Thursday 06/03/25

I really recommend that you listen to the podcast I recorded yesterday with Giles Morgan, founder of negotiation coaching and consulting company Kahvay. I learned a lot from talking to him about what motivations lie behind the various negotiating tactics that Trump is currently using. Fascinating stuff!

We’re ready for trade war and real war, China tells Trump (The Times, Richard Spencer) reflects China’s anger regarding Trump’s most recent announcement of additional tariffs of 20% on Chinese imports as the foreign ministry made a statement saying “If war is what the US wants, be it a tariff war, a trade war or any other type of war, we’re ready to fight till the end”. US defence secretary Pete Hegseth responded by saying “Those who long for peace must prepare for war…That’s why we’re rebuilding out military”. China’s government said that it will double-down on the state subsidies that make Chinese products so competitive, particularly in biomanufacturing, quantum technology, AI and 6G technology.

In Donald Trump says it is ‘over’ for Hamas unless hostages are released (Financial Times, Felicia Schwartz, Neri Zilber and Andrew England) we see that Trump is putting more pressure on Hamas to hand over its remaining hostages just hours after holding direct talks with the group. He added that “I am sending Israel everything it needs to finish the job, not a single Hamas member will be safe if you don’t do as I say…This is your last warning!”. Hamas is still holding 59 hostages in Gaza, with fewer than half believed to be alive.

In yet another example of Trump’s latest negotiating blitz, US cuts off intelligence sharing with Ukraine (Financial Times, Christopher Miller, Lucy Fisher, Henry Foy, Ben Hall and Fabrice Deprez) highlights another dramatic move which could seriously dent Ukraine’s ability to target Russian forces. This follows on from the decision earlier this week to suspend military aid to Ukraine. The director of the CIA added that there was hope that it would be restored, but for now it has paused. The US has also formally blocked its allies from sharing US intelligence with Ukraine.

German borrowing costs rise sharply after deal to allow more defence spending (The Times, Jack Barnett) highlights the inevitable consequences of incoming chancellor Merz’s plans to construct a $500bn fund whilst ring-fencing defence spending from its “debt brake” rule. * SO WHAT? * Economists have blamed dogged adherence to the rule as one of the main drags on economic growth in Germany over the last few years. Merz’s move was described by Jim Reid, head of macroeconomic research at Deutsche Bank, as “one of the largest fiscal regime shifts in postwar history, perhaps with reunification 35 years ago being the only rival”.

I mentioned the prospect of seizing frozen Russian assets earlier this week and The West is sitting on $300bn of Russian assets – but seizing it will chill the City (Daily Telegraph, Lucy Burton and Tim Wallace) takes a closer look at the implications – that Europe could suddenly access £200bn of assets that could be used to boost defence spending significantly. * SO WHAT? * This sounds like a no-brainer initially, but some are worried that this could set a precedent that may deter billionaires from settling in the UK. It could also breach international law and result in a slew of lawsuits from these people and nation-states. Macron has already dismissed the idea and

Reeves has highlighted the importance of broad-based international co-operation to make it work because, presumably, if some accessed such assets and others didn’t, money would immediately flow to those places that didn’t! Interestingly, the US has been a fan of Europe seizing such assets for some time and first looked into the feasibility of doing so in April 2022. At the moment, it doesn’t sound like it’ll happen but we are in desperate times so you never know!

Staying with the subject of financing defence spending, Pension savings to be spent on rearming Britain in defence push (Daily Telegraph, Michael Bow and Szu Ping Chan) shows that plans are being drawn up to boost defence spending by rewriting the voluntary Mansion House Compact in such a way that it will unlock pension fund assets that could be used to invest in defence companies. The MHC was put together to encourage UK pension funds to park some of their money in growth assets. Alongside this, the government is working on ways to take away any ESG investment concerns specifically regarding the defence sector. * SO WHAT? * All of this would be positive for the UK’s defence sector because a) investors have had ESG concerns in the past about investing in the sector (because their product kills people – violating the “S” in ESG), so these developments could ease such concerns and because b) the industry, aside from a few big players like BAE Systems, is actually quite fragmented and pension funds have not been able to invest in the smaller players. It’ll take time to put together and implement though…

In tariff-related news, Trump temporarily spares carmakers from US tariffs on Canada and Mexico (The Guardian, Callum Jones) shows that the president has just given carmakers a free pass for one month regarding the new US tariffs on goods from Canada and Mexico. Shares in large carmakers GM, Ford and Stellantis all jumped in a bit of a relief rally. * SO WHAT? * My question here is – what happens when the month is up?? I guess this gives the companies a bit of breathing space and time to come up with a proper way forward to accommodate Trump’s thinking.

In ‘Substantial’ risk to the UK from Trump tariffs, says Andrew Bailey (The Times, Jack Barnett and Mehreen Khan) we see that the governor of the Bank of England told parliament that Trump’s tariffs will hit UK and global economic growth, adding that UK household disposable income would be squeezed as a result. * SO WHAT? * FWIW, I would say that one of the main dangers of Trump’s tariffs is that product intended for the US market may be diverted elsewhere (including here) and push prices down for domestic companies that produce the same or similar goods. That’s great for consumers and taking the heat out of inflation but could potentially kill companies and industries…

Then in Oil price tumbles to 3-year low on fears trade war will hit demand (Financial Times, Tom Wilson) we see that oil prices weakened for the third consecutive day on fears that Trump’s trade war will prove to be a major drag on global economic growth, which will in turn lead to falling demand for oil. Brent Crude’s price is now at its lowest level since December 2021. * SO WHAT? * There’s a real cloud hanging over the oil sector now what with OPEC+ recently deciding to open the taps and end its policy of production cuts and Saudi Aramco reporting disappointing results.

Lower growth forecast in ‘long and challenging year’ for UK firms (The Times, Alex Ralph) cites the BCC’s latest economic forecasts which have been downgraded due to major costs pressures “piling up on businesses”. The downbeat assessment comes ahead of Reeves’s spring statement, which is due out on March 26th.

UK business cutting jobs amid ‘loss of momentum’ from autumn budget (The Times, Jack Barnett) cites findings from the latest S&P Global PMI for February which shows that service

companies have cut employment for the fifth straight month – the longest losing streak since early 2011 (excluding the pandemic). * SO WHAT? * I thought that Pantheon Economics’s chief UK economist made a very interesting point though – that the PMI “asks only how many firms are cutting output or employment, rather than by how much”, meaning that the findings can be exaggerated. The implication here is that the survey is underestimating underlying economic activity.

In a quick scoot around some of today’s other interesting stories, Adidas lowers profit forecast for year (The Times, Emma Target) shows that the company has reined in expectations for this year after a strong 2024 but it remains optimistic about its product offering whilst acknowledging a tricky macroeconomic backdrop. Fun fact: its final pair of Yeezy’s got sold at the end of 2024, bringing a close to a very difficult chapter for the company.

Gaming chat platform Discord in early talks with banks about public listing (Financial Times, Arash Massoudi, Hannah Murphy and Tabby Kinder) shows that the San Francisco gaming chat platform’s is in the early stages of talking with banks about an IPO. It now has 200m monthly users around the world and was last valued at $15bn in a 2021 funding round. It sounds like tech IPOs are in the offing this year!

New car registrations in the UK slip for fifth consecutive month (The Times, James Hurley) cites the latest SMMT stats which showed that car registrations fell for the fifth month in a row in

February as fleet registrations were down. On the plus side, EV take-up is increasing and Tesla saw a bounceback in sales from a weak January. * SO WHAT? * Car manufacturers are still having to subsidise their EV sales in order to meet EU emissions rules whilst at the same time facing competition from China. It’ll be interesting to see what happens next month in terms of registrations because that’s when the new numberplates come out. February is traditionally a quiet month because fleets are waiting for the new plates to come out.

Then in Games Workshop shares lifted by few short words (The Times, Emma Taggart) we see that the maker of computer games and Warhammer posted results that came in ahead of expectations in its latest trading update. It has strong momentum and will no doubt benefit from an announcement in December that Amazon will be turning Warhammer 40,000 into a TV series. It’s looking good!

This is a highly amusing cat video – make sure you watch it right through to the end though!