Germany is enjoying possibly its longest economic upswing since the second world war. Unemployment stands at 3.5 per cent. Wage growth is accelerating. The government coffers are overflowing and public debt is plummeting. Its brands are synonymous with quality. Economic strength has given it pre-eminence in Europe. Germans have never had it so good.
Suddenly, however, Germany’s export-driven economic model is beginning to look vulnerable. Protectionism is on the rise and value chains in manufacturing are being unpicked. As China has ramped up its efforts to acquire foreign technology and substitute high-tech imports for domestically manufactured ones, Germany can no longer be sure its bet on engagement will pay off. Britain, its third largest export market, is leaving the EU and could fall out of the single market with no preferential trading deal at all. Italy, its sixth largest market, could be pitched into a financial crisis by its Eurosceptic government.
US President Donald Trump has trained his fire mostly on China. But Europe could move back into his crosshairs at any moment. Transatlantic efforts to avert a trade fight and indeed liberalise trade in industrial goods have made little progress so far. The hawks in the Trump administration are itching to impose import tariffs on European, meaning largely German, cars.