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British businesses, along with many others across Europe, have always seen the US as the one market they really wanted to crack. It was where they could turn themselves from a regional into a global company. That has started to change.
The US has dropped out of the top three destinations for British manufacturers for the first time in a decade, according to a survey by Made UK. Only 4% of UK-based manufacturers said they would currently consider setting up an operation in the US. Investors are looking elsewhere as well, with a flood of fresh money moving into Europe as the major funds rotate out of US assets. British exports to the US dropped by £2 billion in April, according to the Office for National Statistics, the largest monthly fall on record.
That is understandable. When Donald Trump was elected to the presidency last year there was a wave of optimism that he would run a pro-business administration focused on tax cuts and deregulation. The reality has been very different.
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The tariffs have restricted trade, imposed significant tax rises on companies, and threatened to throw supply chains into turmoil. Stocks plunged into a bear market almost as soon as the tariffs were announced, and many US businesses reacted with horror. Worse, the tariffs were chaotically implemented, with levies imposed seemingly at random, and then changed again a few days later. It has been a complete mess, and one that has damaged faith in the administration.
But getting out of the US is also a big mistake. The tariffs were a terrible idea and one that will damage the competitiveness of the economy. But many of them have been lowered already, exemptions have been granted where necessary, and most of the rest will probably be negotiated away in a series of “great deals” negotiated by the president on the golf course. Once it has all blown over, the US will remain the most exciting major economy in the world.
From 2008 to 2025, GDP in the US rose by 87%, according to the World Bank, while in Europe it grew by just 13.5% over the same period. If we rewind to the financial crisis, Europe’s total output was 110% of the US total, but by last year it was just 67%, although, of course, it still has a far larger population.
On any measure you care to look at, the US has been growing at a far faster rate than anywhere on this side of the Atlantic. It has achieved energy independence, mostly by developing fracking, which remains banned in Europe, and is now a major energy exporter. Its tech industry has surged to become by far the most powerful in the world and it is now taking a world-leading position in AI as well. Indeed, its only serious competition in AI is coming from China, with Europe, and the UK, sliding into irrelevance.
Trump’s policies aren’t all bad
Many of Trump’s policies beyond the tariffs will stimulate growth. By offering tax exemptions for overtime, he will encourage longer working hours, and that will boost productivity.
Loosening restriction of bank capital and listings, imposed in the wake of the financial crisis, will make it easier for companies to raise capital, and allow more mergers, and that will help to boost investment.
A lot of the wasteful spending from the Biden era has been scaled back, but the subsidies for semiconductor manufacturing and other high-tech industries are continuing, and that will eventually strengthen its industrial base.
Even the tax breaks for green energy remain in place, with solar power and battery-storage facilities still expanding at a rapid rate across the US, and with extra nuclear capacity now added to the mix. Ironically, it seems increasingly likely that the US will hit the target for a net-zero economy before anywhere in Europe does.
The US market remains a tough one to crack, but there is still more money to be made there than anywhere else. It is hard to see Europe catching up now, or providing the same kind of opportunities. If companies give up on it now, it will only get harder to get back in later. If businesses ignore it because of a few strange decisions by Trump, they will lose out permanently – and that will prove very expensive.
This article was first published in MoneyWeek’s magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.
