German exports to US hold steady
• Trump tantrum fails to curb trade surplus but tensions could flare up
Germany’s trade surplus with the US is showing little sign of buckling under President Donald Trump’s accusations of unfair practices.
Germany’s trade surplus with the US is showing little sign of buckling under President Donald Trump’s accusations of unfair practices.
The nation’s exports to the US exceeded imports by €24.4bn in the first half of 2018, German data showed on Tuesday. That has barely changed from the €24.5bn in 2017.
The booming US economy is continuing to suck in German goods, from cars to chemicals, even amid repeated criticism from the Trump administration and threats of tariffs on Europe.
Still, the latest figures show how tensions could flare up again, despite Trump’s agreement with European Commission president Jean-Claude Juncker to refrain from any action while the two sides negotiate. “At the moment, we don’t see much of a decline in the trading relationship with the US,” said Jan-Philipp Schulz, treasury manager at Sparkasse Suedholstein. While some confidence indicators have weakened amid a worsening of ties, “this overflow into the real economy hasn’t happened”.
Trump has lambasted the country for its underspending on defence, links to Russia and exports. He has complained on Twitter about the “MASSIVE trade deficit” with Germany and at a meeting with EU leaders called the country “very bad” for selling “millions of cars” in the US. His top trade adviser, Peter Navarro, has accused Germany of benefiting from a “grossly undervalued” euro.
Yet while German exporters do benefit from a weaker currency, the country does not set the exchange rate. That is largely a consequence of the European Central Bank (ECB), which is running looser monetary policy than the US Federal Reserve (Fed) because the bloc’s recovery from the global financial crisis has been slower. There is little sign that this dynamic will change anytime soon, with the Fed pledging to keep raising rates at a gradual pace and the ECB saying it expects to keep borrowing costs at current record lows in 2019.
Exporters are still nervous about the outlook, even after Trump’s meeting with Juncker in July. The US commerce department is continuing an investigation into car imports under an act that permits trade restrictions if needed to safeguard national security.
That is a particular concern for Germany. Vehicles were its largest export category by value in 2017, accounting for almost a fifth of the total, and levies on vehicles including MercedesBenz, BMW and Porsche models would represent a significant blow to the economy.
Chancellor Angela Merkel has described automotive tariffs as “a danger for the prosperity of many in the world”.
The US is Germany’s largest non-EU export destination, taking 9% of shipments in 2017.
The breadth of the economy’s manufacturing base shows how difficult it would be to curb exports through product-specific tariffs, though. The country is also a major seller overseas of machinery, chemicals, electronics and electrical equipment.
Its global trade surplus was €122bn in the first half of 2018, putting it on track to match 2017’s €244bn, and within reach of 2016’s record €249bn.
One area where Germany is largely dependent on imports is crude oil and natural gas. Trump has alleged the country is “captive to Russia” for its energy supplies and tried to pitch US liquefied natural gas instead.
Juncker told Trump Europe would expand US fuel imports. Even that may not add up to much. Germany has so far been lukewarm to the idea of buying US liquefied natural gas, and analysts have noted supplies from Russia’s vast Siberian fields are far cheaper.