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Does Europe Need America Anymore?

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Does Germany, and by extension Europe, need America anymore?

German exports to Asia are growing rapidly. Exports from the country to the rest of Europe and to the U.S. are growing too, but at slower rates.

German exports to China rose 12% in the first four months of the year, with exports to India rising at about the same rate, and exports to Vietnam jumping over 20%. Nina Adam, writing at the Wall Street Journal, suggests new business in Asia could offset any negative trade effects brought on by the Trump administration in the U.S. She writes:

Mr. Trump has repeatedly criticized Germany for its large trade surplus with the U.S. and threatened to impose tariffs on German car imports. But action by the U.S. administration has proved modest while German businesses have remained committed to the large U.S. market.

German exports to the U.S. rose 3.9% in the first four months of 2017 from the same period last year. Exports to the U.K. fell by around 4%.

Given increased tensions between Europe and the U.S. over issues such as climate and free trade, European leaders have redoubled efforts to cultivate China. German Chancellor Angela Merkel and Chinese Premier Li Keqiang met in Berlin earlier this month, and Mr. Li stressed that both parties were “in favor of fostering free trade and the simplification of investment.”

German businesses’ rising exports to Asia draw on a long record in the region. Economists say that China’s One Belt, One Road initiative—-a series of vast infrastructure projects to connect mainland China with the rest of the continent-—will open up more opportunities for trade.

Last year, China became Germany’s largest trading partner, with combined imports and exports of almost €200 billion ($223 billion).

Five years from now, the Europe Union’s export revenues with Asia will be almost twice its export revenues with the U.S., estimated Charles-Edouard Bouée, chief executive of Roland Berger. “We are very positive on the outlook for Asia,” Mr. Bouée said.

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Dick Young

Richard C. Young is the editor of Young's World Money Forecast, and a contributing editor to both Richardcyoung.com and Youngresearch.com.