Britain recorded a rare goods trade deficit with the United States at the end of last year, data published on Thursday showed. The UK hopes this will strengthen its case to avoid new tariffs imposed by President Donald Trump.
The Office for National Statistics reported that Britain’s goods trade balance with the US showed a deficit of 164 million pounds ($205 million) in the fourth quarter, compared with a surplus of 713 million pounds in the third quarter.
Excluding large fluctuations during the height of the Covid-19 pandemic, this is the first goods trade deficit with the US since 2011.
Since returning to office last month, Trump has imposed a range of tariffs and threatened to impose more levies, targeting countries that export more to the US than they import from it.
Britain and the US trade hundreds of billions of dollars in goods and services each year, but London hopes that the ambiguity in the trade data will help it secure exemptions from Trump’s tariff plans.
Earlier this month, Trump said he believed something could be “achieved” with Britain over the threat of tariffs, but later complained that the US had a “huge” trade deficit with its historic ally.
However, the two countries actually reported an overall trade surplus with each other – including goods and services – due to differences in measurement methods. British Prime Minister Keir Starmer hopes this will give him an advantage.
Machinery and transport equipment make up the largest share of goods imports and exports between Britain and the US, according to the ONS, while the US is Britain’s main source of fuel.
Thursday’s data highlighted Britain’s shift towards trade in services. Goods exports continued to fall in the fourth quarter, particularly to former trading partners in the European Union.
After adjusting for inflation, Britain exported just £13.6 billion worth of goods to the EU in December. Excluding the pandemic, this would be the lowest reading since November 1997, shortly after monthly records began.
By contrast, Britain’s imports of goods from the EU have remained stable since Brexit. This means Britain’s trade deficit with the EU – a contentious issue among Brexit supporters – has widened since Britain left the bloc, reaching a record high of 32.9 billion pounds after adjusting for inflation in the fourth quarter.
Overall, trade in the fourth quarter weighed on Britain’s economy, but other factors such as higher government spending and rising inventories helped the economy grow by an unexpected 0.1%. Economists surveyed by Reuters had previously expected a 0.1% decline.
“The trade deficit is expected to remain wide in 2025 as rising wholesale energy prices push up import costs and Trump’s tariff threat dampens global trade,” said Elliot Jordan-Doak, senior UK economist at consultancy Pantheon Macroeconomics.
The Bank of England’s chief economist, Huw Pill, said in an interview with Reuters published on Thursday that higher US import tariffs would not necessarily lead to higher inflation but could have a “fairly significant impact” in the longer term.
