Trump's advisor Peter Navarro claims that Germany exploits the US and the EU by maintaining the Euro at an all time low.

The Guardian for example says:

Germany “continues to exploit other countries in the EU as well as the US with an ‘implicit Deutsche Mark’ that is grossly undervalued”, he said.

Does Navarro have a point here? Is the supposed independence of the ECB somehow compromised? Does Germany have means at all to keep the Euro weak?

  • 5
    It might help to explain how an "undervalued" currency is exploitative. I would think it just the opposite: if I can buy two Euros with one dollar, I can buy German stuff (priced in Euros) cheaper than if I get one Euro per dollar. But I am not a Trump advisor :-)
    – jamesqf
    Feb 3, 2017 at 22:57
  • 13
    At what point are we allowed to stop pretending that anyone in the Trump cabinet has any idea what they're talking about, by the way? Feb 4, 2017 at 8:45
  • 7
    The quoted claim from the Guardian is essentially true: Germany's current account surplus (over $300 billion, i.e. 9% of GDP) is excessive in any terms and is distorting world and European economies. But this is not the same as saying Germany exploits the US and the EU by maintaining the Euro at an all time low, since the Euro is not at an all time low (it was significantly lower in 2000-2002) and Germany is not manipulating the rate.
    – Henry
    Feb 4, 2017 at 12:32
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    The key is in the phrase implicit Deutsche Mark. What Germany is preventing from happening is the rise in internal consumption which would normally happen with a rising exchange rate; in a fixed exchange rate system like the Euro, what should be happening in Germany is increases in real wages and in government consumption, with a consequent increase in imports - the fact that Germany is preventing this is leading to unbalanced results in Europe and across the world as well as making Germans have lower standards of living than they should have.
    – Henry
    Feb 4, 2017 at 12:37
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    @jamesqf - you're also not an economist. Cheaper domestic currency means "unfair" trade deficit balance - other importer countries buy more of your stuff than the stuff from country with more expensive currency. In a global heavy-export economy, that's a big difference. So yes, deliberately undervaluing one's currency can reasonably be labeled "exploitative" as far as trade - the problem with the question is that it requires proof of motivation which is offtopic.
    – user5341
    Feb 4, 2017 at 12:46

1 Answer 1


Does Navarro have a point here?

According to a Washington Post article:

"I think [Navarro] has a point, in that Germany has basically set up the rules in the euro area to suit itself, and if they hadn’t been a euro area, the German currency, the Deutsche Mark, would be much stronger now, and that would hurt their exports," said Joseph Gagnon, a senior fellow at the Peterson Institute for International Economics. "They have basically tied themselves down by the weak partners in the euro area. And they’ve forced Italy, Spain and Portugal to do massive fiscal austerity, and that caused big recessions which killed their imports."

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