Germany’s record trade surplus in 2016 may fuel US tensions

President Trump’s top trade adviser claims country is using weak euro to gain advantage

Germany’s trade surplus for 2016 rose to €252.9 billion, surpassing the previous high of €244.3 billion in 2015

Germany’s trade surplus climbed to a record high in 2016, official data showed on Thursday, days after US president Donald Trump’s top trade adviser accused Berlin of exploiting a “grossly undervalued” euro to its advantage.

The surplus is likely to worsen tension between Washington and Berlin, which is trying to safeguard global free trade this year during its presidency of the Group of 20 leading economies, adopting the motto “Shaping an Interconnected World”.

Germany's trade surplus for 2016 rose to €252.9 billion, surpassing the previous high of €244.3 billion in 2015, the Federal Statistics Office said.

"The record surplus will continue to fuel the conflict with the USA and within the EU," said Marcel Fratzscher, head of the DIW economic institute, an advocate of stronger investment in Germany.

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“European neighbours would benefit from stronger investment in Germany,” he said. “Germany, however, would profit first and foremost, as the investment gap and the resulting excessive trade surpluses are detrimental to the domestic economy.”

Charge rejected

Last week, US president Donald Trump’s top trade adviser said Germany was using a “grossly undervalued” euro to gain advantage over the United States and its European partners .

Chancellor Angela Merkel rejected the charge, saying her government had always called on the European Central Bank to pursue an independent monetary policy.

Some German politicians have pressed the ECB to tighten its policy. Finance minister Wolfgang Schäuble said at the weekend the euro was too weak for Germany, but he noted that the ECB “must make policy that works for Europe as a whole”.

On Wednesday, Ms Merkel said the European Union would have to press ahead on trade deals with other countries if it does not reach an agreement with Mr Trump's administration.

The German trade surplus grew even though exports fell 3.3 per cent in December while imports were unchanged. That means, for December alone, the trade surplus narrowed to €18.4 billion from €21.8 billion in November.

German industrial production also fell in December, but orders rose the same month by the most in more than two years, suggesting the first quarter of 2017 may be getting off to a strong start.

On Wednesday, Germany’s DIHK Chambers of Commerce raised its forecast for German economic growth in 2017 to 1.6 per cent, but it warned that companies were worried about US trade policy .

– Reuters