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frankzappa

Consequences for the United States

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Brexit is a vote against globalization. It takes the United Kingdom off the main stage of the financial world. It creates uncertainty throughout the U.K. as The City seeks to keep its international clients.

The day after the Brexit vote, the currency markets were in turmoil. The euro fell 2% to $1.11. The pound fell 8% to $1.36. Both increased the value of the dollar. That strength is not good for U.S. stock markets. It makes American shares more expensive for foreign investors. 

A weak pound also makes U.S. exports to the U.K. more expensive. The United States has a $18.9 billion trade surplus with the U.K. In 2018, it exported $141 billion while importing $122 billion. Brexit could turn this surplus into a deficit if a weak pound makes U.K. imports more competitive.

Brexit dampens business growth for companies that operate in Europe. U.S. companies invested $758 billion in the U.K. in 2018. Most of this was the finance sector with some manufacturing. These companies use the U.K. as the gateway to free trade with the EU nations.

U.K. businesses invested $561 billion in the United States. Brexit puts at risk jobs in both countries. In addition, there were 716,000 U.K. immigrants in the United States and 215,000 U.S. immigrants in the U.K. in 2019.

thebalance.com

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