Listening to The Economist’s podcast, I heard news about how lately, Trump’s trade policies have affected China, India and Mexico. That made wonder how the UK would be affected if Trump decides to go against it. So, let’s have a look at the trade and investment situation between the UK and the USA.
According to information from the International Trade Centre, in 2018, the UK Imported the value of US $669 billion worldwide. The UK’s exports totalled US $487 billion in the same year. That reveals a trade balance deficit as we are buying more than we are selling. The trend has been the same since 2014. The next figure shows the top 10 countries that sell products to the UK. (note that the US is in the top 3).
In terms of “shopping”, we are diversified. The US imports are just 9% of our international spend (in this category). Let’s say they don’t want to sell us anymore, we have plenty of options to source elsewhere.
The exports side is quite different with the US in 1st place with 13% of the UK’s exports. Despite this, it is interesting to see the rise of the Netherlands, China and Switzerland. See the following figure.
Regardless of the importance of the US market, it looks like the UK is looking to diversify the risk with other markets. It seems to me that at this point, we need to be more worried about the Brexit situation as Germany
and other UE countries are key trade partners. (Workman, 2019) The top 3 countries with a deficit trade balance with the UK are Germany, China and the Netherlands.
Now, let’s see the FDI situation.
Foreign Direct Investment- FDI is a relevant interconnection between the UK and the rest of the world. (Walker, 2018) FDI means either establishing a business operation or taking a controlling interest in one already up and running – usually defined as holding 10% of the market or more.
The latest data released by the Office for National Statistics- ONS in December 2018, shows that the UK’s FDI started to decline from 2016. See the following picture.
The same info shows that the US is in the top 2 of the countries that have Direct Investments in the UK. See the following figure.
With this information, the interests of the 2 economies in maintaining good trade relations are undeniable. The UK needs to become more attractive to bring FDI again, especially after Brexit.
The above contrasts with the information related to UK investment abroad, which is increasing from 2016. (It looks like many foreign and national capitals are leaving the UK).
You guess where the money goes!. Yes, you are right! To the US. See the following figure.
As I see it, the rest of the world is affected when a person like Trump is in the presidency of one of the most influential countries in the world. But it is important to remember that the US also can be affected by other countries’ decisions. The questions are, who will support who? And is it worthy to respond to “violence with more violence”?
- International Trade Centre – ITC (2019) International Trade In Goods. Available from: http://www.intracen.org/itc/market-info-tools/statistics-export-country-product/[Accessed 31stJuly 2019]
- Walker, A. Palumbo, D. (2018) The UK-US trade relationship in five charts. BBC News. Available from: https://www.bbc.co.uk/news/business-44802666[Accessed 31st July 2019]
- Ward, M. (2019) Where does the UK rank in foreign direct investment statistics?. House of Commons. Available from: https://commonslibrary.parliament.uk/economy-business/where-does-the-uk-rank-in-foreign-direct-investment-statistics/[Accessed 31stJuly 2019]
- Workman, D. (2019) United Kingdom’s Top Trading Partners. Available from: http://www.worldstopexports.com/united-kingdoms-top-import-partners/[Accessed 31stJuly 2019]