Monday 07/04/25

So I think that it would be fair to say that Trump caused a bit of a stir last week! Trump officials vow to stay the course on tariffs despite market turmoil (Financial Times, James Politi) shows that the president’s top economic officials presented a united front on tariffs and committed to plough on with them, saying that they were a key part of the overhaul of global commerce while Global stocks tumble as Donald Trump offers no respite from tariffs (Financial Times, Arjun Neil Alim, Leo Lewis, George Steer and James Politi) highlights the negative reaction and Markets brace for another volatile week as Trump’s most punitive tariffs kick in (The Guardian, Rob Davies) shows that analysts are expecting more carnage, something that Trump’s tariffs will tip America into recession, warns JP Morgan (Daily Telegraph, Eir Nolsoe and Louis Goss) reflects as America’s biggest investment bank has slashed its growth forecasts for the US economy. Why Trump’s tariffs won’t last long (Financial Times, Tej Parikh) suggests that, despite Trump’s protests to the contrary, the tariffs just can’t go on because a) the administration has underestimated the depth of the economic pain they will cause, b) they will just intensify the impact of his DOGE-led cost-cutting measures, c) targeted retaliation from trade partners will be severe, d) his economic approval among non-MAGA and Republican voters is falling and e) it’s splitting opinion in his party. Pressure is going to pile up from households, companies, markets and his own party – and this could open the door to delayed implementation, exemptions and reductions.

In terms of impact thus far on individual companies, Apple’s collapse proves cosying up to Trump is no guarantee of safety (Daily Telegraph, James Titcomb and Hannah Boland) shows that Tim Cook’s warm relationship with the president has failed to shelter his company from the potentially massive impact from Trump’s tariffs and Cost of iPhones to rocket if Apple passes on tariffs pain (The Times, Emma Powell) suggests that the price of an iPhone 16 Pro Max could shoot up by over 43% from $1,599 to $2,300 if Apple decides to pass on the tariffs and not absorb any of the cost. Sales of the iPhone have already slowed down, but this is really going to be a buzz-kill. Sports shoes’ supply chain is pain point in Trump’s tariff war (Financial Times, Gregory Meyer, A.Anantha Lakshmi and Florian Muller) highlights the apparent folly of companies like Nike, Adidas and Puma choosing Vietnam to be the global hub of athletic shoe manufacturing as Vietnam was one of the prime targets in Trump’s tariff cross-hairs. Although it’s possible for supply chains to be rerouted the general consensus seems to be that doing so could take about two years. Jaguar Land Rover pauses US shipments to assess impact of Trump’s tariffs (The Guardian, Jane Clinton) shows that the car manufacturer is going to suspend shipments of its UK-made cars to the US for one month as it considers what to do next. The US is the second biggest importer of British-made cars after the EU. Then in Stop ‘catastrophising’ over Trump, urges US hotel giant (Daily Telegraph, Daniel Woolfson) we see the president of Hyatt Hotels saying that everyone’s overdoing the panic about the impact of Trump’s policies on tourism. He says “the magnitude might be overblown at this point” and although I understand what he’s saying about people still wanting to go on holidays and stay in hotels, I think that the the inflationary nature of what Trump has just done will at the very least mean that fewer people will be able to afford going on holiday because of the impact. Even if large swathes of would-be travellers to America decide to avoid it, I imagine that domestic demand should be able to take at least some of the slack. After all, if you’ve only got ten days of holiday on average per year, you’re hearing that other countries don’t like you and your spending power in terms of both your disposable income and weakening power of the dollar makes going

abroad less palatable then you’re probably going to be more inclined to stay in America. * SO WHAT? * Supply chains take ages to rejig – and companies are going to want certainty to change their strategies and production plans on a permanent basis. Given the changing nature of Trump’s policies, this is difficult so it may well be that companies do nothing. If that happens, prices have to go up, consumers will buy less and the companies will have to downsize. I wonder whether Trump will use the money from the tariffs (that his own citizens and companies are paying – NOT the countries that he’s imposing the tariffs on) to pay everyone a cheque (like what happened under Covid) to keep them onside and proclaim that his policies are “working”. Even if he does that, it may only work for a short while before this sugar-rush spending pushes inflation up further. I would also expect Trump to put more pressure on the Fed, and Jerome Powell in particular, and blame him for the US economy going down the toilet.

In terms of other tariff repercussions, UK wealth managers say American clients are moving money to Britain (Financial Times, Mary McDougall and Emma Dunkley) shows that money managers including Rathbones, RBC Brewin Dolphin, Evelyn Partners and Schroders Cazenove have said that they’ve seen a considerable uptick in the numbers of US clients who are considering moving more of their wealth to the UK. Although it’s still early days in the presidency, there are growing concerns that Trump might amend legislation that will limit investors’ ability to park money in foreign markets and currencies.

Meanwhile, Tens of thousands join protests against Donald Trump and Elon Musk (Financial Times, Stephanie Stacey) highlights that a number of anti-Trump rallies went on in cities around the world on Saturday. Protestors united against tariff impact, cuts to government agencies, the deportation of legal immigrants, attacks on the transgender community, threats to invade Greenland and DOGE. These demonstrations were the first major ones against the administration since Trump kicked off his latest term in January.

Elsewhere, US closes in on critical minerals deal with DR Congo (Financial Times, William Wallis, Leslie Hook and Camilla Hodgson) shows that the US is close to doing a deal with the Democratic Republic of Congo that would lock in the supply of important mineral assets for American companies. At the moment, it looks like the the focus will be on lithium but there is scope to broaden. The details are still being hammered out…

Over in Europe, Marine Le Pen rages against political ‘witch-hunt’ at Paris rally (Financial Times, Ian Johnston and Leila Abboud) shows that the leader of Rassemblement National is pushing back against the conviction she got last week, branding it a “witch-hunt” and promised to appeal in order to “defend democracy and the rule of law”. * SO WHAT? * This has echoes of Trump, who voiced his support of Le Pen last week. I am sure that Le Pen and RN are going to play the victim card for as hard and as long as they can – but the opposition needs to take advantage otherwise Le Pen and the RN could well gain momentum here…

Back home, UK to scrap or merge more quangos in anti-regulation drive (Financial Times, Lucy Fisher) shows that the government is now taking a look at over 300 quangos with a view to axing or merging them. * SO WHAT? * This is all part of the wider government effort to cut public sector costs and red tape.

Big investors look to sell out of private equity after market rout (Financial Times, Antoine Gara and Alexandra Heal) shows that major institutional investors are looking at options to cut stakes in illiquid private equity funds following the cratering of markets around the world. Big players such as Blackstone, KKR and Carlyle saw their share prices fall by between 15% and over 20% as a result of the panic. * SO WHAT? * It depends whether this is a permanent thing or not but if investors are serious about pulling their money out, PE firms are going to be forced to sell down assets. This withdrawal will mean that inflows may dry up and that will give them less money to play with in terms of investing in new assets. Ultimately, if this trend takes hold, companies will have fewer avenues to raise money…

Just as things seem to be getting tricky for both PE firms and hedge funds, Britain to dilute rules for smaller private equity firms and hedge funds (Financial Times, Martin Arnold) shows that

the UK government is looking at ways to encourage more investment by loosening the rules. Basically, it’s looking to make more onerous rules apply to alternative asset managers with funds under management of over £5bn rather than the current £100m threshold. * SO WHAT? * The PE firms and hedge funds concerned are no doubt going to be pleased with this but it might prompt a backlash from the EU who are inclined to tighter control.

Then in Nearly half of all hedge funds are considering cutting fees (The Times, Patrick Hosking) we see that, according to an industry survey by IG Prime, 44 of 100 hedge fund respondents are looking at cutting the traditional “two and twenty” hedge fund fee structure due to poor performance and weakening client inflows. This structure refers to a 2% management fee with an additional 20% performance fee. 74% of hedge funds polled currently charge the two and twenty rate or something similar. Tricky times – and Trump may just be making them trickier!

In car-related news, EV targets watered down to help tariff-hit UK car industry (Financial Times, Lucy Fisher and Kana Inagaki) highlights efforts by the UK government to dilute its targets for EVs, with lower fines, to support the domestic car industry in the face of Trump’s tariff attack last week. Although the 2030 phase-out date will remain unchanged for new petrol and diesel cars, manufacturers will be allowed to sell full hybrid and plug-in hybrids until 2035. * SO WHAT? * This gives makers some breathing room for sure, but there’s still going to be a lot of pain to come as a result of Trump’s tariffs. Small and micro-volume manufacturers like McLaren, Lotus and Caterham will also be given an exemption in order to help British supercars and support advanced engineering.

German car giants shake off their Nazi past to prepare for war (Daily Telegraph, Matt Oliver) shows that Porsche SE, having avoided military contracting since the 1960s in seeking to distance itself from Ferdinand Porsche’s Nazi past, is now looking to make a return to the defence business. Porsche SE is the powerful holding company behind Porsche and the VW Group. * SO WHAT? * Given the problems that the country’s automotive sector has been seeing and the

sudden rising need for defence equipment it certainly makes strategic sense for German manufacturers to pivot.

Then in A&O Shearman unveils AI tool to speed up senior legal work (Financial Times, Suzi Ring and Melissa Heikkila) we see that the “magic circle” law firm has created an AI tool, in collaboration with AI start-up Harvey, that will accelerate work performed by senior lawyers. It focuses on time-intensive, low-billing tasks and is the second product, after ContractMatrix, that the law firm has brought to market in order to make money from AI in the legal sector. * SO WHAT? * The firm was adamant that this wouldn’t lead to lawyer numbers being cut – it said that it would free up senior lawyers for other tasks. This is a particularly interesting development because AI has so far been more focused on junior tasks, so it would suggest that AI capability is improving. This new product is still being developed but should be available for sale later this year. It will focus on four areas – antitrust, cybersecurity, loan review and fund formation.

I saw this “challenge” last week and tried it on everyone in the Watson household. It was very satisfying to see the reaction 🤣🤣🤣 If you decide to try this out for yourself on others, make sure you use the exact wording!