How exposed is the UK to the second China shock?

Financial Times Europe30 Jul 2026Sou maya Keynes sou maya.keynes@ft.com

As China’s goods exports soar and its imports sag, its biggest trad ing part ners arereact ing dif fer ently. The Amer ic ans are tak ing a “not our prob lem” atti tude, while(re)build ing their tar iff wall. The EU is anxiously con sid er ing new trade bar ri ersbut strug gling to agree on the details. What of a middle power such as the UK? As“China shock 2.0” hits, can this small island relax and let the cheap stuff roll in?

The most basic argu ment in favour is that Bri tons are acutely aware of the cost ofliv ing, and embra cing China’s out put means lower ing it. Over the past couple ofyears, UK goods prices have risen by 2.4 per cent. Megan Peters of Gold man Sachshas estim ated that the force of China’s trade flows pre ven ted them from rising by afur ther 0.8 per cent age points. Who doesn’t want a cheap elec tric car or bus to helpwith the green trans ition?

Other argu ments include the claim that “mak ing stuff” is no longer core to the UK’seco nomic iden tity and although the UK is still a trad ing nation, its spe ci al ity is pro -fes sional ser vices. Whereas the first China shock in the early 2000s caused pock etsof eco nomic pain, today there are fewer man u fac tur ing work ers to be dis rup ted byimport com pet i tion.

Out side some selec ted grumblings from makers of products includ ing steel, bicyclesand ceramic plates, busi nesses don’t seem to be wail ing about waves of unbear ableChinese com pet i tion. And when the gov ern ment erec ted bar ri ers against tradedsteel at the start of July, import ers cer tainly made their com plaints heard. Per haps,hav ing been forced by high energy and labour costs to spe cial ise in more soph ist ic -ated, bespoke pro duc tion, the UK just isn’t that exposed.

Now for the argu ments for cau tion. Even if you don’t agree with Prime Min is terAndy Burnham that re-indus tri al isa tion prom ises great riches, in this age of geoe co -nomic con flict giv ing up entirely on man u fac tur ing seems risky. And while China’sgrow ing share of UK imports along side the UK’s shrink ing share of Chinese importscould be entirely healthy, it could also set the stage for depend ence and eco nomiccoer cion.

Com par ing the UK with other major eco nom ies, it does seem less exposed toChinese com pet i tion. Based on indices of goods trade sim il ar ity con struc ted by eco -nom ists at the Fed eral Reserve, the UK’s mix of imports looks less sim ilar to China’smix of exports than those of the EU or the US. The UK also seems rel at ively securein third mar kets, given its exports have less over lap with China’s export mix thanthose of the EU, the US or Japan.

That said, when con sid er ing China’s mar ket itself, the UK’s goods export ers seem tobe in an increas ingly tough spot. China seems not to want the mix of products theUK is selling, given the rel at ive dis sim il ar ity of the UK’s exports and China’simports. (Canada and the US do bet ter on this meas ure, thanks to their energysales.) And since 2019 the mis match has grown, along with those of the EU andJapan.

Mov ing to more gran u lar trade flows, the UK gov ern ment is wary of depend en ciesthat leave man u fac tur ing vul ner able to dis rup tion. At a recent par lia ment ary hear -ing, then trade min is ter Sir Chris Bry ant shared that there were 4,482 types of goodssourced from China in 2024-25, of which 3,380 had few altern at ive sup pli ers, and911 were “crit ical to the UK”, con cen trated in chem ic als, man u fac tured goods andmachinery.

Still, Brit ish man u fac tur ers seem more eager to com plain of expens ive energy thanmoan about Chinese com pet i tion. In that same hear ing, Bry ant noted Brit ish busi -nesses weren’t par tic u larly keen to engage with the pro cess of ask ing for new tradebar ri ers. That is prob ably partly because Bri tain-based man u fac tur ers are reluct antto risk retali ation in a mar ket that for now is both sup ply ing inputs and deliv er inginter na tional sales.

So far, the UK gov ern ment’s strategy has been on the relaxed end of the spec trum,mon it or ing the risks asso ci ated with the UK-China trade rela tion ship while reach -ing for rewards. It has not applied the same bar ri ers to Chinese cars as the EU, forexample, allow ing imports to grow quickly. Two days after Bry ant’s hear ing, hisboss met Chinese min is ter of com merce Wang Wentao to com mit to a joint feas ib il -ity study of a trade agree ment cov er ing ser vices.

In the short term, the greatest threat to this approach might not be from Chinaweapon ising its dom in ance or over whelm ing Brit ish man u fac tur ers with theirstrength. Rather, it could be from the EU, miffed that their man u fac tur ers are beingout com peted in one of their most import ant mar kets. A cas ual atti tude could be fine— until one of the big ger trad ing powers decides that they don