Business abhors uncertainty. There we were, trucking along, with a world order reasonably established, albeit with the prolonged war in Ukraine and the Israel-Gaza conflict. Everyone knew their place, had a firm idea of where they sat. Companies were able to look ahead and to plan, safe in the knowledge they were on the right lines.
Then, into the mix comes Donald Trump and everything is up in the air. The brightest brains using the smartest algorithms have been set the task of modelling a series of what ifs. They might as well not bother; such is the mercurial nature of the new US president.
What we are now into is the challenge governments, companies and markets are left pondering. It is not diplomacy as we know it.
Gone are the traditional niceties of conducting such discussions in private. He likes to do things in the open, in full view, blindsiding his opponents and provoking consternation across the globe’s capitals and financial centres.
As others say will he, won’t he, Trump is repeating “could”. Hair is being torn out in large clumps as strategists try and second-guess his moves. Not least those in the oak lined corporate boardrooms who have been so conditioned to feeding off a system built to work for them.
In the UK, the one subject that is causing the most consternation in the boardrooms – and at the Treasury and Downing Street – is tariffs. On the election trail, he referred to them as ‘the most beautiful word in the dictionary’.
While that may not be a widely shared view, it played to his ‘America First’ agenda. We know that foremost in his sights are China, Mexico and Canada. Time and again, they have been singled out for Mr Trump’s vitriol.
He has talked of a 25 per cent levy on all goods from the US’s immediate neighbours and 60 per cent on imports from China. Globally, he has mentioned 10 per cent. For the UK, the effect could further weaken an already fragile domestic economy.
Ahmet Kaya, an economist at the National Institute of Economic and Social Research think tank, said: “The UK is a small, open economy and would be one of the countries most affected.” NIESR estimates that over two years UK inflation would be 3 – 4 points higher while interest rates would be 2 – 3 points higher.
Retaliation
The resulting retaliation would also damage the US. Its growth would fall between 1.3 and 1.8 per cent in the first two years of the tariffs coming in. It’s the knowledge that the US would also suffer that may explain Mr Trump’s pulling back from the brink on his first day in office.
He said he “could” impose levies of 25 per cent on Canada and Mexico by February 1 and called for his officials to study those countries as well as China. His attitude to the latter was markedly restrained. Mr Trump, though, is nothing if not transactional, something he honed over decades in Manhattan real estate.
He chose to couple fees against China with a proposed deal over the future of TikTok. The US should be entitled to half of the China-owned popular short video platform. If no sale was forthcoming, he would view that as a ‘hostile’ act and tariffs would follow. They could be as high as 100 per cent. “I’m not saying I would, but you certainly could do that.”
The very notion that the whole, delicate issue of imports and trade with Beijing, one he laboured during the presidential campaign, should be used as a bargaining chip to determine the ownership of a social media site is, to say the least, unusual and unexpected. But that is Mr Trump.
Golf rules
In the UK, the most anxious wait is in the automotive sector. The US is the second-largest market for UK car exports. We buy from abroad and send the vehicles we manufacture overseas – eight out of 10 cars produced in the UK are sold elsewhere. That makes it an industry especially vulnerable to tariff battles. Another is Scotch whisky. The US is the largest market for whisky exports. In Mr Trump’s first term, Scotland’s distilleries suffered from retaliatory measures. They could be in for the same again.
This, typically, is where it verges into the surreal. The new White House occupant is especially vexed that one of the jewels in his golf course empire, at Turnberry on Scotland’s Ayrshire coast, is not on the Open roster, having hosted the prestigious tournament in the past. The importance of his favourite pastime to Mr Trump should never be underestimated. In his last presidency, he spent many hours on the golf course. Sure enough, his first stop after flying to Washington from his golf and country club at Mar-a-Lago in Florida was to watch the fireworks at another of his golf clubs, Trump National in Sterling, Virginia. There’s free marketing for you.
The reasoning of the organisers, the Royal & Ancient, based in St Andrews, also in Scotland, is that the association with Trump makes it too political. If the whisky makers, several of whom must be members of the illustrious R&A, know what is good for them they should be pressing hard for its reinstatement.
Likewise, if the R&A knows what is good for Scotland and for Britain, it may consider relenting. It’s that left field with Mr Trump – it’s part personal and it mixes business with government.
Other sectors at risk of harm are pharmaceuticals and aerospace. Unfortunately for them, they don’t have the golf card up their sleeves. They face the danger of a tariff war seeing US customers buy American, a policy that Mr Trump will only encourage.
They, like other exporters, will be hoping that he does not dwell on import levies, that his experts tell Mr Trump the downside for the US will be too great. Instead, they would like him to focus on another topic high on his wishlist: deregulation. Unfettered US public spending, even if it’s reduced in response to his desire to cut waste, would have a galvanising effect.
In Britain and around the world, the waiting goes on. Meanwhile, for many, baldness looms.
