In his Last loyalty exhibition Before Donald Trump, the United States Secretary of the Treasury, Scott Besent, described the president’s U turns on tariffs as a deliberate act to create “strategic uncertainty.” According to Besent, certainty is overvalued and hastened to rebellion, leverages the negotiations that will generate the best trade agreements for the US.
This safe talk reminded me of Brexit, where former Prime Minister Boris Johnson promised that the United Kingdom would get a “great offer” from the EU, while his license campaign partner Michael Gove insisted that Great Britain “would maintain all the cards” in any negotiation.
The Brexiters thought that the commercial deficit of assets of the United Kingdom gave them a winning hand and that the commercial barriers that Great Britain wanted to erect with the EU would benefit the exports of Great Britain. I know, it made no sense even at that time.
Normally in economics, we try to pass them as past. You must look forward and not reflect on past decisions that cannot be undone. But on this occasion, where there are similarities, it is worth looking at how much milk was spilled by Brexit.
Between the 2016 referendum and the EU-UK trade and cooperation agreement in force on January 1, 2021, the United Kingdom created its own strategic uncertainty with multiple ambitions, tactics and prime ministers. Stagnant business investment, Sterling Fell and inflation exceeded that of other countries. Before 2016, the Brexiters complained that the United Kingdom was economically “chained to a corpse”, but the previously superior growth yield of the United Kingdom compared to the EU soon disappeared.
Those losses have not been recovered. Since the 2021 free trade agreement with the EU brought the certainty of the highest commercial barriers to Great Britain, the decreased flow of goods throughout the channel has been more noticeable. The amount of exports of assets of the United Kingdom is lower than in 2016 or 2021 and Great Britain is the only country in the G7 that has this record.
Of course, it is possible to explain aspects of this shocking performance. Some of them come from fuels, which is more likely to reflect the decrease in the production of northern sea oil instead of Brexit. And the export performance of Great Britain with countries that are not from the EU are as poor as with the EU, which suggests a problem with the United Kingdom in general. Services exports have done well.
But it is impossible to build a coherent argument that Brexit has benefited the economy of the United Kingdom. The diminished paper of Great Britain feeds a vigorous debate about exactly how much damage has been caused and if it is wiser to aspire to the United States or the EU hoping to be thrown some remains of one of its tables.
Mark Carney, who was intimately involved in Brexit’s disputes as governor of the Bank of England and must now negotiate with Trump as Canadian Prime Minister, Put it well The weekend, saying that Brexit’s lessons now apply to the United States. “When commercial relations with its main shopping partners break or break substantially … it ends with a slower growth, higher inflation, higher interest rates, volatility, weaker currency and a weaker economy,” he said.
It was painful to live this experience in Britain. Modern capitalist economies are extremely resistant, so there is rarely that cathartic moment in which the whole country realizes that it has made a terrible mistake and moves away from the edge. Therefore, there are little doubt that the Trump administration will continue to sell fantasies about its strategic brilliance, while fighting internally about daily tactics and commercial agreements that recreate the advantages that the United States already had. Commerce is relatively unimportant to the US economy, and can resist many of these nonsense without necessarily crumbling.
But a scamming shock is just that. When it comes to a calculation in some years, the American economy will be weaker and its position in the world decreased. Brexit teaches you that.