0:00
To your view, what just happened
0:03
Well, I think reality bit, finally. And, yeah, the bond market reacted
0:09
And the bond market reacted, and the impact of the bond market, apart from the worry about financial collapse
0:16
which is always at the end of things, is that it means that interest rates go up
0:20
So his base would be paying higher interest rates, higher interest rates on their credit card
0:24
higher interest on their mortgage. So, yes, there would be the worry about, if you like
0:27
the financial plumbing, big deal, but fundamentally it means that his political base is exposed
0:34
and he's got midterms he's worrying about and his party is worrying about. So I think those two
0:40
work together to have effected a significant reverse of where he was heading. Is this now
0:47
with this pause and then whatever happens in 90 days time, is this now a return to the status quo
0:52
or do you see governments holding their breath for the outcome of the negotiations that are going to happen in that time
0:59
Oh, I don't think this is the status quo. I mean, I think if you go back to the US campaign
1:06
where he is now is actually further down the line than he was saying in the campaign
1:12
He was talking about a 10% tariff on everybody and a 60% tariff on China
1:16
And even his own people were saying, oh, look, that's a negotiating position
1:21
So this position that we're still left with is deeply troubling and will remain troubling to the markets
1:26
Apart from anything else, you've got a huge trade war with China possibly happening
1:31
And you've got still very significantly increased costs in the market. And the bond prices, the spread in the bonds, which I hate to get too technical, the spread in the bond rates are still worrying and very unusual by anybody's standards
1:44
Why are they worrying? Well, because it's still going to have inflationary pressure
1:49
There still no doubt about that And you have a big uncertainty which you got the two largest economic nations at each other throats in trade terms So on the negotiations that are presumably happening now whether it the Japanese whether it the South Koreans whether it the United Kingdom how can governments trust what they hear from the White House as part of those negotiations
2:11
Yeah, I think that's a very good question. And I don't know anybody who really knows the answer
2:15
But I think in a way the answer is your sense of trust has got to be diminished
2:20
The only question is how much. You know, it's going to be a very difficult situation because you want to get rid of those tariffs
2:26
They're still very significant. And you probably want to get rid of them quickly
2:31
But do you want to be the first mover? Do you want to end up with a crummier deal than the person who's second or third
2:36
Do you want to give him something that enables him to climb down but then find in actual fact his position is unsustainable
2:44
So in actual fact, you've got some real difficult judgments to make
2:48
If you really believe he's on the run, then you're hardly going to pay a high price
2:53
You talked about the potential trade war with China. What's going to be the effect, do you think, on the United Kingdom of the United States having placed 125% and with the fentanyl tariff it's now actually 145% tariffs on China
3:09
Well, in many ways, you could argue that the implications for the UK are significant for a couple of reasons
3:16
One, if that doesn't get sorted out, it still has a downward effect on global growth
3:21
OK, so that will affect the UK. Secondly, in the meantime, we still have all those tariffs on ourselves
3:28
Remember, it's not just the 10% tariff, it's 25% on autos, et cetera
3:32
And there's more that he said he's going to do. So, you know, we have a number of reasons to still be anxious, don't want to be a doomster
3:41
The important point is that he has changed direction. That's surely significant and drawn back from the brink
3:46
But there is still a lot of work to do to get out of the woods on this one
