Podcast - Macro Waves

Audiobrief | European Union's trade balance: back in surplus


In this Audiobrief, Guillaume Derrien discusses recent evolution of the European Union's trade balance. The latter moved back to a surplus in 2023. Despite China’s ramping up to higher value-added sectors, the EU trade surplus in traditionally buoyant industries (pharmaceuticals, automotive) remains at historically-high levels.


Hello Guillaume,

Hello Claire

You are economist in the OECD Economic Research team of the BNP Paribas group and in this Audiobrief you will tell us about the European Union's trade balance.

So Guillaume first question: what are the recent developments?

The European Union's trade balance with the rest of the world recovered significantly in 2023. It should be noted that this rebound was quite predictable. It follows two years (in 2021 and 2022) marked, as we know, by a period of soaring energy prices. Because EU countries, as a whole, import large quantities of hydrocarbons, the energy crisis had led to an unprecedented deterioration in the EU's trade balance with the rest of the world, which had reached a deficit of nearly EUR 440 billion in 2022; this is equivalent to just under 3% of the EU's GDP. In 2023, energy prices fell and the energy balance logically improved. The EU has even returned to an overall trade surplus, a situation that prevailed before the health crisis.

In addition to the decline in energy prices, which had a positive impact on the terms of trade, there was also a volume effect since the quantity of imports fell more sharply than exports. This partly reflects a certain sluggishness in domestic demand within the Old Continent, but we must not forget the efforts made by EU member countries to reduce energy consumption. This resulted in a decrease in electricity consumption of around 3% in 2023 compared to 2022.

So much for the general situation. If we go into a little detail, which sectors are the biggest drivers to the EU's trade balance and, conversely, which are the ones recording the largest deficits?

The EU's trade surplus is driven by two main sectors: the automotive industry and the pharmaceutical industry. To give a figure, these two sectors accounted for more than a third of the European Union's total trade surplus in 2023. Conversely, and apart from energy, which represents by far the largest deficit component, the European Union has a large deficit in several machinery and equipment goods such as telecommunications products (mainly telephony), integrated circuits and computers.

Today there is a lot of discussion about the automotive sector, which is facing rising competition from China, is this reflected in the trade balance figures?

Yes, in 2023 there was another significant decline in the EU's trade surplus with China, specifically in the automotive sector. This is a trend that was already ongoing in 2022. The entry of Chinese manufacturers into the European market is relatively recent, but the speed of penetration in recent years has been spectacular, as imports of Chinese vehicles into the European Union have tripled in the space of four years. As I said, this has resulted in a decrease in the EU's bilateral surplus vis-à-vis China in this segment, which was divided by three between 2019 and 2023, from around EUR 18 billion to EUR 6.5 billion.

Nevertheless, it is important to put these words into perspective a little. The EU's trade surplus in motor vehicles with the rest of the world has tended to increase, paradoxically, in recent years. What we are seeing is that a sustained increase in exports to other destinations, notably the United States and the United Kingdom, has so far offset the deterioration in the trade balance with China.

The trade surpluses in sectors that are traditionally buoyant for the European Union are therefore still at historically high levels.

Thank you, Guillaume, for your insight into the European Union's trade balance.

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