Factories slowing, exports sliding: EU ends 2025 on shaky footing

BRUSSELS (CN) — The European Union chalked up a 28.4 billion-euro ($33.5 billion) trade surplus in the fourth quarter of 2025, but the headline figure masks signs of economic softness, as industrial production, retail trade and services all took a hit at the end of the year, according to Eurostat data released Thursday.

The trade surplus — the gap between what the EU sells to and buys from countries outside its borders — widened slightly from the previous quarter, but for the wrong reasons. Both exports and imports dropped for the third quarter in a row. Imports were down 1.4%, and exports slipped 0.8% from the third quarter. The surplus got a boost mainly because Europe’s energy bill shrank: Energy imports fell 9.8% over the quarter, trimming the energy deficit from 71.6 billion euros to 62.7 billion.

That drop in energy imports comes as the EU has leaned heavily on U.S. liquefied natural gas since Russia invaded Ukraine in 2022. The U.S. is now the EU’s biggest energy supplier, making up 17.2% of the bloc’s energy imports in the last quarter of 2025 — a mix that includes oil, coal and gas. When it comes to gas alone, the U.S. now covers more than a quarter of EU demand, up from just around 5% five years ago. Russia — which used to provide 27.3% of EU energy imports as recently as early 2020 — is down to just 3.6%.

The scale of that shift has prompted soul-searching in Brussels. EU Energy Commissioner Dan Jørgensen said last month the bloc risked "replacing one dependency with another" after ditching Russian gas for U.S. LNG — and that Trump's threats to seize control of Greenland had been a "clear wake-up call" to find new suppliers. Brussels is now looking to build closer energy ties with Canada, Qatar and North African countries, Jørgensen said.

Three weeks later, U.S. Energy Secretary Chris Wright fired back. After closed-door meetings at the International Energy Agency in Paris, Wright told reporters that Jørgensen’s comments were "very unfortunate" and insisted the U.S. has "never used energy as a political weapon."

"The United States is a rock-solid supplier. You can’t ask for a better partner," he said.

The Eurostat data back up both sides of the argument. Norway is now the EU’s second-biggest energy supplier at 11.2%, with Kazakhstan in third at 7.6% — even though some of its exports still travel through Russian pipelines. The pivot away from Russia is dramatic, but the EU’s growing dependence on the U.S. — an administration not shy about using economic leverage— has people wondering if Europe just traded one problem for another.

The trade stats also show the fallout from the earlier tariff scare. EU exports spiked in early 2025 as companies scrambled to get goods into the U.S. before possible new tariffs, pushing the trade surplus up to 52 billion euros. But that rush was short-lived — exports dropped for three straight quarters after that: down 6.7% in Q2, 0.7% in Q3, and 0.8% in Q4 — as demand leveled out and trade jitters lingered. The euro's appreciation has only added to the pressure: The currency has jumped about 13% against the dollar over the past year, making EU goods pricier for buyers abroad — even where tariffs don’t apply.

The EU still runs a large surplus with the United States, driven mainly by machinery and vehicles — the very trade gap that’s been a sore spot for Washington. But that position is looking a lot shakier: In December, EU exports to the U.S. sank 12.6% year-on-year, even as exports to China, the U.K. and Switzerland all went up. That shows the squeeze is really hitting the transatlantic relationship, not exports overall.

Chemicals and related products — which covers everything from pharmaceuticals to plastics — saw the biggest export drop of any sector in Q4, falling 8.5%. The surplus here slid from 57.8 billion euros to 49.3 billion in just one quarter — an 8.5 billion swing that Eurostat didn’t explain. December’s numbers show this wasn’t just a fluke. Chemicals exports were down 5.3% year-over-year, with the monthly surplus shrinking from 19.7 billion euros a year ago to 16.2 billion.

A firmer euro combined with higher tariffs would be a "double-whammy for eurozone exporters, further eroding European firms' competitive position in the U.S.," said Konstantinos Panitsas, an economist at the U.S.-based economic research organization Conference Board.

Still, with the surplus hanging on in Q4, the EU could be facing even more pressure from the Trump administration.

On the bright side, the wider economy showed some signs of life. EU GDP grew 0.3% in the fourth quarter, adding to a year-on-year expansion of 1.5%, and all six of the bloc's largest economies — Germany, France, Italy, Spain, Poland and the Netherlands — posted positive growth. Economic confidence also got a boost in January 2026, jumping 1.9 points to 99.2, its highest since June 2022, thanks to brighter moods in industry, services, retail and among consumers.

But the more granular activity data tells a different story about where the economy stood as the quarter ended. Industrial production dropped 0.8% in December. Retail sales fell 0.5% that same month, wiping out a small gain from November. Service production slipped 0.5% in November, erasing earlier gains. All three numbers moved in the wrong direction, hinting that the quarter ended on shakier ground than the headline GDP figure suggests.

There’s also more stress on businesses. Bankruptcies went up 2.5% in Q4 2025, the third straight quarter of increases. New business registrations rose a little — up 0.5% — but the steady climb in bankruptcies shows companies are still feeling the strain, especially with trade and production staying weak.

Meanwhile, the government deficit widened to 2.9% of GDP in Q3 2025, up from 2.5% the quarter before, and the debt-to-GDP ratio ticked up to 82.1%. France stands out, with a deficit of 6.6% of GDP and debt at 117.7% — the highest among the big economies.

The EU economy has steadied, but it hasn’t picked up steam — growth is slow, people are cautiously optimistic, but production and trade are still dragging as 2026 gets underway. European Central Bank President Christine Lagarde warned earlier this month that “a stronger euro could bring inflation down beyond current expectations.” That just adds another layer of uncertainty to an outlook already clouded by weak exports and sluggish domestic activity.

With Washington turning up the heat over trade gaps and energy policy, the outside world doesn’t look any easier than the situation at home.

Courthouse News correspondent Yuval Molina is based in Brussels, Belgium.