European Union

U.S. Exports

U.S. total exports to the EU increased by $14.5 billion (or 5.5 percent) to $276.7 billion in 2014 (table EU.1). The increase was largely driven by improved finances in the EU airline industry, expansion of U.S. production to address growth in the EU motor vehicle market, and the fluid nature of gold purchase contracts. These shifts counterbalanced reductions in both the volume and the prices of exports of refined petroleum products.

U.S. total exports of transportation equipment rose by $3.8 billion (7.2 percent) to $56.8 billion, the largest increase of any sector in 2014. Aircraft and motor vehicles accounted for most of this increase (table EU.2). U.S. total exports of aircraft, spacecraft, and related equipment to the EU rose by $1.6 billion. EU airlines experienced better financial performance and bought more aircraft in 2014 than in 2013, with more than half of aircraft shipments serving to replace older, less fuel-efficient aircraft.¹ Under these market conditions, the list price of shipments from Boeing, the largest U.S. aircraft manufacturer, to EU customers increased by $3.2 billion.²

U.S. total exports of motor vehicles to the EU rose by $1.3 billion (15.3 percent) from 2013 to 2014. In 2014, registrations of passenger cars in the EU increased 5.6 percent.³ BMW responded to this growing market with exports from its Spartanburg, SC, plant, which in 2014 was exporting more motor vehicles outside North America than any other U.S. motor vehicle factory.⁴ The importance of the South Carolina plant is suggested by U.S. export data showing that motor vehicle exports from Charleston to all markets increased by $1.3 billion.⁵

After transportation equipment, minerals and metals accounted for the largest sector increase of U.S. total exports to the EU, rising by $3.1 billion (14.5 percent) to $24.3 billion. Most of this increase was accounted for by exports of unwrought unrefined and refined gold to the UK. These exports went up by $1.8 billion (124 percent) to $3.3 billion in 2014, as U.S. exports of this commodity group shifted away from Switzerland (down $5.7 billion) and Hong Kong (down $4.1 billion).⁶ Swiss and UK facilities refine and fabricate precious metals, while Hong Kong, London, and Zurich are long-established global centers for trading precious metals.⁷

Increases in exports of transportation and metals more than offset shifts in the energy-related products sector, where U.S. exports declined $2.2 billion (8.3 percent) to $24.4 billion. This decline was a result of a decrease in the volume of exports of refined petroleum products, coupled with a drop in the price of these products.⁸ Petroleum products accounted for 75 percent of total U.S. exports to the EU in this sector during 2013–14. U.S. exports of petroleum products, primarily distillate and residual fuel oils and diesel fuels, declined by about 7 percent in volume to 142.8 million barrels in 2014. The average price for these petroleum product exports to the EU dropped from about $100 per barrel in 2013 to $90–$92 per barrel in 2014.⁹

U.S. General Imports

U.S. imports from the EU increased by $30.2 billion (7.8 percent) to $417.8 billion. This rise was primarily driven by increases in U.S. pharmaceutical spending and the introduction of several popular EU motor vehicles models into a growing U.S. market.

U.S. imports of chemicals and related products rose by $9.3 billion (10.7 percent) to $96.2 billion, with a $7.6 billion (14.3 percent) increase in imports of medicinal chemicals accounting for most of this shift. Spending on pharmaceuticals increased 13 percent in the United States in 2014. In part this growth in spending reflects a rise in usage of higher-priced specialty drugs, which are often focused on smaller groups of patients. Such products require more complex production, handling, administration, and monitoring than traditional pharmaceuticals. Price reductions credited to generic pharmaceuticals were also smaller in 2014 than 2013, as fewer drugs went off patent.¹⁰ Pharmaceutical trade between the United States and the EU is mostly related-party trade within large companies with facilities in multiple countries, and increased imports likely reflect these large multinationals using EU-based facilities to meet growing U.S. demand.

U.S. imports of transportation equipment from the EU increased by $9.1 billion (10.0 percent) to $100.1 billion. The most significant component of this increase was in imports of motor vehicles, which rose by $3.1 billion (8.4 percent). New EU models capitalized on an expanding market as motor vehicle sales in the United States increased by 5.9 percent in 2014.¹¹ In particular, Audi and Mercedes both reported higher U.S. sales for models made in Hungary and Spain: imports from those two countries rose by a combined $2.1 billion.¹²

U.S. imports of energy-related products from the EU fell in terms of both volume and value, dropping by $2.1 billion (8.8 percent) to $22.3 billion in 2014. This shift was caused by declining U.S. demand, rising U.S. production of crude from shale sources, and falling crude petroleum prices (from $95.99 per barrel in 2013 to $88.85 per barrel in 2014).¹³ The leading products imported from the EU are crude petroleum and refined petroleum products. Crude petroleum imports, which accounted for 58 percent of total imports of energy-related products from the EU in terms of volume, declined by 40 percent to 416.1 million barrels in 2014.¹⁴ U.S. imports of petroleum products from the EU declined in value by 5.7 percent to $20.2 billion in 2014, but fell by only 3 percent in quantity to 170.7 million barrels that year.¹⁵

U.S. Trade Balance

The U.S. trade deficit with the European Union (EU) increased by $15.7 billion in 2014. U.S. total exports increased that year, but at a lower rate than general imports.¹⁶ The rise in exports was driven by improvements in EU airlines’ financial performance, leading to an increase in purchases of U.S.-made aircraft; by automaker BMW using its South Carolina factory to increase exports of motor vehicles to the EU; and by U.S. export markets for unwrought refined and unrefined-gold ¹⁷ shifting from Switzerland and Hong Kong to the United Kingdom (UK). As was the case with U.S. exports, these factors more than offset a decrease in U.S. exports of refined petroleum products, which was attributed to declines in both value (because of lower prices) and volume.¹⁸

U.S. imports from the EU rose 7.8 percent in 2014, with two sectors accounting for the majority of the increase. Imports of medicinal chemicals climbed as multinational pharmaceutical firms reacted to growth in the U.S. pharmaceutical market, and motor vehicle imports increased as new models produced in the EU proved popular in the expanding U.S. motor vehicle market. These increases more than offset a reduction in in the value of imports of crude petroleum, due primarily to lower prices.