Brexit Redux

March 4, 2025: The  UK decided to withdraw from the European Union on June 23, 2016, with approximately 72.2% of voters participating. It was closely contested, with 51.9% voting to leave and 48.1% to remain. Influenced by issues such as immigration and sovereignty, the vote highlighted deep divisions within the country as the UK officially left the EU on January 31, 2020

While the issues  leading to the US tariffs on foreign imports  are different than Brexit, the underlying sentiment is the same. The  Brits decided they were a powerful, self-sufficient economic force, and have these expendable relationships with other countries, specifically the EU. They could produce and make all the stuff they need on their own.  The Brits overestimated how powerful they were. It turns out they did need all of that stuff from the EU.  The UK was not as self-sufficient as much as they thought they were, and it turned out to be the greatest economic mistake in modern British history.  Brexit has decimated the UK economy. 

The USA is one of the most self-sufficient nations in the world but not completely. The country is about to find out how self-sufficient we actually are. Imports are 32% of the British GDP, in the USA imports are just 14% of GDP. But if you drill down a little,  that number gets much higher. Mexico, Canada and China supply almost 50% of all the imports that come into this country.  Think about what that means.  

America is also very  powerful, but it’s not all powerful. It’s not completely powerful.  And the worst situation for the economy may be about to unfold.  Tariffs often get passed on to the consumer and  are estimated to cost the country around $300 billion, which breaks down to about $2,500 for an average American household. Rising costs means inflation. This not good for anyone but it is mostly not good for lower income families.  The shortage of affordable  housing and lack of new homes being built, already a problem, could get much worse after the tariffs kick in.  

While not a perfect analogy Brexit shows what happens when a country overestimates its power, gets carried away with hyper-patriotism and an exagerated ethos of self-sufficiency and ignores the fact that nations generally do better when they remain part of the global economy and work with their neighbors and trading partners to solve problems to their mutual benefit.