Current Affairs

Trump’s determination to get the garment industry back into the US is just one of the arguments around tariffs, but it is the failure of Trump to realise that good jobs reflect the states evolving industrial capabilities. The concept that the US will be manufacturing jeans and t-shirts and exporting them around the world is more a fallacy than Trump and his cabinet will ever realise.

Four trillion dollars was wiped off the US stock exchanges- led to a realisation that US companies have heavily invested in the far east. Trump circa 1955, is on a roll, his vision of the US future is that manufacturing will once again reach the dizzying heights of 35% of GDP, but the US cannot compete with Asia even with the tariffs and the US cannot compete on the quality and availability of the products coming from Bangladesh, Laos and Vietnam.

But US auto manufacturing has not been set up to compete with the Europeans or Asians, who have not only brought their products into the United States, but have learnt to compete on quality. The quality and finish of a Range Rover or Mercedes is second to none, and the US is struggling to compete not just on price but also quality. The technology that goes into these monsters is exceptional, but most of all they are beyond the expertise of the engineers producing a car made in Detroit. Though European cars are expensive, they afford more luxury and a better driving experience, which the American consumer is willing to pay for.

Countries such as Korea have stepped in to provide emergency support to car manufacturers. Throughout the auto sector, international governments have put in place measures that include financial support as well as tax cuts. There has been a push to boost domestic demand, while governments enter into negotiations with the United States. Kier Starmer, the British prime minister chose to hold a press conference in an auto manufacturing site in the UK and promised support for the industry. Merz, the incoming Chancellor in Germany said that “we need tax cuts for companies and citizens.”

It is as though Trump wants America to revisit a period that left the United States in a hole that it was climbing out of under Biden. Under Biden the investment in new technology brought the United State economy out of the pandemic first, which was not lost on other struggling economies. The concept that the US industrially was building up its economy through new technology after the pandemic has been undone by Trump who has imposed tariffs on the states that were investing in American products and services.

Countries are reappraising their relationship with the US industrially. The world leading technology that got the US out of the pandemic faster than any other country is being ignored in the market place, and countries like Britain, Canada, France and Germany are rejecting this technology and investing in domestically produced technology. The ideas that have been shared in an open market has been challenged by Trump, who is cutting off America from the International arguments and imposing his argument of America first, which has left a bitter taste in the mouths of those doing business with the United States.

Asian countries are reeling from the tariffs that have been placed on their economies, but the reality is that the US will be challenged to build the products coming from Asian nations at an affordable price. The idea that a mobile phone can be manufactured in the US at cost challenges US manufacturers. But it is the realisation that the quality of domestically manufactured products entering the US market is sub-standard in comparison to internationally manufactured products.

But with countries like China entering a trade war with the US, there have been repercussions. Trump’s 105% tariffs on China has led to Asian stock indexes falling further, but the realisation that the economic war between China and the US will not abate, challenges all the markets around the world. Investors in these markets will be challenged to manage their companies investments in both the US and Asia. The markets in these regions will continue to be tumultuous as investors look for other options.

Countries such as Australia, maybe forced into a recession if China, its largest market, moves into a recession. But other Asian markets will continue to negotiate with the United States in the hope that they can negotiate with Trump. But with outcomes uncertain that the US will relent from the sanctions challenges all the stock markets around the world. Netanyahu, who has a relationship with the US president believed that he could negotiate with the US and get the tariff his country faced (15%) reduced, but his arguments fell on stony ground.

Countries like New Zealand cut interest rates, citing trade tariffs. “Recent increases in tariffs and uncertainty about global trade policy have weakened the outlook for global economic activity,” the Central Bank said. At a Republican congressional committee  dinner held in Washington, Trump said, “I know what the hell I’m doing. I know what I’m doing and you know what I’m doing too. He added that “after years of countries ripping off the United States, now it’s our turn to do the ripping.” He hinted that further tariffs were coming and they were concentrated on the pharmaceutical industry, which he said will be focussed on China.

There is widespread panic in the Asian markets, the Yuan has lost 1% of its value on the international markets. Japan has said that it will negotiate with the United States on the value of its currency and Vietnam has asked for a fifty day reprieve before the sanctions kick in. Vietnam has indicated that they will invest in US military equipment, which demonstrates how much panic there is across Asia. The European markets initial trading reflects the Asian markets downward spiral, but financial centres such as London brings a maturity to the markets and though the market had dropped 4%, the City of London led the calming of stock markets across Europe and the United States.

The fluidity of the arguments affecting the countries dependent on manufacturing as an integral part of their industry challenges governments to act to protect industry and it is a political class that is moving as quickly as possible to manage outcomes from the tariffs. Whether it is through tax breaks or investment into the market, there is a determination to invest in the industries that have been affected by the US tariffs. Whether Trump knows what he is doing or not, challenges the markets, the markets that are meant to be investor in Trump’s argument of revival in US manufacturing. But it is the lack of confidence that the US market has with the Trump argument that has led to US being downgraded to a 60% chance of a recession in the coming months.