Strong German exports to the United States helped Europe’s largest economy to avoid a recession in the third quarter, a data showed on Friday, as companies benefitted from a weaker euro and trade diversion linked to the US-China tariff dispute.

The detailed trade figures, compiled for Reuters from the Federal Statistics Office, underline that US demand for German goods remains strong, undaunted by President Donald Trump’s threats to increase import tariffs on European cars.

Germany’s export-reliant economy avoided slipping into recession in the third quarter as consumers, state spending and construction drove a 0.1% quarterly expansion. Exports also fared better than in the previous three months.

Overall, exports grew 1.7% year-on-year in the third quarter after a 1.3% decline in the second. The US and France remained Germany’s two biggest customers, the data showed.

German exports to the US grew 7.6% year-on-year in the third quarter after a 5.3% increase in the previous three months. Exports to France rose 3.1% year-on-year after stagnating in the second quarter.

“Europe is benefiting from still being the uninvolved third party in the American-Chinese trade conflict. This leads to trade diversion and helps European exporters,” Jens Suedekum from the Heinrich-Heine-University in Duesseldorf told Reuters.

Unexpected help for German exporters also came from France, where the economy is doing well thanks to structural reforms and fiscal stimulus measures enacted by President Emmanuel Macron.

“This spilled over to German exporters,” Suedekum said. “Chancellor Angela Merkel should send a thank-you note to Paris.”

Gabriel Felbermayr, President of the Kiel Institute for the World Economy, pointed out that the euro had depreciated by 14% against the US dollar since the beginning of 2018. A weaker euro makes German exports less expensive.

“The strong dollar is one of the macroeconomic side effects of Trump’s trade policy towards China. It leads to trade diversion,” Felbermayr told Reuters. That means the US is increasingly buying goods from the European Union and Germany as tariffs make competing imports from China more expensive.

The United States and China are locked in a trade war triggered by Trump. Both countries have levied punitive duties on hundreds of billions of dollars worth of each other’s goods, roiling financial markets and threatening global growth.

Reuters