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How Brexit Will Affect Supply Chains in the United States

Image via Flickr LaertesCTB
Image via Flickr LaertesCTB

Only a few months have passed since the Brexit vote happened, but many people don’t understand that Britain hasn’t actually left the EU yet. What the Brexit vote did is require Britain to give the EU a two-year formal notice that the country will be leaving. Britain hasn’t actually given its notice to the EU yet, and the nation hasn’t provided a time frame for this event. You can read more about the implications of Brexit in Article 50 of the Treaty on European Union. It’s unclear how smoothly the process will go, which is why supply chains in the United States and around the world are worried.

How Brexit Affects American Companies and World Trade

Many American companies turn to Britain when looking to expand into foreign markets. This is because Britain has long had one of the more stable international economies as well as easy access to trade in other European countries. This has happened partially due to the EU’s Customs Union and Free Trade Agreements. Britain has also been a popular partner for American companies because they share the same language.

When Britain’s exit from the EU is final, American companies will be subject to new duties and taxes when trading with other countries. It’s likely that Britain will negotiate its own trade agreement with the EU and other countries, but this will take time. The EU currently has free-trade agreements with Norway, Switzerland, South Korea, and South Africa, but these trade agreements will no longer be in effect for Britain once Brexit is complete. It’s possible that Britain will want to enter the World Trade Organization or make its own agreement with the EU.

Brexit Also Means Supply Chain Disruptions

Not only does Brexit change the way Britain will handle duties and taxes, but changes in policy may also cause supply chains to experience disruption because of trade compliance issues. Brexit may lead to a number of new laws in Britain, and businesses will need to change the way they move goods from one place to another, such as shipments from ports to other countries in the EU. This impacts supply chains in all industries, including financial services.

Britain may also experience inflation or economic slowdown. This is a particular problem for American companies that source products from Britain, because the costs will increase, raising the price of goods for people around the world.

Brexit will have a substantial effect on Britain’s economy, but the United States will feel the changes too. It could take several years for companies to get used to the changes and for Britain’s economy to stabilize again.

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