Article 2HBR0 Trump is wrong to criticise Germany over trade –he should look closer to home

Trump is wrong to criticise Germany over trade –he should look closer to home

by
Hans-Werner Sinn
from on (#2HBR0)

The president thinks Germany's trade surplus is the result of manipulating the euro, but Wall Street fuelled the problem

Donald Trump has criticised Germany's enormous current account surplus, which he considers the result of German currency manipulation. But the president is wrong. While Germany's external surplus, at 8% of GDP, is big - too big - it is not the result of currency manipulation by Germany. The real culprits are an inflationary credit bubble in southern Europe, the expansionary policies of the European Central Bank, and the financial products US banks sold to the world. So, instead of blaming Germany, Trump would do well to focus on institutions in his own country.

Germany's trade surplus is rooted in the fact that the country sells its goods too cheaply. Here, the Trump administration is basically right. The euro is too cheap relative to the US dollar, and Germany is selling too cheaply to its trading partners within the eurozone. This undervaluation boosts demand for German goods in other countries, while making Germany reluctant to import as much as it exports.

Related: Trump's trade advis""er says Germany uses euro to 'exploit' US and EU

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