EU-US trade hits record highs in goods and services, but auto sector shows sharp losses
German Economic Institute reports record €875bn goods and €865bn services trade between EU and US last year, while auto exports fell sharply.
The German Economic Institute (IW) says total goods trade between the European Union and the United States reached an unprecedented €875 billion last year, while services trade topped €865 billion. This surge in EU‑US trade masks divergent sectoral outcomes, with the automobile industry suffering a steep decline in exports even as intellectual property and licensing services drove service imports. Experts warn aggregate figures obscure mounting pressures in vulnerable sectors.
Record goods trade despite tariffs
The IW study reports that EU exports of goods to the United States rose 7.7% to €580 billion, while imports from the US increased 2.2% to €295 billion. Taken together, those flows produced a merchandise surplus for the EU of roughly €285 billion. The figures suggest that overall goods traffic expanded even amid higher tariffs and political tensions initiated under the Trump administration.
The institute cautions, however, that headline growth does not mean all industries benefited equally. Several sectors have been hit hard by trade measures and shifting supply chains, and the aggregate statistics can mask localized losses and competitive shifts within key markets.
Automotive exports suffer a steep decline
Automobile exports and parts from the EU to the US plunged 20.4% during the year covered by the IW analysis. Germany, which accounts for about two‑thirds of the EU’s car exports to the US, recorded an 18.9% fall in vehicle and parts shipments. This contraction contrasts sharply with the broader gains in goods trade and highlights structural strain in the motor industry.
Industry analysts point to a combination of elevated tariffs, rising production costs, and changes in consumer demand as drivers of the downturn. The decline threatens employment and supplier networks across several member states where the auto sector is a major employer.
Services trade grows but shows a large EU deficit
Services exchange between the EU and the US reached an all‑time high of €865 billion, according to the IW study, but the EU ran a services deficit of about €178 billion. That imbalance reflects strong US exports in high‑value service categories, even as EU goods maintain a pronounced trade surplus. Policymakers will likely view the services gap as an area for strategic attention.
The composition of those services is consequential: fees for intellectual property, software licensing, patents and trademarks make up a large share of the flows, underpinning the US position as a net services exporter to the EU.
Intellectual property and licensing drive service imports
More than 40% of the EU’s service imports from the United States were recorded as intellectual property payments, including software licenses, patent fees and trademark charges. IW data show that this category climbed by 13.7% year‑on‑year, making it one of the fastest‑growing segments of bilateral services trade. The pattern underscores the central role of technology and knowledge‑based services in transatlantic commerce.
For European firms, the concentration of IP‑related payments raises questions about competitiveness and the balance of bargaining power in digital and high‑tech markets. Regulators and industry groups are expected to monitor these dynamics as they shape future trade and investment negotiations.
Sectoral divergence complicates trade picture for EU economies
Economists at the IW, including Samina Sultan, emphasize that the overall expansion in EU‑US trade conceals significant differences between sectors and member states. While machinery, pharmaceuticals and other manufactured goods have supported aggregate growth, vulnerable industries such as automotive face concentrated losses. The divergence complicates assessments of the net economic impact across the bloc.
National policymakers must weigh the benefits of record aggregate trade against localized dislocations when designing industrial and trade policies. Targeted support, retraining programs and incentives for technology adoption may be needed in regions exposed by the downturn in vehicle exports.
Policy implications and outlook for transatlantic ties
The IW report suggests that despite high aggregate volumes, trade frictions and concentration in services could influence future negotiations between Brussels and Washington. A persistent services deficit for the EU and sectoral damage in autos may fuel calls for strategic trade measures, regulatory alignment, or targeted industrial policy. Both sides face incentives to manage tensions while preserving the overall depth of the commercial relationship.
Market watchers say the next phases of policy will determine whether the current pattern of record flows with uneven impacts stabilizes or produces further sectoral realignments. Continued monitoring of detailed sector data will be essential to assess the long‑term consequences for jobs and competitiveness in the EU.
Looking ahead, EU and national authorities are expected to balance trade diplomacy with domestic measures to support affected industries and capitalise on strengths in high‑value goods and services. The IW findings underscore that headline records in EU‑US trade are not a substitute for granular policy responses to shifting economic realities.
