By way of example, Germany’s trade in the engineering sector has grown over the period between 2013 and 2018, particularly with Spain, Poland, the UK and the US in terms of exports, and with Poland, the US and China in terms of imports (see Figure 4).
What is clear is that imports from the US are growing more quickly than exports to the US across the sector as a whole, while exports to China have dropped back considerably, perhaps because of the economic challenges that China has faced in the wake of the US trade war and general global uncertainty. What is perhaps more interesting from this chart is that although trade with Poland has increased, trade with other countries within Europe has fallen back, suggesting that Germany may be redistributing its supply chains within Europe in favour of Eastern European nations. Poland has been a particular beneficiary of this.
The engineering sector is Europe’s largest combined export grouping, and Germany is its major player. The problem for Europe is that, although there is indeed a surplus with the US in automotives and machinery and components, the sector itself relies heavily on imports both from within Europe and, ironically, the US and China as well. There is a misconception that because the end (value-added) products, such as machines and automotives, have a trade surplus, this is a ‘bad’ thing. Actually, because the production of final goods relies on imports – of iron and steel, metals and electronics as well – such a misunderstanding of how trade works could undermine the potential of cross-border supply chains.