President Donald Trump touched down in the UK today amid warnings over the impact of his trade war with China on already struggling UK manufacturers.
His arrival coincided with the worst manufacturing result for almost three years.
The IHS/Markit CIPS Purchasing Managers’ index fell from 53.1 in April to 49.4 in May, signalling shrinking output and the worst figure since the immediate aftermath of the Brexit vote in 2016.
Orders fell from domestic and overseas sources. Duncan Brock at CIPS said: “Concern for manufacturers has deepened. There is the likelihood of more bad news to come.
“Trade wars hotting up could tip the scales even further and increase the likelihood that the UK manufacturing sector will remain in contraction territory.”
Rob Dobson, a director at survey compiler IHS Markit, said: “Demand was impacted by ongoing global trade tensions, as well as by companies starting to unwind inventories built up in advance of the original Brexit date.
“Some EU-based clients were also reported to have shifted supply chains away from the UK.”
Some economists fear Trump is willing to knock the US into a recession to be seen to win his trade battle with China, a fight that could hit businesses and consumers across the world.
The Trump administration has more than doubled tariffs on $200 billion of Chinese products, sparking Chinese retaliation. Trump also slapped 5% tariffs on Mexican imports from June 10 over the weekend. China has accused the US of “intimidation and coercion”, spooking traders across global markets.
In London the FTSE 100 fell 74.22 points, or 1%, to 7087.49 points in edgy trading. That followed overnight falls in Asian markets which are particularly exposed to a trade war.
In China, Hong Kong’s Hang Seng index fell 0.4%, while the Shanghai Composite shed 0.5%. Japan’s benchmark Nikkei 225 was 1.3% lower. Last week was the Dow’s worst since 2011.
The latest figures suggest China has been hurt more than the US by the tariffs war. China’s export volume to the US fell by almost 10% year on year in the first four months of 2019.
But defence minister General Wei Fenghe said: “If the US wants to talk we will keep the door open. If they want to fight, we will fight to the end.”
