Trade and the G20 Meeting

Daily Spotlight

The G20 summit kicks off today in Osaka, Japan. On Saturday, President Trump is scheduled to meet with Chinese President Xi Jinping, amid the backdrop of additional threatened tariffs by the US and potential retaliations from China.

The crux of the issue for President Trump is that the U.S. has the largest current account deficit of any country in the world on an absolute basis, and also has one of the highest in terms of its GDP.

As of June, the U.S. deficit was 2.4% of GDP according to The Economist. Other countries with sizable deficits include the United Kingdom, Canada, France and Mexico. Which countries have surpluses? Many are in the Asia Pacific region. Taiwan has the largest current account surplus from counties in this region at 13.2% of GDP, followed by South Korea, Japan and China. European nations also make this list; Germany, a major auto exporter, has a trade surplus that is equal to 6.6% of GDP (larger than China's 0.3% surplus).

There seems to be a very low correlation between current account levels and near-term economic growth. Of the surplus nations, China's GDP is expected to grow 6.5% this year, but Japan's growth has been mired at 1% for years and Germany is now flat. The major deficit nations are all expected to grow in the 1.7%-3.0% range in 2019.

courtesy of ARGUS Research