Euro area trade surplus narrows to near two-year low

The Eurozone recorded a trade surplus of €1 billion in January 2025, a sharp narrowing from the downwardly revised surplus of €10.6 billion in the same period of the previous year, and contrasting sharply with market expectations of a €14 billion surplus.

Euro area trade surplus narrows to near two-year low

This marked the lowest trade balance since the series of deficits triggered by the energy security crisis ended in May 2023. The decline in the surplus came as imports surged by 7.6%, reaching €231.5 billion, primarily driven by a significant increase in the import of manufactured goods. Exports rose by a more modest 3% to €232.6 billion, highlighting a slowdown in the region's export growth despite a relatively stable global demand environment. Meanwhile, the broader European Union experienced a trade deficit of €5.4 billion in January 2025, a stark contrast to the €6.7 billion surplus recorded in the same month last year. The shift into deficit was largely attributed to a dramatic swing in the balance for manufactured goods, net of machinery, vehicles, and chemicals, which moved from a surplus of €0.2 billion to a deficit of €7.8 billion. This shift indicates that Europe is facing challenges in its industrial sector, with rising import costs and slowing demand for certain types of manufactured goods.

Exports to US grow

One area of relative strength was exports from the EU to the United States, which grew by 16% to €46.7 billion. This surge was driven by firms front-loading sales in anticipation of potential tariffs imposed by the Trump administration, indicating a strategic effort by European businesses to capitalize on the U.S. market before any possible trade barriers were enacted. This sharp increase in exports to the U.S. helped to offset some of the broader trade imbalances within the EU, though the overall trade dynamics remain fragile amid ongoing global economic uncertainties.