Wednesday 22/01/25

Five takeaways on Donald Trump’s opening trade salvo (Financial Times, Andy Bounds, Aime Williams and Alan Smith) is a useful summary of Trump takeaways so far as he laid out his new “America First Trade Policy” yesterday. Firstly, he’s going to implement “tariffs sooner rather than later”; secondly, he’s turning his sights initially on neighbours Mexico and Canada with tariffs coming into force on February 1st with a review of the USMCA trade deal to follow in July 2026; thirdly, there will be a wholesale review of its dealings with trading partners, especially towards China; fourthly, the US will use trade to achieve other policy goals (e.g. whacking up tariffs on imports from China by 100% if Beijing doesn’t play ball on selling at least 50% of TikTok to a US company); fifthly, there will be a scrutiny of global trade flows to stop Chinese manufacturers bypassing US tariffs by exporting to America via third countries such as Vietnam and Mexico. Trump threatens to double taxes on foreign companies as he declares war on EU deal (Daily Telegraph, Tim Wallace) looks at the president’s instruction to his secretary of the treasury to ascertain whether “any foreign country subjects United States citizens or corporations to discriminatory or extraterritorial taxes pursuant to section 891 of title 26, United States Code”, which gives Trump the power to double taxes on foreign nationals or corporations should they be falling foul of this. It also highlights Trump’s withdrawal of support for an agreement on a global minimum corporation tax of 15% that had previously been agreed under the auspices of the OECD by 140 nations. This had also been supported by Biden and adopted by the EU last year. Trump did this because he said it unfairly gives the OECD power over US tax policy. ‘Animal spirits alive’ as Wall Street bankers anticipate Trump boom (The Guardian, Kalyeena Makortoff and Graeme Wearden) shows that Wall Street Bankers are getting excited at the prospect of “a bonfire of regulations”, which is likely to unleash a barrage of dealmaking, and will in turn result in a barrage of fees! Trump is definitely going to keep everyone on their toes.

Trump is also likely to destroy, or severely damage, certain industries – particularly if they are related to climate change. Donald Trump pulls the plug on battery-makers’ EV dream (Financial Times, Lex) highlights particularly aggressive treatment of EVs. He has ordered his administration to ditch EV mandates, pull back on regulations on automotive pollution and fuel-

economy standards and he will consider the elimination of unfair subsidies that prioritise EVs over other technologies. Ørsted sinks after Trump moves to block new turbines in the US (The Times, Emily Gosden) gives us a bit more detail following the story I mentioned in yesterday’s Watson’s Daily and highlights the prospect of no additional US offshore wind development for the medium term. * SO WHAT? * I think that Trump’s anti-EV stance could actually damage American automotive manufacturers because it may potentially limit them to selling in the domestic market if everyone else continues to prioritise EVs. Car makers have really long lead-times (a few years) so pulling back on electrification now could really cause a lot of uncertainty in a fragile industry and act as a disincentive for consumers to buy. Mind you, it could be good for some of the European (and Japanese) manufacturers that have been slow to the EV party because there will at least be one major market in the world where they’ll be able to sell their wares! The major fly in THAT ointment, though, would be import tariffs.

Meanwhile, in the UK, Labour needs to compromise on employment rights (Financial Times, The Editorial Board) highlights ongoing frustration at the effect of the Budget on hiring in the UK and the danger that it could kill the delicate first shoots of economic recovery before they’ve had a chance to get established. Not only are businesses having to contend with rising NICs and an increase in the minimum wage, they are facing the implementation of a new employment rights bills that gives employees rights that are likely to be expensive for employers. The bill as it stands at the moment gives workers protection against unfair dismissal from day one, stronger rights on flexible working, a clampdown on the use of zero-hours contracts and fire and rehire policies. * SO WHAT? * Reform is needed, but the government should provide more guidance on how and when these changes are going to be implemented. It also needs to build some flexibility in as well. So far the day one unfair dismissal thing has been watered down to a nine-month probation period, but small businesses say that this is still too long and are pushing for a threshold of six months, which is more in line with norms in Europe. Other measures appear to be very union-friendly and could prove to hamper growth severely. The government needs to find a better balance between  satisfying its union sponsors and boosting the economy.

In Boss of Monzo leans toward floating $5bn UK-based fintech in US (The Times, Helen Cahill) we see the potential continuation of the New York exodus as the board of the UK fintech looks like it might go stateside for a listing. The CEO is leaning this way, but the company’s board is leaning towards a London listing. Monzo announced its first annual profit last year. * SO WHAT? * Rival Revolut has already said that it wants to list in the US because of better liquidity so it seems inevitable that Monzo is at least entertaining the possibility. I wonder whether the UK government will try to incentivise it to stay. In Revolut’s case, I wonder whether at least some of the motivation to go stateside is a “**ck you” to the government and regulators who dragged their feet for years in giving it a banking licence.

German electric car sales plunge by more than a third (Daily Telegraph, Christopher Jasper) cites the latest findings from the European Automobile Manufacturers’ Association (ACEA) which show a massive 39% collapse in sales last month thanks to the withdrawal of government tax breaks (I have always said that this happens – and I mentioned it yet again yesterday: “once these incentives disappear, sales fall off a cliff”). This translated into a 10% fall in EV sales across the whole of Europe. In terms of where we are at the moment in terms of market share, petrol cars had33%, hybrid-electrics 31% and EVs 13% in 2024. French EV sales also took a pasting last year. * SO WHAT? * I really do think that governments have to step up and help rather than sit back and watch their manufacturing capability die. As I’ve said before, I think that they should still keep the EV quotas but just postpone the fines for another year. The incentive thing costs too much and results in a collapse of sales the moment they are taken away.

Then in Waterstones profits rise fourfold as workers return to office (The Times, Isabella Fish) we see that the return of office workers helped to almost quadruple profits at Britain’s biggest

bookseller last year (BTW, Waterstones also owns Blackwell’s and Foyles). * SO WHAT? * This is welcome news for the company, which is owned by activist hedge fund Elliott Advisors, as it saw profits decimated by 78% last year thanks to technical issues at its warehouse that resulted in a backlog of orders. The company is now emboldened enough to open dozens of new bookshops in the UK this year and even intimated that it could have an IPO. It currently has 300 bookshops across the UK, Ireland, the Netherlands and Belgium.

In other uplifting news, Premier Foods had a tasty Christmas as shoppers treated themselves (The Times, Emma Taggart) shows that the British food manufacturer put in a strong performance over the quarter and it now expects full-year profits to be towards the top end of expectations. * SO WHAT? * I thought that it was worth noting that revenue from its branded products rose strongly while its non-branded product revenues actually fell. Normally, when people are feeling stretched financially, they ditch branded for non-branded so this looks like there’s a turnaround going on, no?

Marston’s toasts ‘solid’ quarter despite weather woes (The Times, Jessica Newman) highlights more Christmas cheer as the pub operator posted a “solid” quarter with “particularly strong” trading over Christmas. Rubbish weather in November and January dragged things back a bit though. * SO WHAT? * This echoes the story at rival Mitchells & Butler, although analysts argue that the weather hit M&B more than Marston’s because it had more exposure in geographic areas where the storms were more severe.

There were some pretty interesting stories on AI in the press today! SoftBank and OpenAI back sweeping AI infrastructure project in US (Financial Times, George Hammond, Myles McCormick and David Keohane) highlights a dramatic announcement yesterday about their launch of a massive US AI infrastructure project which Trump interpreted as a “declaration of confidence in America”. The plan is called “Stargate” and will involve the initial spending of $100bn on Big Tech infrastructure projects which could then rise to up to $500bn over the next four years, although there wasn’t much detail forthcoming about the financing. Will Starmer’s AI Opportunities Action Plan be anywhere near as impressive as this??

Then in TikTok-owner ByteDance plans to spend $12bn on AI chips in 2025 (Financial Times, Zijing Wu and Eleanor Olcott) we see that ByteDance has some pretty ambitious spending plans while its fate in the US continues to hang in the balance. * SO WHAT? * Around 60% of ByteDance’s domestic semiconductor orders would go to Chinese suppliers including Huawei and Cambricon with the rest being spent on Nvidia chips (these ones aren’t the full fat ones that are banned by US export controls) – but if Trump decides to get properly feisty, sourcing Nvidia chips is going to get much harder.

AI-developed drug will be in trials by year-end, says Google’s Hassabis (Financial Times, Stephen Morris and Madhumita Murgia) is an impressive-sounding headline which highlights the prediction by four-year-old drug discovery start-up Isomorphic Labs that it will have an AI-designed drug in trials by the end of this year! The company is currently looking into the fields of oncology, cardiovascular and neurodegeneration. * SO WHAT? * If this turns out to be true it will be absolutely mind-blowing because it usually takes 5-10 years to discover a drug. As you can imagine, big pharma is already very interested because if the path from drug discovery to manufacturing can be shortened it would have a dramatic effect on costs and the breadth of treatments available.

Legal AI is reaching deep into the workplace (Financial Times, John Gapper) is an interesting article which suggests that law is a particularly juicy candidate for AI disruption because legal systems have lots of rules and precedents that can be crunched. Harvey is one of the best-known AI start-ups in the field of law along with smaller players including Genie AI, Luminance and Robin AI. * SO WHAT? * Although expensive pre-deal due diligence is undoubtedly a big target

for AI, thus far AI has been used by a lot of smaller manufacturing and building companies to draft contracts, allowing them to do more legal work themselves. A platform like Luminance enables companies to upload thousands of existing contracts into AI models which soak up all the clauses and terms they use and then generates new ones, highlighting where changes are needed. One of the major stumbling blocks for AI in law is that the fee structure continues to depend on the billable hour, and if AI saves huge amounts of time clients are inevitably going to want to see smaller bills.

Meanwhile, in social media, Meta reassures advertisers over fact-checking changes (The Times, Richard Fletcher) we see that senior execs have been engaged in a charm offensive with advertisers over the last few days in order to calm nerves regarding its recent decision to abandon its fact-checking programme in the US. Meta has switched this model to a system which allows users to flag misinformation in the form of “community notes”, aping a system used by X. * SO WHAT? * Zuck is just drinking the Trump/Musk cool-aid and it’ll be interesting to see how advertisers react. Advertisers have ditched specific platforms in the past but it never seems to have stuck for a long time. That being said, if Bluesky can get its act together on this to differentiate itself then it could make serious gains! If I was the Snap owner, I’d be looking at content moderation/fact-checking as well.

Then in streaming, Netflix Raises Prices Across Plans, Reports Record Jump in New Subscribers (Wall Street Journal, Jessica Toonkel) shows that Netflix is raising prices in the US from $6.99 a month to $7.99 a month for the ad-supported tier while the cost of the premium tier will rise by $2 to $24.99 per month. It also announced a chunky 44% increase in subscribers for Q4 and was confident enough to raise its 2025 revenue guidance. Season 2 of “Squid Game” and the action Thriller “Carry-On” were just two titles that brought in the viewers. Netflix is winning streaming’s battle royale (Financial Times, Lex) makes a few interesting observations about the streamer – that it’s stuck pretty much to one thing (unlike rivals such as Amazon, which has loads of different business areas), has rising margins (unlike rivals, whose margins are being squeezed) and although it has a very full valuation it isn’t indulging in any mega-expensive projects that could pull the rug from under it. Despite its competitive environment, Netflix is likely to continue to lead the pack.

In a quick scoot around some of today’s other interesting stories, Prologis Sees Warehouse Leasing Picking Up Since Election (Wall Street Journal, Liz Young) shows that world’s biggest industrial property developer has been seeing an acceleration in warehouse leasing since Trump won in November as they gained more certainty about the next four years. * SO WHAT? * The sector has fallen since its pandemic highs, so it sounds like there’s a rebound going on but clearly we’ll have to wait a bit longer to see if this is a a blip or a trend.

Then in Tritax Big Box building UK’s biggest data centre next to Heathrow (The Times, Tom Howard) we see that Tritax Big Box REIT has just splashed £70m on buying 74 acres of land

between Heathrow and Slough in order to build a massive three-storey data centre. This will be its first ever data centre and be the the UK’s largest! * SO WHAT?* The company reckons that demand for data centres exceeds supply by about 50% at the moment, so it certainly seems to be a decent area to lean into! This is also something to consider from the energy angle as more data centres will require more energy – and this will also require more water supplies to cool the data centres down!

Have you ever had a Slinky? Been frustrated at it only being able to get so far? Well so has this guy – but he’s done something about it! He’s invented the world’s first infinite Slinky staircase! Woohoo! It’s so pointless but sometimes in life I think that a bit of silliness doesn’t go amiss 👍