The US services of Google, Amazon, Meta, Apple, Microsoft, Tesla and Nvidia that are missing from the US trade balance – Image: Xpert.Digital
Imbalance or balance? Facts about the trade balance between the US and the EU
The claim that the trade balance between the US and the EU is unfairly skewed in favor of the EU does not stand up to detailed analysis
If one were to look at the figures honestly, then the EU should have a right to tariffs, and not the other way around.
In 2023, the EU exported goods worth €503 billion to the USA, while importing goods worth €347 billion, resulting in this trade surplus of €156 billion in favor of the EU.
In contrast, in 2023 the USA exported services worth 427 billion euros to the EU, while importing services worth 319 billion euros, resulting in this surplus.
Taking into account the services balance, which shows a surplus of €108 billion for the US, the difference reduces to just €48 billion. This corresponds to only 3% of the total trade volume between the US and the EU, suggesting a relatively balanced transatlantic trade relationship overall.
The total trade volume between the US and the EU in 2023 amounted to an impressive 1.6 trillion euros, including trade in goods and services.
- Trade volume of goods: 851 billion euros (EU exports: 503 billion euros; EU imports: 347 billion euros).
- Trade volume in services: 746 billion euros (EU exports: 319 billion euros; EU imports: 427 billion euros).
However, a crucial factor distorts this picture: A significant portion of the revenue generated by US technology companies, particularly the “Magnificent Seven” (Google, Amazon, Meta, etc.), from digital services in Europe is not recorded as direct US exports. These companies often operate through subsidiaries in countries like Ireland or Luxembourg, from where they issue invoices. As a result, these revenues are statistically recorded as intra-European trade and therefore not included in the US balance of services.
The service revenues of the Magnificent Seven not included in the US trade balance amount to approximately €160 billion*1. This figure explicitly includes only services (advertising revenue, cloud services, software), while hardware sales and other physical products have been excluded.
This shows that the often-discussed "trade inequality" between the US and the EU is primarily due to statistical gaps in the recording of digital services. Including these sales figures paints a much more realistic picture, underscoring the close economic integration and parity between the two economic areas.
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Alphabet/Google
Alphabet/Google generates annual revenue of over €100 billion in the EMEA region (Europe, Middle East, Africa). According to reports, revenue in Europe and surrounding areas (EMEA) exceeded US$100 billion for the first time, which is approximately US$102 billion.
Invoices for services like Google Ads or Google Workspace are issued by the Irish branch. These revenues are not directly included in the US services balance sheet, as they are processed through Google Ireland in accordance with EU regulations and tax rules. This means that taxation and invoicing often comply with local regulations, including the reverse charge mechanism for VAT.
Amazon
Amazon generates over €50 billion in annual revenue in Europe, managed through its headquarters in Luxembourg. This revenue is not included in the US balance of services because it is processed through the Luxembourg subsidiary. This allows Amazon to benefit from Luxembourg's tax advantages while complying with local EU VAT regulations, such as the reverse charge mechanism and the use of local VAT since August 2024.
Meta
Meta generates annual revenues of nearly €40 billion in Europe, primarily through digital advertising. According to reports, advertising revenues in Europe exceeded $10 billion in a single quarter for the first time, underscoring the company's strong market presence in the region.
Invoicing for services such as Meta Ads is handled through the company's Irish branch. Therefore, these revenues are not included in the US services balance sheet, as they are processed locally in accordance with EU tax and regulatory requirements.
This practice distorts the trade balance between the US and the EU because it fails to fully reflect the economic significance of US companies in the European market. The failure to account for such sales contributes to an underestimation of the true strength of US service exports and significantly impacts perceptions of trade relations.
Apple
Apple generated total revenue of $101.3 billion in Europe in fiscal year 2024, with services (such as the App Store, iCloud, and Apple Music) accounting for a significant portion. Worldwide services revenue amounted to $96.2 billion, and Europe is the company's second-largest market, contributing approximately 26% to total revenue.
Revenues from the services segment in Europe are estimated at US$26.34 billion.
As with many others, the processing of European revenues is largely handled through Ireland, where Apple has its headquarters for the EMEA region (Europe, Middle East, and Africa). Ireland's low corporate tax rate offers attractive conditions for multinational companies like Apple. This allows Apple to tax profits from European services in a way that minimizes its tax burden. However, the EU has repeatedly intervened against Apple's tax practices in Ireland, resulting in the recovery of billions in taxes.
Tesla
The exact amount Tesla receives for services in Europe is not directly available, as service revenues are not reported separately. However, there are some indications:
Tesla's total revenue: In 2024, Tesla generated total revenue of US$97.7 billion (approximately €89.5 billion). Of this, US$8.3 billion (approximately €7.6 billion) came from the "Services and Other" segment, which includes services such as maintenance, repairs, and software upgrades.
Europe's share: Europe is one of Tesla's largest markets, accounting for approximately 16% of global vehicle sales in 2023. It is plausible to assume a similar share of service revenue.
Estimate of service revenue in Europe: If approximately 16% of service revenue is generated in Europe, Tesla is expected to earn around €1.2 billion from services in Europe. However, this figure is an estimate and depends on the precise regional distribution of revenue.
Nvidia
The total amount Nvidia receives for services in Europe can only be estimated from the available data, as the exact breakdown for services is not reported separately. However, there are indications of Europe's share of Nvidia's total revenue:
European revenue share: Europe contributes approximately 11.17% to Nvidia's total revenue.
Total revenue 2025: Nvidia's total revenue in fiscal year 2025 was US$130.5 billion.
Nvidia's estimated revenue in Europe for fiscal year 2025 is approximately US$14.57 billion. However, this figure includes all revenue from Europe and not exclusively services.
Tesla and Nvidia's services are primarily provided in the USA, although both companies also have significant operations in Europe and other regions.
Microsoft
Microsoft generates significant revenue in Europe from its services, particularly cloud services such as Azure, Office 365, and other digital products. While precise figures for European revenue are not directly available, cloud and server products account for the largest share of global revenue, amounting to approximately $97 billion in fiscal year 2024.
The majority of European sales are processed through Microsoft's Irish subsidiary, Microsoft Ireland Operations Ltd., as Ireland serves as the central location for Microsoft's European operations. This allows the company to benefit from Ireland's low corporate tax rates. Microsoft frequently licenses software and services for Europe, the Middle East, and Africa (EMEA) through Ireland, which offers tax advantages.
Microsoft also maintains other locations in Europe, such as the new digital distribution center in Barcelona, which serves European customers. Nevertheless, Ireland remains the primary location for tax and operational accounting within Europe.
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Sales of the Magnificent Seven in Europe not included in the US trade balance
Calculation of undisclosed sales (approximate estimate):
- Alphabet/Google: 102 billion US dollars (approx. 93.4 billion euros)
- Amazon: 50 billion euros
- Meta: 40 billion euros
- Apple: 26.34 billion US dollars (approx. 24.1 billion euros)
- Tesla: 1.2 billion euros (estimated)
- Nvidia: US$14.57 billion (approx. €13.3 billion, total revenue in Europe, excluding services)
- Microsoft: Estimating here is more difficult. Since no specific figure is given for Microsoft's service revenue in Europe, we assume that a significant portion of its $97 billion in global revenue from cloud and server products is generated in Europe. It is a conservative estimate that at least 25% of this is generated in Europe, which equates to approximately $24.25 billion (around €22.2 billion).
Based on available data and estimates, the “Magnificent Seven” generate approximately €244.2 billion in sales in Europe that are not directly recorded in the US trade balance as US exports.
Important notes:
- Estimates: Many of these figures are estimates, as the exact sales figures per region and the breakdown between goods and services are often not publicly available.
- Not just services: Some of the mentioned revenues (especially for Amazon, Apple, and Tesla) also include sales of goods. However, the focus is on the service components, which do not usually appear in the US trade balance.
- Transfer pricing: The topic of transfer pricing has not been addressed here. The figures mentioned are based on the reported sales of the European subsidiaries. It is conceivable that further profits are shifted to the USA through internal transactions, which would further affect the significance of the trade balance.
- Methodological limitations: The calculation is necessarily simplified. A more precise analysis would require more detailed financial reports from individual companies and would have to take into account the complex mechanisms of international tax planning.
- However, the majority of these revenues are booked in Ireland or Luxembourg, where the companies have their European headquarters to benefit from the low tax rates. This means that these revenues do not appear in the US trade balance and the true strength of US services exports is underestimated.
All of this demonstrates that the trade balance between the US and the EU is significantly distorted. The revenues of large technology companies, which are processed through European subsidiaries, are not fully recorded as US exports, leading to an underestimation of the US's economic importance in the European market.
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- Global economic situation in 2025: Will we experience a global economic crisis or economic downturn?
Model-based and analytical estimate for the EU trade deficit with the USA*1
The aforementioned €244.2 billion includes both service and some non-service sales (e.g., hardware sales). To isolate only the service sales not included in the US trade balance, the non-service sales portion must be deducted. Here is the detailed calculation:
Step-by-step customization
1. Alphabet/Google
- Total revenue (EMEA): 93.4 billion euros.
- Estimate: 20% hardware/cloud (non-services).
- Services: 93.4 × 0.8 = 74.7 billion euros.
2. Amazon
- Total revenue (Europe): 50 billion euros.
- Estimate: 20% AWS (cloud services), 80% e-commerce (non-services).
- Services: 50 × 0.2 = 10 billion euros.
3. Meta
- Total revenue (Europe): 40 billion euros.
- Estimate: 90% advertising (services), 10% hardware/other.
- Services: 40 × 0.9 = 36 billion euros.
4. Apple
- Service revenue (Europe): 24.1 billion euros.
- Note: Apple explicitly states service revenues that are already isolated.
5. Tesla
- Total revenue (Europe): 1.2 billion euros.
- Estimate: 90% vehicle sales (non-services).
- Services: 1.2 × 0.1 = 0.12 billion euros.
6. Nvidia
- Total revenue (Europe): 13.3 billion euros.
- Estimate: 90% hardware (chips), 10% software/services.
- Services: 13.3 × 0.1 = 1.33 billion euros.
7. Microsoft
- Estimated service revenue (Europe): 22.2 billion euros.
- Estimate: 80% cloud/software (services), 20% hardware.
- Services: 22.2 × 0.8 = 17.76 billion euros.
Result of adjusted service revenues
The adjusted results for service revenues show the following distribution: Alphabet/Google achieved revenues of €74.7 billion, while Amazon generated €10.0 billion. Meta reached €36.0 billion, followed by Apple with €24.1 billion. In comparison, Tesla recorded only €0.12 billion, Nvidia €1.33 billion, and Microsoft €17.76 billion. Total service revenues amounted to €164.0 billion.
Recommendation for a lump sum: 160 billion euros
- The precisely adjusted total of service revenues amounts to 164 billion euros.
- A general figure of 160–170 billion euros would be scientifically sound.
- 200 billion euros would be too high, as it disregards non-services (e.g., Tesla's car sales).
The service revenues of the Magnificent Seven, not included in the US trade balance, amount to approximately €164 billion. This figure explicitly includes only services (advertising revenue, cloud services, software), while hardware sales and other physical products have been excluded.
Nevertheless, the EU does not publicly “complain” about this deficit, for several reasons:
- Interdependence: The companies of the Magnificent Seven create jobs, invest in local infrastructure (e.g. data centers) and drive digital transformation in the EU.
- Tax revenues: Despite profit shifting, billions flow to EU member states through sales tax and national levies (e.g. digital taxes).
- Regulatory focus: The EU is concentrating on laws such as the Digital Markets Act or the AI Regulation to correct power imbalances, rather than escalating trade conflicts.
- Global interconnectedness: A large part of the services (e.g. cloud computing) are essential for European companies – an open conflict would harm both sides.
The apparent deficit thus reflects less a real weakness and more the complex symbiosis between US tech giants and the European economy.
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