British exports to US suffer record hit from Trump tariffs

British goods exports to the United States plummeted by a record 33% in April, a £2 billion drop to £4.1 billion, following the imposition of tariffs by the U.S., contributing to a wider-than-expected UK trade deficit of £23.2 billion, the largest since January 2022; the British Chambers of Commerce attributed the decline to the tariffs, with thousands of UK exporters facing lower orders and higher costs, despite a recent agreement to remove some tariffs, which has yet to be implemented.

Analysis

British goods exports to the United States experienced an unprecedented 33% month-on-month decline in April, falling by £2 billion to £4.1 billion, the lowest level since February 2022 and the most substantial drop since monthly records commenced in 1997. This significant contraction is directly attributed to new U.S. tariffs, including 25% on British steel and aluminium effective March 12, and increased tariffs on car imports to 27.5% plus a 10% blanket tariff on other goods from early April. The export slump was a key factor in a larger-than-anticipated fall in UK gross domestic product for April and contributed to Britain's global goods trade deficit widening to £23.2 billion, its most extensive since January 2022 and nearly £3 billion above economists' forecasts. The British Chambers of Commerce highlighted that while some March export activity involved front-loading to preempt tariffs, April's goods exports were still 15% lower year-on-year, indicating sustained pressure on UK exporters who are now contending with diminished orders and elevated supply chain costs. Despite an outline agreement last month to remove additional tariffs on steel, aluminium, and cars, this deal is not yet implemented, and the 10% tariff on other goods remains, casting ongoing uncertainty over trade with the UK's largest single goods export market. The severity of this data contrasts with the Bank of England's earlier, more modest, estimation of the tariffs' economic impact.

Key Decisions for Investors

• Investors should closely monitor the timeline and final terms of the U.S.-UK tariff removal agreement, as its implementation status is crucial for the outlook of affected British exporters.
• A cautious stance may be warranted for UK companies with substantial export dependency on the U.S. market, particularly in sectors like automotive, steel, and aluminium, until there is greater clarity on tariff resolutions and trade normalisation.
• The widening UK trade deficit, exacerbated by these export declines, could exert downward pressure on sterling and warrants consideration in macroeconomic assessments and currency hedging strategies.