This week marked the signing of the Brexit withdrawal bill in the House of Lords, which was then further signed by the Queen, making Brexit UK law. The bill confirmed that the UK will leave the EU on January 31st with no exceptions. Many are now questioning what Brexit will mean for the UK going forward and how its relations will be with allies like the United States, particularly from a trade standpoint.
What Has Already Happened Concerning Brexit, the UK and the US?
The day after the Brexit vote, the currency markets were in turmoil. The euro fell 2%, the pound fell 8% and both combined to increase the value of the dollar. This was not beneficial to the US stock markets as it made American shares more expensive for foreign investors. A weak pound also makes US exports to the UK more expensive, with the US having around $18.9 billion trade surplus with the UK in 2018, it exported $141 billion while importing $122 billion. This is a risk which threatens the UK-US trade if Brexit ultimately causes a weaker pound, as this surplus could reduce into a deficit if a weak pound makes UK imports more competitive.
There was also 716,000 UK immigrants in the United States and 215,000 US immigrants in the UK as of 2019, suggesting that the two must have a deal in place regarding the movement of its people in each other’s territories post-Brexit. UK businesses also invested $561 billion in the United States, Brexit puts at risk jobs in both countries.
Recent Developments in Brexit Trade Deal Row Between US and UK
Britain and America were embroiled in a transatlantic trade row earlier this week after the UK government vowed to press ahead with plans for a levy on US tech giants such as Google and Facebook. The US hit back, denouncing that it will impose tariffs on UK car manufacturers unless the plan is ditched. This puts a spanner in the works for the previously ‘best of friends’ nations. Brexit appears to be driving a slight wall between the two as each nation fights for the better of their own country. The UK is not alone in plans to introduce the digital services tax, as France also suggested something similar. But plans for the French have halted after the US announced that it would levy against the French cheese and Champagne sectors if the digital tax went as planned.
The disagreements with the US will likely put a damper on Boris Johnson’s plans to quickly negotiate a deal with the US after the UK leaves the EU later this month. President Trump is not shy to make threats against countries which he feels are treating the US unfairly on trade and this is no different for the UK, despite their history. The UK-US trade talks will continue for months and investors from both parties will hope that the direction becomes clearer as negotiations make progress.
If you have an upcoming currency transfer would like a free quote when buying or selling dollars then contact me directly, Tom Holian, using the form below. I look forward to hearing from you.