The EU primarily conducts its trade with the United States, making it its foremost commercial ally
In the ever-evolving landscape of global trade, the relationship between the European Union (EU) and the United States (USA) remains a significant factor. This article delves into the key industries that depend on transatlantic trade, the interdependence within the technology sector, and the complexities surrounding the measurement of the trade deficit between these two economic powerhouses.
The automotive, aerospace, and luxury goods sectors emerge as the key industries most dependent on transatlantic trade. In 2024, a staggering 22% of EU vehicle exports were destined for the U.S., highlighting the deep dependency of the European automotive sector on the American market. Firms like Stellantis and Volkswagen face significant vulnerability to tariffs and trade tensions due to their high U.S. revenue exposure.
The technology sector also shows strong interdependence. The EU relies on U.S.-based tech giants like Microsoft, Google, and Amazon for its tech infrastructure, while the U.S. depends on European companies such as German Zeiss, Trumpf, and Dutch ASML for advanced microchip production capability crucial on a global scale.
However, the trade deficit measurement between the EU and the U.S. is considered partially inaccurate due to a significant share of transatlantic trade consisting of intra-company transfers, which account for about one-third of total trade. This internal trade within firms can distort apparent trade balances as these transactions do not reflect conventional exports or imports driven by independent market demand. Moreover, tariffs between the two regions are already low (under 3%), and much of the friction arises from non-tariff barriers and complex corporate structures affecting the flow and valuation of traded goods.
In terms of goods trade, oil products were the most frequently imported US goods to the EU in 2024. The USA was Germany's most important trading partner, with a foreign trade turnover of 252.8 billion euros. In the opposite direction, medical and pharmaceutical products, medicines, and cars were the main EU exports to the USA. The weighted tariff rate of the USA on goods from the EU is currently around 11 percent.
The EU-US trade turnover in 2024 was 865 billion euros, accounting for approximately 17% of the EU's foreign trade. Goods worth 531.6 billion euros were exported to the USA, accounting for 20.6% of EU exports. Germany was the seventh most important customer for the USA. Chemical-pharmaceutical products, machinery, cars and vehicle parts, and electrical engineering accounted for almost a quarter of the exported goods from Germany to the USA.
In 2024, the USA became an important supplier of fossil fuels to the EU following the Russian invasion of Ukraine and the ban on Russian oil and gas. Goods worth 333.4 billion euros were imported from the USA, accounting for 13.7% of all EU imports. The main EU countries that imported goods from the USA were the Netherlands and Germany. The main EU exporting countries to the USA were Germany, Ireland, and Italy.
The value of services was 65.0 billion euros, giving Germany a small export surplus. German companies supplied goods to the USA at a higher value than the USA to Germany, with a difference of almost 70 billion euros. Germany provided services worth 68.3 billion euros in the USA in 2024.
In summary, the EU-US trade relationship is characterised by key industries heavily dependent on transatlantic trade, strong interdependence within the technology sector, and complexities surrounding the measurement of the trade deficit. The trade deficit alone does not fully capture the complexity and mutual dependence in EU-US economic relations.
- The economic and social policy implications of transatlantic trade are profound, as evidenced by the significant revenue exposure of automotive firms like Stellantis and Volkswagen, which are heavily dependent on the American market for their exports.
- In the tech sector, there is a clear interdependence between the EU and the U.S., with American tech giants like Microsoft, Google, and Amazon essential for EU tech infrastructure, while European companies such as Zeiss, Trumpf, and ASML are crucial to U.S. global-scale advanced microchip production.
