Small businesses under President Trump are optimistic

Two years of "America first!"US President Trump's risky economic policies

To say it in advance: From an economic point of view, things are still running smoothly for us: Many people have a job. Most companies cannot complain about a lack of orders. It even goes so far that companies have problems processing their orders - simply because they lack the necessary specialists. And yet: Many people have a bad feeling when they think about the future.

The EU Commission, but also many leading economic research institutes, have already revised their economic forecasts for 2019 downwards. The federal government is also no longer so optimistic about future economic growth here in Germany. And that is also the case with many financial market professionals on the stock exchange. Stock trader Stefan Scharffetter has to take a deep breath: "I've started the new year more optimistically, to see it that way."

Fund manager Hendrik Leber from the asset manager Acatis also finds clear words: "The worries are extremely justified. When I look at the players who operate in this political arena, they are extremely reckless, sometimes stupid, negligent and they can wreak havoc. And the stock exchange is worried about it. "

Trade conflicts create uncertainty

What is the situation like? Are there any indications that what has spurred the economy in the past few decades, what has brought companies rich profits and increased prosperity - are there any indications that this is all coming to an end? Rolf Langhammer, the trade expert at the Kiel Institute for the World Economy, expected such change processes:

“Ten years after the crisis, if you will, we had an upswing of this length, from 2008 to 2018. And so it was to be expected that the pace would slow down In 2018 it became clearer that interest rate policy in the US would become more restrictive. Of course, this has also caused problems for the emerging countries, because they are heavily indebted in dollars . But the main sticking point for the fact that the forecasts have now been withdrawn are the trade conflicts that have all been brought up by the US. They affect the EU. They affect China. They affect the entire world economy. This creates enormous uncertainty. "

Donald Trump's maxim

"Build that wall." - Donald Trump's 2016 election campaign, which ultimately made him president, was built on three central pillars: There was and is the wall to Mexico, which was supposed to prevent illegal immigration from the south. But at the same time it is symbolic of the country's isolation. For an America that is more aware of its limits and looks inward. Then one of the key slogans was "Make America Great Again". A return to the traditional values ​​of the country, its history as the strongest nation and the strongest economy in the world - unassailable. And finally "America First", the promise to refocus political thinking on one's own country. To conclude treaties in such a way that they serve the US and not, as Trump would put it, supply the world at the expense of the US. Instead: fairness and reciprocity.

With the announcement of foreclosure and "America first" Donald Trump scored points in the presidential elections (Brendan Smialowski / AFP)

As a businessman and building contractor, Donald Trump has always traveled internationally. The rules according to which the global exchange of goods and services work, however, disadvantage the USA, according to his political position. He is particularly fond of three regions, with which he wants to put the country's relations on a new basis: China and Europe, both of which he accuses of sealing themselves off against American goods with the help of tariffs and selling their products to the American market throw. So that US companies dig the water both in the domestic market and in export.

Donald Trump: "The EU is probably just as bad as China, only smaller. It's terrible what they are doing to us. Look at the car situation. They send their Mercedes here, but we cannot send our cars there."

Finally, there is the NAFTA free trade agreement between the United States, Canada and Mexico. Negotiated under President George Herbert Walker Bush, signed by Bill Clinton. Trump was particularly fond of this treaty from the moment he took office. He said he would terminate it, and did so immediately: "I have said for a long time that it is the worst trade agreement that has ever been signed. The US has lost two trillion dollars since it was signed." There is now a successor agreement, USMCA, or NAFTA 2 for short, signed on the sidelines of the G20 meeting in Argentina. Negotiations are also progressing with China. The Europeans are looking for a balance. A visit by the heads of VW, BMW and Daimler to the White House was like going to Canossa. Investment promises were made to break Donald Trump's focus.

Economist: Trump's politics are dangerous

From an American perspective, this could be celebrated as a political victory and successful tactic by the president. But that is exactly what Dan Ikenson, an economist at the Cato Institute in Washington, thinks is inappropriate. This economically liberal think tank assumes that there is conviction at work here: "He is an economic nationalist. He sees trade as a zero-sum game. When looking at America First, he confirms the view that if we export more than we import, we will land on it Doing well abroad. And that's absolutely wrong. "

Ikenson considers the short-term successes and concessions of its trading partners to be dangerous for the US in the long term. The strength of the United States is largely based on the strength of the other, the strength of the world. Basically, it is the task of the USA to ensure with an internationally oriented economic policy that people abroad are financially able to buy American goods. A balanced trade balance is not a value in itself. Trump's method of unsettling partners is dangerous: "Trump builds on the idea that uncertainty helps the American economy. But that comes at the expense of creating wealth and growth."

The effects of the trade dispute can already be felt

In fact, the trade wars are already having consequences - in both directions. The US steel industry is currently making as good as it has been in a long time. Trump's tariffs have pushed cheaper competitors out of the market. At the same time, prices for consumers are rising. But consequences can also be seen on the other side, the consequences of China's countermeasures. For example, prices for soy, grain and pork have collapsed. American farmers can no longer compete in the Chinese market because of the punitive tariffs. "Everyone's talking about it. Everyone's worried, very worried. The prices are now below production costs," says farmer Bill Shipley.

US farmer Bill Shipley: "Everyone is worried, very worried." (Thomas Spang / Deutschlandradio)

The greatest concern, however, is that the well-established production chains and trade routes will be destroyed during the trade war. Finding new trading partners and not coming back to the market. The agricultural economist Chad Hart: "Every trade conflict leads to a reorganization of the trade routes. Most of the time, these trade flows never return to normal. You will find that some market participants have simply been knocked out. And that is exactly what is happening here."

China tries to keep conflict small

A park in the center of the southern Chinese coastal city of Fuzhou. Five middle-aged men are sitting at a camping table, drinking beer, smoking and playing cards. And they discuss international politics. The men agree that Germany is a great country. The USA adds that they are not that great, but "Americans are good people! The USA has done a lot for the world. The world cannot do without the USA. The Americans have sacrificed many soldiers in their history - and..." they sent a lot of money to the United Nations. "

The USA and China have been in a trade war for months and are imposing tariffs on each other - but there is hardly any sign of an open hostility towards the USA in China. Neither here in Fuzhou Park, nor anywhere else in the country. The main reason for this: China's state and party leadership is trying to publicly keep the conflict as small as possible.

The government wants to exude calm and confidence to the outside world, for example after the top meeting between President Xi Jinping and US President Donald Trump in Buenos Aires at the beginning of December. Chinese Commerce Ministry spokesman Gao Feng sounded almost as if the economic conflict was over after the meeting. On the sidelines of the G20 summit, both sides had only agreed new negotiations: "China and the USA will discuss the main concerns and concerns of both sides - with the aim of abolishing the special tariffs. The talks are taking place on the basis of mutual principles Respect, fairness and taking into account the concerns of the other side. "

In 1978, the communist state and party leadership under Deng Xiaoping allowed market economy elements for the first time. Initially only in a few special economic zones, later throughout the country. China became the engine of globalization, the much-cited "workbench of the world", a cheap production facility for consumer products of all kinds and at the same time an apparently insatiable sales market for Western companies. However, for some years now, the conditions for foreign companies in China have become more difficult. The country now produces a lot of its own. Chinese companies now manufacture products that are on a par with western companies and have a cool image.

Criticism of Chinese subsidy policy

China's leadership has been instrumental in driving this development forward, with what is actually a contradicting mixture of market economy openness and systematic protectionism. Even if China's state and party leadership has been promising to open up the country further economically for years, the bottom line is that they want to keep control. Opening with the handbrake on, so to speak. As can be seen, for example, from the fact that China's huge state-owned corporations have become even more powerful and influential in recent years.

Poison for fair international trade and globalization, say critics like Pascal Lamy. The many billions in subsidies for China's state-owned corporations stand in opposition to fair international competition, says the former Director General of the World Trade Organization (WTO). Today Lamy is visiting professor at the Sino-European Economic University (CEIBS) in Shanghai.

The blame for the powerful role of Chinese state corporations is not only the leadership in Beijing, but also the existing, outdated WTO system. In order not to stifle globalization, it urgently needs to be reformed, says Lamy: "The previous WTO rules leave China too much leeway to subsidize its economy with the state. So it is not that China is violating the WTO rules. Rather, it fits the rules no longer govern China's size and economic strength. "

Ex-WTO chief: Trump has initiated discussion on WTO reform

The roots of the current trade conflict lie in China, emphasizes Mats Harborn, President of the European Chamber of Commerce, the most important lobby association for European companies in China. In terms of content, he agrees with US President Donald Trump, who justifies the special tariffs primarily with China's unfair trade practices. These allegations have also come from Europe for years. But unlike Trump, Europe's economy continues to rely on negotiation and diplomacy. Mats Harborn: "Although we share the concerns of the US government, we do not believe that the matter can be resolved with tariffs."

As for the matter, the situation is deadlocked. It is unlikely that China and the US will find a compromise where they just carry on as they did before the trade war began. The Chinese economist Hu Xingdou from Beijing Technical University is not only demanding concessions from the US government. The Chinese state and party leadership must also move: "The government should ensure good and fair economic conditions under which state-owned, private and foreign companies are treated equally. The right of the strong must be replaced by the rule of law."

Relentless power struggle between the world's largest economies: China's head of state Xi (left) and US President Trump with delegations (AFP)

Former WTO boss Pascal Lamy is also calling on China to open up its economy further and to position it fairly. China has announced a lot over and over again, but mostly little is being implemented: "Once more: I think it is about walking the talk. So far we have had more talk than walk." What the former head of the World Trade Organization (WTO) also emphasizes: For globalization and worldwide exchange, the best thing would be if the international community agreed on new trade rules: "I reject the way Trump acts in terms of trade policy and imposes tariffs on other states, that do not conform to the WTO. Nevertheless, one has to acknowledge that he initiated a discussion on reforming the WTO. And that is a positive development. "

Economic power struggle between China and the USA

Yes, the external economic framework is changing: There is an American president who wants to put the rules by which the global exchange of goods and services works on a new basis. Under the premise: “America first” and “Make America Great Again.” And there is a Chinese state and party leadership that has basically the same plan, namely: to get a significantly larger piece of the pie in the global exchange of goods and services It's a relentless power struggle that is taking place between the world's two largest economies, and sooner or later the other players on the world market will be drawn into the tussle.

Rolf Langhammer, the trade expert from the Kiel Institute for the World Economy, has no illusions about what is happening at the moment: "I think you will not be able to go back to what we had before President Trump. Because many in the world, many Populist leaders, many autocrats, think of President Bolzonaro now in Brazil, emulate him. And that will not change, even if he is no longer President. He has the world trade architecture, especially the one on the GATT and the World Trade Organization was based - you could say he really shredded it. And that will be irrevocable. "

For the economist Gabriele Widmann from Deka-Bank, this is not a new development. Such change processes began a few years ago - long before Donald Trump started the many trade disputes. In principle, this was already apparent during the 2008/2009 financial crisis, she says: "Since then we have had trade barriers raised again, more tariffs, and more other obstacles to world trade. People and governments are afraid that globalization will affect their business models too threatened. Therefore one tries to protect oneself more again. "

New kind of globalization

"The risks are considerable," says Holger Schmieding, who is chief economist at Berenberg-Bank: "But one way or another the power of globalization will continue to develop in the long term. The cross-border exchange of information is increasing. Even if there are some obstacles here and there in trade - we can also see that there is still progress in other areas thanks to new agreements between the EU and other countries. No - globalization is very powerful. "

The trade in goods will probably no longer play the global role in the future, as it did in the past. Retail expert Rolf Langhammer speaks of a new kind of globalization that will essentially revolve around two aspects: "First, the digital economy. That means, a lot of trade then happens over the Internet. And we can't measure that properly at the moment. And on the On the other hand, it will be migration that will determine globalization in the future. We call this circular, temporary, seasonal migration. So people migrate, are ready to migrate. And that will certainly become even more important in the future. I even believe that it will will be one of the key elements of globalization in the future. " What role the USA, China and Europe will play in this - that is not yet a foregone conclusion.