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 immense current account surplus, which he considers the result of German currency manipulation. But the president is inaccurate. While Germany’s external surplus, and at 8% of GDP,is big – too big – it is not the result of currency manipulation by Germany. The genuine culprits are an inflationary credit bubble in southern Europe, the expansionary policies of the European Central Bank, or 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, and 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 adviser says Germany uses euro to 'exploit' US and EU Continue reading...
Source: theguardian.com