EU trade keeps taking hits from US tariffs and Chinese competition, data shows

[FRANKFURT] The European Union’s trade surplus kept shrinking, data showed on Friday (Feb 13), as tariffs weighed on exports to the US and rising Chinese imports crowded out domestic production, highlighting existential threats to its economic model.

Shifting trade and political relations with the world’s biggest powers have been squeezing Europe for years, and leaders met yet again on Thursday to brainstorm about ways to survive the aggressive economic rivalry from the US and China.

The EU’s trade surplus fell to 12.9 billion euros (S$19.4 billion) in December from 13.9 billion euros in the year-ago period – as machinery and vehicle sales, the engine of export growth for years, kept falling. Chemicals sales were also down.

Exports to the US, the bloc’s biggest export market, fell by 12.6 per cent from the year-ago period, pushing down the surplus by a third to 9.3 billion euros.

Meanwhile, the bloc’s trade deficit with China rose from 24.5 billion to 26.8 billion euros.

Exports have been volatile since the US announced a raft of tariffs in early 2025 but – smoothed for this volatility – the trend shows significantly lower sales, as higher prices force US importers to either cut purchases or source their products from elsewhere.

Economists say it will take years for Europe to regain this lost market, leaving a large gap in the economy as net exports have been the key plank in growth and the eurozone is now facing years of expansion barely above 1 per cent a year.

Still, the domestic economy appears to be resilient to the trade shock for now, as artificial intelligence-related investments and domestic consumption are kicking into higher gear, keeping gross domestic product growth at a modest but still respectable rate.

In the final quarter of 2025, the eurozone grew by 0.3 per cent, in line with a preliminary estimate, Eurostat said in a separate statement.

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Employment in the eurozone – in another hopeful sign – rose by 0.2 per cent over the previous quarter, holding steady from three months earlier.

Some optimism is also fuelled by rising domestic spending, particularly in Germany, where the government is boosting investment into defence and infrastructure, two long-neglected areas.

This spending is slow to pick up pace, but should already lift second-quarter figures and be at full speed by the end of the year.

The bloc’s external economic challenges could also kick-start long-stalled reform efforts at home. The European Central Bank estimates that breaking down external barriers can offset trade lost to US tariffs. REUTERS