King Trump, Little Britain and the Big Picture.

"The U.S. has the U.K. by the short and curlies, with tax rises likely in the autumn as tariffs further slow business confidence and that elusive trade deal remains ever over the horizon."

Make no mistake, this is a game changer. Under Trump, the U.S. has turned against everyone, even the Heard and McDonald Island penguins. Well, that's not strictly true; Putin and the Fat Lad in North Korea receive a free tariff pass. The unpredictability of these actions leaves us all in a state of uncertainty. 

Trumps action has many consequences, not least because the beacon of U.S. influence is fading on the geopolitical stage, a trend that could have long-term implications. 

As far as I can tell — and I'm no expert, so if I get this wrong, please let me know — Trump seeks to achieve two things. First, he wants to re-shore manufacturing and, second, to address perceived trade imbalances. Following this, the tariffs are supposed to generate revenue for the government to spend without raising taxes while suppressing growth, which creates demand for government treasury bills and drives down interest rates. This move, in turn, reduces U.S. national debt.  

This new tariff regime impacts nearly every conceivable product, from electronics and machinery to apparel and agriculture, leaving only a few strategic imports, such as certain metals, semiconductors, and energy resources, untouched. Trump claims that these "reciprocal tariffs" will tackle foreign protectionism and address "unfair" trade deficits that have "hollowed out" U.S. manufacturing. 

It's important to note that the tariffs are not based on actual foreign tariffs, but on a nonsensical formula tied to bilateral trade gaps. This is a crucial point to understand.

To justify his actions, Trump argues that the U.S. is being taken advantage of and that the economy is in crisis. Neither of these claims stands up to scrutiny. Americans run deficits with some countries and surpluses with others. Meanwhile, the U.S. economy was performing well until last week; unemployment is at a 50-year low, inflation has dropped to 3 %, and GDP is growing at 2.4% while other countries are struggling. 

Trump asserts that he wants to re-shore production to "Make America Great Again." That's fair enough. However, that assumes it makes economic sense to manufacture goods in the U.S. For example, the U.S. is unlikely to be competitive in T-shirt production due to the low wages in Cambodia and Pakistan. 

Consider the production of high-end items like the iPhone. Under the new tariff regime, the cost of an iPhone could triple, making it uncompetitive against cheaper Chinese phones. 

Meanwhile, a conservative estimate suggests shifting iPhone production out of China will take five to ten years. Of course, this assumes all other things are equal, that you have skilled people, and that the plant and infrastructure are in place state-side.

And how does Little Britain fair in all this? Angus Hanton's book "Vassal State" gives a comprehensive and stunning account of how the U.S. has already captured Britain's markets and moved to dictate economic policy. It has long been recognised that the British Foreign Office operated under the principle of "find out what Washington is doing, and do slightly less." Now, the U.S. has the U.K. by the short and curlies, with tax rises likely in the autumn as tariffs further slow business confidence and that elusive trade deal remains ever over the horizon. 

And if Britain doesn't play ball, bullying can quickly get the Limeys to comply. In 2020, when the U.S. banned China's Huawei, the Brits initially decided to take a different path with a partial ban. Trump went ballistic. U.S. officials urged British MPs to rebel against a cabinet decision as Trump called Boris Johnson in rage.  A U-turn followed, cloaked in "new technical advice". 

Similarly, the U.K. military relies on the Americans for equipment, transport, and training. Between 2010 and 2021, the Ministry of Defence spent £26 billion on U.S. companies. 

While researching his book, Hanton discovered that the British government was reluctant to share details about the extent of U.S. ownership of U.K. businesses. A subsequent tip-off directed him to a U.S. government database that revealed the details.

The U.S. owns numerous British businesses, including heritage brands that most Brits still believe belong to good old Blighty, such as high-street shops and manufacturers. Most folks think that Boots, Cadbury Chocolate, Quaker Oats, Fanta, Mars, Costa Coffee, and Manchester United are British. No. 

When Brits deal online with the U.K. government agencies such as the DVLA and the Ministry of Justice, U.S. big tech provides that communication channel. IBM, Microsoft and Oracle have cornered the market.

When accounting for major U.S. multinationals like Amazon, U.S. companies now have annual sales in the U.K. exceeding $700 billion, translating to an average of about £20,000 per U.K. household. And yet, U.S. multinationals routinely avoid paying U.K. tax to a suspected sum of £5.6bn for 2022-23.

Over two million Brits work directly for U.S. companies. The U.S. has placed 30% of all its overseas investments in the U.K., and half of its European investments are in Britain. This takeover is not surprising. The Brits opened their markets in a steady decade-long process, and the U.S. swept in. That's not to suggest that these companies don't provide quality services, many do. 

Significantly, other European nations protected certain critical sectors from takeovers by U.S. private equity firms and Big Tech. 

Now, the U.K. gets hit with a 10% tariff despite Starmer's genuflecting to Trump with a letter from a real King. Arguably, Trump has laid the lowest rate on Britain because, in effect, he's taxing U.S. businesses. Meanwhile, Europe is hit with a higher 20% rate. As the leaked Signal messages reveal, the Trump regime has no love for the Europeans. 

Yet, one continent is in a sweet spot regarding this uncertainty and arbitrariness. As the map below reveals, African nations have shifted from trading with the U.S. to focusing on China. 

How the U.S. lost Africa in twenty years.

Meanwhile, Hong Kong as a free port is not retaliating against Trump(for now). Our regime of free access remains unchanged. And this imposition of tariffs on a free port exposes that these measures have little to do with trade. The big game is played on many fronts. 
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