Trump's Tariff Threats Are Tested by Europe's Record Trade Surplus
By Paul Hannon and Tom Fairless
Europe's trade surplus with the U.S. hit a record high in 2019,
a rise that risks drawing the ire of President Trump, who recently
renewed threats to place tariffs on European Union goods if the
bloc didn't agree to a new deal.
The EU's surplus with the U.S. stood at EUR152.6 billion ($165.5
billion) last year, an 11% increase over 2018.
The surplus has been a frequent target of anger from the U.S.
president, who said this week his administration would refocus on
trade talks with the EU following a recent agreement with China.
President Trump wants to reach a deal with the EU before the
November election and has threatened to levy tariffs on European
goods if the talks fail.
"Europe has been treating us very badly," he said Monday. "Over
the last 10, 12 years there's been a tremendous deficit with
Europe. They have barriers that are incredible."
The U.S.-EU trade talks have progressed little due to a number
of differences, most notably over U.S. insistence that Europe open
its giant agricultural market to American businesses.
The European Union's statistics agency Friday said the 27
members of the bloc imported EUR231.7 billion in goods from the
U.S. during the year, an increase of 8.6% from 2018. But European
exports to the U.S. rose 9.5% to EUR384.4 billion.
Among the goods singled out by Mr. Trump for tariff increases
are automobiles. According to Rabobank, an increase in U.S. import
duties on cars would hit Germany particularly hard, with production
in Europe's largest automobile industry falling as much as 5% if a
tariff of 25% were imposed.
That fresh blow would fall at a challenging time for Germany.
Figures also released Friday showed its economy stalled at the end
of last year, as the export powerhouse wrestled with tensions in
global trade, turbulence in its large auto industry and a slowdown
The country's economy grew at its slowest pace in six years
during 2019, held back by a drop in exports to the U.K. and a
slowdown in sales to Chinese buyers. A pickup in sales to the U.S.
was a bright spot, although imports rose even more rapidly, leading
to a narrowing of its trade surplus.
Germany has been flirting with recession for a year and a half,
with no end in sight. Its slowdown has rippled across the entire
continent, prompting a fresh burst of stimulus in September from
the European Central Bank.
Economists expect the slump could deepen if the coronavirus in
China hits the global supply chains on which Germany's
export-oriented car and capital goods manufacturing sectors depend.
German growth will likely slow further to 0.5% in 2020, according
to economists at Allianz.
German exports to China could fall around 5% in the first
quarter of 2020 due to the coronavirus-induced shutdown, slicing
about 0.2 percentage point off German growth, especially as some
companies could suffer from a lack of deliveries from China, said
Joerg Kraemer, chief economist at Commerzbank in Frankfurt.
But Germany isn't the EU's only soft spot. A separate release
from Eurostat on Friday showed that none of the bloc's three
largest economies managed to record an increase in economic
activity during the final three months of 2019, with France and
Italy experiencing contractions. It was left to Spain and the
Netherlands to drive the meager, 0.2% increase in eurozone gross
domestic product at the end of last year.
According to economists, the faster rate of growth in the U.S.
is one reason for its widening trade deficit with the EU, with
recent tax cuts spurring higher spending by businesses and
households, some of which goes on imports.
While U.S. complaints have focused on the EU's protection of its
farmers and other barriers to trade, the Trump administration has
also urged European governments -- and that of Germany in
particular -- to cut taxes as a spur to growth. Germany's
government has indicated it has no plans to ramp up spending.
Write to Paul Hannon at firstname.lastname@example.org and Tom Fairless at
(END) Dow Jones Newswires
February 14, 2020 07:31 ET (12:31 GMT)
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