The US Languishes in Debt to Shoulder European Union Trade
The USA is paying for security for the most prosperous economic bloc in the world while it languishes in debt itself. This is the case with the NATO program for which the USA is contributing the largest percentage. President Trump is now calling for more initiative from the European countries in growing global growth.
A Costly Legacy
The US has, for a long time, offered an open market to European goods. This, coupled up with its remittances to NATO, is proving to be a costly way of creating a legacy. By the end of 2019, the US will have a quasi-unstoppable public debt amounting to $23.2 trillion. The deficits for the public sector will remain constant at 7% of the entire country’s GDP.
By the end of last June, the US had a net foreign debt of $10.6 trillion. Things do not get better when you consider the external trade deficit on goods and services reports, and an annual rate of $529 billion. With all these issues happening, the question is, how far is the US willing to go while shouldering the burden of European countries.
A Wealthy European Continent
While the US seems to lose its grip on the public debt, the Eurozone is experiencing a period of prosperity. By the end of the second quarter in 2019, the combined public debt for the EU stood at $14 trillion against a budget deficit of 0.9% of the GDP. Additionally, in the first half of the year, surpluses for goods and services stood at $194.3 billion. Experts owe this to the large net exports the bloc makes to the USA.
In an announcement last week, experts observed negligible progress on cost-sharing concerning the NATO budget. Analysts now expect the USA to save up to $150 million on military exercises and NATO administration costs.
The suggestion was that the other allies would help meet the NATO budget by raising their military spending to at least 2% of their GDPs. As it stands, only 29 countries are complying with this. Germany, which pegs its prosperity on US military support, has come out to oppose any compliance with this agreement defiantly.
Berlin continues to play hardball with the US with promises of complying early in the 2020s. While this continues, it is evident that Berlin continues to profit off the USA while there is no inverse benefit. In a report released in September, the annual net income Germany earned on US goods trade was $67.6 billion.
The Need for Change in Trade Relations
From the look of things, it is evident that the US needs to renegotiate its trade relations with the European Union. The current deficit on goods trade stands at an annual rate of $180 billion against the EU. This figure represents a 10% upward movement compared to last year.
The only viable option here is for the US to admit that this is unsustainable and renegotiate its trade deal. Part of its demands should be for the EU to use its surplus to spur global trade growth.
