Weber Shandwick assesses how Trump’s victory affects the UK, and the chance of a post-Brexit US-UK trade deal.
After the shock of Donald Trump winning the US election recedes, it is important to consider the impact on the UK. As Britain begins to plan to leave the European Union, hard Brexiteers have pushed the idea that a trade deal with the US will be important, and British businesses will now wonder whether President Trump will preserve the openness of American consumer and capital markets.
The UK economy is historically very sensitive to international shocks. So far, sterling has strengthened slightly against the dollar, and the FTSE has taken this result in its stride, especially since a Presidential election has no immediate consequences for access to American markets. Trump’s election will, however, deliver an almighty blow to confidence in global investors, who have longed relied on the United States and the United Kingdom as powerful advocates for opening up world markets.
In the short-term, UK markets will be depressed, and companies may well hold back on major international investments and acquisitions. British companies will look closely at the President-Elect’s words for reassurance that he will not restrict the movement of capital or the movement of production facilities into and out of the United States. They will also look for reassurance that he will not immediately spark a trade war with retaliatory tariffs on China, which could also provoke a sell-off of US government debt with huge consequences for global capital markets and investment.
UK corporations over the longer-term will have to look to Speaker of the House, Paul Ryan, and Senate Majority, Leader Mitch McConnell, who are much more committed to a pro-business agenda, for reassurance that they will still be able to move their capital and production into and out of the United States freely. They will also likely delay major expansions and restructurings until it becomes clear whether more experienced and savvy policy minds in Congress can slow up the bull in the china shop. Transactional activity may well seize up a bit as big companies nervously weigh up the new environment and seek safe assets.
US companies will seek the same protection from Republican Congressional leaders. Nonetheless, President Trump will still shake the confidence of both investors, and large manufacturers, consumer goods companies and technology companies dependent on international supply chains.
The UK’s hard Brexiteers may take some heart from the vote, which President-Elect Trump promised would be “Brexit-plus-plus-plus”. International Trade Secretary Liam Fox will feel his hand strengthened, and may use the parallels in the narrative of countries taking back control against the loss of good jobs and cultural identity to play up the possibility of a US-UK deal.
There can be no question, however, that the United States voted to turn inward. The UK will have to force the issue of a trade deal onto the US political agenda, and much of the UK’s political energies and leverage will absorbed negotiating the terms of its departure from the EU. Moreover, Britain would want a deal with the US that would be favourable for its financial services industry, and probably for its manufacturers. President Trump’s anti-elite populism, which delivered victory in the Rust Belt, might once again foreclose such a deal.
Indeed, the UK may face the loss of a partner with whom it has pursued freer global trade since Bretton Woods in 1944. Whereas Barack Obama said that after Brexit, Britain would be at the back of queue – under President Trump, there may be no queue at all.