Secondly, the current account balance is more complex than a simple trade tracker. Particularly with respect to services, country specific trade data can vary depending on the national statistical agency: A service provided by an US owned company based in Ireland for a customer in Germany for example is a service export from Ireland to Germany. If revenues are repatriated to the US headquarter, they additionally become a primary income from Ireland to the US. Depending on how the transactions are reported, country specific statistics might differ. The US reports a questionable 20 percent EU service export share to Ireland and only a 14 percent export share to Germany. Especially with respect to digital service trade, statistics are imprecise when trying to assign value added geographically (Jung, 2018).

Hence, analysing the EU as an aggregated trading block also reduces the evident biases and reflects the interconnected European wide value chains. By zooming in on the US-EU economic relations published by the US Bureau of Economic Analysis the picture becomes clear (see figure). The 14 billion US-Dollar US current account surplus with regard to the EU can be divided into a 153 billion US-Dollar goods trade deficit, a 52 billion US-Dollar services trade surplus and 106 billion US-Dollar primary income surplus.

These balances reflect the different economies’ business models. The US is strongly focused on the service sector exporting financial, legal and digital services as well as tourism. The respective services surplus accounts for one third of the goods trade deficit. Additionally, US companies are much stronger in investing abroad and repatriating their high-yielding revenues. The total share of primary income in relation to the respective current account increased significantly from 21 percent in the 1990s to 27 percent in 2017 and decreased to 18 percent in the EU (and 11 percent in Germany).

On the contrary, value added in the US manufacturing sector declined to 12 percent of total gross value added (GVA) of the economy, but accounts for 16 percent of GVA in the EU – and for even 23 percent in Germany. What is more, European manufacturing companies are embedded into closely entangled value chains that allow for the integration of smart services into industry products. In contrast to American “stand alone” companies (Berger et al., 2013), the European industry acts frictionless over borders and as a hub for the entire economy. The joint production of the manufacturing sector together with the service sector accounts for another four percent of EU GVA (and even nine percent in Germany) whereas the respective share amounts to only one percent of GVA in the US (Fritsch et al., 2018).

The strong exposure of European manufacturing based exports gives the US a strong leverage on the tariff side. And the EU does not always meet its own demands as the world’s free trade champion: On average the EU enforces slightly higher tariffs than the US (unweighted tariffs: in the EU 5.2 percent; in the US 3.5 percent). However, the total amount of tariffs the US charged for imports from the EU (7.1 billion US-Dollars in 2015) was significantly higher than the total amount of the tariffs the EU charged for imports from the US (5.7 billion US-Dollar in 2015) (Felbermayr, 2018). These numbers provide under no circumstances justification for a penalty tariff against allegedly unfair trade partners – disregarding the arbitrary justification over national security. However, given the unpredictable US trade politics, there can be no waiting for future WTO rulings in the matter: In the end, an instrument targeting the highly profitable American digital multinational might be the only answer the US government will bend to.

Finally, there is no need for an obsession with the current account deficit: a trade deficit is not in itself a weakness. US companies and households indeed consume more goods and service than they manage to sell and repatriate in primary incomes – relatively stable around 400 billion US-Dollars over the last 10 years. This means US consumption and investments are financed from abroad. The standard of living would be significantly lower without the foreign money inflow.

Anyway, the EU and the US need to pull themselves together and develop a strategy on how to deal with state funded ring-fenced competitors that China currently establishes and that will be launched on the global market sooner or later.