After three long years of negotiations and the possibility of a lack of Brexit rising every day, economists have predicted what it could mean for the US economy and its financial markets when Britain finally leaves the EU.
A current round of leadership to succeed Prime Minister Theresa May has largely put Brexit into play, but whoever wins the contest – former Foreign Minister Boris Johnson or the existing Jeremy Hunt – must quickly focus on the issue, given a October 31 deadline for leaving the block.
The effect that Brexit will have on the US economy, even less Britain, will largely depend on the form of departure and how close the UK's residency is to the EU ̵
Pro-Brexit campaigns want the UK to implement trade agreements with countries outside the block, but it cannot negotiate these while still in the EU – which is incredibly remai nal U.K.'s largest trading partner as a block. The United States is Britain's largest single trading partner.
It is currently uncertain whether the UK's new prime minister would take the country out of the EU without an agreement, rather than Parliament finally approving any form of formal agreement.
Some Brexiteers have insisted that the UK now has to leave the EU on what may be October 31 and believe that a "no-deal" breach is preferable to a potentially interminable alliance with the EU that is similar to partial membership.
"America First" Trade Agreement?
US trade deficit (where it imports more than it exports) with a particular country is a bugbear of President Donald Trump and his trade and customs disputes with China and the EU have reflected this. U.K has to a large extent released Trump's anger, as the US has a trade surplus with U.K.
President Donald Trump attends a ceremonial welcome at Buckingham Palace on June 3, 2019 in London, England.
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U.S. United States trade in goods and services amounted to $ 262.3 billion in 2018, according to the Office of the US Trade Representative, with exports of $ 141.1 billion and imports of $ 121.2 billion, giving the US a trade surplus of $ 19, $ 9 billion in 2018.
Trump had promised the United Kingdom a "phenomenal" trade agreement after Brexit, but not everyone is convinced that Britain's well-managed "special relationship" with the United States will be transformed into such a mutually beneficial trade. Second, IHS Markit's vice president Dan Yergin told CNBC that "the challenge for the UK will be to make that special relationship very special".
There are question marks about what a trade would mean, but Trump also caused a furor during his latest British state visit when he said "everything is on the table" when it comes to trading documents and included Britain's closely guarded healthcare, NHS.
Capital Economics Senior American Economist Andrew Hunter believes that the United States really does not have so much to gain – or lose – from a disordered Brexit, or even a trade, because US exports only accounts for 0.7% of gross domestic product in the US (GDP).
"It may well be an attempt on the British side to at least create a closer economic relationship with the United States to compensate for the loss of ties with the EU, and widespread trade between the United States and the UK could lead to a modest increase to both economies, "he said.
"But when it comes to the United States, it will be a big upswing. I also think it is difficult to imagine that a trade deal is at least, at least when Trump is still in force. The US government wants every deal will mean significant access to Britain's agricultural sector and possibly even the NHS, both of which are certainly non-political political leaders from the UK government, "he added.
US President Donald Trump and Prime Minister Theresa May shake hands during a joint press conference at the Foreign Ministry & Commonwealth Office on the second day of Presidential State Visit on June 4, 2019, in London, England.
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U.K .: Outgoing Finance Minister Philip Hammond summarized how the government's government could feel about establishing a trade pact with the United States, suspecting that any deal would very likely benefit America.
"The trade agreement is really complex and what I hear the President says, as well as" We want to make a trade agreement between the United States and the United States, "what I hear the President say is" America first, "he said Monday." cannot quite coincide with some people in the UK's idea of a trade deal. " It would also allow market volatility, notes for economists.
"The Fed has explicitly mentioned Brexit uncertainty as a potential factor that weighs the US outlook, and it is certainly possible that no business Brexit can cause a period of volatility on the global financial markets which, if left, can weigh on the ikansk growth, "Hunter told CNBC.
"It is said that it is worth remembering that financial market volatility after the 2016 referendum result was phased out rather quickly, and we suspect it would happen again."
The original Brexit vote caused the Dow Jones industry average to fall by 5% or 6% in June 2016, and many US economists believed Brexit could shave as much as 0.5 percentage points from its GDP growth. "But the shares recovered quickly, and it was also the forecasts that Brexit would damage the US economy," said Chris Rupkey, CEO and CFO of MUFG in New York. CNBC.
Most economists agree that it is difficult to quantify the exact impact of a "no deal" Brexit because it would be an unprecedented, uncertain scenario.
JP Morgan economist Malcolm Barr said in a note that it is "extremely difficult" to try to figure out the magnitude of the shock to output that may occur if no agreement occurs as Brexit occurs.
"There are basically no precedents that we can identify for a shock of this type that works across the sector at the same time," he said. Meanwhile, IHS & # 39; Dan Yergin noted that "if Brexit turns out to be a major shock to the British economy and the European economy, the reverberation will feel in the United States"
There are some companies, such as Consumer goods sector that is more exposed to the effects of potentially harder Brexit-like higher product prices and subdued consumer issues, James Knightly, head of international finance at ING in London, told CNBC Wednesday.
"We actually see examples of consumers moving from premium brands (USA) to cheaper alternatives because of the pressure on household spending. But I would argue that the greater risk for the US is that a hard Brexit has negative infectious effects for Europe more generally, either through economic weakness or increased political instability that could damage European consumer demand, "he noted.
US companies that have European supply chains (like car companies) will also be more vulnerable, Knightly said. "It may also be possible for some US exposure to tighten the European economic conditions for Brexit, if conditions were to deteriorate, as already stated by the Federal Reserve."