The European American Chamber of Commerce (EACC) hosted the webinar “Recent U.K. Election: What do the results mean for the U.K., Brexit, and Transatlantic Business” on January 23, 2020. The EACC brought together the viewpoints of Richard Eccles, partner in a U.K. law firm, Thaima Samman, member of Paris and Brussels bar associations, and Marc Chandler, managing partner of Bannockburn Global Forex, LLC.
What is Brexit?
As of January 31, 2020, the United Kingdom (U.K.) is no longer officially a part of the European Union (EU). While the U.K. and EU had worked out what the U.K. departure would look like, there is a transition period for the remainder of 2020 to help decide the U.K. and EU’s future relationship. The U.K. and EU are working on what their trade agreement will be going forward after the transition period.
What does this mean for U.S. businesses?
U.S. businesses that will feel the impact of the U.K. leaving the EU first will be U.S. businesses that set up a business in U.K. to be their entry into the rest of the EU. No longer will they be able to sell their goods into the EU duty free meaning an increase of costs for U.S. businesses.
The uncertainty in the U.K. and EU can also have impacts on the currency rates. A strong dollar could mean less foreign investors in U.S. businesses, and a weak pound also mean U.S. exports are more expensive to the U.K. which could lead to less sales for U.S. businesses.
What is the future impact on U.S.?
The U.S. will have to negotiate trade deals with the U.K. and the EU separately. The U.S. has been in the process of negotiating with the EU. France, part of the EU, has proposed a digital tax which would impact the U.S. the most due to most digital companies being on U.S. territory. President Trump stated the U.S. would retaliate with 100% tariffs on certain French goods. The Organisation for Economic Co-operation and Development (OECD) has intervened, and a postponement is in place until the end of 2020 on both the digital tax and U.S. tariffs.
The U.S. and U.K. hope to begin negotiations soon. Historically, the two countries have been allies so there is hope an agreement could be reached quickly. The U.K. did indicate they wish to impose a digital tax, which in turn caused President Trump to suggest tariffs on British made autos. The U.K. is looking to the U.S. to relieve some of the Brexit pain, and Trump has indicated he will provide a trade deal to support Brexit, so only time will tell how these trade negotiations progress.
2020 will be an important year not only due to the trade negotiations taking place, but it is also an election year in the U.S. We will work on keeping you up to date on major developments. For additional information please call us at 513.241.8313 or click here to contact us. We look forward to speaking with you soon.