Germany Set to Record World’s Biggest Trade Surplus for 3rd Year in a Row

Germany Set to Record World’s Biggest Trade Surplus for 3rd Year in a Row

Germany is expected to end 2018 with a trade surplus of nearly USD 300 billion, recording the world’s biggest trade surplus for the third consecutive year.

Germany’s projected trade surplus of EUR 264 billion (USD 299 billion in 2018 will surpass substantially both of its closest competitors for the top exporter title, Japan and the Netherlands, research by Munich-based economic research institute IFO reveals, as cited by DW.

This development is likely to feed into the already constant discontent over Germany’s trade surplus of a number of international political figures, most notably US President Donald Trump.

US President Donald Trump frequent accusations that Germany deliberately keeps distorting its balance of trade with the United States has been countered by German Chancellor Angela Merkel by pointing out that the overall trade balance in the bilateral relationship is in America’s favor when services are counted in.

Maurice Obstfeld, chief economist at the International Monetary Fund (IMF), also recently criticized Germany for failing to cut its trade surplus and therefore contributing to global imbalances.

IFO’s report is based on trade in goods, services and income from foreign assets. Thus, Germany’s trade in goods is projected to generate a surplus of over EUR 200 billion in 2018, while income from assets is expected to raise around EUR 63 billion.

At the same time, Germany is forecast to run a EUR 18 billion deficit in services, and the surplus figures show a slight decline as a proportion of Germany’s total economic performance compared to 2017, from 7.9% to 7.8%.

Achieving a high trade surplus is not a political goal in itself for Germany, a spokeswoman for the country’s Economy Ministry stated on Monday, while arguing that government policies could have a very limited impact on reducing it.

“[The trade surplus] is an indicator of German companies’ performance and the attractiveness of their products — and all this in a difficult international environment,” commented Volker Treier, chief foreign trade analyst at the German Chamber of Industry and Commerce (DIHK).

In his words, Germany’s trade success should be celebrated, and the revenues are being used for positive investments.

“The complaint that Germany is flooding the world with its goods is only superficially true,” Treier argued, point out that many German companies use their capital surplus to finance worldwide investments.

German firms are estimated to employ a million people in China and more than 850,000 in the US, while the German economy is estimated to be responsible for about 5 million jobs in the rest of the EU.

Germany’s next door neighbor and export competitor the Netherlands actually has a far larger surplus as a proportion of its total economic proportion, at 12%.

China is expected to record the largest export numbers overall but its trade surplus fell in the first half of 2018 because of a rise in its imports.

US President Donald Trump’s critical rhetoric of Germany and its trade surplus has subsided since the recent agreement to prevent an all-out trade war between the United States and the European Union that he reached with European Commission President Jean-Claude Juncker. Its results, however, have been received cautiously in Germany.

(Banner image: Flickr)

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