Germany has the biggest economy in the 28-nation European Union and is one of the world’s biggest exporters. It is wary of a more protectionist US approach under the new administration.
Germany has the biggest economy in the 28-nation European Union and is one of the world’s biggest exporters. It is wary of a more protectionist US approach under the new administration.

Germany’s Surplus Waning

Germany’s Surplus Waning

The Trump administration appears intent on escalating the long-standing US practice of attacking Germany’s current-account surplus. And good news for those on the receiving end: It has probably peaked.
As officials like US National Trade Council director Peter Navarro rail against the trade imbalance that dominates the balance of payments between the two countries, pensioners, home-buyers and immigrants are quietly working to bring that $297 billion current-account surplus down, Bloomberg reported.
According to research by Deutsche Bank, demographics and a housing boom are two factors that will drive the current account balance—the difference between what a country earns from abroad and what it spends—to its lowest level in seven years by 2020.
That may offer little consolation to the German delegation when it hosts a Group of 20 meeting of finance ministers in March, as they’ll likely face intensified criticism for allowing such an imbalance to continue. Germany has long faced flak, both within the eurozone and outside it, for failing to encourage greater domestic spending and imports to balance out its external excess.
Still, while the weaker euro will continue to make German exports attractive in the US—think expensive sedans, high-tech machinery—there are countervailing factors at play on the other side of the equation.
“In the medium term we expect the demographic development and the solid domestic economy, driven by a sustained positive development on the property market, to push the surplus down to 7% of GDP,” Deutsche Bank economist Heiko Peters said by phone. 
A rising share of pensioners in the German population, who normally have less money to save than people in jobs, will crimp household savings rates, while an increasing number of immigrants such as refugees will contribute to boosting German imports, Peters wrote in a study first published last year.
And with housing valuations outpacing income and rent growth since 2009, home owners feel richer, save less toward retirement and borrow against their property. That leads to rising imports of building materials to fuel the property boom and increased demand for foreign consumer goods on the back of the wealth effect.
Seven percent of GDP is still a mighty big number for an economy as large as Germany’s. “That’s still a relatively high level until 2020,” Peters says. “But an even greater demographic effect is then expected for 2020-2025, and the surplus should then decline clearly further.”

 Talk, Talk, Talk
Germany’s Economy Minister Brigitte Zypries says President Donald Trump’s administration has sent “alarming” signals on trade so far, but in comments published last Wednesday she said isolationism would also hurt the US economy and it’s important to keep talking with Washington, AP reported.
Germany has the biggest economy in the 28-nation European Union and is one of the world’s biggest exporters. It is wary of a more protectionist US approach under the new administration.
“What we have been experiencing for the last 10 days is alarming and disconcerting,” Zypries was quoted as telling German daily Bild. “This goes in completely the wrong direction.”
Asked what the German government can do to prevent a negative impact on German jobs, she replied: “We must talk, talk, talk. The kind of isolation Donald Trump apparently strives for would hurt everyone, including American business.” She added that “US business can have no interest in an escalation either.”
Zypries said, without specifying details, that some of what Trump has announced “is not compatible with the principles of the World Trade Organization.”
Zypries noted that 60% of German exports go to Europe and only about 10% to the United States. However, in 2015—last year’s statistics are not yet available—the US was Germany’s biggest single trading partner. German exports to the US totaled €113.7 billion ($122 billion), while imports were worth €60.2 billion.

Short URL : https://goo.gl/dUIOm9
  1. https://goo.gl/D4yM8t
  • https://goo.gl/4CSvOd
  • https://goo.gl/z6p43p
  • https://goo.gl/BTGjkh
  • https://goo.gl/v8Y10K

You can also read ...

More and more Thai merchants are integrating WeChat Pay and Alipay’s systems to cater to tourists.
The internet has changed the way most people live. Through...
Cambodia’s economic outlook remains positive, but is subject to downside risks.
The IMF Managing Director Christine Lagarde expressed optimism...
More India Bank Frauds Revealed
Over 25,800 fraud cases involving about Rs179 crore ($1.79...
Qatar Calls to Investigate UAE Bank’s Bogus Deals
Qatar has asked US regulators to investigate the US subsidiary...
Free trade achieves more good for the planet.
US President Donald Trump’s steel tariffs have brought the...
Morocco Currency Reform on Right Track
Few weeks after the launch of the gradual dirham float, the...
EU Readies Tax on US Technological Titans
The European Union will next week unveil plans for a digital...
Apparel imports from ASEAN are growing, spurred by low labor costs  in such countries as Vietnam.
Import prices for apparel and daily goods in Japan plunged...

Add new comment

Read our comment policy before posting your viewpoints