Donald Trump is nothing if not a global thinker. Having already accused China and Mexico of being unfair traders, he's now broadened his worldwide insult offensive to include Germany.
The head of Mr. Trump's new National Trade Council told the Financial Times this week that Berlin was guilty of using a "grossly undervalued" euro to "exploit" the United States and its European Union partners.
Meanwhile, the President himself was arguing that Japan and China have manipulated currency markets in the past to gain an unfair advantage over the U.S.
"They play the money market, they play the devaluation market, while we sit here like a bunch of dummies," Mr. Trump thundered.
Give the man credit: He's got the dummies part absolutely correct.
But the reason that the President and his posse look so dangerously clueless to the rest of the world isn't because of their forbearance on trade issues. It's because of their apparent ignorance of some fundamental economic relationships.
Start with a simple reality test: If trade deficits with other countries were automatically poisonous, a shrinking deficit would be great news for an economy. In contrast, a growing shortfall would signal grim times ahead.
Unfortunately for supporters of Trumponomics, the past few decades in the U.S. have demonstrated that the opposite is often true.
Patches of slower economic growth have typically been heralded by a diminishing deficit in the current account, which is a broad measure of trade in goods and services. On the other hand, a big current-account deficit has usually gone along with faster growth.
To be sure, the relationship between imports, exports and economic growth is complicated. But that's just the point. Despite Mr. Trump's bellowing, trade isn't some contest in which the trophy goes to the country that exports the most. If it were, any nation could win the global race simply by giving away stuff for free.
Instead, trade is a mutual exchange in which countries buy from one another and invest in one another. Barring intervention, this back and forth usually works to both parties' benefit, because it allows each country to specialize in what it does most profitably.
This is true even in cases, like the United States', where there's a trade deficit. The benefit comes because foreigners with excess dollars put them to work in the U.S.
Put more formally, this means any shortfall in the U.S. current account has to be balanced by a surplus in its capital account, which is a broad measure of how much other countries are investing in Mr. Trump's America.
Foreigners' willingness to hold U.S. assets – stocks, bonds, factories and the like – helps to hold down interest rates and fund productive investments. If the President wants a lower trade deficit, he is, in effect, demanding less in the way of foreign investment in the U.S. Everything else being equal, that would mean higher interest rates and fewer foreign-owned factories in the United States.
But wait – isn't Mr. Trump also toying with the idea of tariffs or border taxes that would encourage foreign-owned firms to set up shop in the U.S.? Well, um, yes. But no one is accusing the new administration of coherence.
Take the administration's attack on Germany. Peter Navarro, Mr. Trump's top trade adviser, said the country was benefiting from an artificially low euro that functioned like an "implicit Deutsche mark."
Except that's not quite correct. Germany can't manage the euro the way it used to manage its own currency. In fact, Germany is only one country in the 19-country euro zone.
True, there's a strong case to be made that Berlin should indulge in more stimulus spending to help boost consumption and reduce its trade surplus. But Germany doesn't control euro zone monetary policy.
That's the job of the European Central Bank. For now, the bank seems eminently justified in sticking to its ultra-low interest rate policy so long as the currency bloc as a whole continues to be dogged by slow growth. And so long as rates remain low, the euro is unlikely to rise by much.
So what does the U.S. administration hope to accomplish by targeting Germany? It's hard to say.
But then it's also hard to say why it's so concerned about trade right now. Trade deficits as a percentage of the U.S. economy have shrunk to about half their level of a decade ago. In 2006, reasonable people could complain about Chinese currency manipulation. But now the Chinese are trying to support the value of the yuan, not drive it down.
Some might argue Mr. Trump is simply playing politics and trying to blame foreigners for slow U.S. growth. Fair enough. But let's not confuse a potent political argument with sound economics.
Ian McGugan