Trump vs. EU: US trade deficit falls surprisingly!

Trump vs. EU: US trade deficit falls surprisingly!

The US trade balance has recorded a significant decrease in deficit in April 2023. According to recent reports, the deficit fell to $61.6 billion, compared to $138.3 billion last month. This is well below the expectations of economists, who had forecast a deficit of $70 billion. This development could have been influenced, among other things, by increased economic activity before the introduction of new tariffs. Imports fell over 16 percent to $351 billion in April, while exports rose three percent to $289.4 billion. These numbers paint a complex picture of current U.S. economic relations.

Another important aspect is trade in goods, which has a deficit of $87.4 billion. In contrast, a trade surplus in services of almost $26 billion was achieved. This suggests that the US may be more successful in certain areas, such as services, than others. In addition, companies had already stocked up on goods before the announced tariff increases, which could also have contributed to the declining import figures. President Trump declared April 2 as “Liberation Day” and imposed blanket tariffs of 20 percent, putting those tariffs on hold for 90 days but leaving the base tariffs in effect in many cases.

Expectations and effects of customs policy

From Wednesday, an additional tariff rate of 20 percent will come into force on US imports from the EU. EU Commission President Ursula von der Leyen had proposed lifting all mutual tariffs on industrial goods, but this was rejected by Trump. Trump justified the tariff policy with the aim of correcting imbalances in trade. He described the trade balance with the EU as “sad” and said that the USA was being “ripped off”.

In 2024, Germany exported goods worth 161.4 billion euros to the US, while US imports from Germany amounted to 91.4 billion euros. The trade volume between the USA and Germany was 252.8 billion euros. Germany therefore remains the USA's largest trading partner, with an export surplus of 70 billion euros, which accounts for the USA's trade deficit.

Economic analyzes and challenges

Despite the alarming trade acrimony, some economic experts such as Professor Tim Büthe from the Technical University of Munich do not generally see a foreign trade deficit as a disadvantage. Büthe points out that services between the USA and Germany are difficult to measure and this further complicates the trade balance. He also explains that foreign countries that run trade surpluses with the United States can either purchase U.S. goods or invest in U.S. government bonds. High demand for these bonds leads to lower interest rates, which is beneficial for heavily indebted American households.

Nevertheless, Büthe suspects that there is no coherent strategy in Trump's tariff plans. He draws parallels to a time in the late 19th century when tariffs were seen as an important source of financing. The discussion about Trump's trade strategies and their actual effects on the US economy remains explosive and will continue to need to be closely monitored.