EU's Growing Trade Deficit With China Bodes Poorly For The Future

While we read a great deal about the huge trade deficit America runs with China it is important to understand we are not the only one. Other countries also have this problem.

Europe as a whole runs a solid trade deficit with China. In some ways, this is balanced by the EU having a surplus with America. Still, in many ways, a growing trade deficit with China bodes poorly for the EU as they look down the road.

Reuters reports the European Union’s trade surplus in goods with the United States and its deficit with China both increased in the first seven months of 2019. Eurostat, the EU statistics office, reported the European Union’s surplus with the United States grew to 100.8 billion dollars in Jan-July 2019 from 88.6 billion in the same period of 2018. During that time the EU’s trade deficit with China expanded to 120.9 billion dollars from 109.2. This comes at a time that trade figures are adding extra strain to global tensions.

This brings up the importance of what countries buy and sell to each other. If a county's exports are not centered around products where they have a core advantage over time they can see them erode. I contend part of the problem the EU has going forward is that much of the EU is simply uncompetitive. This means unless it takes strong action to halt the importation of cheap Chinese consumer goods it will be flooded with them in coming years. Since Europe does not sell China much in the way of "raw goods" it has little to balance this trade.

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