US trade policies and the activity of US multinational enterprises in the euro area

This box provides an overview of how US multinational enterprises (MNEs) shape euro area trade patterns. It focuses particularly on trade with the United States in the light of ongoing trade tensions and their potential impact. MNEs based in the United States contribute substantially to euro area economic activity. In particular, these companies shape euro area trade in goods with the United States via substantial exports of pharmaceutical products, intragroup trade and contract manufacturing. Moreover, the euro area production activities of US MNEs are closely linked to corresponding services imports, reflecting the structure of MNE supply chains and tax optimisation strategies. Higher tariff barriers could affect output and US MNE profits in the euro area depending on whether these companies adjust prices or move production outside the euro area. If US MNEs were to relocate their euro area operations, it could result in lower euro area GDP via lower production and exports, although gross national income and employment would likely be less strongly affected. JEL Classification: E22, F23, F43, F62