With a 16% drop in exports of goods compared with the same period in 2023, Brussels' exports of goods, worth EUR 5.1 billion, show a slowdown in the first half of 2024, after three consecutive years of growth.
Brussels accounts for just 2.8% of Belgian exports of goods. And with the closure of Audi, this figure will fall even further. Brussels exports to the United States fell by 45% in the first six months of 2024, compared with the first half of 2023. They represent 8.3% of Brussels exports of goods. The impact of new US customs duties is therefore likely to worsen the situation.
Our partner ING shares the conclusions of a study so that you, as Brussels companies (particularly exporters), can measure the potential impact of this drop in competitiveness and of these customs duties on your activities and adapt your strategies accordingly.
Conclusions of the ING study
At a time of geopolitical tensions and growing economic uncertainty, world trade is undergoing major transformations. Countries are struggling to cope with the effects of trade barriers, sanctions and shifting alliances.
Belgium, whose very open economy has lost competitiveness over the last decade, is particularly vulnerable to these new global dynamics. In addition, sectors with high domestic added value are more exposed to the US market. The possible introduction of customs duties by the United States against the European Union could, in the short term, reduce GDP by 0.11% for a customs duty of 10% and by 0.26% for a customs duty of 25%. This is just the direct impact via the reduction in exports. The indirect effect on confidence and the financial markets could make the negative impact on GDP even greater.
The openness of the Belgian economy has always been important, but the share of Belgian exports in European exports has been declining over the last ten years, with a particularly marked fall over the last two years. Over the last decade, the growth in volumes exported by Belgium has been lower than the trend observed in the EU. Moreover, despite an increase in export volumes driven by pharmaceutical products (vaccines) and mineral fuels (oil and gas) during the pandemic and the energy crises of 2021 and 2022, the post-crisis period has been difficult. Export volumes have fallen sharply back to pre-pandemic levels.
‘Belgium's loss of competitiveness seems to be the main reason for the fall in export market share. Since the financial crisis, nominal labour costs per unit and per hour worked have risen no more sharply than in Germany. What's more, our electricity prices have risen and our companies have not been able to reduce their energy dependency to the same extent as their counterparts in neighbouring countries,’ explains Ruben Dewitte, economist at ING Belgium.
Sectors with high domestic added value are more exposed to the US market
The decline in Belgium's competitiveness coincides with increasing pressure on trade relations, particularly with the United States. The United States is Belgium's fourth-largest export market, with an export value of €28.03 billion in 2023, or 7.6% of total exports. Moreover, the relative importance of the United States as an export market has increased further over the past five years.
However, Belgium's strong integration into global value chains means that not all Belgian exports are produced domestically. Exports to the US of a Belgian product are typically made up of 44% domestic value added and 55% foreign value added (the remaining 1% is not clearly attributed).
‘Sectors such as chemicals and pharmaceuticals, which are particularly exposed to the US market, and foods and beverages, generally have a higher domestic value added. Conversely, industries dependent on foreign raw materials, such as metals and oil, have lower domestic value added. This is also the case for sectors integrated into value chains spread over several countries, such as the automotive sector’, comments Ruben Dewitte.
These global value chains also mean that Belgian exports are indirectly exposed to the United States via other countries. This applies, for example, to a car part produced in Belgium and fitted to a car in Germany, which will then cross the Atlantic.
Ultimately, Belgium's direct exposure to the US is around 0.9% of GDP, but through EU exports to the US, this figure rises to 1.54%. If Trump were to introduce customs duties against the whole world, Belgium's total exposure to the US would be around 2.1% of GDP.
US customs duties of 10% have a short-term negative impact on Belgian GDP of at least 0.11%, while the direct impact is at least 0.26% for customs duties of 25%.
This does not mean that 2.1% of GDP will be lost when President Trump imposes customs duties on the EU. Initially, these customs duties will have an impact on direct trade flows. In the short term, i.e. over a period of 1 to 2 years (which does not allow time for production to adapt or for other trade routes to develop), a 10% or 25% customs duty will lead to a fall in Belgian exports of 7.6% or 19% respectively.
‘For the EU, an increase in customs duties to 25% could lead to a direct fall in GDP of 0.33%. This is the direct and immediate impact of customs duties. But the negative effect on GDP could be even greater in the short term due to indirect effects, such as a loss of confidence and a negative impact on financial markets. If we take these indirect effects into account, the total impact could, in the worst case, almost double’, concludes Ruben Dewitte.
It should be added that the longer customs duties remain in place, the greater the impact will be. Exports between Belgium and the United States could fall by as much as 19% with a 10% customs duty, and 45% with a 25% customs duty.
The direct impact (excluding indirect effects) on Belgian GDP would also increase and could reach 0.69% at a 25% customs duty.
Source ING. For more information, feel free to contact their experts:
Renaud Dechamps, spokesman: renaud.dechamps@ing.com + 32 497 47 16 04
Ruben Dewitte, economist: ruben.dewitte@ing.com + 32 495 36 47 80