Export Blitzknall Before Old World's Takedown: EU Pumped $85.4B to US in March
US-bound EU exports climbed to EUR 71.4 billion in March.
The Old World (European Union) ramped up its shipments to the New World (USA) just before Trump's tit-for-tat trade war escalation. In March, the Old World's America-bound trade reached a whopping $85.4 billion, marking a whopping 59.5% surge from the year prior, as per Eurostat's recent report. Companies may have seized the moment to expedite goods delivery before potential US tariffs kicked in. US exports to Old World inched up 9.4% to $36.7 billion.
Old World's trade surplus with New World, long a sore point for Trump, ballooned to $48.4 billion in March, up from $19.4 billion a year back. Trump heralded April 2 as "Liberation Day" and slammed tariffs on numerous allies, a few of which were eventually scrapped. Despite this, basic tariffs remain intact.
The overall external trade for Eurozone reported a surplus with the rest of the world in March, at $43.5 billion. Exports skyrocketed 13.6% year-on-year to $334.7 billion, while imports grew 8.8% to $291.2 billion.
Sources: ntv.de, rts
Now, let's dive deeper into the reasons behind this export juggernaut and its potential consequences:
Export spree before trade reckoning
- Favorable Economic Grapevine: Prior to Trump's trade drama, economic conditions generally shone bright, with low-hanging interest rates and robust demand for goods. This climate encouraged trade expansion, potentially fueling the increase in Old World exports.
- Trade Deals and Protocols: The lack of substantial trade barriers and existing trade accords (though limited) between Old World and New World facilitated trade flow. Average tariff rates were minimal, with Old World slapping an average tariff of 1.35% on New World imports and New World imposing an average tariff of 1.47% on Old World imports[1].
- Supply Chain Trickery: Companies may have fine-tuned their supply chains to maximize exports ahead of tariffs, anticipating potential disruptions in the pipeline.
Long-term Aftershock of Tariff Showdown
- Trade Crunch: The imposition of tariffs drastically influenced trade between Old World and New World. The new tariffs jacked up the effective tariff rate to around 17% for Old World exports to New World, up from a measly 2%[4]. Such an increase could saw off EU exports to New World, posing a threat to industries heavily reliant on these exports.
- Economic Fallout: As per earlier reports, US tariffs on EU goods threatened €380 billion in exports, which is around 70% of Europe’s total US-bound trade[2]. These tariffs could trigger higher consumer and business costs, potentially impacting economic growth and employment in both regions.
- Retaliation and Countermeasures: The EU countered with counter-tariffs meant to protect domestic industries and is developing the Anti-Coercion Instrument (ACI) to further fortify its position[2]. This ongoing tussle might extend the economic impact, with potential ramifications on global trade patterns.
- Diversification and New Trade Channels: Countries in the EMEA region are diversifying their trade partners and reworking supply chains to weather potential US shocks[2]. This long-term strategy could help reduce dependence on US trade and foster more durable trade relationships.
All in all, the surge in Old World exports to New World was likely driven by favorable economic conditions and the absence of significant trade barriers. The long-term effects of the tariff showdown complicate the picture, with reduced trade volume, economic consequences, and strategic moves by the EU to mitigate these consequences.
- The surge in Old World exports to New World can be attributed to favorable economic conditions and advantageous trade policies, such as low tariff rates and existing trade agreements.
- The imposition of tariffs by both the Old World and New World could lead to a significant reduction in trade volume, higher consumer and business costs, and potential economic consequences, particularly for industries heavily reliant on these exports. Additionally, countries in the EMEA region are diversifying their trade partners and reworking supply chains to reduce dependence on US trade and foster more resilient trade relationships.
