Stop the fixation on China trade. Investors should be watching US exports to Europe

Angela Merkel and Donald Trump

By Dr. Michael Ivanovitch for CNBC

Washington’s lack of attention to European affairs is a costly mistake. Germany’s refusal to reflate its economy and support the continent’s growth is killing the market where the U.S. sold $63.4 billion worth of goods in the first two months of this year — one-fourth of all U.S. goods sales abroad.

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That compares with a pitiful $15.6 billion of American exports to China during the same interval. And those sales were down a whopping 20.4 percent from the first two months of last year.

The U.S. is wasting time trying to reform China’s economy. It is about time for Washington to realize that China — as befits a great power — will do its own thing, on its own terms and in its own time. China’s structural reforms should be driven through the World Trade Organization, the International Monetary Fund and, all else failing, through bilateral trade instruments.

Washington’s priority should be to rapidly balance its trade accounts with China. It’s very early days to say that progress is being made, but a 9.2 percent decline in Beijing’s trade surplus with the U.S. in the first two months of this year could be a good beginning.

Warm up US-German ties

China should quickly get out of the huge U.S. trade problem it created for itself. Beijing does not need that debilitating liability while it is trying to manage the issues of Taiwan, Tibet, contested maritime borders in the South China Sea, the explosive mix on the Korean Peninsula, a strategic China-Japan-Korea triangle and a sprawling “Belt and Road” global infrastructure investment initiative.

The U.S., for its part, does not derive any strategic leverage from the trade scuffle with China. It’s just noise and distraction from a firm grip Washington should keep on a vitally important trans-Atlantic alliance. That’s where America finds a hugely important contribution to its jobs and incomes and the support it needs to maintain the West’s world order.

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