Trump's complaint about the trade deficit with EU and what could come next

Donald Trump, President of the United States

Trump has pledged to reduce a long-standing trade deficit between the United States and the European Union. He says he will do this by imposing tariffs, or forcing the EU to buy more U.S. gas and oil. In a memo entitled "America First Trade Policy", issued by Trump on his first day in the White House, he directed the Commerce and Treasury Departments and the U.S. Trade Rep to investigate the goods trade deficit and recommend measures before April. Ursula von der Leyen, President of the European Commission, said that the EU is willing to engage in negotiations with the United States. She also warned against the danger of a global race to the bottom using trade tariffs.

Here are some facts and figures about the EU-U.S. trade relationship, and how they may interact over the next few weeks.

Goods Trade Deficit

Trump has focused on the goods-only trade and complained frequently about the EU's car exports into the U.S., with very few vehicles being shipped east across Atlantic.

Eurostat data shows that the U.S. goods deficit in 2023 was 155.8 billion euro ($161.6 billion).

Eurostat reports that the U.S. will have a surplus in exports of services over imports of 104 billion euro in 2023.

Both the EU and the US are the largest foreign direct investors and trade partners of each other.

GERMANY DOMINATES EXPORTS TO THE EU

Germany will be the EU's biggest exporter to the United States of goods including cars and machinery. It is expected to account for more than 30% in 2023 of the total transatlantic exports of the EU. Italy was in second place with a share of 13%.

Many EU policymakers called for EU unification in the face the threat of tariffs. This was a winning strategy during the Brexit negotiations, even though Britain is smaller.

The EU's unity in this matter is not assured, however, given the recent rise of nationalist and populist politicians across several countries. Brussels officials hope right-wing Italian prime minister Georgia Meloni could provide a path to the Trump presidency. Viktor Orban of Hungary, who is known for vetoing EU policies, including those relating to Ukraine, said that a Trump presidency would trigger a surge of right-wing populism in Europe, and further disruptions of EU policy. Austria is currently forming a coalition led by the far-right eurosceptic Freedom Party, which won elections last September.

OIL AND GAS

For the next three years, up to 2023, the United States will be the largest LNG supplier to the European Union (EU) and Britain.

According to Eurostat, the EU statistics office, data show that in 2024 the U.S. will provide 46% of EU oil imports and 15% for LNG.

Trump said that the EU should import more U.S. gas and oil, but how this can be done is unclear. The United States produces all it can and the domestic consumption is increasing in many sectors, and is due to artificial intelligence's high energy requirements. The United States does not have the capacity to export. Trump's pledge to "drill baby drill" could result in new sources, but it will take some time for them to materialise. He may demand that Europe sign longer-term contracts in order to purchase more LNG.

Nevertheless, the majority of EU LNG consumers are private companies and not governments. Their purchases are driven more by price than by politics.

The EU still imports some LNG from Russia. If the EU decides to stop importing LNG through sanctions, importers may look to the other side of the Atlantic.

The picture is the same for oil.

MILITARY PURCHASES

Defence is another factor that affects the equation of trade. Trump has urged NATO allies to increase defence spending, and after Russia's invasion in Ukraine, the EU is generally willing to do this.

The EU is still divided over how much taxpayer money should go to non-EU weapons and whether the bloc should invest in its own defence industry.

According to the Stockholm International Peace Research Institute, the number of Europeans who import arms from the United States has already increased. They will reach 55% of the total European imports by 2023, up from 35% between 2014-2018.

(source: Reuters)