The European Union and the USA showed a fluctuating pattern in the last five years of the world economy, which was the scene of epidemics, conflicts, and trade wars. The US and EU trade seek a balance across the Atlantic based on mutual interests. The EU has been giving trade fads in its bilateral trade with the USA for many years. On the other hand, the Russian/Ukraine conflict looks like it can't be resolved in the short term. This situation both negatively affects the EU economy and increases security concerns. EU will inevitably increase its energy imports from the USA. Especially energy and weapon imports in 2023 may cause the EU trade balance to change in favor of the USA.
EU Trade and Market capacity
The European Union is the world's largest, most integrated political and economic organization. Although the community of 27 countries accounts for about 6% of the world's population, it has a trading volume corresponding to 15% of the average world trade. The EU market has a diversified market structure besides its numerical size. Advanced infrastructure facilities, technical standards applied in the same way in all member countries, and balanced trade policies applied worldwide to make the EU a preferred market for trade. In addition to its current market size, the EU promises to be a growing market. EU trade capacity is very high with both import and export figures. There are 5 EU countries among the top 10 exporting countries in the world and 3 among the top 10 importing countries.
EU GDP & USA GDP
Approximately 448 million people live in 27 countries within the EU. Although members have different GDPs, it is among the largest economies in the world, with an average of 33.9 thousand USD per capita income. With a GDP of 15.1 trillion USD, the European Union is the second-largest economy in the world after the USA. Anyway, USA GDP is about $25.0 trillion USD. The US per capita is 69,28 was thousand USD in 2021
EU GDP & International Trade Statistics
EU export-import statistics, we are faced with almost balanced figures. When the export figures of all countries that make up the European Union are added together, we see that they make up 15.2% of the world's exports of goods. The EU realizes 14.7% of world imports. EU Services trade posted a trade surplus of 112 billion USD in 2022. For 2023 EU trade capacity is focused on energy supply chain solutions.
The US vs. EU Import Export Statistics
EU Exports to The US 464.07 Billion USD in 2021. In the first 11 months of 2022, USA's imports from the EU exceeded 500 billion USD. The total figure for 2022 is estimated to be around 550 billion USD.
US exports to the EU were over USD 271 billion in 2021. In the first 11 months of 2022, exports amounted to 318.8 billion USD. The total export figure for 2022 is expected to reach 350 billion USD. In 2022, the EU will have a trade surplus of approximately 185 billion USD from its trade with the USA.
Trade fluctuating:
Although the US trade with the EU remained fluctuating in 2022, it increased by around 30% compared to 2021. It is predicted that the export figures of the USA to EU countries in 2023 will increase for two reasons. The expected increase in exports of initial LNG and petroleum products. The second reason is that the EU's trade embargoes against Russia will increase, and it will look for different suppliers.
The U.S. & EU Trade Outlook
What makes the EU market attractive is that all kinds of goods and services, from raw materials, minerals and energy products to consumer products, have both export and import market shares. As the import legislation throughout the EU is determined by the joint decision of a community of 27 countries, it is seen that they maintain very balanced trade policies.
As a result of the crisis due to the Russia/Ukraine conflict, the EU sought to supply LNG in order to reduce its energy dependence on Russia. The USA will increase its LNG exports to the EU in this process. The USA is also one of the world's largest shale gas producers. Shale gas exports are expected to increase during 2023-2024 due to both the orientation towards clean energy sources and the EU's search for an alternative energy supply to Russia.
Trade Policy and Regulations:
With an import volume of approximately 2 trillion USD, the European Union is a big market many countries want to enter. For US companies, it is possible to trade with any EU members in accordance with EU regulations. Although the EU generally acts according to free trade policies, it imposes quotas and restrictions on the imports of some products to protect the production-oriented sectors of the member countries. For this reason, it is recommended that companies wishing to enter the EU market research tariffs and import procedures on a product and sector basis.
US Inflation Reduction Act (IRA)
As part of the fight against inflation, the USA decided to support domestic production in clean energy technologies with a law of 430 billion USD, which is seen as a "climate package." The tax incentives provided under the law will provide price advantages to products manufactured in the USA. This process is likely to increase trade disputes with the EU.
IRA, tax reductions:
With the IRA, tax reductions will be applied to cars producing batteries in North America and electric vehicles where minerals from North American mines are used as raw materials.
With this law, cars manufactured in the EU will have a tax disadvantage over cars manufactured in the US. Therefore, exporting automobile products to the US market will take a lot of work. The EU is working on the restrictions European auto companies, and battery and renewable energy equipment manufacturers will experience in the US market. Presumably, the EU will apply tax benefits for products manufactured within the EU borders with a similar law. US companies exporting to the EU market should follow this process carefully.
What the EU Can Do to Close Disadvantages
The EU is working on the restrictions European auto companies and battery and renewable energy equipment manufacturers will experience in the US market. Presumably, the EU will apply tax benefits for products manufactured within the EU borders with a similar law. US companies exporting to the EU market should follow this process carefully.
Europe's production is expected to slow down in 2023 due to the rise in energy prices. The increase in energy prices and supply problems are not the only consequences of the problems experienced due to the Russia/Ukraine conflicts. Regional instability and the geopolitical position of EU member states such as Poland and Romania cause problems in the EU supply chain.
Conclusion
In short, mutual trade between the EU and the USA will continue increasingly in 2023. USA and EU trade presents opportunities due to geopolitical imperatives and the need for cooperation. The EU market still harbors opportunities for US exporters. The US is expected to meet EU demands for liquefied natural gas and petroleum products. It is inevitable for the EU to publish a taxation law similar to the USA or take measures to balance bilateral trade to close its disadvantages in industrial production.
Written by: Aykut Alan
Another impressive forecast, thanks. We are advising our clients for The U.S. & EU possible trade futures. I would like to see these kind of articles on a site.
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