The United States and the 27 Member States of the European Union share the largest economic relationship in the world.  U.S. goods two-way trade with the European Union totaled an estimated $1.1 trillion in 2021 according to the American Chamber of Commerce to the European Union.[1]  Within the 2020 foreign investment stock, 64% of global investment into the U.S. comes from Europe and 59% of U.S. global investment goes to Europe.  As a result of the COVID-19 pandemic, however, the economy of the European Union, which represents nearly 500 million consumers, entered a sudden recession in the first half of 2020 with the deepest contraction of output in Europe since World War II.  Due to the containment measures that were introduced to combat the pandemic, the economy of the European Union operated between 25% and 30% below its capacity during the strictest period of confinement, according to the European Commission Summer 2020 European Economic Forecast.  While the EU economy grew by 5.4% in 2021, according to the Summer 2022 version of that forecast, it has been forecasted to grow by 2.7% in 2022 and 1.5% in 2023—lower than in previous forecasts due to the war in Ukraine, increased fuel costs, and COVID-related supply chain disruptions.  As of July 2022, inflation in the European Union is 8.3%, the highest ever, caused by the dual impacts of the Russian invasion of Ukraine and the response to the COVID-19 pandemic, but it is expected to ease to 4% in 2023, according to that same forecast. 

U.S. businesses continue to benefit from the European Union’s border-free Schengen area, which eases movement across air, land, and sea borders.  This area covers 22 of the 27 EU Member States, along with non-members Iceland, Liechtenstein, Norway, and Switzerland.  Croatia is likely to join the Schengen zone at the start of 2023.  Ireland and the United Kingdom[2] opted out of the Schengen area, and it is not certain when Bulgaria, Cyprus, and Romania will join, even though they are legally obligated to do so. 

Engagement on Transatlantic Economic Issues

February 24, 2022, Russian invasion of Ukraine has had tremendous implications for the transatlantic relationship.  The war has exacerbated two preexisting transatlantic challenges—rising inflationary pressures and congested supply chains—but it has also reinvigorated transatlantic cooperation, including on sanctions-related measures that have altered the economic landscape.  This is evident, for example, in the energy landscape where challenges to reduce the U.S. and EU’s dependence on fossil fuels have become increasingly urgent.  Accordingly, in March 2022, the United States and the European Commission announced the creation of a joint Task Force on Energy Security to reduce Europe’s dependence on Russian oil and gas.

This increased cooperation can also be seen in the U.S.-EU Trade and Technology Council (TTC), which held its second ministerial meeting in France in May 2022.  The TTC was announced in June 2021 at a U.S.-EU Summit in which President Biden met with Charles Michel, President of the European Council, and Ursula von der Leyen, President of the European Commission, to set a joint transatlantic agenda.  Co-chaired by U.S. Commerce Secretary Gina Raimondo, U.S. Secretary of State Anthony Blinken, and U.S. Trade Representative Katherine Tai, and Executive Vice President Vestager and Executive Vice President Dombrovskis for the European Union, the TTC has presented a historic opportunity to deepen integration between the United States and the European Union, especially in technology-enabled sectors, including by supporting transatlantic supply chains, promoting the use of digital technologies by small and medium-sized enterprises, and exploring ways to avoid new and unnecessary technical barriers to trade.