Britain has observed President Trump’s tariffs with a mix of disbelief, intrigue, and disconcerting familiarity. The nation, after all, initiated a comparable venture towards economic isolation when it decided to exit the European Union in 2016. Nearly nine years post-Brexit referendum, it continues to grapple with the consequences.
The insights gained from that ordeal are once again pertinent as Mr. Trump employs a similar strategy to build barriers around the United States. Detractors previously labeled Brexit as the most significant act of economic self-sabotage by a Western nation in the post-World War II period. It may now be facing competition across the Atlantic.
Even Mr. Trump’s sudden retreat last week from some of his tariffs, prompted by a revolt in the bond market, echoed Britain’s experience, where Liz Truss, a briefly-serving prime minister, was compelled to withdraw her radical tax cuts that alarmed the markets. Her misguided endeavor was the culmination of an extreme policy cycle ignited by Britain’s choice to abandon the world’s largest trading bloc.
“In some respects, the worst legacies of Brexit lie ahead,” remarked Mark Malloch Brown, a British diplomat and former deputy secretary-general of the United Nations. Britain, he noted, now confronts a difficult decision between mending trade relationships with Europe or maintaining ties with Mr. Trump’s America.
“The core issue remains the rift with our largest trading partner,” Mr. Malloch Brown stated, adding, “If the U.K. finds itself aligning more closely with Europe because neither side can engage with the U.S. anymore, that’s merely half a victory.”
During the 2016 referendum, Mr. Trump was a vocal supporter of Brexit, highlighting explicit similarities between his political movement and Brexit. Initially, he imposed lower tariffs on Britain compared to those on the European Union, which some interpreted as a nod to Britain’s choice to depart.
The negative impact of Brexit on the British economy is no longer contentious, although its repercussions at times have been challenging to disentangle from subsequent shocks, including the coronavirus pandemic, the war in Ukraine, and now Mr. Trump’s tariffs.
The government’s Office of Budget Responsibility forecasts that Britain’s trade volume is approximately 15 percent lower than it would have been had it stayed within the European Union. Long-term productivity is estimated to be 4 percent lower due to trade barriers with Europe.
Productivity was already lagging before Brexit, but the split with Europe intensified the issue by creating uncertainty that dampened private investment. The years between the referendum and Britain’s formal exit at the end of 2020 were mired in arguments over the terms of departure.
By mid-2022, investment in Britain was 11 percent lower than it would have been without Brexit, based on a model by John Springford, utilizing comparable economies to estimate a non-Brexit Britain. Meanwhile, trade in goods was 7 percent lower, and gross domestic product was 5.5 percent diminished, according to Mr. Springford, a fellow at the Center for European Reform, a London-based think tank.
Mr. Trump has induced even more volatility with his imposition, reinforcement, and then suspension of various tariffs. His actions affect numerous countries, particularly the United States and China. Already, recession predictions and renewed inflationary pressures are emerging.
Brexit and its aftereffects have produced several second-order effects, both economic and political. Ms. Truss’s debt-fueled tax cuts, aimed at revitalizing Britain’s sluggish economy, instead ignited a sell-off of British government bonds as investors recoiled from her propositions.
A similar sell-off of American bonds commenced last week, bearing significant implications for the United States. Rising bond yields exert pressure on governments, necessitating higher borrowing costs. Sell-offs are also destabilizing, signaling deeper concerns about a nation’s creditworthiness.
In Britain’s circumstance, apprehensions of a credit crisis forced Ms. Truss to abandon her tax cuts, leading to her rapid exit from office. While this stabilized the markets, it left lingering doubts among investors regarding the UK. Mortgage rates remained elevated for months, reflecting what one analyst derogatorily referred to as a “moron premium.”
This investor apprehension has restricted Britain’s Chancellor of the Exchequer, Rachel Reeves, from implementing bolder measures to invigorate the economy. Prime Minister Keir Starmer last week dismissed any notion of relaxing the government’s self-imposed fiscal limits, attributing this caution to the backlash against Ms. Truss’s free-market endeavors.
“I would contend that the cautious approach of our Chancellor stems from the lessons learned from Truss’s tenure,” Mr. Malloch Brown asserted. “It directly relates to the desire to avoid inciting a repeat of the Truss effect.”
In contrast to Britain, the United States still benefits from the world’s default currency in the dollar, and prior to last week, Treasuries continued to be a refuge for investors. However, economists anticipate that both will face heightened scrutiny under Mr. Trump’s leadership.
“Confidence has been undermined, and bond vigilantes are now more vigilant,” commented Richard Portes, a professor of economics at London Business School. “People are significantly more responsive to policy inconsistencies and irresponsibility.”
Brexit also reduced Britain’s standing in global diplomacy, something it has only recently begun to restore under Mr. Starmer’s attempts to bridge relations between Europe and the United States.
Mr. Trump’s retreat from America’s traditional security role within NATO has brought Britain closer to Europe. However, Britons continue to wrestle with the ramifications of Brexit. For instance, a defense agreement with the European Union is stalled due to France’s insistence that Britain make concessions regarding fishing rights—an old issue from Brexit negotiations.
Analysts suggest that the most enduring consequence of Brexit may be its impact on politics. The prolonged contentiousness surrounding Brexit has divided and radicalized the Conservative Party, which held power from 2010 to 2024 with a fragmented array of policies on immigration and trade reflective of the unwieldy coalition that supported Brexit.
Some proponents of Brexit envisioned Britain as a low-tax, lightly regulated, free-trading nation—a vision aptly dubbed “Singapore-on-Thames.” Others desired a more robust governmental role in the economy to safeguard workers in neglected areas from the impacts of open borders and the global economy.
These clashing views led to policies that frequently contradicted the original Brexit message. For instance, Britain experienced an unprecedented surge of net migration following its departure from the European Union. Notably, the new wave of immigrants came predominantly from South Asia and Africa, with a decline in migrants from Central and Southern Europe.
Brexit’s supporters promoted the exit as a cure-all for the dilemmas introduced by a global economy—paralleling Mr. Trump’s assertions that tariffs would bolster public finances and rectify the inequities of international trade. However, experts contend that no magic solution exists in either scenario.
“The reality is, Brexit did not resolve any of the issues tied to deindustrialization,” stated Tony Travers, a professor of politics at the London School of Economics. “If anything, it exacerbated them.”
Dissatisfaction with the economy and immigration policies were among the factors driving voters to replace the Conservatives with Mr. Starmer’s Labour Party last year. Nonetheless, his administration continues to confront these challenges, along with the lingering repercussions of Britain’s separation from Europe.
Mr. Trump’s MAGA coalition exhibits some of the same ideological divides as the Brexiteers, pitting economic nationalists like Stephen K. Bannon against globalists like Elon Musk. This raises questions among analysts about whether post-Trump politics in the United States will resemble post-Brexit politics in Britain.
“Brexit inflicted severe damage on the Conservative Party,” Professor Travers concluded. “It has become virtually unelectable due to internal divisions. Will the Republican Party face a similar fragmentation following Trump?”
