29 October 19  |  International Shipping

E.U. Accepts U.K.’s Brexit Delay Request and how Brexit Could Affect the U.S.

On October 28, the European Union announced that it accepted the U.K.’s request for a Brexit delay until January 31, 2020. Prime Minister Boris Johnson is calling for a general election on December 12, which requires parliament’s approval, in order to try and shift the Brexit decision to his side. 

Brexit is the name used to describe Britain’s possible exit from the European Union, thereby affecting its trade, security, and migration. The U.K. first voted in 2016 to leave the European Union but the government is divided on how to approach the decision. The division has led to 3 years of negotiations and uncertainty about the U.K.’s future. Businesses don’t know how to plan ahead, ports are expecting delays in the case that no deal can be reached, and politicians can’t come to an agreement. 

Brexit’s Impact on the United States

The U.S. is the U.K.’s largest single-country trading partner, which leads to the obvious question: how could Brexit affect the United States?

Brexit’s effect on the U.S. economy largely depends on what type of agreement is made and how closely aligned the U.K. stays to the E.U., which would also dictate Britain’s future trading relationship.

Some Pro-Brexiters believe that a “no-deal” Brexit is better than a partial ongoing alliance. Most economists agree that it’s hard to quantify the exact impact of a “no-deal” Brexit as the situation is unprecedented. Brexit could affect multiple sectors simultaneously, and if it is a shock to the U.K. and European economies, then the U.S. could also feel its effects. 

Many business leaders are apprehensive of a “no-deal” scenario because it means the U.K. would abruptly leave without a transition period. Businesses could not adjust to life outside the E.U. without a transition period, which may cause market volatility and weigh on U.S. growth. 

Examining Past Brexit Events

However, past events may show otherwise. When the U.K. voted to leave the E.U. in 2016 there was a period of financial market volatility that followed but the period dissipated quickly. In June 2016, the original Brexit vote cause the Dow Jones industrial average to drop by 5-6% and U.S. economists thought Brexit could take off up to 0.5% points from the country’s GDP (gross domestic product) growth. Fortunately, stocks recovered quickly and negative forecasts that Brexit would damage the U.S. economy were reversed. 

U.S. Industries Affected by Brexit

Nonetheless, there are certain companies that may be more exposed to the effects of a hard Brexit. Companies within the consumer goods sector may experience the effects of higher product prices and lower consumer demand. Some consumers within the U.K. are buying less premium, U.S. brands and moving towards cheaper alternatives. U.S. companies that have European supply chains, such as car companies, will also be more vulnerable. 

While some specific U.S. industries may be impacted by a hard Brexit, the greater risk for the U.S. lies in the negatively contagious effects for Europe on a broad scale. These negative effects could show through economic weakness or heightened political instability which then hurt European consumer demand. 

On the flip side, some economists don’t foresee a large issue in the future. Andrew Hunter, Capital Economics’ Senior U.S. Economist, believes the U.S. doesn’t have much to gain or lose from a hard or disorderly Brexit. U.S. exports to the U.K. only account for 0.7% of U.S. GDP. Hunter states that if there is a hard Brexit, the U.K. may attempt to foster a closer economic relationship with the U.S. to make up for the loss with the European Union. At that point, a comprehensive U.S.-U.K. trade deal could give a modest boost to both economies.

Importing and Exporting with R+L Global Logistics 

R+L Global Logistics offers a variety of services to assist with your importing needs from the United Kingdom as well as exporting to the United Kingdom. Our ocean services include:

  • LCL (less than container load)
  • FCL (full container load)
  • Fully integrated transport, clearance, and distribution through our warehousing and fulfillment network 
  • End-to-end visibility using our global network of partners

In addition, we can help you to meet critical deadlines with our air freight services, which provide expedited, day of service, and same-day pick-up of the order transaction. We want your air freight on the way, not waiting in the system. Talk to one of our experienced international shipping experts at 877-510-9133 today to handle your importing, exporting, and international shipping needs.