Tuesday 25 September 2018

How Donald Trump's trade comments could impact firms in the UK

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Helen Cahill

President Donald Trump has attacked Theresa May's Brexit plan, saying it will scupper any potential trade deal with the US.

Mr Trump's comments come as he embarks on a visit across the UK, and shortly after the Government published its plans for a future relationship with the EU.

So why are the President's comments so divisive, and what do they mean for businesses?

Why does the UK want a trade deal with the US?

Signing new trade deals is seen as one of the key upsides from leaving the EU.

The EU has agreements with several countries outside the bloc, but not with the US, making it one of the biggest trading partners that the UK could do a deal with.

A potential trade deal with the US would have benefits for businesses looking to export, and could lead to more regulatory co-operation in financial services. An agreement could also help smooth migration of highly-skilled workers.

Why are Mr Trump's comments damaging for UK businesses?

In the short term, traders are worried that Mr Trump's comments could destabilise Mrs May's government and delay Brexit decision making.

Sterling was knocked following Mr Trump's comments, falling by 0.54% against the dollar to 1.313.

"Trump's words of no deal have confirmed the fears of Brexiteers and will have stoked the fire in the hard Brexit camp, making Theresa May's future in charge look doubtful once more," said Jasper Lawler, head of research at London Capital Group.

"This fear was reflected in the pound as it dropped sharply in late night trading."

Why would an EU trade deal scupper a deal with the US?

The US and the EU have been unable to nail down a common rule book, and if the UK signs up to one, its ability to strike a trade deal with the other will be restricted.

The US and EU have spent years trying to agree a deal, the so-called Transatlantic Trade and Investment Partnership, but talks have stalled due to disagreements.

Given the regulatory differences between the US and the EU, and their inability to compromise, the UK must decide which trading bloc it wishes to be more aligned to.

Press Association

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