By Steve Goldstein
It seemed innocuous enough.
The U.K. has just reached a trade deal with Japan, and the Department for International Trade’s social-media manager decided to reference the popular television series “The Great British Bake Off” (known as “The Great British Baking Show” in the U.S.) in a celebratory tweet /zigman2/quotes/203180645/composite TWTR -4.12% .
That tweet generated a flood of responses. First, there is the use of “soya sauce” rather than the more commonly written soy sauce. But the tweet just isn’t true. Tariffs on soy sauce, at the moment, are zero, thanks to the U.K.’s current participation in the European Union, which has its own trade deal with Japan. Since the U.K. is leaving the EU at the end of the year, it needed its own trade deal with Japan.
So the Department for International Trade issued another tweet, clarifying that, OK, soy sauce won’t get cheaper, but it won’t get more expensive than it would have, had the U.K. not signed a trade deal with Japan.
But that still isn’t necessarily right. Because the U.K. imports most of its soy sauce from the EU, not Japan. Kikkoman /zigman2/quotes/200008494/delayed JP:2801 +0.29% , for example, makes soy sauce in the Netherlands for distribution into the U.K.
Now, the likelihood is that the U.K. will reach a deal with the EU that at the very least allow goods to continue to be free of tariffs, even if services aren’t. But the firestorm does show that one of the consequences of Brexit is a great deal of running around to stay in the same place. And it underscores the difficulty in getting the EU to believe the stated willingness of Prime Minister Boris Johnson to leave without a comprehensive agreement.
The confidence by market participants that the U.K. will reach a trade deal by the end of the year is why the pound /zigman2/quotes/210561263/realtime/sampled GBPUSD +0.0356% has been trading around the $1.30 level even during the acrimonious negotiations.