At times like these, any port in a storm will do. In the modelling and role-playing currently underway around the globe, the UK suffers in Donald Trump’s trade war, like everyone else. But, cross fingers and toes, things might turn out to not be so bad here as elsewhere.
The reasons for this are laced with irony. Britain is not in the EU any more, thanks to Brexit, so the hit from the White House is reduced. They’re being clobbered with 20 per cent, the British penalty is 10 per cent. That is a sizeable difference.
So, exiting the EU, which has damaged the UK economy, has come good in the end. That, at least, is the Brexiteer interpretation of events.
They ignore the first part and focus on the second. They prefer not to dwell on the fact that businesses miss the customs bloc terribly, that companies would dearly love to return to the free movement of goods and people.
Still, let us concentrate on this unexpected “Brexit dividend”, and give thanks.
Britain has long since ceased to be a manufacturing nation. The economy is heavily skewed towards services, something we’re exceptionally smart at providing. In his onslaught, complete with game-show-style scorecard, Trump was devoting all his vitriol towards items that Americans are choosing to buy, instead of the homegrown variety. They drive him mad, the Toyotas and Mercedes cars blocking the Manhattan avenues rather than Chevrolets.
The Rust belt is testament to the decline in US production might. It also happens to be the home of Trump’s bedrock support. Revitalise blue collar, restart the factories and see them humming once more, the locals returning to meaningful jobs, and America will be great again.
British exports are not in his crosshairs. It is true that Jaguar Land Rover and its luxe auto peers are dependent upon the US, but in the context of what is occurring, they are down the pecking order compared with the Asian and German swampers.
The UK’s steel industry, such as it is, will also suffer. But, like cars, churning out metal is not what Britain does these days. Far worse would have been Trump slapping services or another domestic success, similarly spared, in pharmaceuticals.
In tech, Britain excels at providing talent, in creation and developing ideas. Subsequently, however, this same talent has drifted overseas to the US and the Far East. That has been an enormous source of frustration in recent years as one after another, the digital “unicorn” companies, those worth $1bn and more and not listed on the stock market, have headed abroad.
It is the global tech giants and their smaller, similarly high-flying brethren that are squealing loudest in the great Trump powerplay. None is British. The UK government is aiming to build a Silicon Valley between Oxford and Cambridge. Meanwhile, the existing Silicon Valley in California is reeling.
Previously, we would have given anything – we would still – to have Apple, Meta, Alphabet and the rest on our stock exchange. For now, though, we can take comfort that London bears no resemblance to Nasdaq and the S&P 500.
The UK flagship FTSE 100 index comprises what analysts at Barclays describe as “defensive” stocks – miners, supermarkets and energy suppliers – able to better weather the tariffs fallout. Not so long ago, that was a dirty word.
Then, we were moaning about the look of the FTSE 100, how it seemed quaint and old-fashioned, staid and dull, not at all reflective of the modern era. The companies that were there attracted lower valuations than the foreign go-getters – another reason for the migration. Today, the London big board looks cheap and appealing to investors seeking a home for their cash. As Barclays points out: “The average price to earnings (PE) ratio on the FTSE 100 stands at 17.1x earnings, compared with a PE ratio of 21.3x on Germany’s Dax and 24.9x for the S&P 500.”
This is why, apparently perversely, the Barclays strategists have upgraded their position on the FTSE 100, telling investors to “overweight” their portfolios in its favour. This, despite the London listing suffering its sharpest falls since the pandemic.
“London’s blue-chip index has outperformed its international peers in recent days, falling just under 10 per cent since Trump’s ‘Liberation Day’ speech. The S&P 500 fell by as much as 12 per cent since the market opened on Thursday, while the German Dax is down over 11 per cent.” There is method in their analysis.
Add to that, the Keir Starmer growth agenda in driving housebuilding and infrastructure projects, such as the Silicon Valley equivalent, and Britain is not in such unhealthy shape. We are leaner with less fat to lose, intent on becoming fitter.
We wanted that surplus, of course we did. But that is in the past. This is about coping with Trump’s new world order – and we are not so poorly off.
