The meetings with the Europeans last week were largely seen as contentious, with Trump criticizing allies for failing to contribute enough financial resources to defense efforts and Europeans showing concern about his commitment to the Paris climate accords. After German media reported that Trump lashed out over German auto exports in private meetings, White House officials downplayed the exchange, though not entirely.
“He said they're very bad on trade, but he doesn't have a problem with Germany,” National Economic Council Director Gary Cohn told reporters.
On Sunday, following the meetings, Merkel announced that Europe “really must take our fate into our own hands,” showing new distance from its long-standing alliance with the United States.
Germany maintained a $69 billion trade surplus with the U.S. in 2016 — reflecting $49.4 billion in U.S. exports to Germany and $114.2 billion imports from Germany.
In general, economists say that trade deficits are a poor way to measure economic success or failure. But while Trump's criticism of the country in the U.S. context may not be entirely fair, they say, his broader point has merit.
Germany, overall, exports $270 billion more than it imports, and critics say that partially reflects questionable policies the German government has promoted during years of economic unrest on the continent.
Germany, as the strongest economy in Europe, has benefited from a situation where it shares a currency — the euro — with many weaker countries. As a result, the euro is valued far less than any German currency would likely be on its own. It also means that other Euro zone countries' exports are more expensive than they might otherwise be. Countries that have had economic crises in recent years, such as Italy, Greece and Spain, are particularly hard hit.
For those reasons, U.S. economic officials under the Obama administration also chided Germany, though in far more diplomatic terms. They said Germany, whose famously austere budget policies lead to a culture of saving and not spending, should do more to stimulate consumer demand, which would boost the amount Germany imports.
“You have him saying Germany is bad, and it’s just such a strange way to put things. It’s so undiplomatic that it comes off as, okay, this is out of the blue and crazy,” said Caroline Freund, a senior fellow at the Peterson Institute for International Economics. “But there is a kernel of truth, absolutely, that the euro crisis is born in Germany as much as in Greece.”
Decisions by the U.S. and European central banks have also caused the value of the euro to decline against the dollar, weighing on U.S. exports. As the U.S. economy has sped up, the Federal Reserve has begun to raise interest rates — offering better returns to investors, coaxing international investment to the United States and raising the value of the dollar. Meanwhile, the European Union has continued to hold its interest rates at zero.
A stronger dollar compared to the euro has weighed on U.S. exports. However, the main victim with Germany’s surplus has not been the United States but the countries of peripheral Europe, which are still weighed down by double-digit unemployment rates.