Brexit, Mexico and Trade Agreements
By David Crook
Global Economist and Chief Strategy Officer
I would like to take this opportunity to remember the hundreds of thousands of brave British and American troops and civilians who, on this day in 1944, stormed the beaches of Normandy in, perhaps, the most important event leading to freeing Europe from Hitler’s clutches.
President Trump and The First Lady have been on a State visit to the United Kingdom, historically America’s staunchest ally. It will come as no surprise that, with the Brexit deadline looming in October, trade has been an issue foremost on everyone’s agenda.
2018 U.S. goods and services trade with the U.K. totaled $262 billion, with $127 billion traded in both directions in goods and $135.3 billion traded in services, making the U.K. the 5th largest goods export market for the U.S.* These numbers are not insignificant to the U.S. and are even more important from Britain’s perspective. I remember making a prediction, not long after 23 June, 2016 when Britain voted in their referendum to Brexit, the prediction was that the U.S. and the U.K. would agree upon a new trade deal as soon as practically possible; today it would seem that this is, in fact, a likely scenario. Prime Minister May and President Trump both alluded to the fact that trade talks are a priority so that if the U.K. is to “hard exit” on 31st October she will be ready to trade under a different regime to that of the European Union.
As important a trading partner as the U.K. is, the relationship is not nearly as sizeable as compared to the trade between Mexico and the U.S. (goods and services traded between the U.S. and Mexico in 2018 totaled $671.0 billion)**. It is this volume and importance of trade that President Trump is using to try and pressure President Andres Manuel Lopez Obrador (AMLO) to reduce the number of Central American emigrants making their way to the Mexico/U.S. border. It is sad for all Americans and all aspiring immigrants that the subject has become so political; America needs immigration to continue to grow our economy, but we need a process that is legal and practical.
More importantly, Mexico is not only an important trading partner but is our Southern neighbour, and in that light we should endeavor to develop a good, if not excellent, working relationship with them.