After three long years of negotiations and the possibility of a no-deal Brexit rising every day, economists have predicted what it could all mean for the U.S. economy and its financial markets when the U.K. does finally leave the EU. A current leadership race to succeed Prime Minister Theresa May has largely put Brexit on hold, but whoever wins the contest — the former Foreign Minister Boris Johnson or the incumbent Jeremy Hunt — will have to quickly turn his attention to the issue, given an October 31 deadline to leave the bloc. The effect Brexit will have on the U.S. economy, let alone the U.K.'s, will largely depend on what form the departure takes and how closely aligned the U.K. stays to the EU – and to what extent this dictates Britain's new trading relationships. Pro-Brexit campaigners want the U.K. to forge trade deals with countries outside the bloc but it cannot negotiate these while still inside the EU — which unsurprisingly remains the U.K.'s largest trading partner as a bloc. The U.S. is the U.K.'s largest single-country trading partner.

It's currently uncertain whether the U.K.'s new prime minister would take the country out of the EU without a deal in place, rather than Parliament finally approving some sort of formal deal. Some Brexiteers have insisted that the U.K. must now leave the EU come what may on October 31 and believe a "no deal" Brexit is preferable than a potentially interminable alliance with the EU that resembles partial membership.

'America first' trade deal?

U.S. trade deficits (where it imports more than it exports) with any given country are a bugbear of President Donald Trump and his trade and tariff disputes with China and the EU have reflected this. The U.K. has largely escaped Trump's wrath, however, as the U.S. has a trade surplus with the U.K.

President Donald Trump attends a Ceremonial Welcome at Buckingham Palace on June 03, 2019 in London, England. Samir Hussein | WireImage | Getty Images

U.S. goods and services trade with United Kingdom totaled an estimated $262.3 billion in 2018, according to the Office of the U.S. Trade Representative, with exports at $141.1 billion and imports at $121.2 billion, giving the U.S. a goods and services trade surplus of $19.9 billion in 2018. Trump had promised the U.K. a "phenomenal" trade deal post-Brexit, but not everyone is convinced that the U.K.'s cherished "special relationship" with the U.S. will translate into such a mutually beneficial trade deal. For one, IHS Markit's Vice Chairman Dan Yergin told CNBC that "the challenge for Britain will be to make the 'special relationship' very special." There are question marks over what a trade deal would entail but Trump also caused a furor during his recent U.K. state visit when he said "everything is on the table" when it came to trade talks and included Britain's closely-guarded health service, the NHS.

'Political non-starters'

Capital Economics' Senior U.S. Economist Andrew Hunter believes that the U.S. really doesn't have that much to gain – or lose – from a disorderly Brexit, or even a trade deal, given that U.S. exports only account for 0.7% of U.S. gross domestic product (GDP). "There may well be an attempt on the U.K. side at least to foster a closer economic relationship with the U.S. to make up for the loss of ties with the EU, and a comprehensive U.S.-U.K. trade deal would have the potential to provide a modest boost to both economies," he said. "But in the case of the U.S. that boost really would be pretty miniscule. I also find it hard to imagine a trade deal being agreed, at least while Trump is still in power. The U.S. administration wants any deal to include significant access to the U.K. agriculture sector and possibly even the NHS, both of which are surely political non-starters from the U.K. government's perspective," he added.

US President Donald Trump and Prime Minister Theresa May shake hands during a joint press conference at the Foreign & Commonwealth Office during the second day of the President’s State Visit on June 4, 2019 in London, England. WPA Pool | Getty Images News | Getty Images

The U.K.'s outgoing Finance Minister Philip Hammond summed up how the U.K. government might feel when it comes to drawing up a trade pact with the U.S., suspecting that any deal was very likely to favor America. "Trade deals are intrinsically complex and what I hear the president say as well as 'We want to do a U.S.-U.K. trade deal,' what I hear the president say is 'America first'," he said Monday. "The president's idea of a trade deal may not entirely coincide with some people in the U.K.'s idea of a trade deal."

Market volatility

Many business leaders dread a "no deal" cliff-edge scenario for the U.K., as it would mean that the country abruptly leaves with no transition period in place which would allow businesses to adjust to life outside the EU. It would cause market volatility too, economists note. "The Fed has explicitly mentioned Brexit uncertainty as one potential factor weighing on the U.S. outlook, and it's certainly possible that a no deal Brexit could cause a period of volatility in global financial markets which, if it was sustained, might weigh on U.S. growth," Hunter told CNBC. "That said, it's worth remembering that the financial market volatility following the referendum result in 2016 was unwound pretty quickly, and we suspect the same would happen again." The original Brexit vote caused the Dow Jones industrial average to drop by 5% or 6% in June 2016, and many U.S. economists thought Brexit could shave as much as 0.5 percentage points from the country's GDP growth. "But stocks quickly recovered, and so too did the forecasts that Brexit would damage the U.S. economy," Chris Rupkey, managing director and chief financial economist at MUFG in New York, told CNBC.