US-EU trade tension


The European Union (EU) and the United States have, over the decades, built the world’s most deeply integrated economic, trade, and investment relationship. Annually, the United States exports around $575 billion in goods and services to the EU, and imports approximately $684 billion. Services have become an increasingly important component of transatlantic trade flows, making up an estimated bilateral trade of around $450 billion in which the United States runs a $60 billion trade surplus. Trade in goods still accounts for the bulk of the relationship however, totaling more than $800 billion. The EU runs a trade surplus in the bilateral goods trade of approximately $170 billion.

Deep integration of trade and economies aside, several longstanding economic dynamics affect the transatlantic relationship and hinder its expansion. Among these are the reality that trade is much more important to the European economy than to the US one, the critical role of the US dollar as the most important global reserve currency and settlement currency for trade transactions, and disagreements on aspects of non-tariff barriers to trade and other policy areas that change through time but are always present, including politically charged issues such as food standards and agricultural subsidies.

The current US-EU trade dialogue stems from a joint statement by US President Donald J. Trump and European Commission President Jean-Claude Juncker in July 2018, in which they agreed, among other things, to work together toward zero tariffs, zero non-tariff barriers, and zero subsidies on non-auto industrial goods. Other aspects of the agreement included the EU stating its desire to purchase more liquified natural gas and soybeans from the United States.

Notably, the United States did not as part of that statement eliminate or reduce existing tariffs on aluminum and steel that it has levied on a large number of global trading partners, including the EU since March 2018.  In addition, Washington did not take off the table the prospect of new tariffs on European cars and auto parts. In all its currently ongoing trade dialogues, and seemingly regardless of progress made, the Trump administration has reserved the right to unilaterally decide when key tariffs will be levied, reduced, or eliminated, at its sole discretion and often without stating the conditions necessary to be achieved by the trading partner for an elimination or reduction.

  • Aside from the question of whether agriculture should be included in the talks, another hindrance to progress has been the continued US threat of tariffs of up to 25 percent on European car and auto parts. Furthermore, the EU is bracing for a tit-for-tat tariff fightwith the U.S. on disputed aid to aircraft makers Airbus and Boeing, while also seeking to keep at bay a threat of American duties on imported cars.