The huge trade deficit of the United States in trade with the EU is the key reason for the announcement of the tightening of relations between Washington and Brussels.
The energy-dependent European Union, in addition to all the current supply crises this winter, has been facing since yesterday a possible takeover for American oil and gas, with its key rivals in Asia. Namely, it acts as a forced consequence of the first trade ultimatum of the 47th US President Donald Trump to partners on this side of the Atlantic.
“I told the European Union that they have to make up for the huge US trade deficit with each other by buying our oil and gas on a large scale. Otherwise, customs will follow until the end”, the new head of the White House said yesterday on the social network “Trut Social”. With whom Trump spoke in the EU on this occasion, it was not specified.
Meanwhile, the import of goods from the EU to the US was worth about 553.3 billion dollars in 2022, while Americans placed products worth 350.08 billion dollars in the union, AFP reported yesterday, citing official Washington statistics.
It remains to be seen whether Brussels is ready to look at trade relations with America from this point of view. It is certain that the USA, since the outbreak of the Russian-Ukrainian conflict, has become a key supplier of oil and liquefied natural gas (LNG) to the EU. During the same period, America became the world’s leading oil producer (about 20 million barrels per day), far surpassing its OPEC plus competitors, led by Saudi Arabia and Russia. At the same time, the European Union has become the most important buyer of American energy products.
Last year, the EU marketed 66 percent of the necessary LNG in the US, with Great Britain, France, Spain and Germany being the most prominent buyers. In the first six months of this year, the EU bought 48 percent of LNG from the USA (16 percent from Russia). The government in Washington predicts that US LNG exports will reach 12 billion cubic feet per day by the end of the year, with announcements of further expansion of production and terminal capacities in the near future.
At the same time, the EU is increasingly consuming American oil. Thus, 15 percent of the oil on the EU market this fall was purchased in the USA. Quantitatively, America today exports to the EU about two million barrels of oil per day, which is more than half of the total export of black gold from the USA (the remaining amount is marketed in Asia). Within the EU, the Netherlands, Spain, France, Germany, Italy, Denmark and Sweden are the leading buyers of US oil today.
How can Europeans, if they want to avoid American tariffs, buy more oil and LNG from the USA?
The answer seems uncertain for several reasons. Namely, on the one hand, it is known that in the market of these energy products, deals are mostly bound by long-term contracts, except in the case of “purchase on the spot”, which usually implies frequent fluctuations (spot price). On the other hand, it is known that states and conglomerates, such as the EU, are not, in principle, direct actors on global energy markets. Before all of this, there is an even more delicate topic. Namely, the USA currently does not have spare LNG capacities to send them to Europe, says Florence Schmidt, energy analyst of the Dutch multinational Rabobank (headquartered in Utrecht) in a statement for the London “Financial Times”.
Where then should the Europeans buy American oil and gas in even greater quantities than before?
The solution is somewhere in the sea of ​​the world. As things stand in the world LNG trade, cargoes of this gas can be diverted from the direction of the seller to the buyer, for example in Asia, if a more profitable offer appears. In other words, the Europeans – if they want to avoid the newly mentioned “maximum American tariffs” – could find themselves in a situation of competing financially with LNG buyers from Asia before the coming cold winter. How much that scenario could cost is hard to imagine.
As recently as yesterday, the price of natural gas on the reference energy exchange in the Netherlands reached a price of 43.73 euros per megawatt-hour, which represents an increase of six percent this week alone. At the same time, the euro strengthened 0.3 percent ($1.0398) on currency exchanges, which is interpreted as investors’ confidence that the EU will be able to meet Trump’s demands and avoid “tariffs until the end”.
Only, the big question is whether the EU’s political establishment is ready to comply with Trump’s tariff negotiation model announced yesterday. Uncertainty on this occasion is fueled by the statement of Jovita NeliupÅ¡ien, the EU ambassador to the USA (from Lithuania), that “if there are any new frictions for trade, the EU will be ready to react to it”.
By the way, last year, the EU placed almost 20 percent of its exports in the USA (worth about 576.3 billion dollars), where, according to Reuters, products from Germany dominate: vehicles, industrial machinery and chemicals.
