Unequal trade balance USA-EU? Digital US services are missing-Revaluation of transatlantic trade is necessary!
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Published on: April 8, 2025 / update from: April 8, 2025 - Author: Konrad Wolfenstein
Unequal trade balance USA-EU? Digital services are missing - Revaluation of transatlantic trade is necessary! - Image: Xpert.digital
Customs alarm USA-EU: Are US tech profits not taken into account?
The US-EU trade balance in the digital age: a reassessment of economic reality
The traditional consideration of trade relationships between the United States of America (USA) and the European Union (EU) is a multi -layered undertaking, which often leads to simplified conclusions. On the surface, the EU seems to achieve a significant surplus in the trade in material goods, while the United States traditionally has ahead in the area of services. But this picture is incomplete. The dynamics of the digital age, characterized by the ubiquitous presence of large American technology companies in Europe, requires a more profound analysis.
The central thesis of this investigation is that the official trade statistics may draw a distorted image of the actual economic interdependencies between the USA and the EU. This is mainly due to the way income from digital services is booked. Many US technology giants generate considerable sales in Europe, but these profits are often booked through subsidiaries in countries such as Ireland and Luxembourg. As a result, a significant part of these income in bilateral trade statistics is not shown as direct US exports in the EU.
The aim of this analysis is to critically examine the existing data, detection methods and estimates of the income from digital services. It should be examined whether the claim of an "unfair" presentation of the trade balance is justified and what political consequences could result, especially with regard to tariffs and other trade restrictions.
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The official US-EU trade balance: an overview
In order to understand the overall picture, it is essential to first look at the official figures published by various statistical offices.
Trade with goods
The latest available statistics on the goods trade between the USA and the EU show a significant imbalance in favor of the EU. The EU was exported to the USA worth hundreds of billions of euros to the United States, while imports from the USA are lower. This surplus has tended to increase in recent years. The most important export goods in the EU include medical and pharmaceutical products, motor vehicles, machines and electrical devices. On the import page, crude oil, chemical products and certain machine products dominate.
The United States, on the other hand, has a considerable deficit of goods with the EU. Exports to the EU are significantly lower than imports from the EU. This deficit is a recurring topic in the trade relationships between the two economic areas.
It is important to note that the information on the commercial balance sheet surplus or deficit can vary depending on the source (EU or US statistics). These discrepancies are due to different detection methods, assessments and statistical adjustments. In order to obtain a comprehensive picture, a careful comparison and coordination of the data on both sides is therefore required.
Trade in services
In contrast to the goods trade, the United States traditionally has a surplus in service trade in the EU. The United States exports services worth hundreds of billions of dollars to the EU, while imports from the EU are lower. The most important service areas in which the United States are strong include financial services, information technology, travel and tourism as well as licenses and fees for intellectual property.
The EU, on the other hand, has a deficit in service trade with the United States. The imports of services from the USA exceed exports to the United States. This deficit is an important factor that influences the overall structure of the trade relationships.
Here, too, it is important to note that the reported service trading balance sheets can be different depending on the source. These differences are due to various statistical detection methods and definitions.
Combined trade balance (goods and services)
If you take into account both freight and service trade, a more complex picture is created. The entire bilateral trade volume between the EU and the USA amounts to trillions of euros. The difference between EU exports to the USA and US exports to the EU is relatively low, which indicates that transatlantic trade is relatively balanced as a whole.
However, this image is distorted by the fact that a significant part of the income from digital services generated by US technology companies in Europe is not covered as direct US exports. This leads to an underestimation of the actual economic importance of the US companies in Europe.
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The challenges of recording international service transactions in the digital age
The measurement of international service trade is a complex undertaking, which is even more difficult by the special features of the digital economy.
Methodological standards
The statistics of international service trade are usually based on international guidelines and standards developed by the International Monetary Fund (IMF) and other international organizations. The core principle is to grasp the service trade between the local and non -regional of an economy. The concept of area grant is decisive and is based on the "center of the predominant economic interest" of an organization or individual and not on the location or nationality.
Types of delivery
The international service trade can take place via various types of delivery, including cross-border delivery (e.g. a software company in the USA, which sells software to a customer in Germany), consumption abroad (e.g. a US citizen who is on vacation in Europe), commercial presence (e.g. a US bank that opens up a branch in London) and presence of natural persons temporarily works in Europe to look after a project).
Challenges in measuring digital services:
The measurement of international service trade, especially in the digital area, has significant challenges. Traditional statistics often concentrate on production and the location of the producer, which makes it difficult to adequately grasp the value and the flow of digital services. Digitization leads to a greater participation of small companies and households in international trade, which may not be sufficiently taken into account in conventional data sources. In addition, the role of digital mediation platforms (Dips) plays a growing role, the transactions of which are statistically difficult to grasp. The intangible nature of digital services and the developing business models in the digital economy are therefore considerable hurdles for precise measurement in traditional trade statistics.
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How US tech giants distort trade statistics between the USA and the EU
The role of multinational subsidiaries and digital services in the US-EU trade balance
The structure and functionality of multinational companies, especially in the digital sector, play a crucial role in the design of the trade balance between the USA and the EU.
Operating structures of US technology companies in Europe:
Many large US technology companies have settled their European headquarters or important subsidiaries in countries such as Ireland and Luxembourg. These locations are often chosen due to favorable tax regulations, access to the EU internal market and a qualified workforce potential.
Booking of income from digital services:
When European consumers or companies use services from these US technology companies (e.g. Google Ads, Amazon Web Services, Meta ADS), invoicing is often carried out via the Irish or Luxembourg subsidiary. In the standard trade statistics, these transactions are recorded as intra-Community trade (e.g. Ireland in another EU country) or as services from Ireland or Luxembourg to the USA, but not necessarily as direct US exports to the EU country in which the service is consumed. This operating structure potentially leads to an underestimation of the exports of digital services from the United States to the EU in the official bilateral trade statistics.
Internal trade
A significant part of international trade, especially in connection with multinational corporations, takes place as an internal trade between different subsidiaries of the same company. The digital services provided by US technology companies to European users could be regarded as part of internal trade in the sense (between the US parent company and its EU subsidiary), but the statistical recording does not reflect the actual consumption market in the bilateral context between the USA and the EU.
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The quantification of the "missing" income from digital services
The quantification of the income from digital services that are subordinate to the official trade statistics is a difficult undertaking. It requires the analysis of various data sources and the use of estimates and assumptions.
Google (emea)
Google's annual turnover in the EMEA region (Europe, the Middle East and Africa) is considerable and amounts to dozens of billions of dollars. A significant part of this sales is generated in Europe, especially through online advertising, cloud services and other digital products.
Amazon (Europe)
Amazon's annual turnover in Europe is also considerable. The company works in various areas, including e-commerce, cloud computing (Amazon Web Services) and digital advertising. The European market is an important growth factor for Amazon.
Meta (Europe)
Metas annual sales in Europe also amounts to billions of dollars. The company generates income mainly through online advertising on its platforms Facebook, Instagram and WhatsApp. Europe is an important market for meta.
Apple (App Store, Europe)
The income from Apple's app store in Europe is difficult to quantify, but contribute significantly to the digital service income that is generated by a US company in Europe and booked through an Irish subsidiary.
It is important to note that these numbers are estimates and can vary depending on the data source and detection method. The exact quantification of the "missing" income from digital services is a challenge, since the companies do not always break down their sales in detail for geographical regions.
Revaluation of the US-EU trade balance: a changed picture
The inclusion of the estimated income from digital services in the calculation of the trade balance could significantly change the image.
Add valued income from digital services
If these income were fully recorded as US service exports into the EU, the service trade balance would be shifted significantly. It is conceivable that the current US surplus will pass into a deficit or at least decrease significantly.
Effects on the entire trade balance
The inclusion of these income from digital services in the calculation of the entire trade balance (goods and services) could possibly eliminate or even reverse the current low trade surplus of the EU to the United States. This indicates that the actual economic relationship is more balanced or even has a slight overweight in favor of the United States if one takes into account the entire scope of digital services.
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Arguments for and against the claim of injustice: a question of perspective
The assertion that the official trade balance does not reflect the actual economic relationship between the United States and the EU is the subject of debates and controversy.
Arguments to support the claim of injustice
The assertion of an unfair representation is based on the assumption that the official commercial balance sheet numbers do not accurately reflect the actual economic relationship between the USA and the EU, since the considerable income in Europe is not counted as direct US exports in the EU due to their booking through subsidiaries in Ireland and Luxembourg. An essential part of the value that is created by these companies in Europe benefits the US economy, but is treated differently differently. This sub-entry of US exports of digital services could lead to wrong decisions in trade policy, especially with regard to potential tariffs.
Counter arguments and alternative perspectives
It is important to recognize that the current statistical standards prescribe the recording of the trade based on the area of the area and the location of the transgent companies. The establishment of subsidiaries in Ireland and Luxembourg is a legitimate business practice that is often motivated by tax optimization and access to the EU market. In addition, the official figures for service trade already have a clear deficit for the EU to the United States. The attribution of the added value in the digital economy is complex, and the definition of the origin of a digital service is associated with challenges. The EU could argue that the dominance of American companies in the field of digital services in Europe is a result of the market and not necessarily unfair trading practices in the traditional sense. There are ongoing debates and efforts to improve the measurement of digital trade in international statistics.
The claim of injustice is therefore subjective and depends on the respective perspective on the interpretation of trade statistics and the economic relationship in the digital age. While the official statistics may not fully grasp the value, they adhere to established international standards.
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Commercial excess or balance? The true value of digital trade: a call for a new consideration
The analysis shows that the official statistics show an EU trade surplus to the United States, the inclusion of the estimated income from digital services that are booked through European subsidiaries, but could significantly change this image. Taking into account the entire scope of the digital services, a more balanced or even slightly low trade relationship indicates.
This has important implications for trade policy. The arguments for and against the collection of tariffs due to the perceived "injustice" in the booking of digital trade are complex. The implementation of tariffs to digital services contains challenges and the potential for retaliation.
It is essential to continue the efforts to improve the measurement of digital trade in international statistics. The development of new statistical framework works, which can better grasp the value and the flow of digital services, is of crucial importance.
Political decisions that are based exclusively on traditional goods trading records could overlook an important aspect of the economic relationship. A more comprehensive and more differentiated consideration is necessary to understand the actual economic interdependencies between the United States and the EU in the digital age.
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