Reconfiguring trading relations a priority

European leaders and businesses are hard at work finding new markets to counter reduced exports to the United States (US) in the wake of tariff hikes. Trump tariffs potentially threaten €544 billion (R11 trillion) of EU exports to the US, which have been hit with a blanket 15% tariff hike. This is half the 30% tariff previously announced by Trump. As part of the deal, the EU has committed to procuring US liquefied natural gas, oil, and nuclear energy products with an expected offtake valued at €700bn (R14 trillion) over the next three years. This will contribute to replacing Russian gas and oil on the EU market. The EU has also committed to purchasing €40bn (R828bn) worth of AI chips essential to maintaining the EU’s technological edge, according to a statement by the European Commission. The Trump tariffs will affect exports in key EU sectors such as automobiles, luxury goods, pharmaceuticals, and agricultural products. A 25% tariff on vehicles and vehicle components was reduced to 15% as part of the deal, which will make them more competitive than vehicles sourced from South Africa which are subject to a 30% tariff. With the dramatic changes in what was a growing market, EU exporters are looking for new customers, which will put them in competition with those from other countries, such as South Africa. The EU has been proactive in renegotiating and updating trade agreements with a number of countries. They include Vietnam, Japan, Canada, Singapore, Mexico, Mercosur and Chile. Negotiations are under way with India, Indonesia, Malaysia, Mercosur, Philippines and United Arab Emirates. New markets in Asia and the Middle East are also being explored. Early indications are that the strategies are succeeding. According to Eurostat, exports of goods to the rest of the world from the euro area in June were €237.2bn, an increase of 0.4% compared with June 2024 (€236.3bn). This at a time when the value of EU exports to the US dropped by 10.3%, the lowest level since 2023. Imports from the US grew by 16.4%. Imports from the rest of the world stood at €230.2bn, a rise of 6.8% compared with June 2024 (€215.6bn). The euro area trade balance fell by €13.7bn from June 2024, driven by lower surpluses in chemicals (€20.6bn to €15.1bn), machinery and vehicles (€17.4bn to €13.6bn), and a shift in other manufactured products from a €2.4bn surplus to a €0.4bn deficit. ER