While rumors about Britain leaving the European Union (EU) had been swirling around major media outlets for months, nearly everyone was a little shocked that the island nation actually decided to cast a “leave” vote relating to its EU status.
After being warned about the economic consequences of leaving the European trade bloc, voting Britons decided that preserving their country’s political sovereignty, economic autonomy and distinctive culture was more important than the economic benefits that the country would retain through its EU membership.
Very few people can accurately predict the long-term impacts that Britain’s exit from the EU will have on the global economy, but many political and economic analysts have already started to assess the situation.
Here are five ways that Britain’s recent actions will impact the U.S. economy according to these experts.
#1 Less Market Confidence in Paper-Backed Currencies
Increased economic uncertainty was the initial result of Britain leaving the European Union. The global economy was already somewhat unstable, and investors sought out safe havens for their assets in the gold and silver markets. The U.K.’s decision to leave the EU resulted in a marked increase in the price of gold. Many countries such as China have called for a new world currency that is backed by gold. As the value of gold continues to rise at alarming rates, the world currency status of the U.S. dollar is increasingly threatened.
#2 Volatility in the Global Oil Market
Britain leaving the European Union resulted in lower prices for commodities such as oil. Oil production companies in places such as Texas and North Dakota were already losing money because of low prices per barrel worldwide, and some smaller oil businesses were forced out of the market. If oil prices continue to dip, there may be more U.S. companies that will have to shutter their operations and lay off workers due to inadequate profit margins. Alternately, consumers should see lower gas prices at the pump in the short term if the trend persists.
#3 U.S. Exports Become Temporarily Less Attractive to Foreign Buyers
While the U.S. dollar looks weak in comparison with gold, it is actually considered strong in relation to other national currencies. The stronger dollar makes U.S. goods more expensive to overseas buyers, which hurts U.S. manufacturers. This is a primary reason why many national economists decry China’s efforts to purposely devalue their currency so that they can sell their goods in bulk at lower prices.
#4 Interest Rates May Remain Constant
According to economic experts, raising interest rates is a sign that the economy is stable and growth is steady. Federal Reserve representatives claimed that they would raise interest rates in the United States because of the improvements in the U.S. economy. However, Britain leaving the European Union caused enough uncertainty in the global economy that the U.S. Federal Reserve is not likely to raise interest rates in the near future.
#5 Short-Term Discounted Travel Within the U.K.
One of the first things that was affected by Britain leaving the European Union was the nation’s currency. The pound was devalued significantly right after the exit announcement was made. Subsequently, U.S. tourists can now get a lot more trip for their money if they decide to take vacations to the U.K. Also, U.S.tourists will be on a more even playing field with the rest of the country’s visitors since tourists from the EU will no longer have the benefit of visa-free travel to the U.K.
Conclusion
The world’s economic environment is more interconnected than ever. Subsequently, Britain’s decision to leave the EU has far-reaching impacts on many nations including the United States. Ultimately, calling for referendums on important issues like trade partnerships may become popular in the United States; a new world precedent has been set by Britain leaving the European Union.
