...everything in business tells us doing things collaboratively with others would always produce better results than doing it alone.
...we now live in an ecosystem of interdependencies. If we want to return to the old days of self-sufficiency in all respects, we spread ourselves thin and becomes Jack of all trades and Master of none. A far too easy way of losing America's exceptionalism.
...but obviously if a country tries hard enough to undo years of good relations including trading relations, then it is forced to think very seriously about becoming independent of its needs.
US Risks Brexit-Style Slow-Burning Damage From Trade Shock: JPMorgan
Investing.com -- President Donald Trump believes his stick-and-carrot trade approach to trade policies has the hallmarks of an economic masterpiece that will propel the economy into the stratosphere, but JPMorgan economists warn that the UK’s post-Brexit experience struggles offer a cautionary tale for America’s current turn away from globalization.
"Recent US tariff changes are a shock to the global trading regime that will have consequences lasting well into the future,” the economists said, noting that both the U.S. and UK shifts were motivated by discomfort with globalization, immigration, and manufacturing decline. Brexit’s Short-Term Resilience Masked a Deeper Shock
In the aftermath of the 2016 Brexit vote, the UK was expected to plunge into economic darkness. But a strengthening global economy doubled Britain’s export growth to 5%, and lengthy exit negotiations with the EU, which ensured existing trade terms were largely intact, averted an immediate recession. But this masked a "domestic shock" and the onset of a slow-burning supply hit even prior to the official EU exit in 2021, the economists said.
In the UK, household consumption growth slowed sharply from 4% before the 2016 Brexit referendum to just 1.5% a year later, while business investment growth collapsed from 9% to zero. Despite a 10% drop in the currency that pushed inflation to 3% in 2017, the Bank of England cut rates and restarted quantitative easing, only to see surveys and GDP rebound temporarily. Brexit’s Three Channels of Structural Damage
This self-inflicted economic shock rippled through the major arteries of the UK economy, leaving scars across three main channels: a drop in trade intensity, a fall in immigration that worsened labor shortages, and a multi-year decline in business investment.
Trade intensity: UK trade in goods is now estimated to be 15% lower than it would have been without Brexit, and manufacturing’s share of GDP has slipped to just 9%.
Labor supply: Work-related immigration from the EU fell from 0.4 to 0.5% of the population before the vote to just 0.1% by 2021, exacerbating labor shortages and fueling inflation.
Investment: The UK’s capex shortfall reached 15% by 2019 compared to trends in the U.S. and Euro area, a gap that remains sizeable today. UK hourly productivity growth, which averaged 2.2% from 1997-2006, fell to just 0.9% in 2017-2019 and turned negative (-0.3%) in 2022-2024.
A Warning for the United States: Slow-Burning Risks Ahead
This slow-burning structural deterioration is perhaps the most telling lesson from the UK experience, JPMorgan warns: “The US may be about to experience something similar.”
Even if a U.S. recession is avoided in the near term, the risk is a slow-burning drag on growth, investment, and productivity – just as the UK has experienced, with most voters now saying they would support rejoining the EU, nearly a decade after Brexit.
The U.S. trade shock may not trigger an immediate crisis, but JPMorgan’s analysis of Brexit suggests the real risk is a gradual, hard-to-reverse erosion of economic potential – a lesson worth heeding as policymakers tout the current tariff regime as necessary for a new dawn of American exceptionalism.
