President Donald Trump, miffed that German chancellor Angela Merkel proved as immune to his modest charms as to his attempts at bullying, has moved the U.S. trade deficit with Germany to the top of his rhetorical agenda — at least for five minutes, until the next shiny object comes into his line of sight.
The United States does run a trade deficit with Germany, about one third of which comes from the sales of vehicles — Americans love German cars, for good reason: German cars are really good. People around the world like German cars for the same reason they like Swiss watches, Japanese electronics, and American aircraft.
But trade imbalances aren’t only, or even primarily, about consumers’ preferences: They are driven by investors’ preferences. This basic economic fact rarely enters the Washington discourse about international trade, but it is fundamental to understanding what is actually going on in U.S. economic relations with Germany, Europe, and the world. One of the many downsides of the president’s being advised on trade by fools and cranks like Peter Navarro is that there is no one around to explain the basics to him.
Say you are a big muckety-muck…