Trump and Brexit. “Make America Great Again” and “Take Back Control”. In 2016, both Britain and America took great steps against the development of modern trade norms. Trump wants wants to redesign the bulk of America’s trade deals, from South Korea to NAFTA, increasing import tariffs to encourage domestic industry and derived job creation. Whereas a hard Brexit’s promise to leave the European single market contradicts the economic principle that Free Trade is vital to sustain the theory of comparative advantage.
This is not to say that America and Britain have now entered a period of mercantilism, but rather the rejection of globalisation for a more economic nationalist approach is telling that Trump wishes to “Put America First.” Therefore, both nations must now act quickly to strike preferential trade deals in order to maintain trade and therefore justify their nationalist deviations. Who better to strike a trade deal with than each other?
At the G20 summit in July, Trump spoke of a “powerful deal” in development between Britain and America, stressing that it would be completed “very, very quickly.”
However, the spontaneity of these kind of trade deals may have long term repercussions for Britain’s feasibility to trade with Europe in the future. For instance, currently in the UK, the EU laws and regulations on financial and business services’ export potential has a “trade dampening effect equivalent of a tariff of 30%” (The Economist). Indeed, the recent controversy over American farmers’ potential to export chickens washed in chlorinated water to Britain is also symbolic of the bilateralism between the two nations. The conflicting laws and regulations between America and Britain gives Britain two options. Either, during Brexit negotiations, new British trade regulations can be more weighted towards EU legislation, or American legislation. Either way, this comes at the trade off of sacrificing potential trade for whoever Britain does not align with, as increased border checks and security reduces the attractiveness and ease of trade between nations.
Therefore, it is too simple to say that Brexit and Trump represent a return to isolationism. However, Britain should think carefully of the terms of trade it wishes to conduct with America, as this may come at the cost of losing out in European trade. Currently, British-EU trade accounts for 44% of British exports, whereas British-America exports accounts for 19%. Economists estimate that if Britain were to leave the European single market, then American trade would have to increase by 58% to make up for lost European trade. This is an improbable increase in trade, regardless of whether or not Britain ultimately agrees to allow the import of chlorinated chicken.