Trade deficits and exchange rates were at the forefront of the most recent presidential election, but the details of those issues are often a mystery to many Americans.

And Donald Trump’s recent bluster about the U.S.’s trade deficit with Germany didn’t necessarily elucidate matters. But it did spur two veteran journalists to write articles explaining how the European Union functions, why Germany rules the European economic roost and why Trump might be right about Germany.

First, Greg Ip of the Wall Street Journal argues that Trump has a point about Germany’s massive account surplus, which combines trade and investment income. According to Ip: “A trade surplus means a country consumes less than it produces and thus saves a lot,” while a deficit means the opposite. This can happen for a while, but when it persists, it suggests “policy decisions are at work.”

China comparison

Usually that policy decision is a currency intervention, which typically means the exporting country buys the debt of the importing country with the importing country’s currency that has come in from all the sales of goods to it. That serves to support the importing country’s currency and devalue the exporting country’s currency. And that’s what China has been doing for a long time with regard to the U.S. If China didn’t buy so much U.S. debt, the dollar would eventually weaken enough to encourage American exports and Chinese imports.

Germany, however, is a strange case, because, as a member of the European Union and an adopter of the euro, it doesn’t control its own currency. Germany does have a labor advantage over its competitors, however, due to a payroll tax cut in 2007 that was financed by a value-added tax exempting exports. Ip says that would have pushed the deutsche mark higher, putting pressure on exports, had Germany remained on it.

But now, inside the euro, the burden falls on Germany’s neighbors such as France by “grinding down domestic wages and prices through high unemployment and fiscal austerity.” That, in turn, has kept the region weak, forcing the European Central Bank to keep interest rates and the euro low, thereby inflating the region’s trade surplus with the world. So the problem isn’t that Germany exports too much; rather it’s that it imports too little.

Ip says a solution could be if tight labor markets drive up German wages, crimping exports and bolstering imports. Outsiders want Germany to borrow and invest more, while French President Emmanuel Macron wants a “fiscal union” allowing Germany to backstop its neighbors’ debt. That would loosen austerity in the rest of Europe, but it has no appeal to Germans. According to Ip, Mervyn King, former governor of the Bank of England, says the euro may have to split into a strong currency area led by Germany and a weak currency area led by France.

Too few imports

Justin Fox of Bloomberg has also argued that Germany’s trade surplus is too large, and that it results not so much from massive exports as from meager imports.

But, as Fox notes, Germany has no trade deals with the U.S. that Trump could potentially renegotiate. All its trade relations are managed through the European Union. Still, Trump is correct about the trade surplus because the EU ran a $146 billion goods trade surplus with the U.S., 44% of which was accounted for by Germany, in 2016.

What accounts for the big German trade surplus, according to Fox, are the euro and German frugality. In contrast to the 30-year period after World War II, when a strong deutsche mark was a priority for Germany, merging the mark with the euro in 1999 put Germany on a weaker currency, especially after the financial crisis.

But although Germany can’t control its currency anymore, Germany can control its spending and investment. Both Fox and Ip cite Marcel Fratzscher of the German Institute for Economic Research, who makes this argument. According to Fratzscher, Germany’s school buildings need 136 billion euros ($153 billion) of repairs. That represents 4.5% of Germany’s GDP. Fratzscher says Germany has one of the lowest public-investment rates in the industrialized world.

Finally, Germany has a high household savings rate, in addition to running government budget surpluses, and has declined to expand the European monetary union into a fiscal one that would share burdens across national lines. In the U.S., for example, rich states effectively support poor states by paying more in taxes and receiving less in services.

So Trump has a point about Germany, but it will be difficult to get Germans to spend more and to share the burdens of their neighbors in a way that could reverse Germany’s trade surplus.