Trade war looms as EU-US surplus hits record high

The EU’s trade surplus with the US reached a record level in 2018, increasing the risk that US President Donald Trump’s annoyance could ignite a fresh trade war.

Trade war looms as EU-US surplus hits record high

The EU’s trade surplus with the US reached a record level in 2018, increasing the risk that US President Donald Trump’s annoyance could ignite a fresh trade war.

The EU official statistics office Eurostat release on Friday showed a surge in the trade surplus with the US by €20bn.

It brings the total surplus for the year to a record high of €139bn. Ireland has been a significant contributor to this export surplus with the US, accounted for 17% of the total in 2018.

Mr Trump has been a furious critic of Europe’s high trade surpluses, accusing the EU and particularly Germany, of unfair practices against US workers, much like he does with China.

Last year, the Trump administration imposed punitive tariffs on steel and aluminium from Europe and other partners.

This was met with countermeasures by the EU, including duties on US motorcycles and denim jeans.

This new trade data comes as the US Commerce Department is reported to have found that auto imports into the US threaten national security, the first step toward possible auto tariffs by Washington.

The report was expected to be delivered to the White House in the past few days and will be seen as a major risk for EU automakers.

The US Commerce investigation team is already on record recommending a 25% duty on foreign-built vehicles including on cars shipped from EU members, if they are deemed to threaten US national security.

Mr Trump would have 90 days to decide on taking the measures, with the latest surplus data likely to impact his decision.

Despite the tense situation, exports of goods from the 28 EU states last year reached € 406bn, according to Eurostat.

This was an increase of 8% compared to the previous year, whereas Irish exports to the US was over double this increase rising to €39bn.

Imports from the US into Ireland fell during the year, adding to the rising Irish trade surplus

The EU Commission has been seeking to defuse the dispute with Mr Trump through a trade agreement with the US.

In the last round of negotiations last year, EU Trade Commissioner Cecilia Maelstrom had proposed abolishing all customs duties on industrial goods, including cars, and removing barriers to trade in technical standards.

The Eurostat data has come at a most inopportune time for Europe’s economies, which in the last quarter have once again shown virtually no growth.

Five of the eurozone largest economies are clearly struggling to gain momentum going into 2019.

Germany and Italy, two of the most exposed countries in the event of the US pressing on with its threat to increase import tariffs on cars, had negative quarterly growth last year.

Most growth initiatives are been hampered by the never-ending Brexit negotiations, sanctions with Russia and Iran and the China disputes with the US.

Any escalation in the trade disputes between the EU and the US will be worrying for European exporters and very worrying for Irish exporters, who have been faced with a slew of tariff, quotas and sanctions last year and are now grappling with the implications of Brexit.

John Whelan is managing partner of The Linkage-Partnership, an international trade consultancy with offices in Ireland, Holland and Switzerland.

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