The Pulse: Economic Dynamics and Policy Shifts

This episode delves into the complexities and implications of recent U.S. tariffs on aluminum, steel, and other goods, exploring their impact on consumers and the economy. As trade policies evolve, we examine the feedback from businesses and the consequences of these decisions on the daily lives of people.

• Discussion on proposed tariffs and their effects on prices 
• UK retailers express concerns over government tax increases 
• Musk's influence on Twitter and its implications for brands 
• The economic debate over the necessity of minting pennies 
• Overview of retaliatory trade measures from China 
• Exploration of strategic business responses to tariffs 
• Analysis of the current U.S. and UK economic indicators 

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Chapters

• 0:03 Global Supply Chain and Trade Tariffs
• 11:43 Effectiveness of Global Trade Tariffs

Transcript

Tony Hines: 0:03

Hello, tony Hines. Here You're listening to the Chain Reaction Podcast. All about supply chain advantage. Well, what's been going on in the global supply chain world this week? We're going to find out in just a moment. Stick around, stay tuned. Find out more.

Tony Hines: 0:19

Well, the President of the United States is at it again More tariffs. He's talking about imposing 25% on aluminium and steel. That, of course, will impact Canada. Lots of steel and aluminium or aluminium crosses the border from Canada, so this is a threat to Canada as well as many other countries. So any imports from anywhere in the world are going to be hit with 25%. The president wants to see American aluminum and American steel. Trump's tariffs, of course, could backfire, and many expect they will at some stage. He's put 25% on steel and aluminium. Aluminium that means that all those folks drinking beer with out of can goods when they're watching Super Bowl or whatever, they're going to be paying more for the beer and for the drinks fizzy drinks, so anything in a can, because cans use both, don they? Steel and aluminum gonna be paying more for new cars too. It's gonna push the price up of a new car by a significant amount. It's gonna put prices up in the building trade, in construction. And of course it's gonna put lots of electric goods up because they contain metals in the product. So let's wait and see Interesting times.

Tony Hines: 1:49

The boss of Marks and Spencer has said that the UK retailers are being raided like a piggy bank by the UK government. Stuart Machen has said that the headwinds, including national insurance contributions paid by firms and higher packaging levies, are all adding to cost of the retailer. He wants the government to roll back those NIC charges. A Treasury spokesman has said that the measures introduced by the budget were aimed at delivering stability to businesses and create conditions for growth. Well, I think the government in the UK is the only one that sees it that way. I think everybody else on the receiving end of those increased taxes is not looking at it as a recipe for growth. Quite the opposite. The long-term planning is a good idea, attempts to boost investment and, of course, develop the infrastructure. Those are all positives.

Tony Hines: 2:42

But this tax rise is actually having a bad effect and it isn't really in force yet. It doesn't come into force until April. Employers start paying the threshold now at five thousand pounds from April and they also see the impact of the national wage putting their wage bills up too. The government has defended the tax rises and said it was necessary, but I think, like everything, there are choices and sometimes, well, governments don't always make the right choices and it could be quite damaging to growth. It needs to be thoroughly reconsidered, I think. Whether they will is a different matter. Farmers, of course, have also protested this week about the inheritance tax bills that they're likely to face as a result of the changes to inheritance tax, and they're feeling pretty bad about things too. So not many people feeling very good about the changes that have happened since this government came to power, although many were looking forward to a breath of fresh air, but actually it definitely feels like austerity 2 or even austerity 3.

Tony Hines: 3:49

There are many challenges ahead. Well, you might recall that twitter was formed in 2006 yeah, it seems a long time ago now, so it's not quite 20 years old. It's 19 years old this year, and it was Jack Dorsey who's set it all up. It was a very useful means to get your message out there in a few words, without clutter, and, of course, it was taken over by Elon Musk in the past couple of years. Elon Musk himself logged on for the first time back in june 2010, according to the bbc and just 12 years later, in 2022, he bought the platform for 44 billion us dollars. He reshaped the algorithm, reinstated banned accounts, repurposed the policy around free speech, renamed it x, and one of the accounts, of course, he reinstated was the president of the united. Of course he reinstated was the President of the United States, who'd been banned. He said it was all about free speech.

Tony Hines: 4:50

He fired thousands of staff, 80% of the workforce left and it became a very different company and many didn't like all the changes and so they've left and they've been trying to set up alternatives, like Threads and Blue Sky and Mastodon and many others trying to take over that space. And some big brands have been leaving recently because they don't like what's going on on the platform. And, of course, all the safeguards on the platform appeared to have been removed also, so no longer is it monitored in the same way it was previously, and even then it wasn't great, but it's hardly at all now, with the tie-up between the new president and Elon Musk, many big brands are thinking about leaving, and many have done so. Will it be the start of an avalanche or is it just a drop in the ocean? Well, who knows? I suppose it depends how things go, but many don't like the changes that they've seen to that particular platform and they also don't like the fact that elon musk is the unelected republican creating policy in the united states. So it's a tough call for brands. Of course, x can still be quite useful for brands, but it's what's behind X itself that they don't seem to be in agreement with and don't like. But whether they'll have the wherewithal to move on, that's another matter.

Tony Hines: 6:17

Well, president Trump has announced on social media that he doesn't think it's worth minting pennies anymore. That's the one cent coin, often known as a penny. It's a debate that's been going on for some time whether it's useful to have pennies anymore, those cents and the cost of making them and President Trump said on his Truth Social it's so wasteful I've instructed my Secretary of the US Treasury to stop producing new pennies. The US Mint said in its 2024 annual report that to make and distribute a one cent coin costs 3.69 cents. Well, the economics of that are just wrong, aren't they? But I would say caution as well, because when those smaller denomination coins go, what do you think happens? Well, yeah, people put their prices up and they work in multiples of two. So everything's rounded up, not down. It was an experience that occurred in the United Kingdom back in the 1970s when we went through a process of decimalization and there was a change in the currency from the old 12 pennies making a shilling and 20 shillings and a pound becoming decimal coins, and everything was rounded up and overnight some small chocolate bars and those sort of things they almost doubled in price and, of course, you never go back. Having said that, canada ditched its one cent coin in 2012, citing, citing the cost of minting it and, of course, the falling purchase power due to higher prices. So let's see what happens. It's an interesting one, isn't it? The supply and distribution of money itself? Of course, most money these days is digital. It's not in coin form.

Tony Hines: 7:59

Anyway, china's lodged a formal complaint with the World Trade Organization saying that the United States is making unfounded and false allegations about the role of China in the fentanyl trade and it's just a reason or an excuse to put tariffs on China. It was placed with the WTO just one day after President Donald Trump raised border taxes on Chinese goods by 10%, in addition to the already high tariffs. Experts have said that they don't expect China to secure a ruling in its favour, as the panel that settles the trade disputes remains unable to function. Of course, president Trump hopes that the tariffs will encourage companies to make their goods in the United States, because he wants to reduce the size of America's trade deficit. But is this the right way to go about it? Well, you can listen to my episode all about tariffs and see if you think the President's right or whether the voice of experience from elsewhere across the world is right. Make your own mind up.

Tony Hines: 9:05

China, of course, has imposed its own taxes on US goods this week. It's tit for tat when it comes to import taxes, and it came into effect on Monday. The two biggest economies are fighting it out. It's like a heavyweight contest, isn't it? Two big sluggers slugging it out. China's latest tariffs include 15% on imports of US coal, liquefied natural gas products too, and a 10% tariff on crude oil, agricultural machinery and large engine cars. Well, de minimis was designed as a loophole in the United States back in 1938, and what it effectively does is it reduces the friction in small packages coming in. So If there's something under a set amount coming into the US, then that just sails straight through the system and gets to its destination without any hold-up in customs.

Tony Hines: 10:05

President Donald Trump took several actions regarding the de minimis exemption, which allows goods valued at under $800 to enter the US duty-free with minimal inspections. The initial ban on de minimis for China started on the 1st of February 2025, and Trump announced an executive order to revoke the de minimis privilege for all imports from China. This was part of his broader strategy to impose tariffs on Chinese goods and combat the synthetic opioid crisis. Just a few days later, on February 7th, the administration paused the de minimis ban due to logistical challenges and the potential for significant delays in the import process. This sudden reversal led to confusion and criticism from lawmakers and industry stakeholders. The de minimis exemption is widely used by online retailers, particularly those shipping low-value goods from China. Temu and Shein, two big Chinese retailers, account for about 30% of those goods on a daily basis coming through the system. Trump's actions were aimed at stopping unfair competition and the lack of custom inspections for those packages. There's an ongoing debate between lawmakers on both sides of the House, that's, democrats and Republicans who've called for comprehensive reforms to address the de minimis loophole, and some are advocating its complete elimination to ensure fair trade practices and better enforcement of tariffs. Overall, the Trump actions on de minimis reflect his administration's efforts to balance trade enforcement with practical challenges of implementing new policies.

Tony Hines: 11:43

So all these tariffs being signed off by President Trump and his administration, placing more tariffs on China, how effective exactly are they? Well, you have to say, the effect could be mitigated and minimized by many businesses who decide to go with their goods on different routes to the United States. So, for example, if you manufacture sub-assemblies, components and other goods in China and you ship them offshore, say to Vietnam or Thailand, where they're put into other products, they get shipped out from those countries and into the United States, or they could be shipped to other countries where the tariffs don't apply and then shipped on to the United States. So, with a bit of foresight and planning, companies whether they be Chinese companies or whether they be Chinese companies or whether they be companies located elsewhere, even in the United States, where they import goods from China, bringing in components and all kinds of things that they need from their Chinese manufacturers, they can move them around. I mean, the typical global company's been doing this for years to avoid taxes, so they're going to find a way to do this. Been doing this for years to avoid taxes, so they're going to find a way to do this.

Tony Hines: 13:03

So all those tariffs that President Trump has placed on China can probably quite easily be got round by those wanting to import goods to the United States, and that of course, might include some US companies who have to import parts from China. I wonder how Elon Musk is getting around it. He must have ways to do that because he manufactures lots of parts from China. I wonder how Elon Musk is getting around it. He must have ways to do that because he manufactures lots of goods in China. If it were me, I'd simply be searching for more favourable terms in countries not affected by the tariffs and moving goods to those countries or through those countries to get them into the markets I want to get them into and of course that's a problem with tariffs. They can be avoided and people do, and it's the same with quotas. I can remember many years ago visiting a Sri Lankan clothing company and they had a problem with quota on a particular order that was going to the United States, but they didn't have a quota in Sri Lanka at that time to make the United States, but they didn't have a quota in Sri Lanka at that time to make the particular product and they simply shipped the order to one of their associate businesses that was offshore on another island, where they did have quota, and then they manufactured there and shipped it to you've guessed it the US, under W WTO rules. So it happens.

Tony Hines: 14:20

President Trump met with Narendra Modi, india's Prime Minister, this week. Mr Trump announced plans to sell more oil and gas to India and Mr Modi said his country was fully prepared to take back undocumented Indian migrants from America. They've signed some new deals American military sales to India will go up by billions of dollars. Just hours earlier, mr Trump had set out his plans for reciprocal tariffs on America's trading partners and ordered advisers to calculate new duty rates to match those being enforced by other countries on US goods.

Tony Hines: 14:57

Emmanuel Macron hosted a summit on artificial intelligence in Paris this week. I thought the venue was a very beautiful venue, but listening to the sound, the audio on reports and speakers coming from the venue, that wasn't so good and it was quite difficult to follow the echoing in the background. I thought they might have done better on that one. But that aside, I think what was interesting about it. You often get people politicians, usually like the many that stood up at that conference that don't know a great deal about artificial intelligence, giving their view of the world, about how important it's going to be, what's going to happen. There needs to be regulation, there needs to be something else, and they don't really say a lot. I watched a few hours of this summit just to see if there was anything new coming out and really it just seemed well for such an exciting subject. It seemed rather boring, but I think that's because there were too many politicians and not enough tech people there, or they didn't get prominence or news space. Vice President JD Vance indicated at the AI summit that Europe was getting it all wrong on AI because they were too focused on rules, safeguards, regulation. But perhaps both Europe and America need to rethink their approach after the recent developments by DeepSeek, china's new entrant in the game, the disruptor.

Tony Hines: 16:26

Everybody's racing to invest in data centers at the moment, expecting the demand for those data centers to grow and grow, and it does look a good prospect from outside presently. So who'd have thought we'd be building big warehouses, but not to store goods, but to store data Data warehouses Remember that term? More interestingly, this week Elon Musk made an unsolicited £97 billion bid to buy the non-profit group controlling OpenAI. Mr Musk was one of the startup founders but has since had a big fallout with Sam Alton, another founder and its current boss, and he launched his own rival AI firm. But many see this, this bid by Elon Musk, as really a disruptor. It's not intended as a serious offer. It's meant to disrupt the plans by perhaps pushing up the value of OpenAI. The bid was rejected by OpenAI and they offered to buy X from Mr Musk for 9.74 billion as an alternative way forward. So I think that was an interesting little spat.

Tony Hines: 17:35

The US annual inflation rate rose for the fourth consecutive month in January. It's 3% and it's back to where it was last June before the Fed Reserve embarked on a round of interest rate cuts. The British economy grew by just 0.1% in the last quarter of 2024, compared with the previous quarter. Markets had expected a contraction For the year as a whole. Gdp expanded by 0.9%. So this is well below the Bank of England's forecast for the full year at 2%, and many expect that growth to turn negative after April. Merger talks between Nissan and Honda will not now be going ahead. It was seen as quite an exciting prospect when it was announced a few weeks ago that both of those big Japanese car makers would be teaming up and sharing expertise. But that's not to be, and I'm not sure what the reason is right now, but no doubt we'll find out in a week or two's time. What's been happening? Bp's annual underlying profit of £8.9 billion in 2024 is its worst since 2020, and many investors have been quite critical of the oil company and they think they need a shake-up on the management of that company to get back on track. The market value of BP is about half of that of shell.

Tony Hines: 18:59

The supply of eggs in the United States has become problematic because of avian flu, and many farmers have had to have large culls of chickens, which is creating a shortage. The prices on supermarket shells in the US are hitting about $10 for just 12 eggs. Many consumers, of course, can't afford to pay those sort of prices. There's already a cost of living crisis that's hitting them in the pocket, and that price for eggs is just too much. This is going to put pressure back on the farmers who are trying to keep the egg supply going, because if they can't sell even that limited supply at those sort of prices, they're going to have to drop the prices, and it's not certain where this one's going to end.

Tony Hines: 19:42

A snapshot of the UK's economic indicators this week show that GDP growth rate in quarter 4 was flatlining at 0.1%. It was better than expected by the market, but even so it's 0% quarter on quarter and 0.9% year on year. Industrial production fell by 0.4% month to month in December 24. Manufacturing production decreased by 0.3% month to month in December 24. Manufacturing production decreased by 0.3% month to month in December 24. The goods trades balance was minus 19.3 billion in December 24, with non-EU trade at minus 7.7 billion. So you can see a large proportion of that negative trade balance is with Europe. Business investment the data shows that it's grown by 1.9% quarter on quarter in quarter 4.24. So that's good news. Construction output increased by 0.2% year on year, so that's still very low. The unemployment rate in the UK remains steady at 4.4% in December 24. And average earnings, including bonuses, has grown by 5.6% year on year. So costs for employment and employers is rising, while for workers wages are going up. Retail sales fell by 0.3% month on month in January 25, but grew by 3.6% year-on-year. So that's a snapshot of where we are right now. Next week, of course, the largest US bricks-and-mortar retailer, walmart, will be declaring its results, and the signs are they're likely to be pretty good, so we'll be reporting that next week.

Tony Hines: 21:29

Don't forget to subscribe to the podcast. You'll be first to know when new episodes are coming your way and you can always message us through the text message on the episodes on the Chain Reaction website. Look forward to hearing from you. Well, that's it for this week's episode. It seems to be all about the macro environment at the moment, with trade and tariffs and, of course, us policy and big governments everywhere all trying to get their own way to get to that future first and take control, and that has implications for everybody and for supply chains in particular, while supply chains are trying to grapple with the day-to-day operations of moving goods and services from where they're made to people who want them in the market. Well, I'll be back next week with another episode of the Chain Reaction Podcast and I look forward to speaking to you then. Let's hope it's not quite as turbulent as this week. I'm Tony Hines, I'm signing off and I'll see you next time. Take care Bye. For now. You've been listening to the chain reaction podcast presented and produced by Tony Hines.