Tuesday 08/04/25

A market rout made in the White House (Financial Times, the Editorial Board) chronicles the ongoing reaction to Trump’s tariffs as markets around the world continued to fall. Hong Kong’s Hang Seng was down over 13%, its worst single-day fall since 1997. Everyone’s selling assets at the moment as they’re trying to limit their losses whilst trying to work out just how bad this is all going to be and the only realistic way to stop this is for Trump to reverse at least some of his measures. If he refuses to do so, the whole economy looks like it could go down the toilet. However, a reversal doesn’t look like it’s on the cards. Trump’s finance chief rejects US recession fears (Daily Telegraph, Michael Bow) cites US Treasury Secretary Scott Bessent as saying on Sunday that “I see no reason that we have to price in a recession” on the one hand but BlackRock’s Larry Fink warns US economy is ‘weakening as we speak’ (Financial Times, Eric Platt) cites the chief of the world’s biggest asset manager as being of the opposite opinion on the other. Donald Trump’s tariffs will fix a broken system (Financial Times, Peter Navarro) is an article that’s actually written by the president’s senior counsellor for trade and manufacturing – and should know what he’s doing considering that he has a PhD in economics from Harvard, no less – who paints the USA as a victim of evil foreign forces intent on taking advantage of America’s generous nature. He portrays the tariffs as being a tool to level the playing field. Hedge fund billionaire turns on Trump over ‘economic nuclear winter’ (Daily Telegraph, Daniel Woolfson) cites Bill Ackman, a billionaire hedge fund boss, as saying that the tariffs were a mistake and that there should be a 90-day “time-out” to provide a window for negotiation but Trump rules out tariffs pause as he claims ‘tremendous progress’ (Daily Telegraph, Chris Price, Alex Singleton and Chanel Zagon) highlights the president’s defiance as he boasted about making headway and “countries that really took advantage of us are now saying please negotiate because they’re getting beaten badly”. Don’t be a ‘Panican’, Trump tells Americans amid market turmoil (Daily Telegraph, Szu Ping Chan, Chris Price and Tim Wallace) shows Trump in full flight, telling members of his own party not to be “a Panican” (a portmanteau of “panic” and “Republican”) which he described as being “a new party based on weak and stupid people”. Then again, Billionaire financiers lambast Donald Trump’s tariffs (Financial Times, Alex Rogers and James Fontanella-Khan) shows that Trump’s billionaire donors are not happy – even first buddy Elon Musk, who said that Peter Navarro, who wrote that article above, “ain’t built sh!t” and that there should be “a zero-tariff situation”. JP Morgan chief Jamie Dimon said that the tariffs “will probably increase inflation and are causing many to consider a greater probability of recession” and even Wilbur Ross, Trump’s commerce secretary last time around, said that the impact was “more severe than I would have expected” and observed that “Fear of the unknown is the worst for people and we are in a period of extreme fear of the unknown”. Ken Langone, founder of The Home Depot and a major Republican donor, said “I don’t understand the goddam formula…I believe he’s been poorly advised by his advisers about this trade situation – and the formula they’re applying”. Which Trump-supporting billionaires have lost the most in tariff markets turmoil? (The Guardian, Mark Sweney) makes for quite an interesting read on how much the billionaires have lost in the kerfuffle – Musk has taken a $130bn hit on his wealth (but don’t worry, he’s still the world’s richest person by miles!), Zuck has lost over $27bn, Bezos lost $23.5bn and Bernard Arnault, Europe’s richest person and owner of LVMH, lost $6bn on

Thursday and over $5bn on Friday. * SO WHAT? * I find it difficult to see how any of this is positive for anyone. Although Navarro portrays America as a victim, it seems to me that his country has done pretty well and the last time I looked, it was still the world’s biggest economy! He blames the machinations of the WTO and foreign tariffs for America’s trade deficit but it seems to me that a lot of this is because Americans (like most people) have become addicted to getting cheap stuff over the years – and this has been aided by globalisation. Production has gone to countries that can produce it cheaper, faster, better and more efficiently. In addition to individuals and companies alike potentially losing out, Jamie Dimon delivers a masterclass in managing up (Financial Times, Lex) points out IPOs have been cancelled as a result of whipsawing markets making for an impossible flotation environment (the rest of that article praises Dimon’s diplomatic appraisal of the current situation).

Meanwhile, China vows ‘fight to the end’ after Trump threatens extra 50% tariff (Financial Times, Joe Leahy, Ryan McMorrow, Arjun Neil Alim and Cheng Leng) shows that China is not backing down after Trump threatened to double down on his tariff threats, which some say would mean an effective tax rate of over 120% on imports from the country! China then fixed the exchange rate of the renminbi to the dollar at its lowest level since September 2023, potentially as a way to mitigate the impact of tariffs. The nuclear option China could take in trade war with the US (Daily Telegraph, Melissa Lawford) is an interesting article that discusses the possibility of China selling its holdings of US Treasuries (it is the second biggest holder of US debt). This would kill the value of the debt and drive up US borrowing costs, which would severely damage the public finances. The problem is that doing this could damage China itself – or as chief Asia economist Mark Williams at Capital Economics put it “China dumping treasuries would be the equivalent of lobbing a hand grenade at someone sitting across from you in a room”. Then of course the US has nuclear options of its own. * SO WHAT? * Trump is playing a massive game of chicken on a global scale and he’s betting that China will blink. He’s already caused a lot of damage, has torpedoed any trust that the world had in America and, IMO, the only way this can be mitigated is if he enters into further negotiations with individual countries. The longer it takes to do this, the more damage he’s going to do to the world economy.

In EU drops bourbon, wine and dairy products from tariffs list against US (Financial Times, Adrienne Klasa, Madeleine Speed and Andy Bounds) we see that the EU is going to hit the US with 25% tariffs on an array of goods in response to the duties on aluminium and steel but has decided to carve out an exception for bourbon, wine and dairy products. The tariff war is starting…

On an individual company scale, Companies get creative in finding ways to limit impact of Trump’s tariffs (Financial Times, Stephen Foley) shows that consultants are advising companies on ways to lower the base price on which the tariffs are charged. Accountants are advising on how to balance tax and customs duty more effectively in order to mitigate the impact of the tariffs, particularly on multinational companies. I would imagine that this is going to be a huge money-spinner for accountancy firms!

In other non-tariff news (!), Donald Trump announces ‘very high level’ talks with Iran (Financial Times, Guy Chazan, Mehul Srivastava and Najmeh Bozorgmehr) shows that Trump has announced the initiation of direct talks with Iran about bringing an end to its nuclear programme. This came after talks held yesterday with Israel’s Netanyahu. Iranian foreign minister Abbas Araghchi said that the two sides would hold “high level talks” on Saturday in Oman. * SO WHAT? * This sounds like some progress as Iran’s supreme leader Ayatollah Ali Khamenei has previously dismissed any such talks with Trump’s administration. Still, I’ll believe progress if/when I see it!

ECB expected to cut rates in April and June as tariffs threaten recession (Financial Times, Olaf Storbeck and Sam Fleming) suggests that the ECB is increasingly likely to cut interest rates next week – and probably again in June – in order to try to mitigate the effect of Trump’s tariffs and avoid recession. Investors are now pricing in a 90% chance of a 0.25 percentage point cut in interest rates at the next meeting, versus the 70% chance it predicted prior to the tariff announcement.

Back home, Starmer vows not to raise taxes despite Trump’s tariffs (Financial Times, George Parker and Lucy Fisher) shows the PM addressing worries that the government could raise income tax, VAT or insurance contributions in the face of global economic uncertainty, saying that the pre-election pledge not to do so is “a commitment we made and a commitment we will keep”. Starmer announces support for car and pharma industries in ‘age of insecurity’ (The Guardian, Eleni Courea) says that he will support industries that will be particularly hard-hit by Trump’s tariffs by diluting the UK’s EV targets (I referred to this yesterday) and cutting red tape for the pharmaceutical industry so that clinical trials could be set up more quickly. He also announced a £600m investment in a health data research service in Cambridge. This is good news for now, but everyone’s going to want to know more about whether there’s any more wiggle room on the tariffs.

In commodities news, Gold falls further as investors take flight to cover losses (The Times, Alex Ralph) reflects an unexpected sell-off in gold yesterday as investors crystallised the value of their holdings after the commodity hit historic highs last week. Some traders and funds were forced into selling liquid assets to pay margin calls.

Then in Oil prices fall to four-year low amid tariff chaos (The Times, Emily Gosden) we see that oil prices hit a new low yesterday, reflecting concerns that demand will fall as the effect of the tariffs hit the global economy. This was compounded by OPEC+’s decision last week to increase output by more than had been expected.

In environmental news, Arctic sea ice hits record March low as global powers eye shipping routes (Financial Times, Kenza Bryan and Jana Tauschinski) cites research from observation agency Copernicus that Arctic sea ice touched a record low for the end of the region’s winter last month as climate change continues to have an impact. It is thought that the region will be ice-free in summer within the next ten years. On a more positive note, Clean energy powered 40% of global electricity in 2024, report finds (The Guardian, Jillian Ambrose) cites findings by energy thinktank Ember which contends that over 40% of the world’s electricity demand was met by clean power sources. This was mainly due to an increase in solar power capacity – an energy source that has doubled in the last three years. Solar power made up almost 7% of the world’s electricity last year, wind power 8% and hydro power 14%.

In property, UK house price growth stalls as stamp duty holiday ends (The Times, Emma Powell) cites the latest Halifax report which says that UK house prices weakened last month as potential buyers stopped when they realised they weren’t going to to make the stamp duty deadline. Meanwhile, Lenders to launch mortgage price war ‘within days’ (Daily Telegraph, Szu Ping Chan) suggests that there’s a mortgage price war in the offing as borrowing costs have now reached their lowest level since just before the Truss-Kwarteng mini-budget. * SO WHAT? * Coventry Building Society and digital lender MPowered Mortgages announced mortgage rate cuts over the weekend and you’d think that there’s more scope for further cuts if the Bank of England cuts interest rates as per expectations. A surprisingly robust consumer (given the circumstances) and more properties on the market may provide ample business opportunities for mortgage lenders.

Defence sector laggards are still waiting to be called up (Financial Times, Lex) points out that the massive uptick in defence spending in the three years since Russia invaded Ukraine hasn’t lifted all companies in this space – British contractors Qinetiq, Chemring and Avon Technologies have been notable laggards. One main reason for this is their comparatively high exposure to US business but there is plenty of scope for them to catch up. Talking of catching up, Can Oneweb

capitalise on tensions over Elon Musk and Starlink? (The Times, Emma Powell) takes a look at whether Oneweb, which is owned by Eutelsat, can actually close the gap with Starlink’s satellite dominance. The EC is now talking to Eutelsat and other European satellite providers about whether they can cover Ukraine as a possible alternative to Starlink. The long and short of it is that Starlink is way ahead of everyone else in terms of coverage, numbers of satellites and costs – but everyone now realises that it can’t be relied upon and another player is sorely needed. The main issue is going to be funding its growth…

Then in UK firms ditching diversity and inclusion ‘face higher risk of lawsuits’ (The Guardian, Sarah Butler) we see potential consequences of companies ditching DEI initiatives – lawyers say that there’s going to be an increased risk of legal action. * SO WHAT? * The Chair of the Employment Lawyers Association (ELA) published an open letter to businesses saying that defending a company against discriminatory acts made by an employee was already tricky but the situation would be made much worse without DEI policies. Those without such policies in place would find it more difficult to show that they had taken “all reasonable steps” to prevent things like sexual harassment, for example.

Picture the scene. I’m in the office over the weekend writing Watson’s Weekly, the sun is shining in through the window and I fancy a bit of music. Now when I’m writing, I generally prefer silence, but for those times when I need something else I normally listen to yoga music/study music that is instrumental and doesn’t have anyone singing because it can be distracting. However, I was feeling a bit wild and thought I’d listen to music that I don’t understand (songs in foreign languages) to keep the writing momentum going. I know right – I am one exciting individual 🤘. Anyway, I thought why not listen to this year’s Eurovision entries. And then I heard this, Estonia’s entry. OMG. It is such a stupid song but it is insanely catchy and I have been annoying my family since that day by playing it out loud – and often singing it loudly – to intensify the whole experience. I’ve found it extremely useful as a way of getting my kids to do things (“do this – or I’ll play/sing the song”) or as a way to prize the remote control from them. I don’t know what it is about this song but it makes me smile. Anyway, have a listen if you like annoying-yet-catchy songs. Other than that I thought that both Sweden’s and Spain’s entries were quite good. I might change my mind before the contest. If you like stupid songs, I would also recommend Australia’s ridiculous “Milkshake Man” 🤣.