Can the UK come out on top of the US/Chinese automotive trade war?

by Heat Recruitment

By Dan Whitmarsh

Anyone with their finger on the pulse of global politics (or at the very least a BBC news alert app) will have noted increased tensions between the US and China as of late – specifically with regards to trade tariffs.

Direct from the ‘America First’ policy in the US today, new tariffs have been announced on 1,300 Chinese products. This follows earlier tariffs that were set on imported steel and aluminium by the Trump administration (at 25% and 10% respectively). In retaliation, China announced 106 tariffs of its own – also at 25% – on products such as cars, chemical products and soybeans… imports worth up to £36bn.

Despite the US President stating: “We are not in a trade war with China”, it seems that the exact opposite is now a very real possibility.

So, in the case of a US / China trade war, could the UK come out on top?

Today, the UK’s automotive industry accounts for 12% of the total amount of goods exported from the UK, boasting a £77.5bn turnover, and £18.9bn in value added to the economy.

Despite this, the automotive industry has racked up 12 months of falling sales in a row. Reuters noted that “After record-high sales in 2015 and 2016, full-year demand dropped in 2017 due to uncertainty about future environmental levies on diesel cars and weaker consumer spending after June 2016’s Brexit vote, which pushed up prices.”

Currently, 18.2% of all Chinese exports go to the United States, with a 59.2% growth in Chinese services improved by the US between 2006 and 2016. The result of this is something of an imbalance – one that the US is looking to rectify. The most recent data shows a trade good deficit of $347bn in favour of China.

Geng Shuang, a spokesperson for the foreign ministry, stated: “There is no winner in a trade war, and an initiator will harm itself as well as others.” He is only partly right.

With the Brexit motivation now in place for the UK to expand new markets, and a new opportunity posed by the US and Chinese trade battle, could new avenues be made in exporting to foreign soil?

Demand for British-built cars is soaring – particularly within Asian markets. According to new research, last year a 19.7% increase in demand was noted in China. In Japan, this was even higher, at 25.4%.

This increased demand was reportedly fuelled by new deals made by Aston Martin and McLaren, with the market for luxury cars rising dramatically.

With such a significant increase to tariffs on automobiles abroad, a gap in the market has emerged… one where British manufacturers can undercut the competition and deliver on the strong demand seen for luxury brands abroad.

The UK and China are now in a ‘Golden Era’ of bilateral relations, with £59bn of recorded trade in 2016 alone. With the UK’s impending exit from the EU, there is strong motivation to increase our trade links with the country. Beyond this, approaching trade tariffs between two of the world’s largest economies leaves the UK’s automotive sector in a unique position to take advantage.

If you’re looking to secure your next expert hire, or are seeking a new career opportunity yourself, get in touch with our dedicated Engineering & Manufacturing team at Heat Recruitment today.

 

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