Thursday 03/04/25

So yesterday was a big day for the world economy, eh?! Donald Trump escalates global trade war with sweeping tariff blitz (Financial Times, FT Reporters) reflects yesterday’s announcement that everyone was getting very concerned about as Trump set about “liberating” the US through the medium of tariffs – imposing taxes of at least 10% on pretty much all imports from April 5th. He also unleashed “reciprocal” tariffs on goods from an array of America’s biggest trading partners. ‘Liberation day’: what are tariffs and why do they matter? (The Guardian, Richard Partington) is an interesting article that explains a bit more about what the fuss is all about and why everyone cares so much. In a nutshell, tariffs are border taxes charge on the import of goods from foreign countries. It is the importers that pay them at the point where they enter the US, in this case. The taxes are calculated as a percentage of the value of the goods – so if you have a $100 product, there would be a $10 charge at US customs. The idea is that this raises prices to the end user, incentivising that end user to buy alternative (local) products instead. The US is the biggest goods importer in the world, buying $3tn worth of products in 2023. It imports more than it exports and Trump says that he is redressing this balance by making imports more expensive. However, the problem (one of the many) is that the end consumer is the one that ends up footing the bill, which means that living costs rise, which in turn tends to result in a drag on economic growth and a driver for inflation. Trade barriers – including tariffs – have been taken away over the decades, helping globalisation to flourish on the one hand but resulting in the hollowing out of manufacturing on the other as production shifts to countries and regions where costs are cheapest. The tariffs – and even recently, the threat of tariffs – are causing such a kerfuffle because the sudden imposition of the tariffs will have a faster negative effect than the manufacturers can react to.

In terms of the tariffs themselves, Donald Trump’s tariffs in brief: universal levies and targeted retaliation (Financial Times, Aime Williams) gives you some brief details. There are now 10% tariffs imposed on imports from all countries. More specific “reciprocal” higher tariffs will apply to 60 countries who have the biggest trade surplus with the US which will range from 10% to 50%. Chinese imports will be hit with a 34% reciprocal tariff on top of the existing 20%. Other Asian countries like Cambodia and Vietnam have been hit with tariffs of almost 50%, Japan gets 24%, the EU gets 20% and the UK gets off lightly with 10%. Tariffs are now changeable both in percentage and duration depending on the whims of Trump and how far countries are willing to go to keep America’s business.

In terms of the effects, What Trump’s tariff bombshell means for the world (Daily Telegraph, Melissa Lawford) observes that effective US tariffs are now at levels not seen since the 1930s while Global stocks tumble as investors move into haven assets (Financial Times, Arjun Neil Alim and William Sandlund) reflects the initial reaction of markets to Liberation Day – one of shock! Things were looking shaky in the build-up, but the reality of the cold hard percentages revealed yesterday had a tangible effect. Markets fell and the gold price hit another new high! Apple and other US tech groups hit as Donald Trump targets suppliers (Financial Times, Michael Acton, Stephen Morris and Gregory Meyer) highlighted the hit to Big Tech share prices because of their involvement in global supply chains – Apple is hugely exposed to extra tariffs on China, for instance. The share prices of big US retailers also took a beating and many observers are saying that what was announced yesterday was actually worse than the market had been expecting. Keir Starmer relieved as Donald Trump imposes 10% tariff on UK exports (Financial Times, George Parker, Peter Foster, Lucy Fisher and Jude Webber) suggests that we may have dodged a tax bullet, relatively speaking, but Aston Martins to Scotch: The UK sectors hit hardest by Donald Trump’s tariffs (Daily Telegraph, Eir Nolsoe, Hannah Boland and Christopher Jasper) shows the taxes will hit our automotive, aircraft, food and drink and aluminium and steel industries the hardest although pharmaceuticals managed to dodge taxes – for now.

So what are the longer term implications? Donald Trump’s beautiful trade war (Financial Times, Edward Luce) is pretty scathing about what Trump has just done and says that it has caused

confusion and uncertainty while the geopolitical impact will be long lasting. It is pushing other countries together – for instance, it’s uniting Europe on defence while last weekend economic officials from Japan, South Korea and China all met up to discuss what to do, the first time in years. The overarching effect of what Trump is now doing is that it will bring others closer together in a collective effort to bypass a country that has lost a lot of trust. And, as the article concludes, “falling trust means fewer deals”.

In non-tariff news, Elon Musk denies role in Trump administration is under pressure (Financial Times, Joe Miller) we see that Musk has dismissed claims that his days in the Trump administration are numbered following the defeat of his favoured supreme court candidate in a recent election I highlighted in yesterday’s Watson’s Daily. He said that a report from Politico, which said Trump told those close to him that Musk would leave DOGE within a matter of weeks, were “false news”. He was expected to head up DOGE until the summer of 2026. * SO WHAT? * It seems to me that there’s a lot of teeing up for Musk leaving. Last week Musk himself said that he could leave the government by the end of May, Trump said earlier this week that “at some point Elon’s going to want to go back to his company” and the White House has confirmed that Musk would “depart from public service as a special government employee when his incredible work…is complete”. Funnily enough, Tesla shares got a 5.3% boost on this news.

Then in UK floats plan for joint European fund to ‘stockpile’ weapons (Financial Times, Paola Tamma) we see that an informal paper, written by UK officials, is suggesting the formation of a multilateral fund for a “coalition of the willing” that could borrow on markets at cheaper rates and support defence spending. It would both lend money for defence projects and buy military assets for participating nations. This is just at the early stages but it sounds like an interesting idea because you would have thought that a combined entity’s buying power should mean cheaper prices – and that will benefit all participants in such a fund.

Commodity traders snap up assets and tighten grip on global supply chains (Financial Times, Leslie Hook and Tom Wilson) highlights what private trading houses like Trafigura, Vitol, Gunvor and Mercuria are now doing with the collective $57bn in net profits they’ve earned since 2022 – they are spending it on expanding in new areas like metals trading, taking positions in monster-growth-potential sectors like biofuels and buying up more physical assets like ships and refineries. * SO WHAT? * While these trading houses have their roots in oil, given how much they earned over the last few years, it makes a lot of sense for them to use the money they’ve earned to expand their business as opportunities like this don’t come along very often! It’s also important now more than ever because of the clean energy transition. In addition to this, the area in which they operate has become more competitive as hedge funds and others have seen their enormous profits and entered the market to get a slice of the action – so they need to keep their edge!

In crypto news, Stablecoin operator Circle files for IPO as revenues jump to $1.7bn (Financial Times, Philip Stafford) shows that Circle Internet, the US company behind the world’s second biggest stablecoin, USDC, has filed for a listing in New York. This will be the first big crypto company to push for an IPO since Trump got the keys to the White House. * SO WHAT? * If this goes ahead, it will mark a major comeback for the company that was the biggest creditor in Silicon Valley Bank, which failed in 2023. Although it’s understandable that such a company would want to list given the crypto-friendly nature of the new administration, you do wonder about the timing given that Congress is thinking about setting up a regulatory framework for US stablecoin operators. Surely you’d want to wait after that wouldn’t you?? Unless, of course, you think that this could have a detrimental effect on its abilities to make money and therefore its valuation. Rivals in this space will also be interested in flotation (in fact, Kraken is already doing this).

Samsung turns to China to prop up ailing chip business (Financial Times, Christian Davies, Song Jung-a and Zijing Wu) highlights tricky times for the South Korean tech giant which have meant that it has had to pivot from its underperforming US business to increased reliance on China. Samsung said last month that the value of its exports to China boomed by 54% between 2023 and 2024 and last year, it sold more than three years’ worth of logic dies – a major component in making AI chips – to Kunlun, the chip design subsidiary of Baidu. * SO WHAT? * Samsung has fallen behind rivals TSMC in the US and SK Hynix, so making the most of its Chinese business has made a lot of sense. That being said, you would have thought that his increasing reliance on China will make US negotiations more difficult.

Meanwhile, Amazon to begin deploying rival satellites to Starlink this month (Financial Times, Peggy Hollinger) shows that the e-tailing giant will start to deploy its satellite broadband constellation, Project Kuiper, this month. Kuiper satellites will launch from Cape Canaveral on April 9th. * SO WHAT? * Project Kuiper has got a lot of ground to make up with arch-rival Starlink because Starlink has launched over 7,000 spacecraft to put together a network that currently server 4.5m customers in over 100 countries since it launched its first satellite in 2019. Starlink controls over 60% of all satellites in orbit. However, concerns about Musk’s reliability and political affiliations have caused a lot of soul-searching among buyers, something that gives “newcomer” Project Kuiper an opening. It’s going to take a while but I would have thought that there’s going to be major momentum to back this up because it seems that everyone wants a proper competitor to Starlink.

Elsewhere, Nintendo Ups Its Game With Launch of the New Switch 2 (Wall Street Journal, Dan Gallagher) heralds the launch of the much-anticipated follow-up to the Switch console – the Switch 2! It will be launched on June 5th at a starting price of $450 in the US, a big rise compared to the $300 entry price when the original Switch launched in 2017. * SO WHAT? * Yes, it’s expensive, but the company is hoping that the very long wait for this new console (it’s taken eight years versus the usual five-to-six year gap) will see pent-up demand unleashed. Hopes for a hit are high but I reckon that a lot of it is going to depend on what the games are like on launch!

Closer to home, Raspberry Pi profits fall for year but beat forecasts (The Times, Emma Powell) highlights profits coming in above market expectations in the microcomputer maker’s first year as a public company and Raspberry Pi’s sliced profits are easier to swallow than its valuation (Financial Times, Lex) mentions the company’s positive outlook, but its valuation is high and the fact that a third of its sales come from North America make future predictions about its progress somewhat tricky.

White House close to approving sale of TikTok’s US unit to investors (Financial Times, Hannah Murphy, James Fontanella-Khan, Antoine Gara, Arash Massoudi and Ivan Levingston) is an interesting article which says that Washington is nearing a deal for a consortium of US investors to buy TikTok’s American operations. Plans are in the early stages, though, so don’t get too excited just yet! Any potential deal would have to get Trump’s seal of approval.

Talking about the president, Donald Trump kicks off sale of $2.3bn Truth Social stake (Financial Times, George Steer) shows that the share price of his social media company took a big hit yesterday after the company said in a filing with the SEC that it was planning to sell over 142m shares. Trump has 114m shares and the stake is worth about $2.3bn. Trump Media itself said that the filing was just routine and denied that this filing was “paving the way for the Trump trust to sell its shares”. Shares in Trump Media and Technology Group (TMTG) have fallen by over 40% this year.

I thought I’d include Meet Newsmax, a Trump-adjacent business with credible prospects (Financial Times, Lex) given the stellar performance this company has had since its IPO on Monday. This right-wing media network is highly influential in right-wing circles, is currently beamed into 50m households and has a number of highly rated shows that are up there with its more established rival, Fox News. * SO WHAT? * There is huge upside potential for Newsmax given that it has hardly scratched the surface of monetisation. If it can provide content that people want, it looks eminently possible that this new disruptor could make some serious waves! 

Tesla sales at lowest level for three years in Elon Musk backlash (The Times, Louisa Clarence-Smith) cites the latest official figures from Tesla itself which show that sales in the recent quarter fell by 13%, the lowest sales since Q2 of 2022. This is obviously disappointing news from the company but the share price got a boost when the market heard rumours that Musk might be leaving the White House to concentrate on his companies once again!

Then in Denmark’s Maersk buys Panama Canal railway (Financial Times, Oliver Telling and Robert Wright) we see that the Danish shipowner has just bought a railway that connects the ports at either end of the Panama Canal. This is interesting because this will weaken Washington’s control of the Panama Canal Railway Company at a time when Trump is trying to get more control of the ports.

I know I keep bandying about “millions” and “billions” so I thought this was quite a good way to appreciate the difference! Fun fact – a UK billion used to be a million million but it became the more widely accepted US definition of a thousand million a few decades ago.