Trump Tweets Diss on Germany and Trade
“Germany is one of the United States’ closest and strongest allies in Europe. US. relations with Germany are based on our close and vital relationship, as friends, trading partners, and allies sharing common institutions.”
So says the website of the US Department of State. Yet the president of the United States continues to treat Germany with disdain. Why? Because he thinks they should be kicking in more money for NATO?
President Donald Trump humiliated German Chancellor Angela Merkel when she visited the White House in the early days of the administration and has dissed all of the US’s European allies by failing to commit himself to their decades-long mutual defense. Now Merkel and other European leaders are proclaiming openly that Europe may no longer be able to count on the United States.
Upon his return from his first overseas trip as president, Trump had nothing better to do than tweet against Germany:
We have a MASSIVE trade deficit with Germany, plus they pay FAR LESS than they should on NATO & military. Very bad for U.S. This will change
— Donald J. Trump (@realDonaldTrump) May 30, 2017
The US trade deficit with Germany is around $65 billion. That’s not exactly massive when compared to the $347 billion deficit the US carries with China. It also falls below the $69 billion trade deficit with Japan. The US exports $49 billion worth of goods to Germany, much of it automobiles, aircraft, and pharmaceuticals, while it imports around $114 billion in similar goods: vehicles and parts, industrial machinery, and medicine. The United States is Germany’s fourth largest supplier of goods and the US is Germany’s largest export market.
Trump’s obsession with trade deficits is presumably based on the idea that the goods the US buys overseas could otherwise be manufactured in the US, creating local jobs. That attitude flies in the face of the very foundation of international trade, which is based on economies developing areas of specialization. (Trump also blames trade deficits on lousy trade deals, even though the US doesn’t have a trade deal with Germany, nor, for that matter, with China.)
Trump’s attitude also ignores the fact that the US enjoys a capital surplus with Germany. In other words, Germany invests more in the US than the US invests in Germany. In 2015, German direct investment in the United States was worth $255 billion, while U.S. direct investment in Germany was worth $108 billion.
The capital surplus is really the flip side of the trade deficit. The US sends money overseas when it trades in goods, but much of the capital accumulated by US trading partners comes back in the form of investments, and the US economy is still the most attractive investment venue on the globe.
Between 2012 and 2014, German companies almost tripled their investments in the US. German investments in the US focus largely on manufacturing and wholesale and employ over 670,000 American workers.
Trump’s dangerous rhetoric, if translated into action, could jeopardize those jobs. Is that what he really wants?