Interning for an International Trade Organization During the Onset of Brexit: What it means, what is doesn’t seem to mean, and will Boris Johnson be the next Prime Minister? by Merritt Ogle

Important note: I am by no means any sort of economic authority but am interested in the economics of Brexit.

            As I wrote about in my last blog post, before interning at Commerce, I knew little about Commerce. However, it wasn’t until the results of the Brexit votes came in, that I realized how much I have learned about the global economy and that I am not as unaware as I once was. If someone had asked me about my thoughts on a Brexit at this time last year, I would have responded: “Wow, all of my favorite things come from the UK: Ellie Goulding, Hobnob cookies, good English tea. European integration definitely seems important there.”

            When I was in meeting on Global Markets on Wednesday of last week (the day before the vote), two fellows from the Council of Foreign Relations were discussing the potential implications of Brexit but they both concluded that it seemed less than likely that the “leave” camp would win the referendum vote. This seemed to be a common sentiment of those around me on that Wednesday; people thinking “that would be crazy if that happened, but it probably won’t.” Just around 24 hours later, voters in the UK would make fools out of those of us who just didn’t believe it could happen.

            I have been asked a few times this week about what economists at work are saying and what does this mean for us, and what does this mean for the UK. And after attending an event this morning presented by Joseph Lake from The Economist Intelligence Unit, I feel like I can put some thoughts down about what I have learned so far.

1. Leaving is about more than racism and xenophobia.

Yes, while leaving the EU has significant implications for the immigration policies of the UK, there are many reasons that were presented for wanting to leave. We are seeing this growing sense of nationalism around the world and it definitely reared its head in the UK in the June 23^rd Referendum vote. To some, leaving the EU is an act of “taking back” what had been “taken away”, splitting voters between the young and old, the urban and rural, and the nationalist and internationalist. The irony in this vote is that the younger a voter is, the more likely they were to vote to stay in the EU; however, that young voter is forced to live with the consequences of the vote for a much longer time, on average.

2. The long-term political consequences are still unknown.

The “contagion effect” of other EU countries potentially holding similar votes has now increased with the Brexit with The Economist predicting that in the next two years the Netherlands, Denmark, and France could hold similar votes. If Nexit, Dexit, and Frexit occur, this could lead to a breakup of the Euro zone (yikes.) Scotland could be looking at a second referendum for independence, as they all voted to remain in the EU. And Ireland could be reunited if Northern Ireland also feels the desire to part ways with England, Scotland, and Wales. Also, Boris Johnson could potentially be the next Prime Minister of the UK.

3. The Economist Intelligence Unit (EIU) predicts a large economic hit to the UK from 2017-2020.

EIU has predicted a UK recession in 2017 with a sharp rise in unemployment. Financial firms will continue to leave London and will move to Dublin, Berlin, Paris, Frankfurt, etc. In addition, this will affect the US market in slowing economic growth in 2016 and 2017. The volatility and uncertainty of the market will lead to decreases in investment which will also have implications for businesses and consumers. The forecast for global GDP growth has also been cut by $200 billion as a result of Brexit. (As a note: $200 billion is the size of the economy of Vietnam or Portugal. If not obvious, this is pretty significant.)

4. “But Merritt, does this have implications for the 2016 US Presidential Election?!?!?” EIU says it does not.

Even with the rise of nationalism on a global scale, EIU predicts that Democrats will win the Presidency and Senate in November. Clinton is predicted to beat Trump through attracting a broader demographic and appealing more to the middle ground voter. However, EIU also predicts that Clinton will only serve one term with a Republican being elected in 2020. They predict the next recession to occur in 2019, which in the second half of the Clinton presidency, does not bode well for reelection. However, the Clinton presidency could be characterized by business friendly policies, legislative gridlock, hawkish foreign policy, and more equitable social policies.

5. There is talk of a “re-do” referendum vote in the UK? Will it happen?

From a democratic standpoint, it shouldn’t. Even though there is a petition circulating for one, telling 52% of the voters that the “chose wrong” kind of defeats the purpose of a vote.

6. How is America looking post-Brexit?

Economic forecasting is still looking pretty good for the next few years in America. We are reaching near full employment, which is giving employees more wage bargaining power so people are more employed and making more money than a few years ago. Also, something really important to know about US GDP is that it is upheld mostly by consumer spending (2/3 of total) so as long as people have money to spend, GDP is not going to tank even if business investment and exports did. The Dollar is also now projected to be stronger against the Euro and Sterling than it was before Brexit.

Conclusion: There are many predictions of what is to come for UK, the EU, and the global economy… BUT this is an unprecedented mess. So, continue to follow the news closely for more information.