The Hidden Costs of Policies: Energy, Tariffs, and Global Supply Chains

The high cost of energy in the UK is crippling businesses including the historic Moorcroft pottery, while political decisions about transparency, tariffs, and trade have far-reaching consequences for global supply chains.

• UK energy prices rank among highest globally due to marginal pricing system, limited infrastructure, environmental levies, and dependence on gas
• Offshoring manufacturing doesn't eliminate carbon emissions - it simply imports them embedded in products made elsewhere 
• Amazon considered displaying tariff costs on products until White House pressure labeled transparency a "political act"
• Major retailers including Harrods, M&S and Co-op hit by cyber attacks causing significant operational disruptions
• Trump's tariffs causing 17% decrease in Trans-Pacific shipping capacity with 29% of sailings cancelled
• Chinese retailers and smaller merchants abandoning small package exports to US due to elimination of $800 de minimis exemption
• Oil companies including Shell, BP, Exxon and Chevron reporting profit drops due to weaker oil prices
• Tech giants Apple, Meta and Google facing regulatory challenges under EU's Digital Markets Act

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Chapters

• 0:00 Introducing Chain Reaction Podcast
• 0:27 UK Energy Crisis Explained
• 3:16 Transparency in Trump's Tariff Policy
• 8:40 Supply Chain Disruptions and Cyberattacks
• 13:02 Oil Company Profits and Ukraine Deal
• 18:10 Amazon Sellers and Tech Regulation

Transcript

Tony Hines: 0:05

Hello, tony Hines. Here You're listening to the Chain Reaction podcast, all about supply chain advantage. Well, great to be here. Great episode coming along in just a moment. It's the Pulse, the heartbeat of business weekly Chain Reaction.

Tony Hines: 0:27

Energy prices in the United Kingdom are among the highest globally and there are several factors driving that. Firstly, the market structure and pricing model. Secondly, the infrastructure and grid limitations. Thirdly, energy policy and environmental levies. Fourthly, dependence on gas and global market exposure. So let's take each of those.

Tony Hines: 0:49

The UK uses a marginal pricing system, meaning that the most expensive energy source sets the price for all electricity. Since gas-fired power stations often meet demand, gas prices heavily influence electricity costs. Unlike some European countries, the UK lacks long-term price controls, making it more vulnerable to global market fluctuations. As an island nation, the United Kingdom has limited interconnectors with Europe, restricting access to cheaper imported electricity. The UK grid has transmission bottlenecks, leading to higher costs for balancing supply and demand. About 25% of UK electricity bills come from policy costs, including environmental taxes and subsidies. Carbon pricing and renewable energy support schemes add to the costs. Even though renewables now generate most of the UK's electricity, the UK is a net importer of natural gas, making it highly exposed to global price volatility. Even though renewables are expanding, gas still plays a major role in setting electricity prices.

Tony Hines: 2:00

And you might wonder why energy costs are so important. Well, they're central to manufacturing and industrial businesses, and just this week a very famous name, moorcroft, in the pottery industry in Stoke-on-Trent, cited energy costs as one of the reasons why they're closing down, and that's with the loss of just 57 jobs. But it's the heritage and the history that's being lost too. Major automobile manufacturers have also cited the cost of energy as being too high, as many other manufacturers have also done. So if the government in the United Kingdom wants to encourage growth, one of the first things it has to do and has to tackle is the price of energy, and it has to take steps to bring down those energy costs to make the business environment far more attractive. And that means rethinking marginal pricing, rethinking those environmental costs that they've added to the price of energy and ensuring policies that there are more interconnectors to Europe and, of course, more storage capacity in the UK itself to make energy resilient. I think one of the most interesting things about all the discussions that go on about energy it's always about jam tomorrow isn't, and it's not about the pain today.

Tony Hines: 3:27

And we can frame this however we want to. But one of the things when we do frame energy cost and we look at industrial activity, we know, for example, that we need steel. We need steel for house building. We need it for ship building if we do any still, we do actually but we do need it for steel. We need it for ship building if we do any still we do actually but we do need it for steel. We need it for automobiles.

Tony Hines: 3:49

We need it to manufacture things like bricks and ceramics, which is the Moorcroft example we've talked about and so those things have to be bought in, and if we buy them in from elsewhere in the world, we're actually importing carbon emission and nobody talks about that very much. It's embedded in the products we bring in. So when we offset in the United Kingdom and we say, well, we can't have carbon emissions, okay, carbon emission is a good thing to control. Nobody disagrees with that. I certainly don't. But you have to have production facilities that make the things that are in demand. And if steel and bricks are in demand, then you have to make them or you buy them in, and if you go into the bought-in option, then those things still have carbon emissions contained in their production. It's just that they've been made elsewhere in the world, so it doesn't stop the amount of carbon going into the atmosphere. It's already gone in the atmosphere and we've bought it.

Tony Hines: 4:49

So there's a kind of double standard taking place when it comes to political discourse. Well, I think it's fascinating what's happening in the United States at the moment. Every day we get our news speak straight from the White House, caroline Levitt, who comes out and spouts what the president is great for and just reels off all the propaganda. It's a bit like Pravda, isn't it? That's Russian, oh right, but the president likes Russia yeah, he does. Likes Putin anyway. So, yeah, a bit like that really. And I'm reminded of George Orwell's book 1984. Remember when I first read it and I thought who'd ever listen to somebody just talking every day and just spouting out the propaganda and putting pressure on people? Anyway, this week I was fascinated to hear that Amazon are going to print all the tariffs on goods on sale on the Amazon website. What a great idea that is. That'll make everything transparent and you'll see the actual impact of Trump's tariffs. And it won't be good.

Tony Hines: 6:00

Of course, the White House propaganda machine came out and said that's an act, a political act. Yeah, so are tariffs. They're a political act too. Everything's a political act when it boils down to it. Every statement made by anyone comes down to they want their own way in any situation. Caroline Levitt's statement that it's a political act is also actually a political act. There's the irony it's a political act is also actually a political act. There's the irony it's a political act. To say something is a political act because it means that you disapprove and you don't like what's happening and you'd like your own way. So there we have it. I think it'd be a good thing if Amazon published the tariffs and the impact of what they're doing to prices on the website and make it quite transparent about what's happening. Then we'll see how much is being added to cost through the tariffs and exactly by how much those tariffs are impacting what you pay. Inflation is about to be revealed, so I'm guessing that's why the White House doesn't like it.

Tony Hines: 7:03

Transparency often gets tangled up in political narratives, doesn't it? And by labelling Amazon's move as hostile and a political act, it shifts the focus from the actual issue informing consumers toward a more charged debate. It's fascinating how framing can shape public perception. I think this kind of transparency could influence broader discussions about trade policies and we'd begin to see just how damaging they actually are. This kind of transparency has the potential to reshape public understanding of trade policies, and their real-world impact will become visible. It could encourage more informed discussions and even push for changes on how tariffs are implemented or negotiated.

Tony Hines: 7:49

It's empowering when people have access to clear information, isn't it? Why keep it under wraps? Well, only to ensure that you have the political power to carry through such damaging policies. Well, I think it's quite interesting, because what's happened is the blowback from the Trump administration has probably prevented any transparency from Amazon taking place. They say it was never planned, it was never cleared, but I'm not sure about all of this. I think they've just decided it's better not to go ahead because they'll get hassle from the president. It's very Orwellian, isn't it? I think they've just decided it's better not to go ahead because they'll get hassle from the president. It's very Orwellian, isn't it? I think it'd have been great. We'd know exactly what we're paying and we'd see the impact of these tariffs. I suppose we'd be seeing inside the madness. Anyway, we can but dream.

Tony Hines: 8:39

Supply chains, of course, are all about transparency. It's about making sure we know exactly what's happening at any point in time, and transparency in government. Why should you run away from it? It's very strange, isn't it? It all comes back to Pravda the truth, and the truth hurts. As George Orwell said, political language is designed to make lies sound truthful and murder respectable, and to give an appearance of solidity to pure wind. Sound familiar, now.

Tony Hines: 9:11

The impact of tariffs couldn't be clearer and if we take a look at a report from Flexport this week, they have a very good article outlining the impact of new executive orders as a lead article over the past few weeks on Chain Reaction is to do with capacity and demand and the reduction of that capacity and the forward bookings for containers, and they confirmed with some data the impact of what's happening. They say the capacity and demand in week 18 was 17% below standard levels for Trans-Pacific Eastbound Freight and it's driven by a significant decline in both demand and subsequent blank sailings from China to the United States. The blank sailings are really important because carriers have reduced capacity for May and 29% of sailings have been cancelled for the week of May 5th. That limits the capacity from China to the United States to about 70%, they say. And what's causing this? Well, a steep decrease in demand since Liberation Day Remember that Liberation Day? That was the day that everything went up in price, april 2nd and since that date it's close to 50% lower than in the previous four-week period.

Tony Hines: 10:40

Major retailers in the United Kingdom Harrods, marks Spencer and the co-op have all been hit in recent weeks by cyber attacks and it's caused significant disruption to their retail operations. Harrods is just the latest to be targeted. Marks and Spencer said it was unable to hire new workers as it continued to battle disruptions to its operations, and it's caused empty shelves in stores for some products, and it's caused problems with pricing and reordering and quite a number of daily things that you would normally expect retailers to be involved in have been hampered by these cyber attacks and, of course, cyber attacks now are one of the most difficult things to address. Marks Spencer suffered a major ransomware attack and it disrupted online orders, contactless payments and job listings, and the attack has affected store operations and it's forced the company to take some systems offline. The co-op group was also targeted, leading to shutdowns of back office and call center services. Employees were instructed to keep cameras on during remote meetings so as to verify identities. They were worried that people would get into things like Zoom meetings or team meetings. Other retailers, such as JD Sports, suffered a breach, leaking 10 million customer records, and VF Corporation, an apparel retailer, had 35 million customer records exposed. Staples faced disruptions during Cyber week sales due to an attack, and it just shows that the environment is getting a lot more hostile out there as cyber security risks for retailers, especially with ransomware groups targeting critical systems.

Tony Hines: 12:30

It's difficult to know what to do, and these things come out of the blue. The only thing you can do is prepare as much as you can by making sure that you've got no holes in your system and, if you have, close them up before those attacks take hold. Harrods, the luxury department store in knightsbridge, was hit by a cyber attack forcing it to restrict internet access at its locations. There were attempts to gain unauthorized access to systems, but customers were assured that stores will remain open, so do what you can now. When it comes to the department of government efficiency in the united states, you might recall that was headed up by elon musk, and they claim to have saved 160 billion US dollars. And then there's been an independent study that came out this week saying it actually cost 135 billion dollars to make that saving of 160 billion US dollars. Now, when I went to school, you wouldn't claim that you'd actually saved $160 billion. You'd say the difference between the $160 and the $135 is what you've actually saved, and that's $25 billion. It's significantly less. It's still a saving, but it's a lot less, and that's the sort of crazy economics or the crazy maths that's put out as a story. I think there's a name for this. Is it fake news? I think it's fake news, isn't it? I think I've heard that before somewhere and I can't remember where Can you.

Tony Hines: 14:09

President Trump marked his 100th day in office during his second time with a speech in Michigan. He said he'd sparked a revolution of common sense and the opinion polls that recorded his waning popularity were fake. He signed more than 200 executive actions with orders on tariffs, migration and diversity programs, and this week he demanded that lorry drivers can read and speak English. During those first hundred days, the Standard Poor's lost 7% of its value, and it's the worst start to a presidency since Gerald Ford's back in 1974. Well, there we are. Make America great again. Well, there we are. Make America great again.

Tony Hines: 14:54

Shell's first quarter profits fell by 35% to $4.8 billion, and that's largely due to weaker oil prices. They've fallen from about $80 in 2024 down to around $60 currently, and that's because OPEC are producing more oil and supplying more oil in the market means that even if demand is remaining the same, prices will fall. It's all supply and demand. In comparison, bp reported a 70% drop in net profits, falling to 687 million, driven by weaker gas sales and lower refining margins. Bp also cut its share buybacks, focusing on strengthening its balance sheet. Shell did that too. They announced $3.5 billion in share buybacks. Overall, shell appears to be navigating the low-price environment better than BP and maintaining steady buybacks and a lower debt-to-equity ratio 18.7% compared to BP's 25.7% debt-to-equity ratio.

Tony Hines: 16:06

Exxonmobil and Chevron both reported their first quarter 2025 earnings, showing resilience despite the market challenges. Exxonmobil posted a net profit of 7.7 billion US dollars, with earnings per share at $1.76. And this was a slight decline from last year, but exceeded the analysts' expectations. The company benefited from higher production in Guyana and the Permian Basin, as well as cost-saving measures that they'd applied. Chevron reported an adjusted earnings per share of $2.18, with revenue at $47.61 billion. However, its earnings dropped by 26%, largely due to weaker refining margins. Chevron also plans to reduce stock buybacks in the second quarter, reflecting the impact of falling oil prices.

Tony Hines: 17:06

The United States and Ukraine signed that long-awaited agreement this week and that gives the United States access to Ukraine's natural resources and critical minerals. It also appears to have eased the tension between the two countries since that meeting in the White House. Yes, that one Details were sketchy, but the deal provides for a reconstruction fund for Ukraine. Scott Besson signed the document on behalf of the United States and said it would boost a peace process centered on free, sovereign and prosperous nations. He made a comment about no state or person who financed or supplied the Russian war machine would be allowed to benefit. Elected and is Prime Minister of Canada after his victory on behalf of the Liberal Party, and he said this gave him a mandate to negotiate with the United States over trade and security, and he'd do so on Canada's terms. Mr Carney and Donald Trump have agreed to meet shortly.

Tony Hines: 18:10

Amazon sellers have been stocking up and that's because of the tariffs. They want to avoid them, but it's only a short-term solution. The third-party sellers build inventory to avoid the impact of Trump's tariffs, but once the stock runs out, they'll probably have to put up those prices. So that's when inflation will bite. Amazon sellers will have to focus on tighter margins and cut costs where they can. The company tried to bolster investor confidence this week and they want to make sure that the third-party sellers stay on board. The 145% duties imposed on China affect an awful lot of those third-party sellers on Amazon, and it's impacted other companies too Walmart and Apple and they're all looking for ways to keep those costs down. Amazon said there hasn't been any slowing down in demand and the CEO of Amazon, andy Jassy, said the company was working with its sellers to move orders to the United States earlier than planned to avoid further tariffs on merchandise. Jesse said our third-party sellers have pulled forward a number of items, so they have inventory. We're encouraging that because we're trying to keep prices as low as possible. But once those prices go up, of course they'll be passed on to consumers and consumers will have to pay more for the goods, and that will be inflationary. It's unlikely that they'll be able to get more than at least three to six months of inventory before they are impacted by the tariffs, but they're hoping, of course, that those tariffs will come off at some point.

Tony Hines: 19:52

In the tech world this week, both Apple and Meta have faced the wrath of the Digital Markets Act in the European Union. Both have been heavily fined Meta for trying to charge for its services, asking users of those services to give their data, and if they don't give the data, they have to pay a fee for the service, and that goes against the Digital Markets Act in the European Union. And so they've been fined. It really is the bane of some of these tech companies, that Digital Markets Act, and I suspect it's going to be something that's tackled by the Trump administration at some point. But meanwhile it can be demonstrated elsewhere that protecting consumer data is very important. Just look at all those cyber attacks. Google is also facing a September trial on ad tech antitrust matters. Alphabet's Google faces that trial in September and the regulators want them to sell part of the advertising technology business to address the company's dominance over tools used by other online publishers to sell ads. So it's all to do with the ad tech.

Tony Hines: 21:05

Now you'll know I reported in Chain Reaction last week that De Minimis has gone. That's the loophole whereby Chinese retailers and other retailers were allowed to export goods into the United States with a value lower than $800. And of course, that's caused some problems with backlogs of ports and it's also caused DHL to stop dealing with smaller packages because it'll cost them too much to do the paperwork and administer the customs duties due to the tariffs. Chinese retailers such as Shiyin and Temu have been beneficiaries of the de Minas loophole. Smaller retailers, of course, have said they no longer intend to export small packages to the United States because of the tariffs. It's too costly.

Tony Hines: 22:02

Well, that's it for the Pulse this week. I hope you've enjoyed the episode and I hope you found out something you didn't know before you began to listen. I'll be back next time with another edition of Chain Reaction and I look forward to seeing you then. In the meantime, if you're not subscribed, do subscribe and you'll be first to know when new episodes drop. So for now, thanks for listening. I'm Tony Hines. I'm signing off. See you next time. Bye, for now, you've been listening to the Chain Reaction Podcast, written, presented and produced by Tony Hines.