Posted Oct 7, 2016
Walker is the keynote at the Greater Phoenix Chamber of Commerce Economic Outlook 2017, set for this week on Oct. 11 at the Arizona Biltmore Resort, where he will discuss the potential Brexit impact on Arizona.
He sees an economic state of uncertainty in Europe with the potential to push back on the U.S.’ already slow economic growth.
Brexit could impact Arizona companies in two ways: the ability of employees to move in and around Europe, and the cost from tariffs being added to British-shipped goods, which would includes parts and products built in Arizona and moved into the Europe through Britain. Transshipping through an English-speaking country is seen as an advantage for U.S.-based companies.
Right now, there are few tariffs between the U.S. and U.K. on primary goods shipped from Arizona. That list includes chemicals, electronic components, metal products and manufactured parts and products. With the Brexit, U.S. transshipments would be considered British goods subject to tariffs.
What this means is with a strong dollar and weak pound, tariffs would add to the price and reduce competitiveness of Arizona-generated products in the E.U.
Right now, once Arizona employees have working papers and visas for the U.K., they have visa-free access to all European Union member countries for travel and business. With Great Britain pulling out of the E.U., American companies will likely have to create permissions for travel and work separately in the U.K. and Europe. Freedom of employee movement will not be automatic.
The breakup may also impact the ability to move goods tariff free onto the European continent.
“Some of those supporting the Brexit believe it will position the United Kingdom as a global market,” said Walker. “At the moment, it’s left our economy in a state of uncertainty.”
“Businesses don’t know what’s going to happen, and they are not making investments,” Walker said. “Some believe that the U.K. will be able to negotiate a low- or no-tariff arrangement with the E.U., but that is a highly speculative notion.”
The new government is talking about a “hard Brexit,” but businesses are going to lose a lot of special accords with Europe, Walker said.
Some are speculating that there may even be World Trade Organization retaliation against Britain, which could imposed a tariff of 2 percent to 4 percent.
“The bigger impact will be on the exchange rate,” he said.
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