Monday 03/02/25

OK, so today’s news is all about Trump unleashing tariffs! Dollar surges as Donald Trump’s tariffs shake markets (Financial Times, Harriet Clarfelt, Ian Smith, Christine Murray, Arjun Neil Alim, William Sandlund) cites a list of the effects of Trump’s imposition of 25% tariffs on all imports from Mexico and Canada on Saturday. There was a lower 10% tax for Canadian energy but an extra 10% tariff was slapped on imports from China. The dollar surged, stock futures dropped sharply, Japanese equities fell (Japan is a big exporter), China’s renminbi weakened against the dollar, South Korea’s Kospi and the won also suffered. Trump faces backlash from business as tariffs ignite inflation fears (Financial Times, Aime Williams and Joshua Franklin) shows the initial reaction from American businesses to this – which is one of push-back as the senior VP of the US Chamber of Commerce said that they “will only raise prices for American families”. Kim Clausing from the Peterson Institute described its as “the largest tax increase since the 1990s”, adding that “going from free trade to 25 per cent is really pretty dramatic and I think it’s going to lead to a huge shock to the US economy”. ‘Enough is enough’: Trump tariffs inspire economic patriotism in Canada (Financial Times, Ilya Gridneff) shows that Trump’s actions have kick-off a widespread patriotic campaign to “Buy Canadian”. One company has seen a boom in sales for its hat with “Canada is not for sale” emblazoned on it after Ontario Premier Doug Ford wore it to a meeting! Trump tariffs: markets brace for falls as Mexico and Canada hit back (The Guardian, Graeme Wearden) shows that Mexico and Canada are hitting back with tariffs of their own but many economists now fear that both countries could be tipped into recession by Trump’s actions and US tariffs threaten to deepen Chinese deflation, says Morgan Stanley (Financial Times, William Sandlund) shows that the investment bank reckons that China’s economy will be pushed further towards deflation by Trump’s actions unless the government implements a major domestic economic stimulus as it is likely to see a slowdown in exports. Trump’s tariffs ‘will force US Fed to delay interest rate cuts’ (The Times, Tom Saunders and Lauren Almeida) shows that the push-back from other countries will result in inflation rising in America which will make it much harder for the Fed to cut interest rates (although everyone has been saying this since Trump first threatened tariffs).

What will be the impact of a North American trade war? (Financial Times, FT Reporters) takes a look at what the implications could be as Canada’s retaliatory tariffs of 25% affecting $107bn worth of American goods will hit US beer, wine, bourbon, fruit, fruit juices, perfume, clothing, shoes, household appliances, sports equipment, lumber and plastics. Mexico and China will retaliate but they haven’t given any details yet. The industries likely to be most affected are carmakers, food producers and construction, all of which depend heavily on cross-border trade.

Back home, Britain beware – Trump’s trade war will choke growth across Europe (Daily Telegraph, Szu Ping Chan) shows that PM Starmer now faces a tricky dilemma – cosy up to Trump or try to mend fences with Europe at a time when Trump is threatening to “do something substantial” on EU tariffs (Nigel Farage said that Trump “dislikes the European Union more than me! He really, really, really thinks the EU model is dreadful”. Although the US is the UK’s biggest trading partner, accounting for around 16% of UK goods exports, the proportion of UK goods exports to the US is quite low versus the share of services (services generally tend not to be the subject of tariffs). In theory, this means that our economy could be less impacted. That being said, How Donald Trump’s trade tariffs could affect the UK (The Guardian, Heather Stewart) shows that we could be hit indirectly because it is likely that there will be a slowdown in global trading volumes, which will limit economic growth. Inflation is likely to rise, which means that interest rates could be higher for longer, which means that debt will be expensive. Trump’s tariffs could have grim knock-on effects for UK’s economy (The Guardian, Heather Stewart) reiterates that the immediate effect of the tariffs will be a rise in borrowing costs, which could mean more spending cuts while UK to rely on skewed US trade figures to skirt Trump tariffs (Financial Times, George Parker and Valentina Romei) shows that PM Starmer will be relying on

US statistics to defend us from punitive tariffs because they show that the UK is one of the few major economies with which America has a trade surplus. Somewhat amusingly, UK stats show the opposite! The absurdity of Donald Trump’s trade war (Financial Times, the Editorial Board) contends that the tariffs are being used to extract concessions from America’s neighbours that they may not even be able to give and that they put a massive spanner in the works in the progress that has been made towards economic integration that America itself has benefited from. They are likely to lead to inflation and cut growth, which will be made worse by retaliatory tariffs.

Meanwhile, Elon Musk vows to cancel grants after gaining access to US Treasury payment system (Financial Times, Joe Miller) shows that the world’s richest man has promised to cancel hundreds of millions of dollars’ worth of government grants as part of the cost-cutting at the Department of Government Efficiency. DOGE has apparently been given full access to the Treasury system which doles out trillions of dollars every year – including social security payments, Medicaid benefits and payments to government contractors – including direct competitors of Musk’s own companies! * SO WHAT? * Conflicts of interest seem to be in vogue at the new US administration what with Trump presiding over crypto and Musk getting ultimate access to sensitive commercial information! It is astounding and yet I think it is likely to continue…

Back home, UK economic growth will be ‘half as fast as official estimate’ (The Times, Jack Barnett) cites predictions from the EY Item Club which say that the British economy will only expand at half the rate predicted by the OBR. Various economic forecasters have been revising down growth predictions since the beginning of the year.

In oil news, Oil demand to remain at current levels until at least 2040, Vitol says (Financial Times, Tom Wilson) cites the new forecast by the world’s biggest independent energy trader which says that global demand for oil won’t drop for a long time yet, which pits it against the IEA which reckons that oil demand will peak in 2029. Clearly, Vitol isn’t exactly an independent voice in the industry and it is one of the most bullish about strong oil demand among commodity traders.

Elsewhere, Shell boss questions Reeves’s optimism on green aviation fuels (The Times, Alistair Osborne) shows that Shell’s chief, Wael Swan, is sceptical about chancellor Reeves’s description of sustainable aviation fuel as being a “game-changer”. He pointed out that although the use of sustainable aviation fuel (SAF) is likely to rise, it is from an extremely low base (less than 0.1% currently) and would only see major growth in uptake if the government pushes it because it can cost anywhere between double and quadruple traditional fuel. He does, however, belief that SAF will be “the only solution” for the aviation sector for at least the next ten to 15 years.

Then in energy news, China’s ‘artificial sun’ fuels Western fears it has lost race to energy holy grail (Daily Telegraph, James Titcomb) we see that China may be further ahead in sustainable energy than we thought as researchers from the national security think tank CNA have published a set of satellite images which show what appears to be a massive laser nuclear fusion research centre. If this is the case, it looks like it’s 50% bigger than its US equivalent! * SO WHAT? * This comes hot on the heels of last week’s announcement from the Chinese Academy of Sciences that it had run an “artificial sun” – a fusion drive that tries to replicate the sun’s reactions – for more than double the amount of time of the previous record. If nuclear fusion can be harnessed, it will be able to provide almost infinite energy without the radioactive waste generated by the current nuclear fission process. Is this yet another area that China will be overtaking the West on?

In India set for blockbuster IPO year despite slowing economic growth (Financial Times, Chris Kay and Krishin Kaushik) we see that the country is bracing for a deluge of massive listings this year that could outperform even 2024’s impressive performance! At least seven companies are gearing up to raise over $1bn each this year and include Groww (online brokerage), Pine Labs (fintech), Lenksart (eyewear). South Korea’s LG is also likely to list its Indian arm. Fun fact: India topped the global ranking for the number of IPOs last year! As things stand at the moment, 34 companies have got the go-ahead to raise $4.8bn this year and another 55 are in the pipeline waiting to get clearance to raise up to $11.4bn. As if that wasn’t enough, it’s also possible that telecoms giant Reliance Jio could list as well, although that is speculation at the moment. * SO WHAT? * More companies are keen to dip their toes in the market as a study by Bank of Baroda shows that the share price of over 82% of companies that listed rose. It seems that a surge in retail investor interest is underpinning the rise in valuations, despite the Indian market already being one of the world’s most expensive. Foreign investors have, on the other hand, pulled $30bn out of the market since October.

Then in Jobless France could become a vision of Britain’s future – here’s why (Daily Telegraph, Tim Wallace) we see an interesting discussion on the government’s commitment to growth whilst at the same time imposing a controversial Employment Rights Bill that will increase the power of unions and potentially increase costs for the business owners. Reeves argues that a more “secure” workforce is a happier, more confident and more productive one but bosses say that the increased costs mean that they will have to put the brakes on hiring and possibly go the other way and make cuts. * SO WHAT? * This article draws comparisons between our own situation and that of France, which has much stricter workers’ rights. It seems that productivity in France is better – but the article argues that this is because French employers take on the most productive staff and leave the rest on benefits which skews the numbers because those in work produce more. The fact that the Employment Rights Bills is being introduced at the same time as the effect tax raid on employers in the form of higher NICs means that UK employers are facing a double whammy at a very sensitive time economically – and that is going to stifle growth.

Nvidia boss Jensen Huang meets Donald Trump at White House (Financial Times, Demetri Sevastopulo, Tim Bradshaw and Owen Walker) highlights a meeting where I’m sure everyone would liked to have been a fly-on-the-wall – the one that occurred on Friday between Nvidia’s chief and Trump! This had apparently been arranged before the DeepSeek thing broke, but they no doubt talked about it! Details of the conversation were not revealed, unfortunately.

Then in China is stealing the scene in Japan’s TV market (Financial Times, Lex), we see that China is making inroads into an area where Japanese companies once reigned supreme – TVs. In

days of yore, almost every TV screen you saw in a hotel room was a product of Sony, Panasonic, Samsung or LG – but Chinese makers such as Hisense, TCL and Xiaomi have muscled in to the extent that they accounted for over 50% of all flat-screen TVs sold in Japan last year for the first time ever! Initially, they benefited from being cheaper – but most recently they have been upping the ante on the tech as well. * SO WHAT? * Japanese companies will be unwise to underestimate their Chinese rivals – they did that with the Koreans and look what happened there!

In a quick scoot around some of today’s other interesting stories, Asos gets a vote of confidence as credit insurers reinstate cover (The Times, Isabella Fish) shows that two major credit insurers have reinstated cover for Asos clothing suppliers, reflecting renewed confidence in Asos’s financial stability. Cover from Atradius and Coface was restored last month having been withdrawn in 2023 due to doubts on the health of Asos’s financials. Credit insurance protects suppliers from buyers and means that suppliers will be paid even if suppliers go bust. If you don’t get credit insurance, suppliers are more wary about supplying. * SO WHAT? * This is a positive step for Asos but it still has a long way to go in its recovery. It is also interesting to note that it is due to re-enter the FTSE250 today after been relegated in 2023.

Staying on the subject of troubled retailers, TM Lewin’s debts grow by £10m (The Times, Isabella Fish) shows that the shirtmaker, which collapsed in 2022, now owes unsecured creditors over £30m. * SO WHAT? * The business suffered hugely from people working from home but was unable to hang on long enough to benefit from the return-to-office trend we are now seeing. It’ll be interesting to see whether we see it makes a meaningful turnaround or whether it will ultimately fade away. 

Which one of these do you think is more impressive?? This is a superb moment from a game of ultimate frisbee but I still think that this try is the best! I may be biased, though, as I’m a rugby coach 😁.