(Bloomberg) -- Terms of Trade is a daily newsletter that untangles a world embroiled in trade wars. Sign up here.
A British-American trade deal won’t be easily agreed after Brexit because the U.K. wouldn’t accept the punitive terms on offer, according to former U.S. Treasury Secretary Lawrence Summers.
“Britain has no leverage. Britain is desperate. Britain has nothing else. It needs an agreement very soon. When you have a desperate partner that’s when you strike the hardest bargain.”
President Donald Trump has promised a deal between the U.S. and the U.K. would be concluded quickly once the latter leaves the European Union, though analysts have questioned that timeline. Bloomberg Economics calculations show that a free trade agreement with the U.S. would offset just a fraction of the cost of a no-deal Brexit.
Summers, speaking in an interview with BBC Radio 4 on Tuesday, said that any trade deal that Washington would agree to wouldn’t be “exciting for the prospect of the British economy.”
“I find it unlikely that there will be a substantial increase in British U.S. trade and close to inconceivable that there will be an increase nearly so large as to make up for what Britain is losing in terms of reduced access to the EU.”
Summer also highlighted the potential roadblocks to any deal -- turbulent American politics, the U.S.-China trade war and the weakening of the U.K. currency.
“The deterioration of the pound is going to further complicate the negotiating picture because we will see it as giving Britain an artificial comparative advantage, and make us think about the needs to retaliate against Britain, not welcome Britain with new trade agreements.”
