In May, for the first time in more than three decades, Germany’s storied trade surplus disappeared. Not only is imported natural gas more expensive, but demand in China is falling — neither of which is good news for Germany. Nevertheless, the fallout will be more manageable than many people expect, the Germans included.
For decades there has been too much emphasis on the importance of the German trade surplus to the country’s prosperity. No one claims to believe in the doctrines of mercantilism anymore, yet they reemerge time and again. To the extent Germany has been a wealthy nation, it is due to its productivity and human capital — not any pattern of trade surplus or deficit.