UK goods exports to US fell to 3-year low in June before trade deal

British goods exports to the United States fell to a three-year low of £3.9 billion in June, a significant 20% drop from the 2024 monthly average, primarily due to the impact of initial U.S. import tariffs. This decline, observed across all commodities including machinery and transport equipment, highlights the immediate negative effect of protectionist measures on bilateral trade. While a new trade deal effective June 30 aims to reduce tariffs on some sectors like cars and aerospace, a 10% tariff persists on most exports, indicating ongoing trade friction.

Analysis

UK goods exports to the United States experienced a sharp contraction in June, falling to a three-year low of £3.9 billion. This represents a significant 20% decline from the 2024 monthly average of £4.9 billion and is directly attributed to the initial implementation of U.S. import tariffs. The impact was broad-based, with the Office for National Statistics (ONS) reporting decreases across all commodity groups; machinery and transport equipment, including cars, saw a specific decline of £0.2 billion. The broader second-quarter data, which shows a fall of over 25%, suggests that manufacturers accelerated shipments earlier in the year to pre-empt the tariffs, indicating a clear disruption to established trade flows. While a new trade agreement came into force on June 30 to lower duties on cars and aerospace parts, a residual 10% tariff remains on most exports and key sectors like steel are not yet covered, implying that significant trade friction will persist despite the deal. Concurrently, British imports of U.S. goods rose by £0.2 billion, signaling a worsening trade deficit in goods with a critical partner.

Key Decisions for Investors

• Investors should scrutinize UK-listed companies with high revenue exposure to the U.S. market, as the persisting 10% tariff on most goods signals ongoing margin pressure and potential for reduced competitiveness.
• While the new trade deal offers targeted relief for the automotive and aerospace sectors, the June data reflects their acute vulnerability; it may be prudent to await Q3 trade figures to confirm a tangible recovery before increasing positions in these specific sectors.
• The sharp deterioration in the UK's trade balance with the U.S. could exert downward pressure on the British Pound (GBP), warranting a review of currency hedges for portfolios with significant GBP-denominated assets or exposure.