Brexit’s parallels with Trump’s tariffs tell a tale

In figuring out why the US tariff shock hasn't sent the economy or financial world into a tailspin, Britain's exit from the European Union trade bloc provides something of a playbook — and without a particularly happy ending.

- Mike Dolan

Aside from vast differences in economic scale and global reach, the two episodes bear some comparison in how they upended years of deeply integrated free trade and possibly in how business, the economy at large and financial markets reacted.

The 2016 Brexit referendum and Mr Trump's tariffs this year were each widely billed as economic shocks that would send the financial world into paroxysms. They didn’t, at least not at the outset.

To be sure, both were followed by dramatic downward lurches in the two countries’ respective currencies. But, to some extent, the steep drop in sterling after the referendum vote and the dollar's plunge on President Donald Trump’s tariff plan this year helped offset some of the wider impact — at least on stock markets that are loaded with global firms with outsized foreign revenue.

More broadly, however, the difficulty in isolating their immediate net impact means no “big bang” economic crisis unfolds to prove critics right — even if their enduring legacy turns out to be a slow burn of economic potential and lost output, often obscured by multiple other crosswinds.

In Britain’s case, the seismic effects of the Covid-19 pandemic distorted any attempt to easily assess Brexit when it actually happened. Tortuous negotiations with the EU meant the UK’s departure eventually occurred on the eve of the health crisis in 2020, and the new trade rules did not come into force until a year later.