Welcome news for the UK economy today, as GDP growth figures for June have beaten many economists’ expectations. US Treasury secretary Scott Bessent has also been talking about possible deals with businesses for export licences, following the news earlier this week that the White House struck an agreement with Nvidia and AMD to permit exports of semiconductor chips to China.
UK growth beats forecasts
The Office for National Statistics (ONS) released the latest UK GDP figures this morning, showing an unexpected bump in growth to 0.4% in June.
It follows 0.1% drops in both May and April, and caps an overall 0.3% growth rate in Q2 of this year, following a 0.7% rate in Q1. Real GDP per head grew 0.2%, meanwhile, beating the same period last year by 0.7%.
A Reuters poll of economists predicted growth of only 0.1% for June, and the stronger figure comes as chancellor Rachel Reeves is planning her next Budget, due in the autumn.
In a piece for the Guardian this week, Reeves said that productivity would be a focus of those plans, as would “building a stronger economy”.
More US export deals?
Scott Bessent, the US Treasury secretary, hinted in remarks to Bloomberg TV yesterday that more deals in the style of the one agreed with chipmakers by the White House earlier this week could be on their way.
Earlier this week, Nvidia and AMD agreed to give the US government 15% of their earnings from advanced chips sold in China, in return for export licences.
“This is a very unique solution,” he said, with regards to the deal on chips.
“I think we could see it in other industries over time. Right now this is unique, but now that we have the model, the beta test, why not expand it?”
There is some suggestion that this form of deal is not permitted under the US Code, which specifies that “no fee may be charged in connection with the submission, processing, or consideration of any application for a license or other authorization”.
We’ll be exploring this question as part of a feature on the national security justifications used by the US and others for protectionist measures in tomorrow’s Daily Update.
Tariff threat for Russia and India
Bessent also raised the possibility of further ‘secondary’ tariffs on India, a major purchaser of Russian oil, should talks between US president Donald Trump and Russian president Vladimir Putin this week fail to yield progress towards an end to the war in Ukraine.
India faces a total 50% rate on its goods entering the US from 27 August, 25% of which is a direct result of its trading relationship with Russia.
Bessent said that support is needed from Europe on US policy towards countries buying oil from Russia, stating that “Europeans need to join us in these sanctions. The Europeans need to be willing to put on these secondary sanctions”.
European leaders have urged Trump to defend Ukrainian interests in the talks with Putin, which take place in Anchorage, Alaska tomorrow. Ukraine lead Volodymyr Zelenskyy is in London today, meanwhile, for discussions with prime minister Sir Keir Starmer.
India faces a 1% drop in GDP and a 60% fall in its exports to the US should the 50% rate stay in place, according to Bloomberg Economics estimates.
What else is happening in trade
· Leaders of SMEs speaking to the Times called for easier access to support from government and regulators – something Chartered Institute public affairs lead Grace Thompson recently noted is a central part of the government’s Industrial Strategy and small business plan
· Tensions between China and India could be easing, as China lifted some curbs on urea exports to its neighbour
· Rising tariffs on imports to China are spurring a rethink in procurement of crucial pharmaceutical industry supplies, according to a Reuters report
Yesterday in Trade
Steady US inflation boosted hopes of a cut to the Federal Reserve's interest rate, while the effect of tariffs has pushed China to refocus on domestic consumption. Read the full story here.
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