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ANALYSIS: America first, European exporters last?

While President Donald Trump said very little on trade policy during his address to Congress on Tuesday, his ‘America First’ mantra rang clear. But where does that leave European exporters?


Kristen McGachey

But there is one crucial advantage European exporters have in configuring a potential trade deal with the US – the type of goods they export.

According to the latest figures from the European Commission, the EU exported €362bn (£310bn) worth of goods to the US in 2016. Industrial products like machinery and transport equipment accounted for the bulk of that total amount (€340bn).

“Europe isn’t sending the US low cost products that they can just get anywhere,” Ali explained. “They are exporting goods that American businesses really need.”

The more likely scenario is that European companies will pass some of these higher costs of doing business onto the American consumer.

“Undeniably, this arrangement is worse for the US consumer,” he said.

Rather than stressing out over Europe’s trading arrangement with the US, Ali’s advice to investors is: “Don’t let the US and Trump take the attention away from Brexit.”

“Brexit will impact European equities and UK companies far more than Trump ever could. The nature of the negotiations and deals that are made between the UK and the EU are likely to have disproportionate effects on British and European industries.”

Although, the US remains the number one trading partner of the UK, making up 14.8% of Britain’s total exports, over half of the UK’s exports are sent to Europe.

UK companies with significant exports to the US have performed well since the Brexit vote, in part thanks to sterling weakness, but Holly Cassell, Neptune UK Mid Cap and UK Opportunities assistant manager, believes they will continue to do so even if a less favourable border tax is imposed.

“The exact nature of any proposed border tax is yet to be made clear, but in many cases UK companies making significant exports to the US benefit from manufacturing in-country,” she argued.

“As a result, sales made from these facilities may therefore fall outside the scope of any such levy.  

“An example of one such company that we hold in the Fund is Devro, the sausage casings manufacturer. The company has just completed the build of a major new manufacturing plant in the US; meanwhile its largest competitor supplies the US market from a factory overseas.

“In this case the introduction of a border tax could actually create a competitive advantage as a result of Devro’s geographical footprint.”