inequality“Yay, a lotta people A lotta people Oh remember to kick to it over
No one will guide you, through Armagideon time” 

 

 

Ironically, the big story this week isn’t Trump’s tariffs, it’s the beginning of domestic protest over his presidency.  

 

More of that later, as we start with tariffs the impact they have had, and reactions to them. 

The chief economist at UBS Global Wealth Management was accurate in his assessment of Trump’s folly: “We often hear that when the US sneezes the global economy catches cold. This is not the US sneezing. This is the US cutting off its own arm. The self-inflicted economic cost naturally weakens the dollar.” 

Anyone expecting Trump to dial-back after crashing markets is misguided, with Trump saying his policies will “never change”.  

This was further endorsed by, Howard Lutnick, the commerce secretary: “The president is not going to back off what he announced yesterday. He is not going to back off.”  

Trump posted on his Truth Social platform: 

“TO THE MANY INVESTORS COMING INTO THE UNITED STATES AND INVESTING MASSIVE AMOUNTS OF MONEY, MY POLICIES WILL NEVER CHANGE. THIS IS A GREAT TIME TO GET RICH, RICHER THAN EVER BEFORE!!!” 

Adding: 

“GREAT JOB NUMBERS, FAR BETTER THAN EXPECTED. IT’S ALREADY WORKING. HANG TOUGH, WE CAN’T LOSE!!!” 

The most immediate response came from China, whose finance ministry announced retaliatory tariffs: “For all imported goods originating from the US, an additional tariff of 34% on top of the current applicable tariff rate will be imposed,”  

They are also imposing a further restrictions on the export of rare earths, which are used in hi-tech manufacturing such as batteries and electric vehicles. It added a further 16 US companies and organisations to its export control list, meaning that Chinese companies are restricted from doing business with them. 

 

‘This is not the US sneezing. This is the US cutting off its own arm’

 

In addition, China has also filed a lawsuit against the US with the World Trade Organization. 

Trump responded on Truth Social saying: “CHINA PLAYED IT WRONG, THEY PANICKED – THE ONE THING THEY CANNOT AFFORD TO DO!” 

Unfortunately, America has VP Vance, who is just what you don’t need when diplomacy is required. 

Speaking to Fox News, Vance said: “To make it a little more crystal clear, we borrow money from Chinese peasants to buy the things those Chinese peasants manufacture. That is not a recipe for economic prosperity, it is not a recipe for low prices, and it’s not a recipe for good jobs in the United States of America.” 

Lin Jian, the spokesperson for the Chinese foreign ministry, responded saying: “It’s both astonishing and lamentable to hear this vice-president make such ignorant and disrespectful remarks. Pressure, threats and blackmail are not the right way to deal with China.” 

Vance was right about “peasant” but its him who is the peasant! 

 

‘It’s both astonishing and lamentable to hear this vice-president make such ignorant and disrespectful remarks’

 

One point that appears to have been overlooked, is Trump’s pandering to his donor oligarchs of big-oil, as his tariffs includes an exemption for the energy sector, meaning the levies will not apply to many fossil fuel products, including liquefied natural gas imports, crude oil from Canada, and materials needed for making petrochemicals. 

Mike Sommers, head of the top US fossil fuel lobby group, the American Petroleum Institute, wrote in a social media post: “We welcome President Trump’s decision to exclude oil and natural gas from new tariffs, underscoring the complexity of integrated global energy markets and the importance of America’s role as a net energy exporter. We will continue working with the Trump administration on trade policies that support American energy dominance.” 

Federal Reserve chair Jerome Powell defied Tump’s demands for an immediate interest rate cut, cautioning that there is high uncertainty over the economy’s direction, saying:  “Downside risks have risen.”  

Trump seems not to understand that his tariffs will see the US importing supply-side inflation which will totally undermine his election campaigns promise to bring down prices. Last week, he incorrectly claimed that prices were “way down”, despite inflation holding firm. 

The real question is, what’s actually driving this apparent madness?  

The Trump administration clearly has major issues with Europe, and not just on trade and defence: “Europe’s been very bad to us: they’re going to have to buy their energy from us, because they need it and they’re going to have to buy it from us.”  

 

‘what’s actually driving this apparent madness?’

 

All now becomes clear; Trump’s demand that Ukraine signs over their all your energy and resources, in return for keeping Russia at arm’s length, is just another part of his plan to control European energy. 

Also, his Treasury secretary, hedge fund billionaire Scott Bessent, has spoken of a “global economic reordering”, and the new chair of the Council of Economic Advisers, Stephen Miran, wrote a lengthy paper, “A User’s Guide to Restructuring the Global Trading System”. In this, Miran details how the US should use not only tariffs but also the threat of withdrawing its security support to compel countries to accept reduced payments due on Treasury bills. Clearly, investors would face loss, and, in effect, the US would be in default. However, they view tariffs as a way of  leveraging the US’s power as the world’s largest consumer and biggest debtor to compel other countries into negotiating terms. 

Today, the US is, for the first time, facing real trade competition, primarily from China, but also the EU. As a result, Trump is trying to reinvent the rules; he wants a cheaper dollar to revive US manufacturing and Chinese competition at bay, whilst, at the same time, maintaining the dollar as the world’s reserve currency. At a cost borne by everyone else. 

The next question is, can the US restructure global trade? 

Well, if we look to back to 1979, we can see how Paul Volcker, the new chair of the Fed did just that. Volker, in his battle against inflation, raised interest rates to 13%, then to 17%, and finally to 19%. This created a double-dip recession, unemployment peaked at C.10% in late 1982, and laid waste to US manufacturing industries, as high interest rates increased the value of the dollar making exports more expensive.  

However, the “Volcker shock” appeared to work as, by mid-1983, inflation was 2.5%, and for the rest of the 1980s, the US economy boomed. 

Volker had, perhaps unintentionally, reshaped trade. Whilst the economy accelerated manufacturing never recovered. Instead investment went into finance and property, creating the giant credit bubble of the 1990s and 2000s. 

The world economy was reordered, with the US consumer creating such demand that they appeared able to swallow exports from the rest of the world with seemingly limitless borrowing. China’s boom was funded by US debt and deindustrialisation.  

The policies implemented by Volcker created the globalised world system that Trump is now trying to destroy.   

 

‘can the US restructure global trade?’

 

At home, PM Starmer has yet to fully respond to the tariffs, but, his handling of Trump, mainly by tolerating him, seems to be delivering results. 

Last week, in “Complete Control”,  I talked of the impact that the tariffs imposed in 1930 by the Smoot-Hawley bill had globally. Back then the UKs main economic activity came from manufacturing and activities like mining, whereas today, 75% of the UK economy is services and untouched directly by tariffs. As such, the overall impact is harder to calculate. 

The big concern is us giving too much away in the ongoing trade talks, with MPs cautioning against trying to become “the 51st US state”. 

As part of the PM’s plan there is the expectation of cuts to red tape and removing more planning restrictions in order to boost growth, but experts say this is unlikely to fill a new black hole in the autumn budget. 

A Downing Street spokesperson said: “The global economic landscape is shifting, and we need to shift with it through overhauling our planning system, bringing forward our industrial strategy and cutting excess red tape. We are already embracing that new era and ready to tackle it.” 

Ministers have said they are still optimistic they can agree a trade deal with the US in the coming weeks that would avoid the worst of the direct impact of the tariffs. It is hoped negotiations will restart next week. 

So what to do?  

Well, firstly we don’t become the 51st state, or sign-up to deals that compromise standards for food imports, our ability to regulate the content of digital platforms and our sovereign ability to tax.  

Also, we need to learn to be independent of America, looking instead to the EU, Asia and Canada. If there is one world leader who could assume the mantle usually held by the US president, it is Mark Carney, assuming he is confirmed as Canadian PM in their forthcoming general election. Carney’s response to Trump’s menacing threats is to re-orient Canada around a new rules-based global trade order he aims to construct. 

It appears that the two dominant EU countries, Germany and France, would view Canada as a privileged trade partner with the EU. 

In addition, the commonwealth takes on a newfound importance, including African members such as Nigeria and South Africa and Asian members such as India, Malaysia, and Australia and New Zealand.  

In effect the UK could have the beginnings of a free-trade zone, creating the independence from the US previously referred to. Ours and other countries independence leaves the US increasingly isolated. 

All of this is now beginning to dawn on some of the Trump electorate, along with the 49% who didn’t vote for him.   

The National Retail Federation, a lobbying group for the retail industry, said: “More tariffs equal more anxiety and uncertainty for American businesses and consumers. While leaders in Washington may not care about higher prices, hardworking American families do.”  

 

‘More tariffs equal more anxiety and uncertainty for American businesses and consumers’

 

Part of  Trump’s rationale for imposing tariffs was job creation, however the National Association of Manufacturers said that tariffs actually “threaten investment, jobs, supply chains and, in turn, America’s ability to outcompete other nations and lead as the preeminent manufacturing superpower”. 

Voters were equally unimpressed; a poll released on Wednesday before Trump’s announcement found that just 28% of Americans believe tariffs help the economy, while 58% believe the impacts will be damaging. 

The real issue facing the US consumer isn’t overseas exporters getting rich as they rape and pillage America, it is the oligarchs that Trump surrounds himself with. 

America has consistently succeeded in being a wealth generation machine and aggressively pursuing its self-interests to the extent that many of its supposed partners, such as the UK, become de facto vassal states. An example of this is how US tech companies have stripped their UK contemporaries. 

Of course there have been beneficiaries from the US consumers addiction to imported goods, especially in Asia. However, as with the UK, the neoliberalism introduced by Reagan and Volkers battle against inflation, led to deindustrialisation and diminished union power, leaving those in the so-called “rust belt”, unprotected, and increasing inequality that is now the highest of any developed economy. 

These are his MAGA people, those that hang on his every word, who see him as their saviour. These are the voters who buy his realpolitik that you can sell to American consumers only if you play by his rules. His tariffs might well become transformative, but not in the way his MAGA supporters hope.  

 

‘His tariffs might well become transformative, but not in the way his MAGA supporters hope’

 

Tariffs raise prices for everyone, especially the poor, while shielding local producers from competition. Meanwhile, as Trump made clear, the revenues are earmarked not for public investment or industrial policy, but for tax cuts that benefit the wealthy. Tariffs may create redistribution but it will be upward only. The poor will pay more, so billionaires pay less. 

But, this is only a part of what Trump is trying to do. 

Universities that support, or even tolerate protests, research or speech that don’t meet his ideals are being investigated and their federal funding frozen or reduced. While Diversity, equity, and inclusion (“DEI”) initiatives and research on climate breakdown or gender and sexuality are not technically banned, they can lead to heavy financial repercussions universities that engaging in, or tolerating them. University administrators are beholden to university boards, comprised mainly of businesspeople, who value financial growth over academic freedom.  

As a result, Harvard is planning to issue $750mi of bonds as part of contingency preparations, in response to the Trump administration announcing a review of $9 billion in federal grants and contracts to the university as part of a crackdown on alleged antisemitism on campuses. 

Harvard’s plans comes only days after Princeton said it was also considering the sale of about $320 million of bonds, due to the government freezing several dozen research grants to the university. 

People are now seeing through Trump and his libertarian ideals, which are anything but for individual liberty. 

Demonstrators estimated to be in the tens of thousands gathered in Washington DC on Saturday protesting against Trump’s policies that organizers hoped would snowball into a rolling cycle of protests that could eventually stymie the US president in next year’s congressional elections. 

This was only one of >  than 1,000 ‘Hands Off’ anti-Trump protests hit cities across the US 

Anger with Trump and his billionaire lieutenant, the entrepreneur Elon Musk, was expressed in a sea of placards and banners. Multiple messages denounced the two men for shuttering government agencies, cutting jobs and services and – in often graphic terms – for threatening the survival of US democracy. 

People with signs such as “hands off HHS!” and “you wanted cheap eggs but got measles’. “ 

Resist like it’s 1938 Nazi Germany” and “Fascism is alive and well and living in the White House”, read two slogans at the Hands Off gathering, organized by the civil society group “Indivisible” and featuring speeches from a host of other organizations as well as Democratic members of Congress. 

Robert Weissman, the co-president of Public Citizen, a consumer-rights advocacy group, told the crowd: “There’s only one thing that can face down the authoritarian moment we are facing, and that’s the movement we see here today.” 

He added that, “there’s been a lot of criticism of the Democrats for not standing up in Congress, so an event like this will stiffen their spine. 

 

‘Fascism is alive and well and living in the White House’

 

 

“It’s about making the Democrats better and giving them courage – and it will. That’s also true for ordinary people, because Trump’s authoritarian playbook is designed to make people think it’s useless to resist. This demonstrates power and it will bring in more people.” 

Several congressional Democrats predicted the rally would inspire more protests, ultimately fuelling an electoral triumph in next year’s congressional midterms, when control of the House of Representatives and the Senate will be up for grabs. 

The impact of these demonstrations, tariffs, and the level of control the Trump administration demands will have knock-on effects for Europe’s populists, who are now faced with defending his policies to those who will become the victims of those policies. 

 

‘This might just be the opportunity to restructure global trade, only this time the US could be on the outside looking in’

 

One adherent of Trump, Matteo Salvini, the leader of the League party in Italy, claimed that Trump’s tariffs represented an “opportunity” for Italian business, without specifying why and how. And if that opportunity is not seized, it will be as Hungarian foreign minister, Péter Szijjártó said, because of the “grave mistakes” made by Brussels. 

Most other far-right leaders, however, are on the back foot, caught is a catch-22 situation. Italy’s PM, Giorgia Meloni, called the decision “wrong” while meekly arguing in favour of transatlantic talks, was clearly uncomfortable. 

The tariffs, coming on the back of the US betraying the Ukraine and supporting Russia, has served to increase Europeans support for the EU. The latest Eurobarometer revealed that 74% of Europeans believe their country’s membership of the EU is a good thing, the highest figure in 42 years.  

Trade is an integral part of the EU, and provides the necessary muscle to allow for the development  and deployment of a coherent counterstrategy to Trump’s trade war. The EU, with >450 million citizens represents the second-largest economy in the world. 

This might just be the opportunity to restructure global trade, only this time the US could be on the outside looking in. 

 

One way, or another, I’m gonna lose ya
I’m gonna give you the slip 

 

 

‘There is much to consider as countries look to deal with the madness of the Trump administration.

At its heart it’s totally authoritarian, a throwback to 1930’s fascism. All the talk of free speech and libertarianism is just talk. You can say what you like so long as it’s in-line with the regime’s view.

His tariffs will do nothing for middle-America, they will stay poor, whilst the apparatchik’s, the golden peasants engorge themselves at the altar of king Donald.

The pathetic sadness of the whole situation can be summed up thus:

Elon Musk lost $35 billion in the first 3-days after Liberation Day, year-to-date he has lost $135 billion. Yet he still has a net worth of $298 billion.

The veneer has well and truly come off Trump and his cronies. The demonstrations at the weekend are the first signs of a groundswell of support against them. The question is can this include some of the MAGA brigade who will become the victims of their own folly?

If not, then this may end badly, as the US descends into anarchy and violence.

Elsewhere, I doff my cap to PM Starmer who seems to deal with Trump in the way you might deal with a naughty child.

Elsewhere, China is unbowed and ready for the fight, as is Canada and the EU. This really is the opportunity to create a new world order without the US at the centre, calling all the shots.

Remember; we don’t need to fall-out with America, we don’t need to go to war with America, we just need to be independent of America!

Musically, we start with the Clash and “Armageddon Time”. We finish with a tribute to the late Clem Burke, the drummer with Blondie, and part of a group that in the late 1970s-early 1980s moved from new wave, to reggae, disco, and rap. “One Way, or Another” seemed a perfect way to end this piece.

Enjoy!

Philip.’

 

@coldwarsteve   

 

 

 

 

 

Philip Gilbert 2Philip Gilbert is a city-based corporate financier, and former investment banker.

Philip is a great believer in meritocracy, and in the belief that if you want something enough you can make it happen. These beliefs were formed in his formative years, of the late 1970s and 80s

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