Trump’s trade war really making Romania great again: Export and trade surplus to the US are booming this year

The trade war between the main global economies, triggered by rising import tariffs imposed by US President Donald Trump last year, has had an unexpected impact on Romania: its exports to the US market rose by 17 percent this year, while imports from the US increased by only 7 percent, according to official data consulted by Business Review.

Last week, Romanian President Klaus Iohannis met with Donald Trump at the White House, and their meeting resulted in the signing of a joint statement that commits the two countries to an expansion of their strategic partnership on issues such as regional security, energy, and the fight against corruption.

On that occasion, Donald Trump gave his counterpart a special present: a hat emblazoned with the message: “Make Romania Great Again.”

The slogan is a tweak of the ones used by Trump in his 2016 presidential campaign.

Ironically, in some unexpected way, Trump’s own policies which were supposed to “Make America Great Again” seem to have boosted Romania, as official data suggest that Romanian exports to the US are flourishing.

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During the first five months of this year, Romanian companies have exported in the United States goods totaling EUR 569.6 million, up 16.9 percent compared with January-May 2018, according to a fresh National Institute of Statistics (INS) report.

This increase rate compares with a growth rate of Romanian exports to the US of 12.3 percent during the first five months of last year, just before the moment when US imposed tariffs on EU imports – showing the Romanian-US trade picture just before the beginning of the “trade war”.

On June 1, 2018, US President Donald Trump ended exemptions for the EU, Canada and Mexico from tariffs of 25 percent for steel and 10 percent for aluminum.

The European Commission launched a legal challenge against the US tariffs at the World Trade Organization and hit back with duties of 25 percent on bourbon, jeans, motorcycles, orange juice and a variety of steel products made in US, ratcheting up a transatlantic trade conflict.

At the same time, Romania’s imports of goods from the US increased by 7.4 percent year-on-year during the first five months of this year to EUR 346.1 million – meaning that Romania had a trade surplus of EUR 223.5 million to the US in January-May.

These data indicate that Romanian exports to the US accelerated following the beginning of the “trade war”, while imports from the US recovered at slower pace.

But this could be only the first phase of a larger trade war between the global economies. An internal memo circulated last year among EU governments showed that the global trade war will get worse and the rules-based system of international commerce is expected to revert to an environment where the strong impose their will upon the weak.

Many experts believed that Romania, a member of one of the largest global economies – the European Union -, could feel the impact of this trade war through several channels.

The main obvious channel is the trade balance, even if the United States is not a large trading partner for Romania.

In 2018, Romania exported goods of EUR 1.33 billion to the US market – or 2 percent of total exports, the US being only the 13th main foreign market for Romania – and has imported from the US goods of EUR 898.1 million – 1.1 percent of total imports, according to official data consulted by Business Review.

However, Romania risks being hit harder through other channels, and one of them is the indirect trade with the US. Romania’s main export market is Germany, which buys almost one quarter of its exported merchandise.

Romania supplies Germany mainly with spare parts for its best-selling cars, and many of these German cars are exported to the US market.

Germany’s exports of high value-added cars to the US market was one major argument for Donald Trump to support his decision to end tariff exemptions for the European Union.

If the export of German cars to the US market are declining, Romania risks being hit as well, as a supplier of Germany’s car manufacturing industry.

So far, this risk did not materialize as Romania’s exports to Germany rose by 5.7 percent in January-may 2019, while imports increased by 5.8 percent.