Exports over imports

Germany has world's largest trade surplus for third year

germany world largest trade surplus
Zooming to consumers outside Germany. Source: Bloomberg

Germany this year will have the largest trade surplus in the world for the third year in a row, according to Reuters, as consumers around the world continue to clamor for its cars, brews and industrial equipment. Europe’s biggest economy is projected to export $299 billion more in goods than it imports, according to the Ifo Institute, a German economic think tank that prepared the forecast for the news agency.

Japan will have the second-largest surplus of $200 billion, with the Netherlands an unexpected third at $110 billion. The United States will have the world’s largest deficit, $420 billion, as it continues to rely on imports to sate consumer demand.

“It illustrates the performance of German companies and the attractiveness of their products — and this in a difficult international environment,” said Volker Treier, who oversees exports for the German Chambers of Commerce and Industry (DIHK).

The projections could further swell a trade war between the EU and the US after President Donald Trump’s tantrums about trade imbalances with Germany and threats of punitive tariffs specifically on German cars, the country’s most important export.

Trade surplus for services

At the time, Germany hit back by saying the US actually has a surplus when service revenue from the likes of Facebook, Google and Amazon are rolled in. A spokeswoman told Reuters the German government isn’t looking to boost the surplus and in fact is more interested in cranking up domestic demand to bring it down.

According to the federal government, the trade surplus is not one of its political goals, but it is trying to work towards a lower current account surplus by strengthening domestic demand.

“The main driver for exports of goods in the first half of the year was demand from the other countries of the euro area, other EU countries and the US,” Ifo’s Christian Grimme told Reuters.

Complaining about the trade surplus may also be superficial. Some of the funds are invested abroad — as with German carmakers who make the bulk of some models abroad, especially in the US.

The biggest locations abroad for German employers are China, with around 1 million employees, and the US, with more than 850,000, according to Reuters.

Still, the figure is above the 6 percent threshold the International Monetary Fund has set for healthy trade surpluses versus a country’s GDP — Germany’s will be 7.8 percent of its GDP this year, which the IMF says can be a threat to stability.

Andrew Bulkeley is an editor with Handelsblatt Global in Berlin. To contact the author: a.bulkeley@handelsblattgroup.com

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