The U.S and U.K. Davos Big Hug Means Bigger Trade, Right? Maybe…

by: The Knowledge Group

January 30, 2018


When it comes to international trade, it’s a natural assumption that the United States and the United Kingdom should be connected. Both countries have a history with each other, they share the same language, and may of their world position and views are similar. So, an announcement from President Trump that trade should increase significantly between the U.S. and the U.K. makes perfect sense conceptually.

While the appropriate buzzwords have been used in front of the press by President Trump and Prime Minister May, such terms as “joined at the hip” and “shoulder to shoulder,” the devil is in the details. Both countries have shifted their economic platforms predominantly to service industries, so actual viable trade is more along the lines of technology, intellectual property benefits, services, and trade support (distribution, shipping, and similar logistics) than actual manufacturing. There are still elements of goods and commodities both countries desire from each other, but it does not make up the bulk of trade potential possible if the two leaders’ press statements ring true in practice.

Agricultural and food industries would be the biggest winners of any trade activity increase. Forestry products, seafood, and brand snackfoods from the U.S. are the most in demand. Equipment and consumer electronics stand to benefit as well. On the U.K. side of the picture services, technology end products, consumer goods, tourism, advanced engineering, professional services, creative arts and entertainment, and media all see bright promise as well.

The annual Davos meeting of world leaders in Switzerland has brought out more government “world love” statements between the two countries, which diplomats and similar are keen to point out. However, industrialists and the businesses sectors will look for more realistic signs of intent, such as reduced customs regulations between the two countries and removal of annoying tariffs. A key symbol of real action would be a new trade agreement, making certain Brexit means no more European Union taxation on U.S. imports and similar for the U.K.’s goods coming into the U.S. However, the challenges are high; the U.K. on the natural has far more government involvement in business than what markets experience in the U.S. and that still can lead to imbalances that favor U.K. businesses but leave U.S. businesses overseas hung up in civil bureaucracy for permits and similar.