A no-deal Brexit would be bad for the U.S.

If the United Kingdom chooses a no-deal Brexit, then there will be major economic and political implications. Not only will the UK be negatively affected by a no-deal, but the United States will feel the rippling effects from the decision as well.

The British exit, colloquially named Brexit, is the attempt of the UK to leave the European Union, according to a Sept. 16 BBC article. The UK has been attempting to leave the EU while negotiating a trade agreement deal that would be favorable to their country. Since 2016, Brexit has been delayed twice and is scheduled to come to a vote on Oct. 31. Despite these complications in negotiations, the UK seems adamant about leaving the EU.

A no-deal Brexit could lead to a slowing of goods coming in and out of the UK, resulting in a slowing of trade. This has far reaching implications because of the impact that a no-deal Brexit would have on the U.S.

A UK recession would have serious impacts on U.S. businesses, both at home and abroad. American companies that sell consumer goods would be vulnerable to a no-deal Brexit through higher consumer prices and reduced consumer demand, according to a July 18 CNBC article.

“Companies that have European supply chains are also going to be more vulnerable,” the July 18 CNBC article reported. “There is perhaps also the possib[ility] of some U.S. exposure to tightening European financial conditions relating to Brexit.”

The UK and EU negotiations are similar to the North American Free Trade Agreement, or NAFTA, between the U.S., Canada and Mexico. These trilateral trade negotiations are meant to eventually eliminate “tariffs, duties and quantitative restrictions” to make trade fairer in North America, according to the Office of the U.S. Trade Representative.

Like NAFTA, the Brexit negotiations involve issues with border relations. Goods coming in and out of the UK, as well as travelers, would be affected by the resulting decision.

“With the low value of the pound, the price of imports rising and the potential new tariffs with the EU associated with a no-deal Brexit, the UK may feel the pinch,” undergraduate coordinator of economics Tammy Batson said. “Also, with border control they may feel the impact in tourism.”

The EU faces greater economic strains in the face of a no-deal Brexit. The impacts would be far reaching and long lasting.

“The EU [would start to] carry out checks on British goods,” according to the Sept. 16 BBC article. “This could lead to delays at ports, [as well as] lead[ing] to traffic bottlenecks, disrupting supply routes and damaging the economy.”

Brexit is a difficult situation for the UK, and the success or failure of making a deal with the EU will have major effects for many years to come. For now, neither the UK or the EU are satisfied with the negotiations taking place.

 

“In general, these multinational agreements are tough,” Batson said. “Although they can be beneficial, there’s winners and losers in both, and sometimes people don’t like the concessions they have to make to be a part of these agreements.”