Will EU trade pivot away from the US? – Standard Chartered
|The US has become the EU’s dominant trade partner in the last decade; tariffs could end that dominance. The UK offers the biggest near-term opportunity to boost trade flows via TCA renegotiation. EU-China relationship has thawed but remains lopsided; India FTA may offer significant long-term benefits. EU-Mercosur deal still needs to be ratified; ASEAN trade negotiations have resumed, Standard Chartered's economists Christopher Graham and Saabir Salad report.
EU looking to accelerate trade deals
"The US has become the EU’s most important trading partner in recent years, with the overall bilateral goods relationship worth almost EUR 1tn in 2024, accounting for more than one-fifth of all extra-EU exports last year. The US’ growing dominance stems from robust US domestic demand, stagnant export growth to the UK since Brexit, and a post-COVID decline in exports to China. Depending on their ultimate scope and duration, the imposition of US tariffs could end this dominance, prompting the EU to explore other opportunities to expand trade links elsewhere."
"We think the UK offers the greatest opportunities for improved trade flows in the near term, given that both sides are incentivised to improve the terms of the existing Trade and Cooperation Agreement (TCA); progress could be seen as early as this summer. The EU’s relationship with China appears to have thawed slightly and there are incentives to improve collaboration in contentious areas; but EU concerns remain over the lopsided trading relationship."
"The EU-Mercosur deal could receive a political boost given the evolving global trade context, but ratification remains far from guaranteed. The reopening of trade negotiations with Malaysia, the Philippines and Thailand reflects improved economic incentives, but EU environmental regulations remain a sticking point. An EU-India free trade agreement (FTA) arguably offers the greatest trade opportunity for the EU over the longer term, and changes to the sequencing of negotiations could yield progress, but various hurdles need to be overcome."
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