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Germany’s Misunderstood Trade Surplus

The ongoing debate about Germany’s current-account surplus – which has now set a new record – has been counterproductive, and is based on three common fallacies. Criticism of Germany’s export prowess, and accusations of currency manipulation, are just as wrong-headed as Germany’s own defense of its bloated surplus.

BERLIN – Now that Germany’s current-account surplus has reached a record €270 billion ($285 billion), or close to 8.7% of GDP, the ongoing debate about its economic model has intensified. Eurozone politicians and Donald Trump’s administration in the United States are each blaming the other for the economic imbalance; and all are blaming the euro.

Trump’s administration, for its part, has attacked Germany for exporting too much, and accused it of manipulating the euro. In fact, Germany’s trade surplus has little to do with the euro; which has become a convenient scapegoat – a stand-in for other policy mistakes.

Many Germans view the latest wave of criticism as a sign that others are merely envious of their country’s success, and they have angrily refuted arguments that Germany has tried to gain an unfair competitive advantage. Germany, they point out, does not engage in price dumping or direct export promotion, and its leaders do not target the euro.

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