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Can We Apply Lessons from the German Trade Balance with China to the United States?

Author(s)

John B. Benedetto


Abstract

In recent years, Germany has had higher per capita exports to China than the United States has had. Some policymakers and analysts have argued that the United States should attempt to replicate Germany’s success in exporting manufactured products to China, or that Germany’s relative success at exporting to China refutes those who attribute the U.S. trade deficit with China to Chinese government policies. This paper analyzes trade data and finds that a majority of Germany’s exports to China likely consist of (1) mechanical and electrical intermediate and capital goods that are likely used in China’s exports to other countries and (2) luxury cars. The paper then argues that, given this export profile, Germany’s example does not offer a way for the United States to substantially reduce its trade deficit with China in a manner consistent with reducing global imbalances, and is potentially consistent with a model of the world in which some governments’ policies exacerbate global imbalances.