BRUSSELS (CN) - EU exports to the United States fell to 37.4 billion euros ($43.4 billion) in November from 40.7 billion euros in October, extending a downward trend that has now accelerated to a 20% decline year-on-year, according to Eurostat data released Thursday.

The monthly drop of 3.3 billion euros came as European industrial production grew 2.5% compared to November 2024. In one sign of ramped up activity, German auto factories increased output by 7.6% compared to October.

The mismatch between European production and U.S. purchases leaves EU manufacturers in a precarious position: factories running but warehouses filling, with their largest traditional market increasingly out of reach.

The boost in production likely reflects manufacturers fulfilling pre-tariff contracts, ramping up for domestic demand and increased European defense spending, or attempting to diversify toward non-U.S. markets.

The year-on-year decline worsened from October's 14.7%, and November data from the EU's statistical office shows no stabilization four months after a July framework agreement was supposed to provide it. That deal capped most U.S. tariffs on EU goods at 15%, down from a threatened 30% rate, but appears to have done little to reverse the trend.

Europe is already pursuing alternatives. On Saturday, European Commission President Ursula von der Leyen and European Council President Antonio Costa fly to Asuncion, Paraguay, to sign a trade deal with Mercosur countries that would create the world's largest free trade zone. The agreement, 25 years in the making, was pushed over the finish line by Trump's tariff offensive, European officials acknowledge.

Still, European producers may simply be stockpiling goods with diminishing export prospects.

German factories - EU's largest industrial producer and exporter - illustrate the paradox. Although the July deal maintained 50% duties on steel, aluminum and copper under Washington's national security provisions, auto production surged 7.6% month-on-month in November, while capital goods output jumped 3%. Yet EU machinery and vehicles exports fell 1.3% year-on-year during the same period.

"External demand weakness remains a key drag, underscored by the decline in exports in November," according to Oxford Economics in a report. The London-based research firm warned the manufacturing momentum is "unlikely to last" because production gains aren't translating to foreign sales: "The improvement appears highly concentrated in a narrow set of sub-industries, leaving the recovery fragile," the group wrote.

Riccardo Marcelli Fabiani, senior economist at Oxford Economics, told Courthouse News the recent production streak "could lead to depicting too rosy a picture for European manufacturing."

"Actual purchases will be rolled out gradually," he said, even if emerging defense spending expectations may be supporting the sector. "Fierce competition from cheap Chinese exports and an unfavorable trade environment mean European manufacturers will struggle to gain international market share."

While the U.S. relationship deteriorated, Europe's trade with China reversed course in November. EU imports from China had been declining through October, falling 4.4% year-on-year. But November saw Chinese imports jump 3.8% compared to the previous year - a sharp monthly turnaround.

The EU's trade deficit with China widened to 32.3 billion euros in November from 30.3 billion euros a year earlier. China remains the EU's largest source of imports at 48.7 billion euros per month, exceeding the 37.4 billion euros in goods Europe sells to America.

The November reversal in Chinese import growth came as Trump and Xi Jinping reached a framework deal on Oct. 26, averting a threatened 100% U.S. tariff on Chinese goods that was set to take effect Nov. 1. The deal included a 12-month pause on China's October export controls on rare earth minerals.

But Chinese exporters still face U.S. tariffs of around 30% - far higher than Europe's barriers. With the rare earth crisis temporarily defused and the American market expensive to access, Chinese goods flowed toward Europe in November.

Chemical exports, traditionally a European strength, suffered the steepest November decline among major product categories, falling 12.8% year-on-year. Energy exports dropped 7.9%, while production of durable consumer goods within the EU also declined.

The EU's energy deficit did improve - shrinking to 20.4 billion euros in November 2025 from 28.2 billion euros a year earlier - but economists attributed the change to falling import volumes rather than export gains.

Europe's overall trade position deteriorated month-on-month. The EU trade surplus fell from 14.7 billion euros in October to 8.1 billion euros in November, a 6.6 billion-euro decline. For the first eleven months of 2025, the EU recorded a 122.4 billion euro surplus compared to 128.0 billion euros during the same period in 2024.

EU exports to all destinations rose just 2% year-to-date while imports increased 2.3%. Meanwhile, intra-EU trade grew 2.2%, faster than external commerce, suggesting European companies are increasingly trading with each other rather than outside partners.

Oxford Economics forecasts a "broadly sideways pattern in activity in the near term" rather than sustained growth. "We remain unconvinced that the recent strength in industrial production marks the start of a durable uptrend," the analysts concluded.

Some offset could come from emerging European defense spending, including NATO's new 5% of GDP target by 2035 and EU-wide fiscal flexibility allowing up to 1.5% of GDP in additional annual spending through 2028. But for now, that impulse is "being largely neutralized by persistent external headwinds," Oxford Economics wrote.

The deteriorating U.S. trade relationship with the EU comes as political tensions escalate over Greenland. The European Parliament is now weighing whether to freeze implementation of the July deal after Trump refused to rule out seizing the Danish territory by force. A committee vote scheduled for Jan. 26-27 on eliminating EU tariffs on U.S. goods may be postponed.

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

Source: Courthouse News Service