Surpassing China, the US-EU... Changing the Global Trade Map

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[Asia Economy Reporter Yujin Cho] Europe has surpassed China to become the United States' largest trading partner. This is the result of European countries' continued efforts to 'de-Russia' their energy sources after Russia weaponized its energy exports. European companies operating in China are also increasingly relocating their production bases to the U.S., reflecting rising tensions between Western powers and Russia and China, which is reshaping the global trade map.

On the 20th (local time), The Wall Street Journal (WSJ) reported that the Ukraine crisis and deteriorating U.S.-China relations have brought allies across the Atlantic closer together, leading to a boom in trade and investment between the U.S. and Europe.

According to supply chain analytics firm Project 44, container volumes at the U.S. East Coast ports of New York and New Jersey in September increased by 35% compared to the same month in 2019, before the COVID-19 pandemic. The volume at these East Coast gateways from Europe has even surpassed that of the West Coast's largest North American ports (Los Angeles (LA) Port and Long Beach Port), making them the busiest ports in the U.S.

This reflects Europe's rapid rise as the U.S.'s largest trading partner, overtaking China. Germany, a leading European manufacturing powerhouse, saw its exports to the U.S. nearly double in September compared to the same month last year. The weakened euro has enhanced the competitiveness of European companies in the U.S. market, and more European firms are expanding into North America, including Mexico and Canada, seeking cheaper energy.

Consulting firm Rhodium Group analyzed that German small and medium-sized enterprises are diversifying their production bases away from China, which has been hit hard by intensified competition, rising labor costs, and COVID-19 lockdown restrictions.

European companies, which were highly dependent on Russian natural gas, have changed their trade practices after Russia weaponized energy exports following the Ukraine war, causing a backlash.

Belgium-based chemical company Solvay SA, which generates about 11 billion euros in annual sales, is a prime example of this shift. Solvay SA revised its initial strategy to enter China and decided to build an electric vehicle battery production facility in Georgia, USA. The investment amounts to $850 million. Ilham Kadri, CEO of Solvay SA, said, "Given the current geopolitical context, the U.S. market is the preferred choice over China."

Private investment is also becoming more active. According to the Organisation for Economic Co-operation and Development (OECD), the U.S. received $74 billion in foreign direct investment (FDI) in the second quarter (April to June), surpassing China's FDI inflow of $46 billion. Ralph Wichers, chief economist at the German Mechanical Engineering Industry Association (VDMA), said, "Last year, COVID-19 lockdowns worsened the competitive environment in China."

This content was produced with the assistance of AI translation services.