Trump's tariffs: Good thing he's not looking at UK financial services exports

For the moment, Donald Trump seems disinclined to levy tariffs on the UK. He also seems disinclined to levy tariffs on services. The text of Trump's Saturday tariff edict is instead all about imposing 25% tariffs on goods from Canada and Mexico (Canadian "energy resources" excluded) and levying 10% tariffs on goods from China. EU tariffs are threatened, but the UK seems to be safe(ish).  

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Why is this? The Financial Times noted at the weekend that Trump's gentler treatment of the UK might have something to do with the US's own trade data. This says that America runs a $14.5bn trade surplus with the UK. However, the data is subject to accounting foibles and to the treatment of Jersey, Guernsey and the Isle of Man. While US data indicates a US surplus, UK data from the Office of National Statistics (ONS) does not. Instead, it indicates a UK surplus, based on the fact that the UK exports £70bn more in services to the US than it imports. 

What are those services? As the ONS chart below shows, they're a lot of "other business services" (AKA 'research and development, professional and management consulting and technical and trade-related services') and a lot of "financial" services. 

The ONS says that while the UK exports around £30bn of financial services to the US, it only imports £6bn of financial services in return. Similarly, the ONS thinks that the UK exports around £58bn of 'other business services' to the US, and only imports around £30bn in return. 

Is this what Trump had in mind when he declared today that the UK is “way out of line” in terms of US trade (although not as bad as the EU, which he said is an "atrocity"). Maybe.

Imposing tariffs on services is much harder than imposing tariffs on goods, but the treatment of banks under Brexit gives an indication of what happens when services trade is less than free flowing. The UK's trade with the US can be "worked out," said Trump, without explaining how. Presumably he's not planning the relocation of London bankers to New York.

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Photo by Library of Congress on Unsplash