How Trump's Trade Wars Are Crippling Global Markets

Global markets are reeling from what can only be described as an economic tsunami, triggered by President Trump's chaotic approach to trade tariffs. The ripple effects are now washing ashore everywhere from the United Kingdom to Japan, leaving financial destruction in their wake.

The UK economy faces a staggering £41.2 billion deficit—significantly worse than the £30 billion previously projected—according to the National Institute for Economic and Social Research. With GDP growth slowing and inflation lingering, policymakers face what experts call an "impossible trilemma": maintaining fiscal discipline, delivering public services, and keeping campaign promises not to raise taxes. The Bank of England's monetary policy tools seem increasingly ineffective, caught between inflation at 3.6% and the need to stimulate economic growth.

Trump's tariff strategy presents a fascinating contradiction. While generating projected revenues of $308 billion for the US government in 2025, the costs are equally substantial. American households could lose $2,400 next year from higher prices, and major companies are absorbing significant impacts—GM expects $5 billion in tariff costs this year alone. The automotive sector has been hit particularly hard, with Nissan reporting a $782 million quarterly loss and cutting 20,000 jobs globally. Jaguar Land Rover saw profits halve after temporarily pausing US exports due to tariffs. Meanwhile, Tesla faces legal troubles over misleading robo-taxi safety claims, wiping $68 billion from its market value in just two days.

The unpredictability of Trump's trade announcements—constantly implementing, threatening, and pausing tariffs—has markets increasingly numb to these disruptions. But behind the headlines, real businesses and workers continue to suffer as global supply chains fragment. Want to stay ahead of these economic shifts and understand how they might impact your financial future? Subscribe to Chain Reaction for weekly updates on the latest developments in this unfolding global economic drama.

Chapters

• 0:00 UK's Growing Economic Black Hole
• 5:09 Bank of England's Interest Rate Dilemma
• 6:25 Trump's Tariffs: Costs vs Benefits
• 10:51 Markets Numbed by Tariff Chaos
• 15:20 Nissan's Losses and Auto Industry Challenges
• 17:27 Tesla's Legal Troubles and China Trade

Transcript

Tony Hines: 0:32

Well, more gloomy news for the UK economy this week, as it became clearer from the National Institute for Economic and Social Research that there's going to be more likely a 40 billion black hole than a 30 billion black hole when it comes to budget time in the UK in October or later. And they're going to have to find money that they hadn't planned to find. And there's only two ways that governments can find money, and that's usually to tax or to borrow more. Now, since borrowing is already considerably high, it's more likely to be tax. That's going to foot the bill and that's bad news for business and for taxpayers. It means they're going to have to stick their hand in the pocket once again.

Tony Hines: 1:23

And, of course, it's all down to the economic conditions around the globe presently and the major disruption that's caused by President Trump in the United States. He's caused a whole tsunami and you can listen to my episode on how tariffs have become a tsunami and they're destroying the stability in the world economy. It only takes one chaotic policy to disrupt the global economic system. The National Institute of Economic and Social Research published a report stating the UK deficit would be 41.2 billion pounds and not 30 billion previously, indicated the disruption to global trade caused by President Trump's chaotic trade tariffs and the US economic policies are having a destructive impact on the rest of the world. They're adding friction to supply chains and extra cost for everybody. The latest report projects the UK government will miss its fiscal stability rule by £41.2 billion by 2930. It calls it an impossible trilemma maintaining fiscal discipline, delivering public service commitments and honouring manifesto pledges not to raise taxes. With GDP growth slowing, inflation lingering and interest rates only gradually easing. They recommend reforming council tax into a land value tax, reducing economic inactivity to ease welfare costs and rebuilding a 99.9 billion fiscal buffer to reassure markets. The total funding gap £51 billion. Bridging it could mean a five-point rise in income tax, and that's a politically tough sell.

Tony Hines: 3:12

Well, the Bank of England is in a dilemma. They're talking about lowering the interest rate by a quarter of a percent and the long-term interest rate has to come down to about 3.5% or even 3%. But with inflation at 3.6% and the target inflation at 2%, an interest rate of around 4% means that real incomes are actually falling. If the nominal interest rate is 4% and you're getting 3.6%, taken out of that by inflation, you've basically got a marginal gain of 0.4%, but of course, in real terms it's very flat. You've actually lost out Money's devaluing. That's if you're saving, If you're borrowing. Of course your loans and lending will fall every time there's an interest rate cut, and that's beneficial for those that borrow.

Tony Hines: 4:13

The problem with more savings and this is why, of course, the government would be keen not to have those savings is because the money doesn't flow around the economy and that's what drives growth. They need spending to drive growth or investment. So it's a conundrum. But it doesn't seem that the monetary policy is as effective as it was in the past. So when they lower interest rates, it doesn't necessarily stimulate the economy. People aren't rushing out to spend on goods that they wish to buy, although inflation is still rising. So it's a very complex situation. So it's a very complex situation Now.

Tony Hines: 4:58

If you haven't heard this week's episode on the tsunami of Trump's tariffs, then you should drop by and pick that up and have a listen. But since then there's been more chaotic tariffs announced by President Trump and I wrote a piece in the Chain Reaction Review called the Cost of Chaotic Tariffs and Potential US Gains. I'll just summarise some of the key points from that and you can drop by and have a look at that. On the Chain Reaction Review, I'll put the link in the episode notes. A clear breakdown of the projected gains and costs of Donald Trump's latest wave of tariffs, based on current data and all the expert analysis look something like this Projected gains. Well, the projected gains are not insignificant. Revenue generation of $308 billion in tariff revenues is projected for 2025, and that's four times higher than it was last year. July alone saw $30 billion collected, a 242% increase year-on-year and tariffs now rival corporate income tax as a top-tier revenue source for the US government. It also gives a domestic investment boost.

Tony Hines: 6:15

Apple announced $600 billion invested in manufacturing, partly to offset its tariff exposure. It doesn't want to be caught by the tariffs be expensive for Apple Factory construction. The spending on that has tripled since 2022, reaching $18 to $20 billion per month, and that suggests there's been some reshoring going on. Us manufacturing output is projected to rise by 2%, although this is sector-specific, but there are projected costs. But there are projected costs. The consumer impact average US households could lose $2,400 in 2025 because of higher prices caused by those tariffs.

Tony Hines: 7:04

I did also read that 60% of the cost of tariffs, according to Goldman Sachs, are being absorbed currently by companies importing the goods, so it's hitting their profits. Prices of apparel, shoes and electronics may rise by between 18 and 39% in the short term and inflation could increase by 1.8%, with gross domestic product shrinking to 0.7% this year. When we look at the business burden of tariffs, tariffs are paid by US importers, not foreign governments, and, as I just said, it's estimated that 60% of the tariffs are currently being absorbed by the importers and not passed on to consumers. Gm expects $5 billion in tariff costs this year and Ford has said it expects tariff bills approaching $2 billion. Companies are facing tighter margins, inventory builder and reduced pricing power. There's also macroeconomic drag, and that means GDP could remain 0.4% smaller long term if these tariffs persist, and unemployment may rise by the same amount 0.4% especially in trade-sensitive sectors like agriculture and construction. Despite all the reshoring rhetoric, us factory activity is actually contracting, not expanding, and there are strategic tensions.

Tony Hines: 8:40

Trump's tariffs are designed to punish trade partners, reshore manufacturing and raise revenue, but here's the contradiction If reshoring succeeds, import volumes fall and so does tariff revenue. The current surge in revenue may only be short-lived if supply chains shift or consumer demand weakens. Now there's been another announcement this week about chip tariffs coming along. They're in the pipeline, so to speak. So what does that mean? Well, he's proposed 100% tariffs on imported semiconductor chips not manufactured in the United States. It's not a blanket tariff of 60%, it's nothing to do with that. The 60% applies to broader categories of Chinese imports, not semiconductors specifically. But there are exemptions. Companies with US manufacturing operations, like TSMC, samsung and Global Wafers, are exempt from the 100% tariff. Tsmc's $165 billion investment in Arizona shields its clients such as Apple and Nvidia from penalties. The economic effects tech companies could face costs which are four times higher than previous tariff rounds could increase the demand and it could cause shortages in those categories. Supply chains may fragment, with smaller firms struggling to relocate production. And then I've got a complete table in my article which tells you all the information when those tariffs are coming into force. So there we are. That's the update.

Tony Hines: 10:38

Well, in the news this week, we have all the latest on Trump's tariffs, and of course, that changes on a daily basis, doesn't it? He's like the Duke of York, the grand old Donald Trump. He marches tariffs up to the top of the hill and he marches them right back down again, and he's been doing this now for months. I don't think he really understands the damage or the connections or the interconnections that are involved in these complex global supply chains. And, of course, I guess markets are becoming numbed. I read a report this week on CNBC and they said markets are becoming numbed. I read a report this week on CNBC and they said markets are becoming numbed. It's a bit like the boy who cried wolf.

Tony Hines: 11:27

Once you've heard some startling news tariffs are going to be 145%, or tariffs are going to be 50% on this country and that country, and we're going to do deals you become a bit weary of the talk and you don't know which are going to get through the chaotic maze and be implemented and you don't know which are going to simply, well, be paused. That's the term they keep using. 90-day pause, two-week pause, a bit like cats and dogs, isn't it? They have paws, don't they? But it's a paws all the time, and that's why he's got that label at the Financial Times put on Donald Trump weeks back, when they called him Taco Trump, because he always chickens out. But does he Not sure, really? But does he know what he's doing? Well, I think it's evident from what's happening, not really Causing an immense amount of damage.

Tony Hines: 12:39

And then we talk about these tariffs being paid by importers, and of course that's the legitimate way in which tariffs are paid. The importer pays the tariff, but they can't just absorb these tariffs continuously, because all these US retailers importing lots of different SKUs into the US economy will have to pass on those tariff costs to customers, and so it's the very people that vote for Donald Trump that will be paying all this money in tariffs. So when we look at the big tax take from the United States, it's probably citizens of the United States that are paying those taxes. In some cases they'll be deal-struck with exporters where they'll share out the pain, and in some cases the companies importing will be able to absorb some of the tariffs but not all. And it depends how long it all goes on, and it's likely that this Trump tariff trade war is going to go on for some considerable time.

Tony Hines: 13:56

He likes being in the news. That's another disadvantage for everybody watching the tariff news, because if there's nothing else happening, if he's not got a war to resolve, he does those in 24 hours. So he says, but there's no evidence of that either. We get to a position that tariffs make the news headlines, and that's what's happening, and it causes an immense amount of uncertainty and disruption to global trade, and there are people's jobs on the line here, all over the world and in the United States itself. So if you want to keep up to date on all this, listen to Chain Reaction and you'll find out the latest news on tariffs every week in the News Round which comes out at the weekend. In the news round which comes out at the weekend.

Tony Hines: 14:49

Nissan's $782 million loss and restructuring drive. Nissan reported net loss of 115.76 billion yen. That's about $782 million, and that's just for the quarter between April and June this year, and it's its fourth consecutive quarterly loss. This downturn's been driven by US tariffs, a 25% levy on foreign-made cars imposed in April, which was later reduced to 15%, but still cost Nissan 68.7 billion yen in operating losses. There was a restructuring cost Nissan, cutting 20,000 jobs and reducing global production capacity from 3.5 million to 2.5 million units, excluding China. Plants in Mexico and Japan are being shuttered or consolidated. There's a leadership change Ivan Espinosa was replaced by Makoto Uchida as CEO in April Shortly after Nissan abandoned a proposed merger with Honda, and there's been a sales decline. Revenues have fallen by 9.7% and US sales have dropped 6.5%, despite being strong in its performance for models like the Nissan Z and the Murano. Overall car sales have fallen by 23.1%. So difficult times for the auto industry and for Nissan in particular.

Tony Hines: 16:24

Another interesting story in the last week or two has been Tesla. They're being sued over robo-taxi safety claims. Tesla and Elon Musk are facing a class action securities fraud lawsuit filed by shareholders in Austin, texas, and this suit alleges misleading statements. Tesla overstated the readiness and safety of its autonomous robo-taxi services launched in Austin in June. They also refer to dangerous behavior. Videos showed robo-taxis speeding, braking erratically, entering wrong lanes and dropping passengers in unsafe locations. The stock impact has been that share prices in Tesla have fallen 6.1% over two trading days, wiping out $68 billion in market value. The named defendants, cfo Valibav Taneja and former CFO Zachary Kirkhorn, are also implicated. Broader context the lawsuit follows a $243 million jury verdict against Tesla in Florida over a fatal autopilot crash and comes amid declining EV demand and regulatory scrutiny, so legal claims against the company for the technology this autopilot technology, which doesn't seem to be what it's cracked up to be, according to the statements by these news reports and also by the lawsuit taken against the company.

Tony Hines: 17:57

Well, tesla also awarded shares worth around $30 billion to Elon Musk, and that raises his holding to 16%. Mr Musk had been battling a judicial decision to strike out a previous pay award worth $56 billion. He has to retain a senior executive role for two years to qualify for the new payout. Whether he'll be able to do that or not depends. A lot of people are unhappy with his stewardship of the company and they would like to see him move on, I think in some respects. So will he hang on? Wouldn't rule it out, would you? China's exports increased by 7.2% in July year on year, and that's been helped by the rowing back of tariffs on China by the US President. August the 12th is the next deadline. So there are all these deadlines. So we'll have to see how that plays out.

Tony Hines: 18:58

And you'll recall that Donald Trump last week fired Erica McIntyre as head of Bureau of Labor Statistics because he didn't like the figures that were coming out of that department. He said they were manipulating the employment figures to make his administration look bad. Well, it's doubtful, isn't it? That very dubious claim. And you remember last week I said it's about shooting the messenger. So anything you don't like you simply replace. It's a wonder he didn't close it down. Really. The figure for July recorded 73,000 new jobs in the month, but it was revised downwards for May and June by 258,000, making those months the lowest for job creation since the start of the pandemic in early 2020. And we haven't seen why this revision was so large. But we'll have to wait and see. But it certainly undermines the credibility of the federal statistics with the sacking of Macintarfer, of course, he's also touting Kevin Hassett or Kevin Walsh to replace Jerome Powell at the Federal Reserve, because they're another set of figures that Trump doesn't like. He's been urging Powell to lower the interest rate for some time.

Tony Hines: 20:18

Glencore, which is one of the leading metal companies, important for the rise of EVs and everything else, has said it's going to remain on the London Stock Exchange and it's not going to seek to register on the New York Stock Exchange. Palantir is a data analytics company and it has sales of about a billion dollars for the first time. It's known for its work in the defense industry and I think it also has interest in health care as well. It's trying to get more health care business and its share price went up by 135% this year, said to be outperforming Meta, netflix, nvidia, oracle and others. Jaguar Land Rover will be getting a new chief executive, pb Balaji, who is head of finance at Tata Motors, chair Lars Per and company, and he'll be in the hot seat.

Tony Hines: 21:17

From November, profits of Britain's largest automotive employer, which is Jaguar Land Rover, halved after a sharp drop in sales. The company's been hit hard by US tariffs. It employs more than 33,000 people in the UK and its pre-tax profit fell from 49.4% to 351 million in three months to the end of June, from £693 million in the same period a year ago, and it's also reported a 9.2% drop in quarterly revenue to £6.6 billion after it temporarily paused exports to the United States because of those tariffs. Jaguar Land Rover is owned, of course, by Tata Motors, as we've just said, which is an Indian auto group, and so the new tariffs on India placed by Donald Trump will also have some impact on JLR and no doubt Tata. It's hoping that a trade deal can be struck between India and the United States that's more satisfactory, and it needs to happen sooner than later.