This week in trade has seen fallout from the UK’s tariff reduction deal with the US, a surprise boost to UK GDP in Q1 and increasing anticipation of next week’s EU-UK summit in London.
The big picture: A trade truce was called between the US and China after talks last weekend led to a tariff reduction from both sides. Set to last 90 days, the tariff ‘pause’ will give the two nations time to negotiate a fuller deal.
The BBC reports of relief on China’s factory floors, as emptying order books are once again being filled with US purchases. Reuters covered a fall in the number of ‘at risk’ jobs, from up to a possible 6.9 million down to under 1 million.
However not all trade agreements were good news for China. It criticised the UK-US Economic Prosperity Deal (EPD) this week, questioning clauses requiring the UK meet US security standards in its steel sector, which specified “the nature of ownership of relevant production facilities”.
China’s foreign ministry told the FT that “co-operation between states should not be conducted against or to the detriment of the interests of third parties”.
The deal could harm the UK’s attempts to improve relations with Beijing, with a government adviser warning that “China will need to respond”.
Elsewhere, World Trade Organization director general, Ngozi Okonjo-Iweala, warned the EPD could undermine the ‘most favoured nation’ trading principle, under which countries must offer the same tariff rate to all trading partners with which it does not have a bilateral trade agreement.
Good week/bad week: Good UK economic news this week, as the Office for National Statistics shared data suggesting the UK economy grew 0.7% in Q1 this year. Economists had predicted 0.6% for the quarter, with no growth whatsoever in March – when the economy still increased by 0.2%.
Experts have suggested that a surge in production and sales ahead of the implementation of Trump’s tariffs were likely behind the boost, with export volumes up 3.5% in Q1 and US figures increased.
However, despite the EPD, the UK still faces higher US tariffs than it did before the Trump president, with concerns that the economy will be hit when these come into effect. Capital Economics economist, Paul Dale, said Q1 "might be as good as it gets for the year" for growth.
South-East Asian manufacturing nations are finding themselves in a tricky spot this week, as export orders from China surged by as much as 20% amid US tariff tensions.
Ordinarily a perk for nations acting as intermediaries in transhipment routes, experts warn that spiking exports to the US from these nations could attract Trump’s ire.
Speaking to the FT, Sharon Seah, senior fellow at the Iseas-Yusof Ishak Institute, said:
“South-East Asia is coming under more pressure than other regions in the world... because of origin-washing.
“The US thinks that the Chinese will use [the region] as a backdoor to continue exporting to the US markets.”
The region has benefitted from increased manufacturing orders and transhipments, as firms globally sought to diversify from Chinese manufacturing in the wake of higher US tariffs following Trump’s first presidency, and increased geopolitical tension in the South Pacific.
Quote of the week: “The two are not mutually exclusive – it’s not about having a good relationship with one of the EU or US, the government will look to have both. However, trade is three-dimensional. What you say with one trading partner can impact what you can do with another.”
Chartered Institute director of EU and international, Fergus McReynolds, speaking ahead of next week’s EU-UK summit, at the organisation’s LinkedIn Live session on the event.
The week in customs: After a four-month ban, UK import restrictions on German animal products were lifted, after the Department for Environment, Food and Rural Affairs (Defra) accepted German authorities’ assessment that the country is free of Foot and Mouth disease.
Back in January an outbreak of the disease was declared, with regions in the North West designated a ‘containment zone’.
In an email to traders, Defra’s Animal and Plant Health Agency confirmed that imports can resume “provided that all other import conditions are met”, including evidence of “attestations in the relevant export health certificate”.
What else we covered: Members can hear more from McReynolds on the EU-UK summit as he discussed the wider geopolitical significance of the talks this week.
We also shared sector-specific insights from our export controls and food and drink Special Interest Groups held last week.
After the Charter Institute became a preferred supplier to the Career Transition Partnership, we spoke to Chartered Institute employees and members to learn more about the valuable skills military service develops and how training can support ex-service personnel to apply these skills to civilian roles after leaving the armed forces.
True facts: One company not feeling relief over US-China trade truce is UK-based toy firm Character Group, which manufactures toys for brands including Teletubbies, Peppa Pig and Doctor Who. The Independent reports that the group paused shipments of toys from China to the US, which accounts for 20% of Character Group’s sales.
The wider industry is likely to continue struggling while trade tensions continue, with China exporting US$38bn (two thirds) of the world’s $57bn toy export total, according to the Observatory of Economic Complexity. Over one quarter of that is US-bound.
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