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Greater German Exports To US Despite Trade Tensions: Reuters

Greater German Exports To US Despite Trade Tensions: Reuters
A weaker euro and diversion in trade related to the ongoing trade war between the United States and China benefited German companies as the largest economy of the European Union managed to avoid a recession in the third quarter, aided by strong exports to the US, showed data released on Thursday.
According to a report by Reuters, detailed trade figures from the Federal Statistics Office of Germany showed that there was strong demand for German products from the US despite the threats from te US president Donald Trump about imposing increased tariffs on cars imported from Europe. Auto is one of the largest export industries of Germany.
There was a 0.1 per cent growth in the German economy in the third quarter driven by consumers, state spending and construction which helped the export-reliant German economy to avoid slipping into recession. The economy also saw a rise in exports in the time period compared to the previous quarter. 
There was a 1.7 per cent year on year growth during the third quarter following a 1.3 per cent shrinking in the economy in the previous quarter.  Data also showed that the two biggest export markets for the country remained the US and France.
In the latest ended quarter, there was a 7.6 per cent year on year growth in German exports following a 5.3 per cent growth in the previous quarter. After stagnating in the second quarter, the economy’s exports to France rose by 3.1 per cent year on year.
“Europe is benefiting from still being the uninvolved third party in the American-Chinese trade conflict. This leads to trade diversion and helps European exporters,” Jens Suedekum from the Heinrich-Heine-University in Duesseldorf told Reuters.
Growth in exports to France was somewhat unexpected for analysts which was driven by a strength of the French economy on the back of structural reforms and fiscal stimulus measures enacted by President Emmanuel Macron.
“This spilled over to German exporters,” Suedekum said. “Chancellor Angela Merkel should send a thank-you note to Paris.” Some of the major sectors of Germany that saw storing demand from France included machinery, cars and airplanes according to the available data mentioned in the Reuters report. There was increased demand for German machinery and pharmaceutical products from the US.
Since the beginning of 2018, there was a drop of 14 per cent in the value of the euro against eth US dollar, pointed out Gabriel Felbermayr, president of the Kiel Institute for the World Economy. That helped bring down the price of German exports to the US.
“The strong dollar is one of the macroeconomic side effects of Trump’s trade policy toward China. It leads to trade diversion,” Felbermayr told Reuters. That indicated clearly the more of goods from European Union and Germany were being purchased by US companies to avoid the high import tariffs on Chinese goods which made them more expensive.
There will expectedly be stronger production of German companies in the United States, weakening exports, because of the uncertainty created by Trump’s ‘America First’ trade policy in the medium term, Felbermayr cautioned.

Christopher J. Mitchell

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