Brexit and tariffs: buyers remorse for our working classes?
Brexit dominates the news in the U.K. and tariffs do so in the U.S.; Big sweeping economic changes can tug at people’s heartstrings, inspire thoughts of independence and cause a rally for the homeland’s prosperity. It has been said however, that “vision” without “action” is a daydream and “action” without ‘vision’ is a nightmare.
Boris Johnson, the foreign secretary and de facto face of Brexit resigned last week. With recent polls showing that the majority of British citizens would vote against leaving the E.U. in a second referendum, it seems that the public may have put the cart before the horse. Although conservative citizens voted to leave the E.U. on the basis of gaining full control of their borders and preserving many working class jobs for British citizens rather than immigrant groups who have been increasing in number over the years, there is new evidence that this will not be the result of the ongoing Brexit negotiations.
A growing sentiment of worry and regret over Brexit has shaken business leaders to their core. Jaguar Land Rover, as well as other major British employers, may close factories and abandon nearly $100 billion in planned investments and be forced to relocate manufacturing jobs to other more competitive countries if things don’t go smoothly.
Auto workers assembling and manufacturing in factories is about as working class as it gets, and Brexit seemingly threatens to displace corporate investment in the U.K. and eliminate and/or outsource these jobs, rather than simply preserve them for the British.
Another incentive for the vote for Brexit was the notion that the U.K. would gain sovereignty in trade rules. This is a myth that is rapidly being dispelled as well. The latest strategy that May and her administration propose is to essentially formally adopt the current E.U. rules regarding many areas of trade. This leaves the U.K. in the position of following E.U. rules without a place at the table to shape and influence how those rules develop through the future.
Those who sought Brexit as a means of independence will surely see this as a major step backwards in control.
So the choice of exiting the E.U. is now between “a hard and a soft Brexit.” British conservatives originally wanted a hard, quick break from the E.U., where ties would be almost completely cut. Now it seems that economists, the majority of the voters and large businesses prefer a “soft” and more diplomatic negotiation with the E.U. May is stuck in the unenviable position of alienating conservatives by pursuing the soft Brexit option or jeopardizing the British economy through a hard Brexit. While Brexit started out as an emotional rally for many working class British, the lack of “vision” it’s leaders have shown in execution threatens to turn this “action” into a nightmare. Americans, does this sound familiar? The Brexit situation seems frighteningly parallel to the Trump administration’s new tariffs. Just as Brexit may cause unforeseen negative economic repercussions against the very working class British who voted for it, the effects of the new tariffs threaten to raise the price of imported goods that Trump voters use every day and to negatively affect the manufacturing jobs they desired. Recently Harley Davidson has proposed consolidating manufacturing and opening new plants overseas because of the increase in steel prices due to the tariffs. The U.S. needs to pay close attention to the nuances of Brexit or chance suffering a similar bout of the U.K.’s buyer’s remorse if our trade negotiations spin out of control into a trade war. American’s should hope that the Trump administration has a thorough and effective strategy regarding foreign trade because as we see with Brexit, these tariffs could prove to be more complicated in execution, and nobody likes an unforeseen nightmare.
Roy DiNola and Alyssa Galuska are MBA students at the University of Rhode Island. As residents of Providence and Richmond, they have multiple years of industry experience in sales and operations.