I don't understand. If they don't want job losses, they have to trade with us.

I'm expecting most EU countries wanting avoid as many job losses as possible.

Doesn't really matter who's got the most leverage. The optimum strategy for both is low/no tarrifs

Tariffs aren't the only factor in the assumed business losses, and they're probably not the biggest.

It's the loss of things like financial services companies based in London being able to readily "passport" their services into other EU countries without relying on local branch offices somewhere in the EU that will really hurt.

When it comes to passporting rights, it's very much in the interests of the EU to tell the UK to bugger off, and let the London HQs relocate a whole bunch of jobs to Frankfurt or Paris or Tallinn if they want to carry on doing business with EU nationals. This is likely bad if you work in some London-based back office role for a big European bank; really bad if you're a London-based fintech startup aiming to serve most European markets.

So the net "winner" for financial services might be Germany? If I were looking for a new financial head office, I would be inclined to locate it in the EU's largest and most stable economy, right?

London is only the financial powerhouse it is because of its dubious status as the least regulated economy with access to the EU market. If they lose said access, that role naturally goes to Luxembourg, the next-least-regulated economy, and that's where these services will move to.

just as an aside, Luxembourg is not really an unregulated economy. it's very popular for fin companies because in addition to access to EU, the regulators (so I hear from my peers in legal) are very proactive speaking to companies to make it easier to set up there, and are quite prompt and more flexible than other countries in assisting companies on ambiguity in interpretation of regulations.

Of course it's not unregulated, and neither is the uk, it's just that the regulations are more relaxed compared to the rest of the eu.

Especially given how cheap real estate in Berlin is compared to London.

Berlin will gain the least.

The city may lose up to 30% (google Euro clearing and ECB. I was always a big issue). It will move to Luxembourg, Frankfurt, Paris and Dublin. Possibly Scotland if Scotland decides to secede - a vague possibility.

The optimum strategy would be to create a regional organization with standardized trade rules, tariffs and other co-ordination structures.

Since it is clear that the optimal economic outcome is not being selected, the optimal Political outcome will win.

EDIT: to elaborate on what I mean. I think that this event has more to do with political points being earned, and poor leadership than it has to do with actual good economic sense.

In such an arena, most of what the HN crowd tends to be focused is less applicable.

What I expect to happen is that life will continue as normal. Any premium which was built into the Pound due to reduced transaction costs with the EU will be priced in very quickly.

What matters is what penalties the EU decides to apply on the UK, in order to set a precedent. I expect the precedent to be onerous - sufficient for the UK to pay with its larger economy, but much harder to cover for any smaller state planning to leave.

Unfortunately this is the worst kind of conjecture - guesswork by someone not currently in the market.

That's what the EU was meant to be. But it isn't

That’s a lie. The EU was never intended to be solely a free trade area, it was conceived as an ‘ever closer union’ and a lot of work has been put into it becoming one since 1952.

De Gaulle certainly was right in vetoing the UK application repeatedly, given how much harm they have done to the common European project and long-time peace and prosperity on the continent.

Who is talking about ceasing all trade with the UK? The biggest changes will not come for net trade volume but more through a shift in supply chains. Politicians on either side will now have to make very bold promises so that businesses don't feel things are too much in limbo and pull the plug on their investments into the UK (factories, headquarters, ...).

the OP's proposition implied that it is the EU's dominant strategy to cut the U.K. a punitive deal that trades off short-term pain for the long-term pain of dissolving by attrition due to other nations leaving.

Tarrifs are not the problem. Even without tarrifs there are additional costs involved, mainly because both sides can't trust the other sides' regulations.

I would still expect every single EU regulation to be in place tbh.

I've heard that all EU laws will remain in place unless explicitly removed

EU regulation has to be signed into law by national parliaments. These laws won't go away.

It's a bit more complicated though.

Existing laws were already signed in. It's only new laws/changes that'd have to be implemented.

In fact, nothing stops the UK following the EU laws that it wants to afterwards as well.