US-UK Trade and Foreign Investment

Euijin Jung (PIIE) and Zhiyao (Lucy) Lu (PIIE)
June 27, 2016

How will the British exit from the European Union affect US-UK trade and investment? Here is a guide to the status quo.

Trade in Goods

The United States ran a merchandise trade deficit of $3 billion with the United Kingdom in 2015. The value of US goods exported to the United Kingdom was $56 billion, and the United States purchased $59 billion of goods from the United Kingdom. Total trade in goods with the United Kingdom contributed 3 percent to US two-way merchandise trade with global markets, making it America’s 7th largest trading partner last year. The United States was a net exporter of machinery and transport equipment, miscellaneous manufactured articles, and inedible crude materials to the United Kingdom, while a net importer of chemical products, beverages and tobacco, and mineral fuels from the United Kingdom (figure 1).

Figure 1

Trade in Services

The United States continued to be a net exporter of services to the United Kingdom in 2014. Total exports reached $64 billion and total imports were $50 billion, leading to a bilateral service surplus of $14 billion. The United States ran notable trade surpluses in financial services and intellectual property related services ($9 billion and $6 billion, respectively) and a $3 billion trade deficit with United Kingdom in insurance services (figure 2).

Figure 2

Foreign Investment

The United Kingdom has been one of major destinations of US foreign direct investment (FDI) as well as a key source of FDI in United States. The US direct investment stock in the United Kingdom was valued at $588 billion in 2014, accounting for 12 percent of US outward FDI stock to the world. About two-thirds of US direct investment in the United Kingdom went to holding companies ($248 billion) and finance and insurance ($152 billion) (figure 3). Meanwhile, direct investment by UK companies in the United States was worth of $449 billion in 2014, representing 15 percent of US total inward FDI stock. UK companies largely invested in the US manufacturing sector ($167 billion)—mainly chemicals—and depository institutions ($60 billion), which accounted for about half of the total stock of US inward FDI from the United Kingdom (figure 4).

Figure 3

Figure 4