Germany had goods trade surpluses with 159 countries in 2017 (using a threshold of €150m) compared with 56 for the United States (using a threshold of $160). While German surpluses come from all regions of the world, the American surpluses are both smaller and are mainly concentrated in Latin America (excluding Mexico, Ecuador and Venezuela,) the Carribean and the Middle East.
The United States last had a goods trade surplus in 1974 while Germany has had a surplus every year since 1952 and it has had a combined goods + services trade surplus every year since 1993.
German export value (goods + services) in 2017 as a ratio of GDP was 47%; France was at 31%; Italy's ratio was 32% — up from 26% in 2006, while Spain rose to 35% of GDP compared with 25% in 2006. The US rate was 12%.
China’s export value/GDP ratio was 19% in 2017 compared with over 35% in 2007.
The EU’s exports to the rest of the world accounted for 18% of GDP in 2017.
The German goods trade balance showed a surplus of €244.9bn in 2017 compared with €248.9 in 2016. The Deutsche Bundesbank estimated the current account of the balance of payments at a surplus of €257.1bn in 2017. Net services exports were in deficit at -€18.0bn.
The US deficit increased from $504.8bn in 2016 to $568.4bn in 2017, as imports increased more than exports. The goods deficit increased from $752.5bn in 2016 to $811.2bn in 2017, and the services surplus fell from $247.7bn in 2016 to $242.8bn in 2017.
In 2017, China's overall goods trade surplus came in at $422.5bn (€350.8bn), roughly $64bn less than in the previous year. Together with a services deficit of $259bn, the net total was $163.5bn.
The top 10 German country goods surpluses in 2017 were valued at €219bn and the top 10 US trade surpluses were valued at $98bn. Germany’s top 10 trade deficits led by China at €14bn, amounted to €58bn while the top 10 US deficits amounted to $706bn with the deficit with China valued at $375bn. German and US data for 2017
Both the US and the UK claim surpluses in their trade with each other, and the Office for National Statistics has struggled to reconcile the difference. See Bloomberg story.
The US reported a goods trade surplus of about $3bn ($0.5bn in 2016) with the UK in 2017 and a services surplus of about $13bn ($14.5bn in 2016).
In 2016 the UK exported goods and services to the US valued at £99.6bn and imports from the US were valued at £66.3bn giving the UK a surplus of £33.3bn.
In 2016, China accounted for over 3% of UK exports, compared with less than 1% in 1999. In 2016, China was the eighth largest UK export market. India accounted for 1.0% of UK exports in 2016 up from 0.9% in 1999.
The biggest US surplus at $24.5bn in 2017 was with the Netherlands which likely relates to tax avoidance and a large number of US holding companies in the country. Ireland had a surplus with Germany and this is also likely related to tax avoidance.
In 2017 in respect of total (goods + services), EU exports were valued at 2.724tn ($2.951tn) followed by China at $2.500tn (including $240bn of services exports) and the United States at $2.332tn.
June 14, 2018: US 2017 Balance of Payments/current account surplus with EU at $14bn- EU says it had US surplus of $170bn with US
EU
The value of European Union (extra-EU) exports to the rest of the world was €2.724tn (€1.879tn goods + €845bn in services exports – this is the same as 2016 as 2017 data is not yet available) in 2017 and as a ratio of GDP was 18%. The main destination for EU goods exports in 2017 was Asia with about one-third of the total, followed by North America (27 %) and other European countries (23 %).
The United States is still the most important goods trading partner of the European Union: In 2017, the EU and the US traded goods worth €632 bn (imports and exports). This represents 17% of all EU trade in goods. China’s share amounted to approximately 15%.
Compared to 2000, the proportion of trade with the United States has decreased significantly, whereas China’s share of EU trade has nearly tripled from 5.5% to 15.3%. Trade with Japan has also decreased since 2000 – dropping from 7.5% to just 3.5% in 2017.
UK and EU
The UK has had a trade deficit with the EU in every year since 1999. In contrast, the UK has had a surplus with non-EU countries since 2012 (as noted above, the US and UK claim to have surpluses with each other.)
The EU, taken as a whole is the UK’s largest trading partner. In 2017, UK exports to the EU were £276bn (44% of all UK exports). UK imports from the EU were £347bn (53% of all UK imports). The UK had an overall trade deficit of £72bn with the EU in 2017. A surplus of £14bn on trade in services was outweighed by a deficit of £96bn on trade in goods.
The UK had a trade surplus of £43bn with non-EU countries. A surplus of £84bn on trade in services outweighed a deficit of £41bn on trade in goods.
Services accounted for 39% of the UK’s exports to the EU in 2017.
The UK had a trade deficit with 18 of the 27 other EU member states in 2016, a surplus with 4 others and was broadly in balance with the remaining 5. The UK’s largest EU trade surplus was with Ireland (£6bn) while its largest deficit was with Germany (£26bn).
Larry Elliot, economics editor of The Guardian, wrote last April:
The economist Christopher Smallwood has been looking at what has been happening to the UK’s manufacturing trade deficit since 2005. He finds that almost all sectors are running a bigger deficit. The deficit with Germany has increased by 5% a year, with France by 7% a year and with the rest of the EU by 11% a year.
Smallwood says the UK’s trade performance has deteriorated because the single market and the customs union are designed to suit other countries, Germany in particular, but not Britain.
“It is not surprising that our trade deficit with the EU continues to grow, because the single market and customs union does not represent a free trade area. It is a free trade area only in goods. Manufactured goods represent Germany’s comparative advantage, whereas ours is in services.
“We have entered into a lop-sided arrangement under which all impediments to trade have been removed from areas where our trading partners are strong but not from areas where we are strong. So obviously our overall trade deficit with them has gone on rising, and will continue to do so.”
US
"The deals we have with other countries are unbelievably bad. We don't have any good deals," Trump in February 2017 told a group of business executives at the White House. "In fact, I'm trying to find a country where we actually have a surplus of trade as opposed to a deficit. Everything's a deficit."
Adam Smith, the Scottish philosopher/economist, wrote in his 1776 magnum opus, ‘The Wealth of Nations’:
Nothing…can be more absurd than this whole doctrine of the balance of trade, upon which, not only these restraints but almost all the other regulations of commerce are founded. When two places trade with one another, this doctrine supposes that, if the balance be even, neither of them either loses or gains; but if it leans in any degree to one side, that one of them loses and the other gains in proportion to its declension from the exact equilibrium. Both suppositions are false.
US tariffs are slightly lower than EU and Canadian rates with WTO statistics for 2015 showing the EU's average-weighted tariff at 3%; Canada's rate was at 3.1% and the US rate was at 2.4%.
Trump complains about Canada's higher tariff on dairy but the US also has some higher rates than its trading partners.
The US goods and services trade surplus with Canada was $8.4bn in 2017 according to the Office of the US Trade Representative
What Trump likely would not want to understand is:
1) The deficit with China is hugely exaggerated – think of the iPhone assembled in China from mostly imported components. The export value is its total manufacturing cost, which becomes a Chinese export to the US. The Organization for Economic Co-operation and Development (OECD) has pioneered the use of value-added methods for intermediate goods trade and in 2011 researchers estimated that the US-China deficit was in reality about 40% smaller.
2) Jobs in US steel production have fallen but production is at a similar level to the 1980s;
3) Trump complains about the 10% European Union tariff on cars compared with a US tariff of only 2.5% — but ignores to mention the 25% US tariff on trucks;
4) Douglas Irwin, a professor at Dartmouth College, told The Wall Street Journal that in 2017, 56% of American-bought light vehicles were domestically produced. The breakdown among imports: 22% from Canada and Mexico, 11% from Japan, and 8% from Germany and South Korea. That adds up to 97% of cars that were either made in America or “came from neighboring countries or those we have an alliance with — not enemies or sources of supply that might be threatened in an emergency.”
5) The US has a low savings rate and persistent annual federal budget deficits — it also has high inequality and according to the Economist in 2016 “cheap imports were a windfall for American consumers. Excluding food and energy, prices of goods have fallen almost every year since NAFTA (North American Free Trade Agreement 1994). Clothes now cost the same as they did in 1986; furnishing a house is as cheap as it was 35 years ago. More trade brought more choice, too. Robert Lawrence and Lawrence Edwards, two economists, estimate that trade with China alone put $250 a year into the pocket of every American by 2008. The gains from cheap stuff flowed disproportionately to the less well-off, because the poor spend more of their incomes on goods than the rich.”
6) The US dollar has replaced gold as the main medium of exchange in international trade and when countries build up supplies of dollars they buy US Treasuries (China held $1.2tn worth at end of 2017) and invest in America.
7) It’s easy to see that Trump’s tariff approach is a zero-sum game — retaliation is inevitable.
China has a “strategic blueprint for where it wants to go,” Prof Irwin told The Wall Street Journal “Trump, in contrast, has these trade instincts but no plan.” The obsession with reducing the bilateral deficit with China appears to have blinded the administration to the need to address “the real structural problems we should be talking about, like protecting intellectual property, transparency, whether you need to partner with a Chinese firm if you go in as a foreign investor, and the rule of law.”
Larrry Summers, ex-US Treasury secretary June 5, 2018: Trump’s trade policy violates almost every strategic rule
What America forgets: Competition drives innovation - Joe Atikian, the author of 'Industrial Shift: The Structure of the New World Economy', argues in Canada’s Globe and Mail:
Competition in an advanced economy leads to more science, more advanced engineering and better products. That lesson should have been fully ingrained in the 1950s, when Russia beat the United States into space and permanently retained the lead in long-duration orbital flight. It should have been reinforced when Japanese automotive technology led the world in the 1980s on quality and customer loyalty – a lead that persists to this day. Instead, the United States is now leaning on trade measures in an attempt to regain an imagined industrial supremacy.
Bloomberg has pointed out if steel triggers a trade war, the effects would probably be smaller than statistical anomalies.
According to the US Census Bureau, the US goods trade deficit with the EU was $146.7bn in 2016, while the EU puts its surplus with the US at €112.9bn (at the average exchange rate for 2016, that is $125.3bn). This $21.4bn ‘asymmetry' would cover the US steel and aluminum trade deficit four times over. The differences are even bigger for services, where both parties claim a surplus.
Before the G7 (Group of Seven) summit, Trump had said in a tweet that the US was running a deficit of $151bn with the EU, although according to its own figures, the US is running a surplus of $14bn on its current account balance (the trade balance plus balances on investments and related income) with the EU and has been in surplus since 2008.
Of crucial importance, however, at least for Trump, is US Department of Commerce data that show a US current account deficit with Germany of $65bn.
"It is wrong to pick out individual EU member states. The EU is a customs and economic union in which individual member states are closely linked. The US surplus of almost $100bn with the Netherlands is largely due to Germany," Prof Gabriel Felbermayr of the Ifo economics institute said.
US internet giants access the German market via headquarters in the Netherlands for tax purposes, with a similar pattern seen in Ireland, he added.
The German car industry relies heavily on the US market. In 2017, its US revenues were €29.4bn and 1.3m German vehicles were sold in the country, 10% of total production. The industry directly or indirectly provides 2m German jobs.
Of these 1.3 million vehicles, 800,000 were built in US factories and many more were made in German factories in Mexico, part of the NAFTA (North American Free Trade Agreement).
Germany is a significant foreign direct investor in both Europe and the rest of the world.
