What Germany's Merz wants to tackle in Trump meeting

CNBC

2 days ago

German Chancellor Friedrich Merz is set to meet U.S. President Donald Trump on Thursday, with much to discuss at a time of trade disputes and ongoing war in Europe.
During both of his presidential terms, Trump has triggered tensions between long-standing allies U.S. and the European Union.
"The tone is as rough as it has not been in a long time," German Foreign Minister Johann Wadephul said in a speech on German-U.S. relations earlier this week.
White House officials have not always found friendly words for Berlin in recent months, and vice versa.
But there have been some signs of rapprochement, with the country's leaders now reportedly being on a first name basis after several phone calls. Building on this will be a top priority for Merz in D.C.
"Top of the agenda for the German Chancellor will be to strike the right chord with Trump," Jörn Fleck, senior director of the Europe Center at the Atlantic Council, told CNBC.
Merz's conservative views on immigration, his links to U.S. businesses — the chancellor is a former BlackRock executive — "and a profile as an old-school outsider who was underestimated but won an election by pledging to restore his country's economy and security," could work in his favor, Fleck explained.
Export-reliant Germany counts the U.S. as its biggest trading partner, leaving it vulnerable in the face of Trump's trade agenda.
Penny Naas, who leads on the German Marshall Fund's allied strategic competitiveness work, told CNBC that this is especially true for sector-specific tariffs, for example targeting autos and steel.
They "hit industries at the core of the German economy," she said.
"Merz will want to see if there is any room for negotiation on these tariffs," such as the U.S. and EU cutting all industrial duties to zero, Naas added.
Trump's so-called reciprocal tariffs, which have also been imposed on the European Union, are also set to be on Merz's agenda, Franziska Palmas, senior Europe economist at Capital Economics, told CNBC.
"He is likely to stress his support for free trade and a EU-US trade deal. He may point to the EU's proposal of a zero-for-zero tariff deal as an ideal outcome," she said.
Negotiations between the EU and U.S. have so far been tough, but European Trade Commissioner Maros Sefcovic on Tuesday signaled talks were "advancing in the right direction."
The Russia-Ukraine war will also almost certainly be discussed, especially after Trump's Wednesday phone call with Russian President Vladimir Putin.
European leaders have pushed Trump to apply pressure on Putin, and Merz is expected to follow suit, the Atlantic Council's Fleck said.
Palmas meanwhile said Merz would likely "reiterate Germany's strong support for Ukraine and the need for European countries to be involved in peace negotiations."
U.S. support for Kyiv has been uncertain, along with Trump's focus on expediting peace-making between Russia and Ukraine — raising concerns in Europe.
Topics like U.S. support for European troops on the ground, enforcing sanctions and sharing information may therefore come up, Fleck added.
Another critical topic will be the NATO military alliance in which both Germany and the U.S. participate and specifically members' defense contributions. Trump has long been pushing for these expenditures to rise to 5% of each country's gross domestic product, meeting some resistance.
Fleck noted that "Merz will want to make sure Germany is no longer seen as a laggard on defense spending and capabilities."
Given Germany's recent fiscal reforms that allow for higher defense costs and its support for Trump's 5% NATO spending target, the German chancellor should have "a positive story to tell" on this front.
Capital Economics' Palmas added that Merz may even use the occasion to announce a specific defense spending target.