Morning Market Tidbits China-EU Trade: Imbalance Over Tariff Effects

BofA analysis shows that while 2025 US tariffs effectively cut Chinese exports by over 20%, there is no evidence of trade rerouting to the EU; instead, EU-China trade growth is driven by Chinese industrial excess capacity. Separately, 2Q US GDP tracking is initiated at 2.6%.

Key Takeaways

• 1.2025 US tariffs significantly reduced Chinese exports to the US (by 20-26%), but there is no evidence this caused trade rerouting to the EU.
• 2.EU imports from China are driven by 'vent-for-surplus' dynamics—excess Chinese capacity and weak domestic demand—rather than tariff diversion.
• 3.US 2Q GDP tracking has been initiated at 2.6% q/q saar, following strong April retail sales data.

Table of Contents

• Key takeaways
• What Matters Today: Tariffs reduced US imports from China but fail to explain any meaningful rerouting of Chinese exports towards Europe
• Tariff-induced rerouting: a second-order story for the EU
• 'Vent-for-surplus' theory explains rising EU exposure
• US GDP Tracking
• Today's economic calendar
• Disclosures

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