Record EU-US trade masks growing tariff pain for key industries

Trade in goods between the European Union (EU) and the United States reached a record €875 billion ($1 trillion) in 2025 despite escalating tariff tensions, though the gains masked growing pressure on key sectors, particularly automobiles, according to a study by the German Economic Institute (IW).

The study found that EU exports to the United States rose 7.7 per cent to €580 billion, while U.S. exports to the EU increased 2.2 per cent to €295 billion, widening the bloc's trade surplus to nearly €285 billion.

At face value, the record trade volumes suggest that tariffs introduced under U.S. President Donald Trump and broader political tensions have done little to disrupt transatlantic trade. However, the IW cautioned that the aggregate figures hide significant sector-specific weakness.

"The first impression is misleading," said Samina Sultan, an economist at the German Economic Institute. "Certain sectors are already suffering significantly, particularly the automotive sector."

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The study showed that EU exports of cars and auto parts to the United States fell 20.4 per cent in 2025. Germany, which accounts for nearly two-thirds of the bloc's automotive exports to the U.S., recorded an 18.9 per cent decline, underscoring the growing impact of tariff-related pressures on Europe's largest manufacturing economy.

Ireland emerged as the exception to the trend, with exports to the United States jumping 52.7 per cent, driven by robust shipments of tariff-exempt pharmaceutical and chemical products.

Beyond goods, transatlantic services trade also continued to expand. Services trade between the EU and the United States climbed to a record €865 billion, although the EU posted a €178 billion deficit in this category.

The report noted that payments for intellectual property, including software licences, patents and trademarks, accounted for more than 40 per cent of the EU's services imports from the United States. Spending in this category rose 13.7 per cent, highlighting the continued dominance of U.S. technology and innovation companies in cross-border services.

The findings suggest that while overall EU-U.S. trade remains resilient and continues to hit new highs, the benefits are unevenly distributed. Key manufacturing industries, especially automobiles, are facing mounting headwinds as tariff pressures and geopolitical uncertainties reshape global trade patterns.