USA TODAY International Edition
Americans love German goods
Americans simply appreciate nation’s well- made products
American car snobs love BMWs and Mercedes. U. S. hospitals love German- made medical instruments. U. S. manufacturers depend on German precision tools.
They’re all big contributors to the huge trade surplus Germany has run up with the United States in recent years, trailing only China and Japan.
President Trump has bemoaned the imbalance in recent tweets, saying Tuesday: “We have a MASSIVE trade deficit with Germany, plus they pay FAR LESS than they should on NATO & military. Very bad for U. S. This will change.”
The surplus isn’t a byproduct of any particularly unfair trade policies in Germany, econo- mists say, but a result of Germans’ reputation for quality and efficiency, plus one big advantage beyond its direct control: a weak euro vs. the dollar that makes German exports cheaper and U. S. goods there more expensive.
In 2016, German companies sold $ 114 billion worth of goods in the U. S., much of it in cars, high- end medical equipment and machinery. American companies sold $ 49 billion of goods in Germany, resulting in a $ 65 billion trade deficit, 35% wider than 10 years ago.
Finding evidence that Germany’s trade surplus causes lasting damage to the U. S. economy or results from unfair trade policy is difficult, economists say. They note that BMWs and other German products are popular in the U. S. and considered a good value. And the surplus can’t be blamed on cheap wages: Compensation is higher for German manufacturing workers than their U. S. counterparts, according to a 2012 Labor Department survey.
“The U. S. trade deficit with Germany is largely a symbol of Germany’s competitiveness in specific categories of imports for which demand in the U. S. is very strong,” said Eswar Prasad, an economics professor at Cornell University. “It is not because of trade or other barriers in Germany that restrict U. S. imports.”
Part of the German surplus comes from U. S. companies’ purchases of German parts used in U. S. manufacturing, said Dan Ikenson, director of the Center for Trade Policy Studies at the Cato Institute.
Yet Americans’ increased appetite for German products has an upside for the U. S. economy. Companies such as BMW, Daimler, Siemens and Volkswagen have expanded operations in the U. S., creating more jobs.
The bigger problem for the global economy may be Germany’s worldwide current account surplus of about $ 300 billion.
While China has been reducing its surplus, Germany has enjoyed unique advantages from being the most competitive economy in Europe. Germany benefits from the weak euro even though it is the strongest economy in the EU by far.
“It’s not that ( the U. S. doesn’t) produce good cars. It’s just that quality per dollar seems higher with German cars,” said Caroline Freund, senior fellow at the Peterson Institute for International Economics. Germany is “hypercompetitive because of the undervalued exchanged rate.”
The currency advantage has worked to Germany’s advantage at the expense of the U. S. and other nations whose companies find global competition too tough and shutter their domestic factories, Scott said.