China Vies with U.S. As EU's Top Trading Partner

China passed the US as the EU’s top trading partner in July with total trade volume of 35.6 billion euros ($49.4 billion), according to Eurostat and China’s Commerce Ministry. By their numbers the total value of China-EU trade in July exceeded EU-US trade volume by 800 million euros ($1.1 billion).

However, data from the U.S. Commerce Department shows that total US-EU trade volume in July 2011 was $51.6 bil., about $2 bil. more than total China-EU trade. Moreover, the US-EU volume increased in August to $53.8 bil. No August data was available for EU-China trade.

The difference between the two sets of data could be the result of a wildly fluctuating Dollar-Euro exchange rate. However, growth trends suggest that China will certainly pass the U.S. as the EU’s top trading partner by 2012 or 2013 unless the financial uncertainty plaguing the Euro Zone cripples trade. Bilateral China-EU trade slipped for a second consecutive month in July, falling 0.8% from the same month of 2010.

The EU’s rise to the status of China’s top trading partner is likely to be powered by rapid growth in Chinese demand for EU exports like luxury consumer goods as well as airliners, autos and raw materials even if the EU’s demand for Chinese-made consumer goods stagnates amid the current uncertainty.

As of July China was the EU’s second largest export market after the U.S., buying up 11.7 billion euros ($17 billion) worth, a 12.3% jump over last July. The EU’s total exports grew only 4.1%, suggesting that China is likely to boost imports from the EU at a faster rate than the U.S. or Japan, the other leading markets for EU goods. China currently takes only 9.1% of EU exports, leaving plenty of room for growth as China’s middle class continues to expand at the world’s fastest rate.

Also, the 168.6 billion euro ($225 bil.) trade surplus that China enjoyed with Europe in 2010 will face intense pressures, especially with the Euro Zone in crisis, forcing China to continue boosting imports even faster than it might have otherwise.

The EU’s imports from China fell 6.2% in July from last year for a total of 23.9 billion euros ($33 billion). However, China still claims the top source of the EU’s imports, with a 17.4% share.

Overall, China accounted for 13.4% of EU’s total trade in July.

Machinery and transport equipment accounted for over 60% of EU exports to China in 2010, with the balance being made up of chemicals, raw materials, autos and luxury consumer goods. China mainly exports consumer goods, telecommunication devices and clothing to the Euro Zone.