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The Trump Effect

US trade policy, as we are all aware, has moved sharply in favour of domestic firms over the last year. In March 2018, the US government announced that it would impose tariffs on imports of steel and aluminium from China of 25% and 10% respectively (which has now been extended to include the EU, Canada and Mexico).

The US has since announced a host of further tariffs, impacting $275 billion worth of car imports from China, as well as today’s announcement of tariffs on 6000 household goods to a value of $200 billion. The Chinese have themselves retaliated, imposing tariffs on US goods, striking fears of a full blown trade war, between the world’s two most powerful economies.

From a UK manufacturing perspective this has the potential to compound what has already been weak trade growth to the US in recent years. UK manufacturing exports contracted by 0.1% in 2016, and were flat in 2017. And yesterday’s rather disappointing trade statistics showed further signs of this, with basic metal exports down 7% and 6% in the two months since the tariffs were first announced.


But it’s not just tariffs we should be concerned about

While the imposition of tariffs, and the prospect of a cycle of retaliation will have clear negative effects on the global economy and trade outlook (Paul Krugman a leading trade economist believes a generalised trade war could see world trade shrink by 70%), it is not the only concern.

There remain significant structural factors at play, with a host of government intervention schemes such as financial incentives, bailouts and export incentives distorting global trade. Indeed the Global Trade Alert estimates that in 2017 75% of G20 exports faced some form of trade distortion.



These non-tariff barriers have become more prevalent over the past 10 years, with many of them appearing to have been introduced as temporary measures in response to the challenges thrown up by the financial crisis. They have however since remained in place, outliving their anticipated shelf life.

As a result manufacturers are increasingly coming up against policies enacted to favour local businesses and lock out competitors when exporting. This, combined with the revival in trade protectionism, makes for a worrying trade backdrop, and compounds the need for a government export strategy.


So what support do manufacturers need?

Our latest survey and report explored the types of support that could make a difference when exporting. The results make clear that many companies, including experienced exporters, benefit from external help in cutting through challenges and in developing and executing their international strategies.

Importantly however, as the chart below illustrates, manufacturers have a need for tailor made, market specific help, rather than generic information on exporting. Indeed the support priorities identified by around half of manufacturers were information on opportunities and demand in individual markets, guidance on marketing business capabilities in other countries and assistance with meeting customers and other contacts overseas.



The government’s export strategy therefore must, amongst other aims, offer companies of all sizes clarity on the strategic aims of government-backed export support, while better aligning resources to match companies’ requirements for market-specific support and intelligence. You can read our full recommendations here.


What is clear is that given the return of protectionism, the UK’s looming EU exit date, and signs that the cyclical upturn is coming to an end, there is a lot riding on the government’s upcoming export strategy, when it comes. Better collaboration between manufacturers and government is needed to build the right support, and implement the right strategies in order to ensure our exporters contribute to sustainable economic growth, in what is a constantly evolving and unpredictable trade environment.

Blog / Policy / Trade