Sophie Hale

The spotlight is on how UK goods exports are reacting to US tariffs — and so far, the answer is: pretty badly. But the quieter, equally important story is the cooling in services trade. Both shifts matter for the UK’s increasingly fragile trade mix, and must not be overlooked.

The fall in UK goods exports is broad-based as is the underperformance of UK exports to the US. Q2 + Q3 exports of chemicals, machinery & transport and misc. manufactures all fell more than 10% with the US, while cars exports to the US have plummeted by more than third vs 2024.

However, it's not just a US story. Goods exports excluding the US also fell compared to last year - down 1.3% in Q2 + Q3 vs the year before.
And no clear benefits materialising (yet) from securing lower tariffs with the US than many of its other major trading partners.

Turning back to the UKs goods exports performance, it is clear US tariffs are playing a role. Exports to the US have plummeted - 12% lower in Q2 + Q3 than the previous year. This looks worse than the relevant March OBR estimate (scenario 2) of a short-run 8% fall.

Services exports have been the clear hero in the UK trade story post-Brexit. And so slowing services trade growth is worrying - average quarterly growth has been just 1% so far in 2025 vs 4% in 2024.

The value of Q3 goods exports fell 0.7% compared to Q2, and this was due to particularly weak non-EU trade which fell 1.5% (while exports to the EU were largely flat). Services trade growth was also relatively weak, with both imports and exports inching up around 0.2%.

Quarterly trade data out this morning. Goods exports were down 0.7% compared to Q2, with weak USA exports certainly contributing. In addition, services trade growth seems to have slowed, with growth of just 0.2%.

The idea that the UK benefits is plausible — but unlikely, for two reasons:
1. It likely underestimates US capacity and intent to onshore, given other active policies to pull investment home.
2. UK firms need to believe these tariff advantages are lasting — a risky bet.

But the economy growing is not consistent with other estimates e.g. OBR suggests medium term GDP fall of 0.3 per cent which can only be partly offset by trade diversion (albeit on a slightly higher tariff input assumption).
obr.uk/economic-and...

The UK’s relative strength makes sense: UK is heavy on unaffected services trade and lower goods barriers mean possible gains from trade shifts — cheaper imports once bound for the US and an export edge into the US market.

As shown below, the UK has ended up with relatively low tariffs - our starting point was ok (we don't run a big goods deficit with the US) and the UK-US deal took off some of the sector-specific sharp edges. Only Canada faces lower tariffs by October.

Research from Yale Budget Lab looks at the impact of US tariffs. As expected, it finds the UK does relatively well. But it goes further suggesting the UK economy will be about 0.1% larger in the long run.
budgetlab.yale.edu/research/sta...

In 2018-20, median wealth among Britons in their 60s was 55 per cent higher in real terms than among those of the same age in 2006-08, whereas median wealth for those in their 30s was a third (34 per cent) lower.

Inequality control • Resolution Foundation The turbulent 2020s have had profound implications for household wealth in Britain: lockdowns pushed saving to unprecedented highs, asset prices surged and then tanked, and high inflation eroded the r...

This aligns with what my colleague
@simonpittaway
found in the UK, where wealth has also become much more unequally shared between young and old.
www.resolutionfoundation.org/publications...

On the other hand, the average net worth of households under 35 slipped from 21 percent of the overall mean in 1983 to 17 percent in 2007 to 16 percent in 2022.

The Extraordinary Rise in the Wealth of Older American Households Founded in 1920, the NBER is a private, non-profit, non-partisan organization dedicated to conducting economic research and to disseminating research findings among academics, public policy makers, an...

Research showing rising US wealth inequality across age groups: the wealth of households aged 75 and over increased from 5 percent above the overall average in 1983 to 16 percent above it in 2007, then continued to rise to 55 percent above by 2022.
www.nber.org/papers/w34131

So trade generally looking weak in August, with goods exports falling and services growth remaining weaker than last year.

There has been a worryingly flatlining of the service sector output over the past couple of months. While services output covers a lot of untradeable sectors, weaker export growth is a particularly worrying signal of a struggling service sector.
bsky.app/profile/jame...

By comparison, services exports growth has been much stronger since the start of 2024. However, 3m on 3m growth has also been tailing off since June, with growth in 2025 looking set to significantly underperform 2024.

3m on 3m goods export growth has dried up in recent months after a strong start to the year - related to US tariff policy and rising global trade tensions. But it is clear goods exports growth has been generally weak across the last couple of year.

The value of goods exports fell by 3.3% in August, driven by a substantial monthly fall in EU goods exports (down 5.3%). The value of imports was flat, with growth in EU imports matched by the fall in non-EU imports. But services trade, both exports and imports, grew in August.

Monthly trade data for August showed a fall in goods exports, flat goods imports and some services trade growth. A very brief look at the trends in the data below:

So overall July trade looked steady, but the big picture: already weak goods exports + high trade uncertainty = trouble. The extent to which the US deal can alleviate this is still to be seen.

But what is more worrying is that the weak goods performance this year is nothing new. UK goods exports have continued to considerably underperform the rest of the G7. With the UKs overall export performance buoyed by a much stronger services performance.

The weakness of exports to the US was felt across manufacturing sectors - with both chemicals and cars exports down more than 20% on this period last year.

But the impact of US tariffs seems to be materialising. UK exports to the US since April (when new tariffs were initially applied to UK goods) were 14% below their level over the same period last year (compared to just 4% lower with the world).

Global trade uncertainty has been unprecedently high, due to the tariff announcement coming from the US. And so a disruption to goods trade is unsurprising. Of course, for the UK, high trade uncertainty is nothing new, with years of high uncertainty following the EU referendum.

But taking a step back to look at year to date where does this leave us? Despite the growth in July, goods export volumes are down 1% on last year. Meanwhile services export volumes have grown 5.5% and imports by 8.2%.

Starting with monthly trade volumes, total goods (excluding precious metals) exports grew by 5.2%, driven mainly by non-EU growth. Goods imports also grew by 4.1%. Services trade on the other hand was weak in July, with exports falling by 0.4% on the June.

Exciting news: I’m back from maternity leave👶and so I'm diving straight in with today’s July 2025 trade data release. But after a few months away, I’ll also step back to see how trade has evolved so far this year.