The Month That Was……April 2025

Oh, man. Where do I even start with April 2025?

I guess I better get the two ‘t’ words out of the way first……Trump……tariffs. There was a third ‘t’ word but my daughter reads this. You get my drift though.

If you are a little t-worded out, now would be a logical place to hop off. No offence taken……I get it.

To understand the whole tariff mess, there is a need to understand why The Trump is doing it firstly. In essence, The Trump doesn’t like the global trading system. For more than a generation, the US economy has been dragged hideously out of shape by a massive financial distortion caused by the way investors use the dollar.

The dollar solves a dilemma. When a country accrues lots of savings, perhaps because it sells huge amounts of oil or has built a whole economy around battery or semiconductor exports, it needs to store the cash. Storing it in the country’s own currency presents two problems.

The first is that a lot of these countries have volatile exchange rates because they are ruled by thieving dictators or because their financial markets are very small so it’s risky to have all the money in local unstable currency. The second is that if they convert their savings into local cash, they’ll push their exchange rate up and that will make their exports more expensive until they become uncompetitive (killing the golden goose).

So, they don’t let that happen. Instead, what all these Governments and Sovereign Wealth Funds (plus a few rich families and pensions) do is buy US Treasury Bonds. The US Treasury Bond market is seen as big and stable, open to anyone and underpinned by the rule of law.

And when I say big……$27 trillion……or for theatrical drama…… $27,000,000,000,000.

The outcome is that dollars, in the form of US Treasury Bonds, have become the backbone of the world’s piggy bank. And The Trump doesn’t like that. He sees the money being made by Governments around the world through the charging of tariffs that the US must pay for their imports. These profits are being converted to dollars and keeps the dollar exchange rate artificially high, which impacts US ability to sell their more expensive goods.

So, in The Trumps eyes there is only one thing for it……reciprocal tariffs. If you want to sell your product / service to the US and you are not a US company making the product / service in the US, then you will pay a tariff to do so.

The Trump announced the tariffs in a speech like a game show. What did your country win (or get away with)? He named it “Liberation Day” and 2 April 2025 will be studied by many generations to come. The UK got off lightly at 10%......China took a hit at 145%.

The financial markets hated it as the outcome of the tariffs was clear for the rest of the world……economic gloom likely to lead to recession……increased inflation……higher interest rates. It was no surprise that within a week The Trump reversed out of the tariffs by announcing a 90 day delay so he could figure out the mess he created.

And what a mess. Classic Trump.

April Fool’s Day just hasn’t got the same spark about it anymore. I blame The Trump……he acts like it’s April Fool’s Day every day.

The Numbers

In response to Liberation Day, the US stockmarket fell 10.5% over a 2 day period……the biggest fall for 5 years. Then when he reversed out of the tariffs with a 90 day delay, the index gained 9.5%......the third-largest one-day return since 1987.

Volatility that only The Trump can create. He really will test Americans threshold for pain this year.

What does this all mean for the UK?

More than £60 billion worth of British goods are exported to the US each year. The Trump’s tariffs threaten sectors from pharmaceuticals to whisky. Most of those exports are now going to be subject to a 10% tariff, although there will be some exemptions and some higher rates. The Trump published a list of more than 8,000 products that could be subject to retaliatory tariffs.

Predictions on the exact financial impact to the UK economy is not an exact science, given that The Trump is full of contradictions and throwing exemptions about for fun.

However, as little as a 0.6% reduction in GDP would wipe out Rachel Jane Reeves’s budget headroom and force her to find almost £18 billion worth of further savings or tax rises. Even a slender 0.2% reduction would result in a £6.2 billion hit to the economy,

The key sectors that will take the biggest hit are likely to be cars, pharmaceuticals, food and drink.

As a whole, US imports of vehicles amounted to $217 billion last year, 6.6% of all goods imported. The US is the UK’s second largest car export market (after the EU), with exports of more than 101,000 units in 2024, equating to £9 billion of cars. There is now a 25% tariff on UK car imports to the US, with up to 25,000 jobs at stake.

Pharmaceutical goods are one of Britain’s top exports to the US, with exports to the country worth £6.5 billion last year. GSK makes more than 50% of its sales in the US and AstraZeneca 40%.

Big figures and a likely big impact……unless we see further reversals from The Trump.

Talking of reversals……Elon Musk performed an amazing U-turn. Having literally been The Trumps ‘go to man’, he announced that he was standing down from Government responsibilities. Perhaps it had something to do with Tesla’s income falling by 39%......or Tesla shares falling by 37% this year. It appears to be expensive to be a friend of The Trump.

Another key measure of confidence in The Trump’s tariffs is the price of oil……with the price falling below $60 for the first time in more than 4 years during April.

As a little light relief, my favourite number this month was……11……the (not so) little lady turning 11 on her birthday!

Trump of the Month

There could only by one winner of the Trump of the Month award for April 2025……Donald John Trump.

To understand how out of touch he is on the reality of how products are made, the answer is probably in your pocket……the iPhone. Consider the journey of an iPhone microchip……the small wafer that powers the supercomputer in our back pockets (it is half the size of a 5p coin).

To make a microchip, white lumps of quartz are mined in Galicia, Spain, before being smelted in Berghausen, Germany. This “polysilicon” is then flown to Oregon, United States, where a Japanese company turns them into silicon wafers, before being shipped halfway round the world again to Taiwan.

There, arguably the most important company in the world (the Taiwan Semiconductor Manufacturing Company – TSMC) takes these wafers and, following designs from British-based, Japanese-owned Arm, etches semiconductors into them using a machine made exclusively in the Netherlands.

The chip then zips up to Malaysia for inspection and wiring. It then lands in Zhengzhou, China where workers for Taiwanese-owned Foxconn attach it to the rest of the phone. From mine to motherboard for just £35 a chip.

If the iPhone were swept up in the tariff war, the cost of the end product would double. There are about 150 million iPhone users in America, comprising almost 60% of the market (the UK is 45%). It is the indispensable consumer product (even The Trump uses one) that any President would do well to avoid doubling in price.

So there was only one action available to The Trump……to perform one of his customary U-turns……and exempted smartphones and semiconductor chips from the new tariffs.

It was a victory for Silicon Valley, proving the power it can exert on The Trump. It also demonstrated the limits of The Trump’s understanding, rhetoric and freedom to operate.

Two things can be true at the same time……US companies are still the best and most innovative in the world and there is no current alternative to Chinese manufacturing. Capitalism at the end of the day will prevail.

The Trump’s craziness has been taken to a whole new level……it’s almost admirable. Almost.

Trump Lunacy Rating: 10 / 10

 

And Finally……

“History never repeats itself; man always does."

Voltaire