merkel schulz Alain Jocard/AFP/Getty Images

Is Germany Unbalanced or Unhinged?

Donald Trump thinks Germany's massive current-account surplus reflects currency manipulation and import restrictions. But, while the German external balance is indeed a problem, the best way to address it has nothing to do with the exchange rate or trade policy.

HAMBURG – For US President Donald Trump, the measure of a country’s economic strength is its current-account balance – its exports of goods and services minus its imports. This idea is of course the worst kind of economic nonsense. It underpins the doctrine known as mercantilism, which comprises a hoary set of beliefs discredited more than two centuries ago. Mercantilism suggests, among other things, that Germany is the world’s strongest economy, because it has the largest current-account surplus.