Sharp fall in exports to US may have further to run; exports to China remain weak. Net exports likely to be a drag on growth in H2 and potentially for much of 2026. EUR strength a further headwind; services exports and new trade routes may partially mitigate impact, Standard Chartered's economist Christopher Graham reports.

Export headwinds from both US and China

"EU-27 merchandise exports to the US fell to EUR 33bn in August, the lowest monthly reading in four years and 22% lower than in August 2024. This was the third successive month of declining y/y export volumes and provides growing evidence that US tariffs – applied at 15% for most goods as agreed in the EU-US trade deal at the end of July – are taking their toll on EU exporters. The decline was more pronounced for Germany (-24% y/y), which has particularly strong export exposure to the US in key sectors such as autos and pharmaceuticals."

"Admittedly, strong frontloading effects were seen until the EU-US trade deal was agreed (EU exports in Jan-Jul were 14% higher than the corresponding period of 2024). This has likely exacerbated the pressures on EU export volumes since tariffs were implemented, but it also provides room for a partial recovery in EU export volumes once US inventories built up in H1 are run down. However, EU exports could come under further pressure once other sectoral tariffs begin to be implemented as ongoing Section 232 investigations conclude." 

"The fall in goods exports to the US has been the main driver of the overall decline in EU exports to the rest of the world, which fell to a 43-month low of EUR 184bn (-7% y/y) in August. This is to be expected given the increasing importance of exports to the US relative to other markets, especially over the past five years. However, the ongoing steady decline in EU export volumes to China is also playing its part, reflecting ongoing headwinds facing Chinese consumers and increasing competition from Chinese firms for established European export industries. Combined, this drove the EU’s merchandise trade balance into deficit in August. Periodic deficits are not uncommon, but this was the largest monthly deficit since April 2023 and would have been even larger had there not been a c.5% y/y decline in EU imports."