We now have another reason to worry about the UK economy – the possibility of slower export growth. The most dramatic cause for concern is the prospect of a trade war caused by China and the US raising tariffs. Even if these don’t apply directly to British goods, they are still a problem for us. Tariffs are taxes, and higher taxes mean lower demand, which means less spending (at one remove) on British goods.
There’s a more mundane, but perhaps greater, cause for concern. It’s that the eurozone economy seems to be cooling off. Last week, purchasing managers reported the slowest growth in activity for 14 months. There’s been, says Chris Williamson at IHS Markit, a “quite dramatic” loss of momentum in the region.
You might think there’s a big comfort here. Supply chains are globalised, so we need to import a lot if we are to export. Because of this, net trade contributed only 0.3 percentage points to real GDP growth last year despite the benefits of a weak pound and strong overseas demand. This implies that if exports falter, so too will imports, with the result that the hit to growth will be moderated.