Data from the ONS suggests that the UK exported £60.4 billion in goods to the U.S. in 2023, with top categories including machinery and transport equipment (£27.2 billion), chemicals (£14.2 billion), and materials (£4.2 billion). Key exports included medicinal products (£8.8 billion), cars (£6.4 billion), and power generators (£5.2 billion). However, recent developments have introduced new dynamics, with the U.S. Administration imposing a 10% tariff on all UK exports to the U.S., with higher rates of 25% specifically targeting cars and car parts. These tariffs are expected to make British goods more expensive in the U.S. market, potentially reducing demand and impacting sectors like automotive and manufacturing. ONS figures suggest over 285,100 businesses export goods oversees from the UK.
In the U.S., firms are prioritizing supply chain diversification, including reshoring and domestic sourcing, as a key strategy to mitigate tariff risks. This trend, which has been expanding since 2020, is now accelerating due to new tariffs. As a result, some manufacturers are establishing, expanding, or shifting production to the U.S. In the UK, business confidence has declined amid ongoing uncertainties. Despite facing the lowest tariffs in the latest announcements, analysts suggest the UK could still follow the broader trend of supply chain diversification.
Supporting this theory, search trends and industry discussions indicate a growing interest in nearshoring and friend-shoring, reflecting businesses’ efforts to navigate shifting cost pressures. In response, UK companies may increasingly target exports to neighbouring markets with more favourable tariffs or consider relocating operations to newly established freeports to offset rising costs. What remains certain is that engagement has surged significantly compared to levels observed two months ago. While mitigation strategies like reshoring offer long-term stability, they come with high costs and require significant multi-year investments.
Beyond tariffs, the broader policy landscape—the “panorama of the proposed”—encompasses potential shifts in tax, energy, immigration, regulatory, and shipping policies. A key proposal from the U.S. Trade Representative would impose a $1 million to $1.5 million fee per U.S. port call on vessels built in China or operated by Chinese companies. If enacted, this could significantly reshape trade dynamics by consolidating container traffic at major U.S. ports, reducing activity at smaller ports, and diverting some cargo to Canadian and Mexican ports. In response, China may re-evaluate its trade flows, potentially increasing exports to the EU and UK instead. As a result, we could see heightened activity from China-based retailers and third-party logistics providers (3PLs) in these markets.
It is evident that businesses in the UK are increasing their stock levels to mitigate potential supply chain disruptions in the short to medium term. Data from the ONS show that in the fourth quarter of 2024, the stock of goods held by firms rose by £6,716 million. This increase clearly reflects a shift by occupiers from a “just-in-time” to a “just-in-case” supply chain strategy, ensuring continued business activity amidst uncertainties requiring more warehouse space within the UK.
