The Pulse: Geopolitical conflicts are reshaping global supply chains

Geopolitical conflicts are reshaping global supply chains, influencing trust, trade policies, and economic stability. Our discussion highlights the importance of diplomacy, the impacts of tariffs, and the intricate connections between geopolitical events and international commerce.

• Analyzing the effects of current wars on global trade 
• Understanding the significance of trust in business partnerships 
• Exploring US-Russia dialogues and implications for Ukraine 
• Examining economic impacts of sanctions on multiple nations 
• Discussing China's strategy to stimulate economic growth 
• Highlighting technological advancements and cybersecurity concerns 
• Addressing inflationary pressures in the UK 
• Evaluating corporate reactions to proposed trade tariffs

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Transcript

Tony Hines: 0:02

Hello, you're listening to the Chain Reaction Podcast. All about supply chain advantage. This is the Pulse, the heartbeat of business weekly. All things impacting global supply chains this week. Stick around, stay tuned and find out more.

Tony Hines: 0:24

Well, it feels like a surreal experience listening to politicians on TV talk about the various wars in Gaza and in Ukraine, with Russia back at the table with the United States, as if they're buddies again. But are you really buddies with an aggressor? Have to wait and see. But it does seem strange to hear all the criticism of Ukraine and all the criticism about Europe. It's very odd. It's like some fictional account of what's going on without due attention being paid to the facts and all the evidence that's involved. Of course, this could end up redrawing the geopolitical maps and it could do a great deal of damage, raising uncertainty in the globalised world.

Tony Hines: 1:19

Will anybody trust anybody ever again? You have to pick your friends carefully. I think, and I'm guessing through time, successful leaders have been able to do that and they've picked people with shared values, shared understandings and shared experiences, and that usually works a lot better than doing something on a whim, on a hunch, and thinking you've got all the answers, because I don't think anybody has all the answers. And if you look at business success, it's the same, isn't it? We partner with people we trust and we develop working relationships that allow us to move ahead and achieve our objectives. Through that shared understanding and through sharing information about competitors, about the landscape, about various suppliers and customers, and because we're able to assess with some degree of accuracy what's happening, based on the facts and the evidence. It's why we look at people's track records, for example, when we give them credit. Track records are important. So if you take that to a countrywide level, look at the track record. That'll tell you something. We all, of course, want wars to end, but they have to end on terms agreeable to the countries involved, and we shouldn't be rewarding aggressors in the process. No decision about me without me is quite a good policy, I think, and I'd be inclined to stick to that.

Tony Hines: 2:58

As the pieces of the jigsaw puzzle get thrown into the air and reassembled in new ways, there'll be different relationships that will be established and there will be different arrangements for different countries. It goes without saying that security can no longer be guaranteed by an external party, if indeed, of course, it really ever was. What will it mean for China? What will it mean for Japan, india, how will those pieces sit in the new geopolitical structures? And, of course, taiwan and the South China Sea, which has long been a cause for tension?

Tony Hines: 3:40

It would appear that the transatlantic agreements made at the end of the Second World War and the support given by the United States is well and truly under question with Trump's administration. And, of course, who does that help? Well, I can think of one country. It helps a lot, and you can too.

Tony Hines: 4:00

One thing is certain diplomatic engagement is important. The recent United States-Russia talks aimed at ending the Ukraine conflict and improving diplomatic relations are a positive move. On one side, these talks, held in Riyadh, signalled a shift in US policy under President Trump, moving away from isolation towards engagement. Notably, ukraine was excluded from the talks, raising concerns among Ukrainian and European leaders. There are mixed signals, though. The US administration shows willingness to reset ties with Russia, discussing lifting sanctions and restoring diplomatic missions. European allies and Ukraine are apprehensive about the exclusion from talks and the potential implications for regional stability. If we look at the potential benefits and risks, the beneficiaries could be hardliners and nationalists in the United States and Russia, defense contractors due to increased tension, and geopolitical rivals like China. Who could gain from a US-Russia rift? The losers in this would be global stability and security, ukraine and European allies facing increased pressure and security concerns.

Tony Hines: 5:19

Economic impact on the United States and Russia due to sanctions and trade disruption, civilian populations in affected regions and the future diplomatic relations and efforts. The impact on global trade is also significant. Potentially, sanctions and export controls have disrupted trade flows, affecting Russia's access to advanced technology and key components. Energy market fluctuations in oil and gas prices due to disruptions in Russian exports have occurred. Shift in trade relationships with Europe moving away from Russia and increasing trade with other partners, and the potential bottlenecks and increased cost for industries reliant on Russian exports.

Tony Hines: 6:07

There are also a couple of things at play here. There's the dialogue. Engaging in dialogue with Russia is seen as necessary, but excluding Ukraine and labelling its leader as a dictator has sparked much criticism. European leaders value transparent and inclusive diplomatic efforts that respect the sovereignty of all parties involved. There is a concern that aggressors should not be rewarded for transgression. The outcomes are uncertain. The success of US-Russia diplomatic efforts is uncertain and depends on various factors, including geopolitical dynamics, domestic politics, trust-building and international involvement. A coordinated and multilateral approach is likely to be much better and allow things to move smoothly to a successful conclusion than one of exclusion, which has currently whether it's real or imagined, appeared to be the case. The delicate dance of US-Russia relations has significant implications for global trade, stability and security. Balancing engagement with Russia while ensuring the interests of Ukraine and European allies is crucial for achieving lasting peace and avoiding negative outcomes.

Tony Hines: 7:38

In China this week, xi Jinping held a rare meeting with tech entrepreneurs. Just a few years ago, jack Ma, the founder of Alibaba, who at one stage had to move to Japan after criticising the Chinese regulators, was hosted in this meeting by China's leader, xi Jinping. Liang Wenfang, the founder of DeepSeek, was also at the table, as were the bosses from Tencent and BYD, and Kettle by dues. Share price actually fell when its chief executive wasn't identified as being present at the meeting. China's economy is struggling at the moment, and anything that Xi can do to beef up the economy is important, and so this meeting was to stimulate growth. It was a move to try and develop more growth and compete in the global tech market.

Tony Hines: 8:37

It was noted this week that Microsoft unveiled a Majorana One chip, which will allow quantum computers to solve industrial-scale problems within years rather than decades. It's based on a substance that Microsoft calls topoconductor. It's one of a class of materials known as topological superconductors. Of course, president Trump is threatening to impose tariffs of 25% or higher on all imports of cars, chips and pharmaceuticals to the United States. It's the latest in his trade war against everybody that's not America. I read somewhere that these quantum computers, once they operate, of course, will become more vulnerable because they're operating at faster speeds. They'll become more vulnerable to cyber attack, so that'll be interesting how they combat that threat.

Tony Hines: 9:31

At the same time, in the United Kingdom this week, value-added tax on independent school fees was given as one of the contributors towards the unexpected increase in inflation. Inflation moved to 3%. It was expected to rise to about 2.8%, but it went higher. Inflation had fallen to 2.4% previously. Of course, banks are quick to lower their interest rates. As soon as the Bank of England lowers its interest rate, but when inflation rises they're not that quick to put it back. They'll be waiting for the bank to make its decision as to whether it puts up the bank rate to stem inflation or whether it leaves it be for a while. The one thing that's becoming more certain it's doubtful that the bank will lower interest rates again any time soon, despite the Chancellor's push for growth. And we're getting closer to that date in April, now, when those national insurance costs will be biting and that will impact employment and it's likely to push the economy into a deepened flat line or even a slight fall below it.

Tony Hines: 10:43

And the added pressure, of course, coming from the geopolitical uncertainty and the new approach by the Trump administration to put America first and to withdraw military support from Europe, which has been talked about regularly, will put pressure on European and the United Kingdom countries to contribute a higher proportion of GDP to defence, and there's talk of anywhere between 2.5% and 3% Most people think it's going to be closer to 3% and that will put pressure on other departments to cut the budgets. So interesting. There's also some concern in the United States that Donald Trump's tariffs could raise prices in the United States and, as American shoppers face higher prices, that could be impacting the control of inflation. The minutes of a Federal Reserve meeting back in January, which were released this week, showed that members of the committee believed Trump's policies might hinder the disinflation process. There'll be higher input costs for industry and that will cause prices at the factory gate to rise. It's pretty simple. Now what do the markets think about Trump's tariffs? They're changing all the time. Of course it's difficult to pin them down. It's like watching a brainstorming exercise what can we put tariffs on next? Reaction's been mixed there's apprehension and some see opportunity.

Tony Hines: 12:24

Trump's tariffs have caused significant market volatility. Investors are grappling with the potential ramifications of these trade maneuvers, leading to fluctuations in stock prices and currency values. The announcement of tariffs on steel and aluminum imports has led to a surge in the price of the metals. American metal stocks, such as United States Steel Corp and Alco Corp, have experienced gains. Additionally, gold prices have increased as investors seek safer havens for their assets Amid all the uncertainty. It's like a whirlwind of uncertainty.

Tony Hines: 13:00

The shift from the universal tariffs to reciprocal tariffs, where the US matches the import duties levied by other countries, has been seen as a more measured approach. The strategy is expected to have a lower impact on US consumers compared to universal tariffs, some think. But there are concerns about the potential inflationary impact of tariffs, as they can increase the cost of goods and this has implications for consumer prices and, of course, business prices as inputs to manufacturing processes. It could destabilise the economy. While some sectors, such as metals, have benefited from the tariffs, other areas of the market have shown muted reaction. The overall sentiment remains cautious and investors await further developments. It's a complex interplay of caution and optimism and, of course, we're only at the beginning.

Tony Hines: 13:55

Jim Farley, the CEO of Ford Motor Company, raised significant concerns about President Trump's proposed tariffs on Mexican and Canadian imports. Farley warned that the 25% tariff on these imports could blow a hole in the US auto industry, leading to major job losses and increased costs for American consumers. He highlighted that such tariffs would benefit foreign automakers from South Korea, japan and Europe, who would not be subject to these tariffs. Farley also expressed concerns about the potential rollback of the Inflation Reduction Act, which provides tax credits for electric vehicle production. He emphasised that the current tariff trajectory has introduced a lot of cost and a lot of chaos to the industry.

Tony Hines: 14:44

Several other companies have expressed concerns over tariffs. General Motors has forged concerns about the impact of tariffs on the automotive industry, and the company has highlighted that tariffs on steel and aluminum increase production costs, which can lead to higher prices for consumers and potential job losses in the industry. Apple has raised concerns about tariffs on Chinese imports, as many of its products and components are manufactured in China. The company has warned that tariffs could lead to higher prices for its products, affecting consumer demand and overall sales. Boeing has expressed worries about tariffs on aerospace components, which could disrupt its supply chain and increase production costs. The company has emphasised the importance of free trade for maintaining its competitive edge in the global market. Walmart, too, as a major retailer, has highlighted the potential impact of tariffs on consumer goods. The company has warned that tariffs could lead to higher prices for a wide range of products, affecting both consumers and the retail industry. Caterpillar, a leading manufacturer of construction and mining equipment, has raised concerns about tariffs tariffs, too, on steel and aluminum. The company has indicated that the rising cost of raw materials could impact its profitability and competitiveness. And, surprisingly, tesla, too, has expressed concerns about tariffs on automotive components and raw materials. The company has highlighted that tariffs could increase production costs and affect its ability to scale up production of electric vehicles. So they're just a few of the companies that are concerned.

Tony Hines: 16:23

Has Musk raised his Tesla concerns? Yes, apparently he has. He's expressed concerns, particularly in relation to the impact of tariffs on automotive components and raw materials, like the other automobile manufacturers, and it will increase production cost and affect Tesla's ability to scale up production of EVs. Musk's political involvement, including his support for President Trump and other right-wing politicians, have led to a backlash among some Tesla customers and employees, and this has resulted in declining sales in key markets such as Europe and Norway. There are a growing number of concerns among Tesla employees and insiders about Musk's leadership. Some believe that his focus on other ventures and controversial actions are negatively impacting Tesla's reputation and financial performance. But just a day or two back, president Trump said he'd love for Elon Musk to make his Tesla cars purely in the United States. Well, is that possible? His biggest plant's in China?

Tony Hines: 17:37

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. So that's it for today. Hope you've enjoyed the episode, hope you found it useful and I'll see you next time in the Chain Reaction Podcast. Bye for now. You've been listening to the chain reaction podcast, written, presented and produced by tony hines.