Standard Chartered’s Christopher Graham notes that European Union (EU) exports to the United States (US) are now contracting at rates comparable to COVID and GFC (Great Financial Crisis) periods, potentially reflecting both prior export frontloading and emerging structural weakness. He highlights that the EU-US trade deal capping most US tariffs at 15% is still unratified, with risks of higher US sectoral tariffs if European parliamentary delays persist.

EU exports slump and tariff uncertainty

"EU exports to the US are contracting at a pace previously seen only during COVID-19 and the Global Financial Crisis (GFC). However, it is too early to determine whether this correction is more the result of export frontloading that occurred ahead of the implementation of ‘Liberation Day’ tariffs last year or signals a permanently lower path for EU exports to the US."

"While it may reflect both, the longer-term picture will also depend on factors such as the degree to which tariffs have been passed on to US consumers."

"Extra-EU exports (to all countries outside the EU) have been dragged lower but not to the same extent, as weakening export flows to China and Japan have been offset by more robust exports to European markets such as Switzerland and the UK."

"The EU-US trade deal – which provides for a 15% US tariff ceiling on most EU imports and the elimination or reduction of most EU tariffs on industrial and agricultural goods – has yet to be ratified from the European side."

"While our base case remains that the trade deal will eventually be signed, there are elevated risks that further delays in the ratification process, or the attachment of clauses to the deal within the European Parliament could trigger an escalation from the US side."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)