At long last, the UK and the US are set to begin negotiations on new, post-Brexit trade agreements. In a recent post on the US and UK trade talks that will start on May 5, we quoted the intention of the forthcoming discussions to create an “ambitious free trade agreement.” While this is a fairly straightforward goal, however, and both sides will be looking for quick and productive progress, it’s fair to mention at this point that the UK may be entering conversations on slightly firmer economic ground.
To be clear, neither nation is in a particularly good way right now. The UK and US have by some numbers had two of the most disastrous responses in the world to the ongoing pandemic, and accordingly are set to face long-lasting economic consequences. But three factors, in particular, but the UK on more stable footing than the US at the moment.
First is that as much as the dollar has retained its strength amidst market collapses and general uncertainty, the British pound has done the same and remains the more valuable currency. As of this writing, the GBP/USD charts favor the pound, with the British currency, has quickly rebounded from the worldwide economic swoon in the middle of March. The chart also indicates a clear but slight preference among traders for buying the GBP against the dollar, rather than selling it. This is not to suggest Boris Johnson will approach a trade negotiation armed with GBP/USD charts, but it does paint the British economy in a better light than it might have.
Another factor is that the US is expecting a calamitous jobs report that will further blacken the overall picture of its economy in 2020. Previews of the jobs report suggest that numbers will show April job losses leading to the highest unemployment rate on record. Given the events of the last two months, this won’t be particularly shocking to many in the US or around the world, in theory — but the numbers themselves may well be alarming. And again, this will only further the sense that the US is in more of a prolonged state of economic turmoil than merely a short-term slump.
Last but not least is the fact that the UK leader himself appears to be on much stronger ground than the president. Boris Johnson consolidated power just months ago, and while we know that UK election cycles can be somewhat fluid, May 2, 2024, is the date currently marked for the next UK general election. By contrast, Donald Trump is already entering a 2020 election cycle that brings with it great general uncertainty in the US — and which could see him ousted from office rather than given a second term.
None of this is to suggest that these specific factors will lead to a UK advantage in trade negotiations. In theory, these negotiations are meant to be mutually beneficial, and nothing about these points necessarily has a direct impact. However, it is worth noting that as much as the UK has struggled of late, the US may be entering trade negotiations on an even shakier footing with regard to economic performance and leadership stability.