(Bloomberg) --
Americans are big buyers of British exports such as Land Rovers, machinery, chemicals and a string of blockbuster pharmaceuticals — a special relationship that leaves UK companies particularly exposed to Donald Trump’s plan to push up tariffs.
While it remains unclear how the US president-elect’s policies will affect Britain, he campaigned on a pledge to raise tariffs as much as 20% on goods from most countries in the world, with higher rates for China and Mexico.
Data provided by the McKinsey Global Institute and UN Comtrade shows the US as the leading destination for nine out of 15 sectors of British goods exports. The same figures show the US as the top customer for only four German sectors, by comparison, and one from France.
“Where goods only are concerned, the US has a more dominant share of UK exports in many sectors than would be the case for key countries in the EU,” said Tera Allas, director of research and economics at McKinsey UK & Ireland.
Britain’s large services sector will give it some relief from Trump’s plans, with certain shares potentially offering a safe haven. Yet the UK’s goods exports are not insignificant. Large manufacturers with more than 250 workers employ, in total, about 1 million people according to official figures earlier this year, and make up the bulk of the factory sector’s £68 billion ($86 billion) in revenue.
Almost a fifth of the UK’s $89 billion in transport equipment sales — the country’s second biggest export — came from the US in 2022, according to the McKinsey data. The sector includes Rolls-Royce Holdings Plc, which earned almost a third of its global sales from North America in 2023; however, the FTSE 100 engineering titan also has significant operations in US states such as Indiana, Michigan and South Carolina.
The US made up almost a quarter of Jaguar Land Rover’s £29 billion revenue in its last financial year, and 42% and 52% of sales respectively for AstraZeneca Plc and GSK Plc. Both pharmaceutical companies are working to beef up their manufacturing presence in the US.
Trade between America and Britain was worth in excess of £300 billion in the year through March, with no other country accounting for more of the UK’s imports or exports. Almost two-thirds comes from tariff-exempt services, with goods exports only making up a couple of percentage points to GDP, signaling that the aggregate impact of Trump’s tariffs is likely to be limited.
Yet by targeting the handful of big companies that dominate UK manufacturing services, Trump’s latest protectionist drive could still have a ripple effect on jobs, revenue and growth. Bloomberg Economics recently warned that in a worst-case scenario Trump’s trade policies could drag UK GDP below 1%. Even if he takes a more gradual, measured approach, the uncertainty over his plans is likely to weigh on demand.
“UK goods exports look very exposed to potential Trump tariffs,” said Emily Fry, senior economist at the Resolution Foundation, a think tank. “The US is our biggest goods export market, and several sectors such as pharmaceuticals have high exposure.”
Pharma and Factories
Sectors such as pharmaceuticals, medical and scientific instruments, machinery and transport equipment are particularly exposed to the US, relying on the American market for around 20% of exports.
“These sectors are likely to be targeted by Trump tariffs,” said Maxime Darmet, senior economist for the US, UK and France at Allianz Trade. “For instance, machinery & equipment are core manufacturing goods for which the US runs a trade deficit against most countries and would like to re-shore the production on US soil.”
When AstraZeneca CEO Pascal Soriot was recently asked about the impact of the Trump administration and potential tariffs, he said that typically pharmaceuticals aren’t included in such measures.
Since Brexit, the UK has held high hopes of a trade deal with the US, and the governing Labour party has stressed its commitment to free trade in recent weeks. However, officials warned ministers that previous attempts to strike a deal proved difficult, partly due to disagreements over climate change, tariffs and government procurement.
--With assistance from Ashleigh Furlong and Lucy White.
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