Explainer-Trump’s complaints about trade deficit | Commodities

By Philip Blenkinsop

BRUSSELS (Reuters) – U.S. President Donald Trump has promised to deal with a longstanding trade deficit with the European Union, saying he’ll reverse that by imposing tariffs or making the EU buy more U.S. oil and fuel.

In an “America First Trade Policy” memo issued on his first day back within the White Home on Monday, Trump directed the Commerce and Treasury departments and the U.S. Commerce Consultant to research the trade deficit in items and suggest applicable measures by April.

European Fee President Ursula von der Leyen stated on Tuesday the EU needs to interact and negotiate with the USA and warned of the risk of a “global race to the bottom” utilizing instruments corresponding to trade tariffs.

Following are some key details concerning the EU-U.S. trading relationship and how the 2 sides might work together within the coming weeks and months. 

GOODS TRADE DEFICIT

Trump has tended to give attention to items trade alone and has steadily complained concerning the bloc’s car exports to the U.S. with few automobiles shipped east throughout the Atlantic.

Certainly, the EU has persistently exported more items to the USA than it has imported and the U.S. items trade deficit stood at 155.8 billion euros ($161.6 billion) in 2023, in line with Eurostat information.        

Nevertheless, in providers, the U.S. has a surplus of exports over imports with the European Union of 104 billion euros in 2023, in line with Eurostat.

The USA is the EU’s largest trade and investment associate and every is the opposite’s largest source of overseas direct investment.

GERMANY DOMINATES EU EXPORTS

Germany is by far the EU’s largest exporter of items, together with of automobiles and machinery, to the USA, with more than 30% of all of the bloc’s transatlantic items exports in 2023. Italy, in second place, had a 13% share.    

Many EU policymakers have known as for EU unity within the face of the tariff menace. This proved a profitable strategy in Brexit negotiations with admittedly smaller Britain.

Nevertheless, EU unity on the problem will not be assured given the rise lately of more nationalist, populist politicians in a number of nations. 

Officers in Brussels hope that right-wing Italian Prime Minister Georgia Meloni may present a route into the Trump presidency. Nevertheless, Hungarian Prime Minister Viktor Orban, who has a file of vetoing EU coverage, notably over Ukraine, has stated the Trump presidency may set off a right-wing surge in Europe and more disruption of EU coverage. In Austria, talks are underway to type a coalition authorities led by the eurosceptic far-right Freedom Get together after it gained an election final September.

OIL AND GAS

The USA has been the most important provider of liquefied (LNG) to the European Union and Britain for the three years to 2023.  

The U.S. supplied 46% of EU LNG imports and 15% of oil imports within the third quarter of 2024, in line with information from EU statistics workplace Eurostat.

Trump has stated the bloc ought to import more U.S. oil and fuel, however it isn’t clear how that is attainable.

The USA is at present producing all it might produce and home consumption, already high, is rising in a quantity of sectors and due to the high vitality wants of artificial intelligence. It doesn’t have spare capability to export.

Trump’s “drill, baby, drill” pledge may result in sources from new tasks, however they are going to take time to materialise. Maybe he’ll demand that Europe indicators longer-term contracts to buy more LNG.

Nonetheless, EU shoppers of U.S. LNG are principally personal corporations, not governments, and their purchases are pushed by price fairly than politics.

The EU remains to be importing some LNG from Russia. A choice by the bloc to cut that off by way of sanctions may steer importers to look throughout the Atlantic.

For oil, the image is comparable.

MILITARY PURCHASES

One other issue within the trade equation is defence. Trump is pushing fellow NATO members to increase their defence spending and certainly, after Russia’s invasion of Ukraine, there may be a normal EU willingness to take action.

EU international locations are nonetheless wrangling over the extent to which taxpayers’ money must be spent on non-EU arms and how far the bloc ought to increase its own defence industry.

European imports of arms from the USA have already grown, reaching 55% of all European arms imports in 2019-2023 from 35% in 2014-2018, in line with the Stockholm Worldwide Peace Analysis Institute.

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