LONDON – Here’s a reality check for British and American policymakers, and for the many pundits who frequently comment on world trade without understanding its realities: data on Germany’s total exports and imports in 2016 indicate that its largest trading partner is now China. France and the United States have been pushed into second and third place.
This news should not come as a surprise. I have often mused that, by 2020, German companies (and policymakers) might prefer a monetary union with China to one with France, given that German-Chinese trade would likely continue to grow.
And so it has, driven primarily by Chinese exports to Germany. But German exports to China have also been increasing. Notwithstanding a recent slowdown, Germany could soon export more to China than to its crucial neighbor and partner France, and it already exports more to China than it does to Italy. For German exporters, France and the UK are the only European national markets larger than China.
Seasoned observers of international trade tend to follow two general rules. First, the level of trade between two countries often decreases as the geographic distance between them increases. And, second, a country is likely to conduct more trade with big countries that have strong domestic demand, rather than with smaller countries that have weak demand.