Trade Wars: A Win for the U.S.

Trade Wars: U.S. and U.K. Benefit with EU Out of the Picture

The Unites States and the United Kingdom may have the most interesting trade relationship and history of any countries on the planet. Every time they are at odds, a prosperous new chapter emerges and they move forward with renewed enthusiasm. The U.K.’s Brexit vote will likely usher an even better business climate.
Think about this relationship from a historical perspective. The U.S. threw a little Tea Party for the Brits a couple hundred years ago, followed by the Shot Heard Round the World. Yes, we got off on the “taxation without representation” foot.
Many people think things were sorted out after the Revolution. But, the two powers got into another trade war that turned hot back in 1812. The backstory of that little skirmish was that Great Britain and Napoleon’s France were locked in conflict and sought to prevent the American Colonies from selling goods to either side. After a three-year war with the Brits, Canadians, and Native American troops, America prevailed in its second trade war turned bloody with the British. Since the Treaty of Ghent officially ended military action, there have been numerous quirky trade deals.
In the spirit of collaboration, two Americans bought the original London Bridge in 1968 and had it relocated to Lake Havasu City, Arizona. The McIlhenny Company, a U.S. business, has been given membership in the Royal Warrant Holders Association that supplies goods to royal families such as The Queen, Prince of Wales and Duke of Edinburgh. At the beginning of the 20th Century, the American and British versions of Big Tobacco started a transatlantic cigarette war. However, cooler heads prevailed and they joined forces, calling themselves British American Tobacco Company. The outfit remains one of the world’s largest sellers of the cancer-causing products in the world. Yes, the U.S.-U.K. trade relationship seems to trend toward cooperation.

The Brexit Effect

Brexit turned Europe upside down in the same fashion that Donald Trump’s thumping of insider candidate Hillary Clinton did in the U.S.. The Populism movement won votes that call for closed borders and trade protection. Brexit, the U.K.’s exit from the European Union, may spell future uncertainty for its trade deal with the rest of the block, but it greatly simplifies its relationship with the United States.
The Americans and Brits have a tremendous shared history. Perhaps no two allies cover each other’s back the way these two nations do. They stand together on almost every world issue and go to war together, without exception. When one calls, the other shows up. Trade has been handled much the same way.
The two countries have enjoyed near-perfect bilateral trade. By “perfect,” we mean it remains fair and balanced. In recent years, it has swayed only a few billion in the red or black for either country. When countries have equal trade, their economies and job rates are stable. The only hitch in recent years has been the EU’s imposition of unfair tariffs.
While Brexit may not officially transpire for two or more years — depending on political foot-dragging — an independent U.K. is good news for Americans. Despite bailing Europe out of two world wars, and paying for 72 percent of its NATO defense, the EU places higher tariffs on U.S. imported goods than the U.S. places on their exports. For example, American car manufacturers pay 10 percent or higher tariffs on vehicles shipped to Europe. The United States charges only 2.5 percent. Pres. Trump calls that a “lousy deal,” and he’s correct.

A Brave New World

The Obama Administration had been working on a Transatlantic Trade and Investment Partnership (TTIP), which was supposed to bridge some of the trade gaps. The U.S. runs a trade deficit of about $90-$100 billion with the EU. The TTIP has yet to be ratified by the U.S. and GOP Senators as well as Pres. Trump have raised concerns about its fairness to American businesses and workers. While that deal will likely die a lonely, unheralded death, Pres. Trump and Prime Minister May are now free to re-enter bilateral trade agreements as Brexit approaches.
Given the historic trade balance between the U.S. and U.K., we can expect business as usual across the pond. With the EU in everyone’s rearview mirror, markets are likely to expand and grow. Between Brexit and President Trump, America may have a real chance of growing toward a solid economy again.