S. under Trump must abide by trade deals

[January 20, 2017] BERLIN (Reuters) - The United States must stick to international agreements under the presidency of Donald Trump, German Finance Minister Wolfgang Schaeuble said on Friday, adding that he did not expect a major trade war despite Trump's attack on German car makers.

Trump, taking office on Friday, has vowed to make sweeping changes to U.S. trade policy, and economists see his protectionism as the biggest risk to U.S. growth.

"The United States also signed international agreements," Schaeuble told magazine Der Spiegel. "I don't think a big trade war will break out tomorrow, but we will naturally insist that agreements are upheld."

Schaeuble separately told the World Economic Forum in Davos, Switzerland, that even a superpower like the United States could not destroy global free trade structures.

"I am quite optimistic that even the U.S. and the rest of the world as a whole will not (abandon) the defense of free trade," he said.

He said the German economy would clearly feel the effects of any protectionist backlash emanating from Washington, but Germany would be somewhat insulated since its growth was currently driven by domestic demand.

Trump criticized German auto makers this week for failing to produce more cars in the United States and warned that he would impose a tax of 35 percent on vehicle imports.

U.S. companies employ more than 600,000 people in Germany, the United States' biggest European trading partner, and German firms employ roughly the same number in the U.S.

Schaeuble said he wished Trump luck if he wanted to tell Americans which cars to buy. "That's not my vision of America and I don't think it's his either," he said.

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German Finance Minister Wolfgang Schaeuble attends the World Economic Forum (WEF) annual meeting in Davos, Switzerland January 19, 2017. REUTERS/Ruben Sprich - RTSW88K

He also recommended not taking Trump's practice of tweeting policy changes too seriously: "One shouldn't confuse Trump's form of communication with statements of government policy. We will not participate in that."

Trump has triggered concern across German industry. Marcel Fratzscher, head of the DIW economic institute, said protectionism would not bring jobs back to the United States..

"It's an alarming day for the European economy because the presidency of Donald Trump has caused uncertainty," Fratzscher told Reuters TV. He urged European officials to remain calm and avoid escalating the situation with threats and counter-threats.

The American Chamber of Commerce in Germany also urged Trump to stick to free trade agreements.

"Protectionist measures like tariffs and/or the cancellation of international trade agreements have no place in a globalized world," its president Bernhard Mattes said.

(Reporting by Andrea Shalal; Editing by Mark Trevelyan)

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