How the UK Economy Looks Exposed to Trump Tariff Threats

It’s not just the royals, high tea and Downton Abbey. Americans also love British drugs, chemicals and Range Rovers, leaving the UK more exposed to Donald Trump’s tariff threats than other European countries.

The US is the No. 1 destination for nine out of 15 British categories of exported goods, according to data from the McKinsey Global Institute and UN Comtrade. By comparison, Germany has four sectors where the US is the main buyer, while France has only one.

Yet in some circles in Britain, there’s been a collective shrugging of shoulders relative to the panic set off elsewhere by Trump’s campaign plans to slap levies of as much as 20% on imports from even the closest of economic allies. After all, the US may be the UK’s largest individual trading partner, with imports and exports totaling £300 billion annually, but almost 70% of that comes from banking, consulting and other tradeable services not usually envisioned as tariff targets, the argument went.

That may be right, but tariffs could still do plenty of damage to the UK economy, as we report here today.

Range Rovers
British manufacturing is dominated by a handful of mammoth goods makers. Imposing tariffs on the country’s goods would hit large companies that employ 1 million people and generate the bulk of the manufacturing sector’s £68-billion turnover. Think Jaguar Land Rover, which derived a quarter of its revenue from the US, or AstraZeneca’s 42% reliance on the American market for its sales.

That could have huge implications for British jobs and economic growth. A Bloomberg Economics analysis recently estimated that in the worst-case scenario, Trump’s trade policy could push UK growth below 1% next year, bringing it even further away from the Labour government’s ambitious 2.5% target.

Also, the UK sectors relying most on the US — pharmaceuticals, medical and scientific instruments, machinery and transport equipment — are the ones that are most likely to be tariff targets.