European Union: From trade deficit to surplus

After two years of deficit, the EU trade balance returned to positive territory in 2023, supported in particular by falling energy prices. Trade surplus in traditionally buoyant sectors (pharmaceuticals, automotive) remains at historically high levels. China’s ramp-up to higher value-added sectors has, over the years, led to a deterioration in the EU’s trade balance with the country. Among other things, imports of motor vehicles from China tripled between 2019 and 2023.

The trade balance of the European Union with the rest of the world recovered significantly in 2023. After two years marked by an unprecedented deterioration leading to a record deficit of EUR 436.1 billion (2.7% of EU GDP) in 2022, the balance returned to positive territory at EUR 37.9 billion in 2023 (see chart 1). This restores the EU’s surplus position that prevailed before the energy crisis. In fact, the surplus widened further this winter to EUR 102.9 billion in February over a 12-month cumulative period.

This improvement mainly reflects the combined effects of lower energy prices (improved terms of trade) and a greater decline in import volumes compared to exports. According to national accounts, the volume of EU goods exports fell by 1.7% in 2023 (annual average), compared to a decline in imports of 3.6%. Apart from 2020 (lockdown), we need to look back to the global financial crisis of 2008 to find the traces of such a drop in imports over a year. The current improvement in the European trade balance therefore partially reflects the fragility of domestic demand on the Old Continent, which weighed on growth in the region in 2023 (+0.4% only). Nevertheless, more positive dynamics influenced this result. Energy efficiency efforts, which resulted in a 2.7% drop in electricity consumption in 2023 compared to 2022, also contributed to the fall in imports.

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