U.S. and EU: Close ties
Historical, cultural, and political ties between the U.S. and EU forged, in the words of the European Commission, “the largest, most bilateral trade and investment relationship in the world.” The importance of this transatlantic relationship cannot be underestimated.
The U.S. and the EU have long been each other’s largest trading partners, and this will remain the case now that the UK has ditched the EU. According to the Congressional Research Service, the EU27 (i.e., the EU excluding the UK) sent $566 billion of goods and services to the U.S. in 2018, accounting for some 20 percent of its total exports and close to four percent of EU27 GDP. Meanwhile, the U.S. exported $433 billion worth of goods and services to the EU27 that year, accounting for close to two percent of U.S. GDP.
But the relationship goes far beyond trade. Transatlantic foreign direct investment is significant. Even with the UK out of the EU, the U.S. and EU will remain each other’s largest sources and destinations of foreign direct investment. Hence, with the EU corporate sector so exposed to such an important partner, with large companies generating some 20 percent of sales from the U.S., the future direction of Uncle Sam’s foreign, trade, and regulatory policies will hold sway with the Continent. The American economy’s growth prospects and potential changes to U.S. policies will be key, in our view, as they feed through to European corporate earnings.
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