Boris Johnson's Borexit Makes Brexit Even More Chaotic

Today’s Agenda

• Theresa May might survive Boris Johnson, but the UK’s Brexit options are still unappealing.
• This week’s NATO and Trump-Putin summits may come to no good end.
• Learn up on Trump’s SCOTUS picks.
• China has surprising strengths and weaknesses in the trade wars.
• Immigration helps economic growth.

Borexit and What Comes Next

(Bloomberg Opinion) -- Boris Johnson will now have a lot more time for writing limericks and aggressive rugby.

The UK’s Foreign Secretary and Brexit poster boy quit Theresa May’s government on Monday. He and some other prominent Brexiteers in May’s cabinet couldn’t abide by her proposal for a “soft Brexit” from the European Union, which they decry as a Brexit in name only. The departures had some suggesting the end of May’s reign was nigh, with her popularity slipping, her government crumbling and an October deadline for settling on a Brexit plan fast approaching. 

But May’s situation isn’t quite as dire as it might seem, suggests Therese Raphael: “The Brexiters who would like to topple her need the numbers to win a confidence vote against her, a leader around whom they can coalesce, and then a plan for Brexit that would survive parliamentary scrutiny or have any chance of engaging Brussels in negotiation. Up to now, the’ve had none of the above.”

One key is whether another hard-Brexit advocate, Environment Secretary Michael Gove, sticks around, Therese writes. Having Gove and other Brexit enthusiasts in the cabinet will lend political legitimacy to May’s plan, which would in turn bolster the British pound, writes Marcus Ashworth. (The currency dipped after Johnson’s exit, but recovered most of its losses by day’s end.)

But don’t be fooled: There are no great options for the UK. May’s plan envisions a sort of “Turkey Plus” EU membership, as Leonid Bershidsky puts it, which Brussels negotiators will probably reject. After that is the Turkey special, in which the UK cedes a lot of power, or the trauma of a hard Brexit. Or the UK could just have a do-over Brexit vote, as most Brits now want. 

Meanwhile on a Parallel Earth … 

NATO leaders will have an awkward summit in Brussels this week, where they’ll mostly try to manage President Donald Trump, his apparent admiration for Vladimir Putin and his demands that long-time allies contribute more to Europe’s defense. Bloomberg’s editors try to imagine a parallel universe in which a President Gallant hunkers down with counterparts to deal with the real problems facing NATO, including Russian ambitions, cyberwarfare, Macedonian membership and, sure, OK, boosting contributions from member states. It’s probably not gonna happen, but it’s nice to imagine.

Here in the real world, Trump will leave Brussels to meet Putin in Helsinki. Eli Lake imagines a parallel universe, too, one in which such a meeting might make sense. In the Earth where Donald Trump is president, it is a very risky thing, Eli writes – there’s a good chance Trump will give away the store in exchange for some help with Syria.

It’s SCOTUS Rose Ceremony Night

Trump has promised to reveal tonight his pick to replace retiring Supreme Court Justice Anthony Kennedy. Noah Feldman breaks down everything you need to know about top candidates Amy Coney Barrett, Thomas Hardiman, Brett Kavanaugh and Raymond Kethledge.

With this pick Trump will have chosen two justices to solidify a conservative majority that could last a generation. While Democrats are angry with Mitch McConnell for denying Barack Obama his court pick, Al Hunt reminds Democrats how much of this situation is their own fault. 

And Francis Wilkinson writes that, when the new conservative court overturns Roe v. Wade, voters on the right and left who are ambivalent about abortion rights will be forced to choose sides.

Trade-War Dispatches

Shuli Ren writes China is wielding an unexpected new weapon in the trade war against the U.S. – shutting American investors out of IPOs of Chinese companies. Given the generally shaky performance of IPOs, that might not sound like such a bad thing; but Shuli points out Chinese IPOs have performed especially well of late.

But China may have a surprising weakness, too: its highly vaunted household savings don’t seem nearly as deep as has long been assumed, writes Christopher Balding. That could make it harder to ride out an economic slowdown. And China’s government has been trying to cut debt levels; a trade war will only make that harder, writes Dan Moss.

So far, the U.S. and other trade-war combatants have been using conventional weapons such as tariffs. The real WMD in this war would be a series of competing currency devaluations, writes Komal Sri-Kumar. These tend to lead to depressions and market crashes – and there are signs nations are starting to use them.

Immigration Is an Economic Asset

It’s easy to see how trade wars can hurt economies. It’s less easy to see how cracking down on immigration can be just as destructive –but new research suggests it may have helped fuel the Great Depression, writes Noah Smith: “Fewer workers mean that fewer goods and services get produced. Fewer consumers mean that there’s less demand. Immigrants are like a natural resource; in the same way that cutting the supply of oil or steel hurts growth, reducing the flow people also limits the economy.” And that's just the start; click here to read the rest.

Chart Attack

Brian Chappatta finds another bond-market hint the economic expansion is nearing its end:

Speed Reading

Why does wage growth still seem so slow? – Michael Strain 

Trump wants lower oil prices, but the only way to accomplish this is to go a little easier on Iran. – Julian Lee 

Crispr promises dream cures – and nightmare bioweapons. – Mark Buchanan 

Believe it or not, Amazon.com Inc. is a value stock. – Matthew Winkler 

By refusing to look grumpy investors in the eye even once a year, Snap Inc. signals it is fresh out of damns to give. – Shira Ovide

ICYMI

The stock market is not worried about anything. Trump’s personal driver of 25 years sued him for back pay.

Kickers

Do you procrastinate by doing pointless small tasks instead of the one big thing you really need to do? Blame your brain.

The Hamptons would be happy to have Alan Dershowitz around, apparently.

Not everybody died young thousands of years ago.

Note: Please send Hamptons invites, suggestions and kicker ideas to Mark Gongloff at mgongloff1@bloomberg.net.

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To contact the editor responsible for this story: Timothy L. O'Brien at tobrien46@bloomberg.net

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