Top economist on US election 2020: That's why Biden would be the better choice for Germany

The President of the renowned Institute for the World Economy (IfW), Prof. Gabriel Felbermayr, is hoping for a new start in relations with the USA after the US presidential election.

Munich.

Economic relations between the

and

have deteriorated dramatically recently.

The American alliance with

has also suffered badly recently.

Merkur.de * spoke to the President of the Kiel

(IfW), Prof.

, about the

, the possible consequences for the German economy and the future role of Europe between the power blocs USA and China

before the landmark election

.

Felbermayr (44) is one of the most influential economists in Germany.

Before moving to Kiel, the economist headed the Munich

Center for International Economics and taught international economics at the University of Munich.

US election 2020: "Trump's economic policy was good for shareholders"

Prof. Felbermayr, with a view to the US election you said last summer that you were hoping for Joe Biden to be elected.

Have you changed your mind in the meantime?

No,

would be better for Germany and Europe overall.

Why?

Because the urgent restart would be possible with Biden.

The basis of talks between

and many European heads of government is massively disrupted, which makes cooperation extremely difficult.

Biden would often be uncomfortable for Europe on the matter, but his style would certainly be much more agreeable.

But if Wall Street is to be believed, incumbent US President Donald Trump has done a lot right.

After all, the Dow Jones has increased by a good two thirds since the US election in 2016, despite Corona.

What do investors like about Trump?

Trump implemented a major tax cut early in his term in office.

That boosted the economy.

He pulled through an agenda of deregulation.

That has improved companies' profit prospects.

He has

successfully pushed

the

into loose monetary policy.

It's a policy that was good for shareholders.

On the other hand, Trump launched a trade war with China in his first legislative term. That was not so well received on the stock exchange.

In contrast, many Europeans have secretly welcomed Trump's tough line in the face of Beijing's increasingly power-conscious appearance.

Do you expect a turnaround here, should Trump win the election?

Many in Europe have reoriented themselves towards China, for example the

.

The points of contact in China policy have become more rather than fewer.

Whether

can cooperate

better with the

this area also depends to a large extent on atmospheric questions.

In addition, Europe has also benefited from the US-Chinese trade war at certain points.

If

no longer buys pork from the USA, then there will be new market opportunities for farmers from Denmark or Lower Saxony.

US election 2020: The economic relationship with Germany is tense

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Joe Biden: An election victory for the democratic presidential candidate would be better for Germany and Europe, says IfW boss Prof. Gabriel Felbermayr.

© Andrew Harnik / Picture Alliance / dpa

The relationship between the USA and the EU is also more tense than ever before.

Trump has imposed punitive tariffs on steel and aluminum imports, on Emmental, woolen sweaters and screwdrivers.

The dispute over aid for the aircraft manufacturers Airbus and Boeing has recently escalated.

The EU could reciprocate with punitive tariffs on ketchup or game consoles.

Will there be an open trade war between the old allies, should Trump stay in office?

That cannot be ruled out and is certainly much more likely under Trump than under Biden.

But one should not exaggerate here: Despite all the pinpricks, the Trump years were not bad for transatlantic trade, especially because the economy in the USA was good until the end of 2019 and the import pull was strong.

The volume of trade is huge, and even the

-

dispute is comparatively small.

Conversely, this also means that the height of the fall would be high in the event of a new escalation.

Trump had threatened German carmakers such as BMW, VW and Daimler with punitive tariffs in recent years.

They could come into force in mid-November.

Is that just rhetoric or does Trump ignite the next stage after an election victory?

Trade policy plays a much smaller role in the 2020 election campaign than it did four years ago.

Trump, for example, has not prominently renewed his threats against the EU.

The German car manufacturers have also reacted to the situation and strengthened their locations in the USA and the supplier networks.

And the EU has made it very clear, and in the case of the steel and aluminum tariffs, has proven that in the event of a trade policy attack it would respond with countermeasures that could hurt Trump.

I hope this is enough to avoid another round of escalation.

How should the EU and Germany react to such an escalation: With the Old Testament approach: punitive tariff after punitive tariff?

It would be best if the threat could remain.

If this is credible, then there is no escalation.

Above all, it is important that the EU adheres to the rules of the World Trade Organization and maintains proportionality.

German-American relations and the relationship between the EU and the USA have deteriorated considerably under Trump.

What developments do you expect here should Joe Biden make the running?

That there is a clear relaxation, especially in the atmospheric area.

Biden wants to make the US climate neutral by 2050;

there he is on the EU course.

I can well imagine that a lot more cooperation is possible here.

In the Airbus-Boeing dispute, I can imagine that a negotiated solution could be found that would help both sides.

In the end, escalation is only good for the competitors in China or

.

2020 US election: effects on the German economy

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The US President's tough line towards China has sparked an open trade dispute between the two countries.

© Evan Vucci / Picture Alliance / dpa

So Biden should move the USA closer to Europe again and there will also be an easing in trade relations?

Yes, I am assuming.

But that doesn't mean that it will be like it used to be.

Biden is certainly not a free trader.

His ideas about “

” could lead to new irritations.

The hope is, however, that these differences can be discussed much better with a new administration

But would the conflict between the US and China remain on the agenda under Biden?

This conflict will continue to shape for decades.

And there is

political consensus across both major parties

in

on a tough stance on China

.

Why?

China will overtake the US economically in terms of GDP.

This process is

accelerating because the

in America is leading to a significant shrinkage while China is growing again.

Economic power also means political influence, and the US will not give it up without a fight.

The US also has many powerful instruments: a global network of allies, the dollar, and much more.

How should Europe react to the changed geostrategic situation from an economic point of view?

Europe needs two things: firstly, it has to do more for its own economic strength.

For me, the

in the foreground here.

This makes Europe strong, also in negotiations with third countries, because access to the internal market is an important asset.

Second, the EU must also develop instruments to counter trade or financial aggression.

This includes, for example,

developing

the euro into a

or adapting one's own foreign trade law so that countermeasures can be credibly threatened if necessary.

Is Europe in danger of being crushed between the US and China?

The danger exists.

The weaker the EU, the greater it is.

Hence my plea for further

the internal market.

If we really want to remain strategically independent, we have to be economically strong.

But the challenge is huge.

It is quite possible that relaxation with the US will lead to major problems with China.