UK Will Need More Than China Trade to Offset Brexit

China trade is set to disappoint Brexiteers.

Despite hopes that negotiating its own trade agreements would boost the U.K. economy, even the worlds’ biggest countries won’t serve as a magic trade bullet.

For example, the U.K.’s trading relationship with China is much smaller than you’d expect. Signing a good trade deal won’t be the transformative move that pro-Brexit supporters are expecting, according to a new report by the Institute for Fiscal Studies.

Even if British exports to China grow by 10% annually over the next 15 years, this still won’t come close to levels seen with Britain’s top trading partners: the United States and the European Union. And dramatic trade expansion with China won’t do enough to compensate for small losses to EU trade, the IFS said.

“A country’s GDP is not necessarily a good guide to its prospects as a trade partner, not least because of distance, language and other barriers,” noted the IFS, which is among the most highly respected independent think tanks in the United Kingdom.

The U.K. voted in late June to exit the European Union, with many voters hoping a so-called Brexit could give the country independence to set trade deals with countries outside the 28-member EU bloc.
But the vote puts the U.K.’s important relationship with the EU at risk.

EU countries currently take in 44% of all U.K. exports and are responsible for 53% of all U.K. imports. By contrast, China takes in just 3% of U.K. exports and ships 7% of all British imports.

via CNN

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza