With President Trump’s announced trade tariffs, a trade war seems only a matter of time. If it does happen, it will certainly impact the Netherlands, a country heavily reliant on trade. But is our economy too dependent on exports? We discuss this with Charles Kalshoven, macroeconomist and expert strategist at APG.
Is the Netherlands dependent on exports?
“First, let’s establish that trade is essential to our prosperity. No country can produce everything it needs on its own, especially not a relatively small nation like the Netherlands with limited natural resources. Exporting is crucial not just to boost our own production but also to facilitate imports—you need something to trade in order to acquire foreign goods and services. We’ve benefited from globalization by positioning ourselves as a trade hub, particularly through key logistical centers like our ports and airports. Exports have created jobs, stimulated innovation, and increased wealth.
That said, we do have a significant surplus on our current account—our total transactions with foreign countries—standing at about 11% of GDP, which is quite substantial. However, I should point out that our export figures are somewhat inflated. Thanks to a favorable tax climate, many companies choose to report their profits in the Netherlands. This can be done, for example, by registering intellectual property here and exporting royalties—think of bands like the Rolling Stones and U2—or by having a parent company sell goods at high prices to foreign subsidiaries through the Netherlands. These activities artificially boost our export numbers.
Additionally, statistical definitions make our surplus appear even larger because of the high number of multinationals based here. The Dutch Central Bank (DNB) estimated that in 2022, about two percentage points of our surplus could be attributed to differences in how investment returns and direct profits are accounted for in statistics.”
Is such a surplus problematic?
“While exports have contributed to a trade surplus and economic prosperity, such a surplus can indeed be problematic. If only the Netherlands exported more than it imported, it wouldn’t be a big issue. But the same is true for major economies like China and Germany. On a global scale, trade must balance out—every surplus country has a counterpart with a deficit. In this case, countries like the United States are on the receiving end of persistent trade deficits, which is exactly what’s fueling Trump’s frustration. He believes that imposing tariffs on imports will help rebalance trade.
The Netherlands' heavy reliance on trade makes us vulnerable in the event of a trade war. The Dutch Central Bank recently warned that our economy could suffer significant damage from U.S. import tariffs, both directly—by reducing Dutch exports to the U.S.—and indirectly, as a trade war would disrupt global commerce. If Trump follows through on his threats, the DNB expects our economic growth to slow down significantly in 2025 and especially in 2026, with unemployment potentially rising to 4.5%. The Dutch Bureau for Economic Policy Analysis (CPB) believes the overall economic impact will be limited but warns that specific sectors, such as machinery, electronics, and vehicle manufacturing, will be hit hardest.
In the 1970s, the Netherlands lost a great deal of its competitiveness, partly due to excessive government spending fueled by natural gas revenues. This phenomenon, known as ‘Dutch disease,’ led to economic stagnation. Starting in the early 1980s, the country pursued a policy of wage restraint, which helped restore international competitiveness, create jobs, and keep inflation in check. Some argue this approach has been too successful. The International Monetary Fund (IMF) has repeatedly urged the Netherlands to boost domestic consumption instead of relying so heavily on exports.”
What can the Netherlands do to create a more balanced economy?
“The question is whether we should actively stimulate domestic consumption, given the existing shortages in the labor and housing markets. If we choose to go that route, we could do so through tax cuts or increased government spending. However, we are already approaching the EU’s maximum budget deficit limit of 3% of GDP.
An alternative approach is to push for higher wages. This would make our exports slightly less competitive but increase purchasing power, leading to more imports. That, in turn, could ease labor market tightness. However, I worry that the housing market would become even more unbalanced. Higher wages and inflation, combined with persistently low interest rates in the eurozone, could drive real interest rates even lower—fueling further increases in home prices and mortgage debt. The only real solution would be a serious effort to build more housing. If we achieve that, higher wages could help balance both the labor market and our trade position.
To some extent, we are already naturally moving toward a more balanced external position. Our current account surplus can be seen as a form of national savings—we are living below our means and accumulating claims on foreign assets. As the Dutch population continues to age, this surplus is expected to decline, and we may even shift into a trade deficit. At that point, we will be living above our means, spending more than we produce. The difference—our increased imports—will then be financed by selling off the foreign assets we have built up over years of trade surpluses.”