A big shift is happening. In a report from the Wall Street Journal, the US imported more goods from Europe than from China this year. The change is motivated in large part by Russia’s war in Ukraine and China's falling out of favor with the West.
The increase in US-Europe trade alleviates the burden on manufacturers navigating the European energy crisis. The move also benefits US East Coast ports that now outperform those on the West Coast.
Follow the Money
According to data from the U.S. Department of Commerce, the amount of foreign direct investment (FDI) from the US to Europe towers over that of recent US to China investment.
US invested $3.454 trillion in Europe in 2019, $3.629 trillion in 2020, and $3.981 trillion in 2021.
On the other hand, China only saw $106, $115, and $118 billion in investment from the US for those same years.
European FDI in the US increased 13.5% (about $3.2 trillion) from 2020-20221.
Europe and the US are drawing closer due to growing tensions…
…with the global East. Europe looks to the US as a source of natural gas and military supplies in an effort to cut its dependence on Russia. Similarly, the US seeks to lower its reliance on China. The US government has expressed fears about the potential of China to engage in economic warfare. Those are the main factors that are driving Europe and the US into one another’s arms.
Other factors include…
…China’s aggressive lockdown measures have increased disruption and unpredictability.
…an American tourism boom in Europe following the rise in the strength of the USD.
…America’s cheap oil and gas, a talented labor force, and clean energy initiatives.
Another sign of the change comes from US Census Bureau data that shows how after January of this year, imports from the EU and the UK passed those from China. The trend has continued throughout the year, peaking in the summer months.
While this restructuring of trade lines has had some bumps and issues, it’s clear that the relationship between the US and Europe is only getting stronger.