Britain’s exit from the European Union sent the U.S. stock market into a daylong downward spin that knocked off 611 points Friday for a 3.4 percent drop at the end of the day. Futures closed at 17,400.
Experts said the long-term effects of the United Kingdom’s exit from the union on the Palmetto State could be volatile if Great Britain’s move precipitates a gradual, full breakup of the EU. But the short-term impact may be more of a mixed bag.
On tourism, the state’s No. 1 economic engine, the hit delivered to the British pound by Brexit would make travel to the United States more expensive for holders of the UK’s currency, the experts said. For U.S. travelers heading to England, a stronger U.S. dollar will give them more buying power abroad and a greater bang for each buck, they said.
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“I think impact on the state of South Carolina is going to be minimal,” said John McDermott, a University of South Carolina economics professor. Friday’s stock sell-off and market volatility over the next few trading sessions will likely see the biggest impacts on the stock market and currency values, he said, because of the uncertainty Brexit has generated.
Brexit will make the U.S. dollar stronger in the short run, McDermott said, as people and their assets “flee” into U.S. assets such as Treasury bills and gold. Gold prices closed Friday at $1,316 per ounce, up $56 per ounce from the previous day.
Higher gold prices and a higher dollar value will make it easier for U.S. tourists to visit England, but more expensive for them to come to the U.S. and popular tourist areas such as the South Carolina coast, from Hilton Head Island to Myrtle Beach.
The currency value fluctuations may not last long, though, McDermott said.
“We do a lot of business all over the world in South Carolina, and we’re going to have to just wait and see what happens with the European Union and Britain. I think this is perhaps more important for Europe than for Britain, just because there’s been a lot of dissatisfaction with the European Union for a long time,” McDermott said.
“The British just happened to have a referendum, but a lot of the French people are just as unhappy, the Germans, etc., and this could be the start of a maybe a dissolution of the entire union over time,” he said.
South Carolina exported $2.8 billion of goods to the United Kingdom in 2015, according to U.S. Commerce statistics. To other European Union members among its top 25 trading partners, including France, Italy, Germany, Belgium and the Netherlands, South Carolina exported $5.6 billion of goods in 2015.
With its other top five trading partners, Canada, China and Mexico, South Carolina exported $10.5 billion in goods in 2015. Nobody is looking to lose an export market, though, and global investment supports 379,100 jobs in South Carolina, according to the Washington, D.C.-based Organization for International Investment.
Jobs supported by global companies also pay more than the state’s average wage in South Carolina and account for 4 in 10 manufacturing jobs in the state. South Carolina ranks 15th in the nation for exports, according U.S. Commerce department.
“At this point, it is too early to speculate, but South Carolina’s economy is extremely strong,” said Adrienne Fairwell, South Carolina Department of Commerce spokeswoman, on Friday. Two of the state’s top five trading partners, the UK and Germany, are members of the European Union.
The state’s other top five trade partners are China, Canada and Mexico. “The other thing that South Carolina has done is work extremely hard to diversify its economy,” Fairwell said, “so that we don’t rely on one particular industry.”
The result of those efforts is that the Palmetto State has become the No. 1 exporter of completed passenger vehicles, Fairwell said, and the top U.S. exporter of tires.
Roddie Burris: 803-771-8398