Trade war madness

O! Let me not be mad, not mad, sweet heaven; keep me in temper; I would not be mad!

The Trumpian horror show that’s going on across the Pond, and its equally horrific economic consequences for the rest of the world are just the very nasty-tasting cherry on top of a rather unpleasant cake, the recipe for which seems to have been dreamed up by the Chancellor Rachel Reeves in a cauldron on the Blasted Heath.

It’s really quite horrible – the biggest fall in the Dow Jones, and the FTSE since Covid. Even a news-junkie like me is actively trying to avoid reading too much about it as it’s too depressing.

The tariffs that the President Trump has brought in are, according to his rhetoric, supposed to boost US businesses, to stop the rest of the world taking advantage of the US, and yes, Make America Great Again. They may well do eventually, but the short-term hit will be painful, and so will the medium. And the long-term possibly as well.

The President and his allies want restore America’s manufacturing base, which would be fine if you could do it just like that. But there’s a reason that so much manufacturing has moved away from the US (this goes for the UK too, and other First World countries), and its labour costs. It is so much cheaper to make, say hammers, in Mexico or China, than it is to make them in Kentucky. Cheaper to make means cheaper hammers to sell to US consumers, whilst still making a profit. If you suddenly make all those Chinese hammers cost twice as much, it doesn’t suddenly make it any cheaper to make hammers n the US. All that will happen is that hammers will cost more to buy in the US, regardless of where they are made.

Clothing too, is likely to rocket in cost for US consumers, possibly by as much as 33% because so many elements that go into making the quintessential American denim jeans are made outside of the US. Mostly in China. And what about all those things that are not made in the US any more? Factories take time to build and get up-and-running. They also require investment, and machinery. Machinery that just got more expensive because, guess what, it’s not made in the States.

I think one of the things we need to remember about Trump is that he still thinks he’s a reality TV star. He thinks this is all about ‘doing the deal’. He has his story and he is sticking to it because it fits his life view of himself as this great wheeler dealer business man.

Maybe this is the crux of it. When stock markets fall, it’s those who are into them for the short-term that suffer. Stock markets rise again, eventually. Those with the cojones to hang on and read the markets are the ones who win out in the end. Could all this be about disrupting the markets and forcing stocks to plummet so they are cheaper to buy and then sell when sanity has returned? Who knows. Some people are going to make a lot of money out of all this, but it won’t be the person on the street.

As an aside, there are reasons why huge American cars are not being bought by the thousands in the UK and across Europe. Here are just some of them:

 

On the plus side, 20,000 construction jobs could be created by Universal Studios building its theme park on the former disused Kempston Hardwick brickworks in Bedford. Who needs Disneyworld or Disneyland Paris with all that passport-shenanigans when you could go to Bedfordshire instead? Um, without wishing to be rude to Bedford, the centre of which is really very pretty, ‘I’m going to Bedford for my Summer Holidays, Hurrah’, is not a sentence I’ve heard that often.