Federal Reserve Board publishes staff note comparing Brexit with 2025 U.S. tariff increases and documenting gradual economic impacts

The Federal Reserve Board published a FEDS Note that uses Brexit as a case study to assess how the 2016–2021 U.K. trade regime shift compares with the 2025 U.S. trade policy changes and what Brexit’s short- and long-run macro effects look like. The note stresses that it is not a forecast for U.S. outcomes, but argues that Brexit illustrates how trade disintegration can have effects that accumulate over time rather than showing up immediately. On policy design, the note finds Brexit did not materially raise average U.K. import tariffs because the EU–U.K. Trade and Cooperation Agreement preserved zero tariffs and quotas for goods meeting rules-of-origin requirements and later unilateral reforms such as the U.K. Global Tariff reduced many rates, but new non-tariff barriers (customs declarations, rules-of-origin documentation and conformity checks) raised U.K.–EU trade costs by an estimated 2–12 percent in tariff-equivalent terms. By contrast, U.S. measures in 2025 were implemented rapidly through cascading tariff increases applied to virtually all partners, with the average U.S. tariff rate projected at 14.4 percent for 2025 versus 2.4 percent in 2024, while concrete non-tariff barrier reductions are described as limited to a small set of recent agreements. Both episodes are associated with elevated uncertainty, including an all-time high U.S. Economic Policy Uncertainty index reading of 725 in April 2025 and a record rise in global trade policy uncertainty. On outcomes, the note reports that the U.K. avoided an immediate severe contraction after the referendum but saw weaker longer-run performance and downward revisions to expected capacity, citing research that by 2025 Brexit reduced U.K. GDP by 6–8 percent and investment by 12–18 percent, alongside persistent trade frictions including U.K. goods exports to the EU remaining 18 percent below 2019 levels in real terms by 2024.