Can new EU trade deals replace lost US exports?

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New EU Trade Deals Are Unlikely to Fully Replace Lost US Exports

New trade agreements recently concluded by the European Union, including the deal with Mercosur, are not expected to fully compensate for the decline in exports to the United States. While these accords aim to bolster free trade amid global uncertainties, economic projections suggest modest gains that are unlikely to offset the immediate impact of lost US trade.
Modest Economic Projections for New Trade Pacts

The economic benefits anticipated from the EU's recent trade agreements are projected to be marginal. For instance, the Mercosur agreement is estimated by the European Commission to boost EU Gross Domestic Product (GDP) by a mere 0.05 per cent by 2040. Similarly, an agreement with India is forecast by the Kiel Institute for the World Economy to add only 0.1 per cent to GDP. These projections highlight that the long-term gains from these pacts are significantly smaller and arrive much later than the immediate economic pressures faced due to trade disruptions.
Competition from China in Targeted Markets

European companies engaging in these new trade agreements will encounter substantial competition from China. Chinese rivals have been actively expanding their presence in these markets over the past two decades, focusing not only on trade but also on investment and key sectors like the energy transition. China has already demonstrated its ability to redirect exports, with an estimated US$150 billion of its exports being rerouted due to US tariffs, with significant portions absorbed by ASEAN countries and other regions. This indicates that the EU will face an established and competitive presence in these markets.
Limited Impact Compared to US Trade Volume

Economists have expressed reservations about the ability of these new trade relationships to truly replace the United States as a trading partner. The GDP per capita in the US is considerably higher than in the EU's new trading partners, suggesting a different scale of economic exchange. While the EU is seeking to offset a potential decline in exports to the US of 15 per cent or more, which could impact GDP by approximately 0.3 per cent, the projected gains from new deals are far smaller.
Potential of the EU's Single Market

Despite the challenges posed by external trade dynamics, the internal efficiency of the EU's single market could offer a degree of compensation. Approximately 60 per cent of EU exports occur between member states. Enhancing the competitiveness and efficiency within this existing single market could potentially offset a portion of the lost exports to the United States. However, the specific mechanisms or strategies for achieving this internal improvement are not detailed in the available information.

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Can new EU trade deals replace lost US exports?

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