Please consider Trump tells Macron the EU is “worse” than China.
In their bilateral meeting in the White House’s Cabinet Room, on April 24, Macron said to Trump, “Let’s work together, we both have a China problem,” according to a source in the room. The source said Trump responded that the European Union is “worse than China.”
“He then went on a rant about Germany and cars,” the source added. (In their private meetings Trump has taken Angela Merkel to task for her country’s tariffs on U.S. automobiles and the ease with which German carmakers like Mercedes, Volkswagen and BMW can sell into the U.S. market.)
Trump also says that America has a fairly balanced trading relationship with France but that the U.S-European trading relationship is very unfair.
US Trade With China”Eu
Germany Worse than China?
For some numbers please see U.S. Trade Deficit by Country, with Current Statistics and Issues.
- China – $636 billion traded with a $375 billion deficit.
- Canada – $582 billion traded with an $18 billion deficit.
- Mexico – $557 billion traded with a $71 billion deficit.
- Japan – $204 billion traded with a $69 billion deficit.
- Germany – $171 billion traded with a $65 billion deficit.
This is not even close. The US has an annual trade deficit with China of $375 billion but only $65 billion with Germany.
However, China’s overall trade surplus is primarily with the US. China runs a deficit with much of the world.
Germany’s Surplus Greater Than China
Reuters reports Germany trumps Asia with world’s largest current account surplus
Ifo said the German current account surplus — which measures the flow of goods, services and investments — was the world’s largest for the second year running in 2017 at $287 billion, followed by Japan with $203 billion.
U.S. President Donald Trump has criticized Germany for doing too little to reduce its trade surplus with the United States, accusing Germany of “very bad” trade policies.
Ifo said China slipped to third place last year with a surplus of $135 billion, less than half Germany’s.
From that aspect, Germany is far worse than China, especially when one takes into account the size of the countries.
But what’s the goal? Balancing global trade or the US deficit?
Penis Envy
The US combined deficit with Canada, Mexico, Japan, and Germany was $223 billion. The US deficit with China alone was $375 billion.
For now, Trump seems hell bent on punishing Germany. Perhaps it’s penis envy. Germany has the largest in the world.
Tariffs on German cars coming up.
Whatever Trump’s goal, his policies will cost the US.
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Mike “Mish” Shedlock
Trade always benefits the producer who does it cheaper – obviously. Clearly if you only pay your workers peanuts it doesn’t take a lot to be the biggest exporter. That’s where China is in the story. The EU (eg Germany) has always had (and maintains) modern manufacturing facilities thanks to the post-war rebuild, and they’ve used that to produce quality products cheaply.
Free trade can only work if everyone trades on an even playing field, as happens within a country, where everyone gets paid the same and efficiencies are equivalent. Otherwise, improving efficiency is doable but fixing the wage disparity is unlikely to happen any time soon. Inevitably China and Asia will continue to be net exporters – as long as their corrupt autocratic and patriarchal political systems survive.
Inevitably, the idea of free-trade is like believing in democracy. To really work it requires an enlightened, egalitarian and standardized global civilization…. something the world is unlikely to see for centuries.
I am perplexed why Mish has not demanded that US trading partners drop/reduce their tariffs. (I believe that is what Trump attempts to achieve with his threats.)
Why are you talking about Germany, when the President said the EU? The trade deficit with the EU in 2016 was $147B, and in 2017 it was $151B, and based on the the first four months of 2018 we are on pace for a $178B trade deficit this year, which will get much worse no matter what Trump does, because the EU economy is imploding under govt largess and the dollar will increase, making our products more expensive even without tariffs. Armstrong’s idea of indexing tariffs to the currency makes sense –
Trump likely doesn’t know what he’s talking about regarding trade, but neither does anyone else. However, in this blind leading the blind trade policy, I still like Trump’s dumb luck. Europe’s going to need much cheaper goods as their currency falls, so they should reduce tariffs – and they should also reduce taxes so their citizens have more of their dwindling currency.
If Central Banks listen to Armstrong for advice, why shouldn’t we?
The U.S. data report U.S. goods and services trade with Canada totaled an estimated $673.9 billion in 2017. Exports were $341.2 billion; imports were $332.8 billion. The U.S. goods and services trade surplus with Canada was $8.4 billion in 2017, but a $17.5 billion goods deficit with Canada in 2017 counting only goods.
The largest item in the goods category is oil!
The cost of social programs has to be covered by something. I don’t see Germans wanting to see their safety nets reduced anytime soon. Ageing population, possible downturn in exports through barriers or global recession. How long before Germans express anxiety through the press and at the ballot box? A more anxious, nationalistic, populist Germany in the EU will lead to change but no way to tell what changes precisely. Any EU country seen to be sucking at the German tax payers tit will receive little sympathy in the Fatherland. Guess who. Southern Europeans.
In my home country of Ecuador, a small, cheap plasma TV runs me about $300. A better TV of the same size here would be about $120. Relatives living in Europe have come here to the US and brought an empty suitcase to fill it up with our cheap products to take back home. American stuff in many places is unbelievably expensive due to uneven and unfair tariffs. Even them up and people in foreign countries would benefit as well by paying less than they do now.
Germany needs to brought to heal for the damage they have done to Southern Europe.
Mish study up on the reciprocity agreements put into place between the US, Western Europe, South Korea and Japan after WW2. Trump is just going to make a few tweaks which should have been corrected a long time ago. All will be fine-MAGA.
I think it’s pretty clear a trade war has started
Pretty sure balancing the US deficit isn’t the goal, since it will reach nearly a trill this year, and should pass $1T annually by 2019 or 2020. If this is what striving for a goal looks like I’d hate to see the alternative.
Not sure what Trump’s issue with German cars is, but he has apparently harbored it since his famed 1990 Mercedes rant at the latest. Perhaps as things were dwindling with Ivana, an alluring woman spurned his advances whilst hopping into an S-class? With Trump, that seems as likely an origin story as anything else.