8 April 2025: Starmer tells JLR he will “back them to the hilt”

On a visit to the Jaguar Land Rover factory outside Birmingham yesterday, the Prime Minister told workers and management that he will “back them to the hilt as they face severe challenges created by the imposition of 25% tariffs on the company’s experts to the U.S.

In a move that will disappoint green campaigners, Sir Keir Starmer said he is prepared to relax regulations regarding the sale of petrol-driven vehicles, which were supposed to see the internal combustion engine phased out by the middle of the next decade.

Staff at JLR watched on as Starmer vowed to 'have their back' at a time of increasing uncertainty but admitted Britain was in a 'completely new world.' As the PM spoke, the US markets took a sharp drop on opening, and President Trump threatened additional tariffs on China if Beijing did not withdraw its 34 per cent retaliatory tariffs on the US.

The Government was badly unprepared for the turmoil that has ensued following Trump’s announcement last week. Several workers at the factory asked why there were no preparations made since it was clear at the time of his election that he was leaning towards adding tariffs, particularly on vehicle imports.

Trump may have been badly misjudged by political analysts who saw the measures as a vote winner, but they expected members of his Cabinet to dissuade him from implementation given the turmoil they would have been right in predicting.

The number of new job listings in the UK has dropped by 23% in the last year, according to the country's biggest recruitment website. Employers warned that the numbers are an early warning of the reality that they are facing given the new regulations relating to the living wage, employers’ national insurance contributions and the new workers' rights bill.

Data showed a 23% decrease in the number of jobs online last month compared to March 2024. While the figures showed a slight rise in the number of listings in February, the news is unlikely to inspire economic confidence.

The data may provide a double hit for the economy. First, businesses may see their competitors pulling back to remain competitive, while those workers looking to change jobs may be discouraged from doing so simply due to the lack of available positions.

Rachel Reeves, who vowed to end Tory fiscal chaos with one financial statement a year, has already made her third. This is not the time for the Chancellor to experiment to try to see what works for the unique situation she now finds herself in. She started in July last year when she discovered an apparent £22 billion black hole in the Government accounts and started to close it by axing the winter fuel allowance for pensioners, as well as cutting science funding and Tory promised infrastructure projects.

This was followed by the change to fiscal rules in her October 2024 budget. This necessitated the £40 billion hammer blow of increased taxes, a dump of resources to an unreformed NHS and enhanced powers for a misfiring Office for Budget Responsibility.

Her Spring spending review was an effort to renew the £9 billion of headroom she felt she needed. It was ironic that the wholly obvious implementation of tariffs by President Trump has wiped that headroom away.

It appears that a “summer review” is on the cards that will entail further public spending cuts, which could promote industrial action from public service workers, the likes of which are being witnessed in Birmingham currently.

The pound has begun to settle down following last week’s turmoil, which is still affecting asset markets. It fell to a low of 1.2715 yesterday and closed at 1.2785.

I wonder why none of Trump’s advisers or political foes have noticed what is blindingly obvious from the decline in the American Manufacturing Base over the past twenty-five to thirty years.

The fault lies almost entirely with investors like Trump and his acolytes, who have become billionaires by “exporting” the country's manufacturing capability to Asian countries, which have a far lower cost base where labour is appreciably cheaper and where workers' rights are virtually non-existent.

Rather than blaming China, Indonesia, Taiwan and Vietnam, among others, for the “pillage” of U.S. industry, the heads of Apple, Amazon and vehicle manufacturers should be hanging their heads in shame.

Trump doesn’t blame those Asian nations for welcoming factories built by U.S. manufacturers on their soil, and rightly so. America has been a willing participant in what has happened, all in the name of cost savings.

If they’re maintained, the tariff hikes announced on April 2 represent a self-inflicted economic catastrophe for the United States.

Real GDP growth forecasts over 2025-29 have been reduced by a cumulative 1.1%. The short-term impact is more severe, with 2025 coming down by about 0.7 points and 2026 down by 0.9 points. There is a possibility of catch-up growth in 2028 and 2029, owing to the possibility that tariffs will be lifted and the alleviation of uncertainty.

However, the tide may be turning, albeit marginally, considering that the President will find it incredibly hard to back down.

JPMorgan Chase CEO Jamie Dimon on Monday warned that trade wars could have lasting negative consequences, days after he and other U.S. bank CEOs met with Commerce Secretary Howard Lutnick to discuss the administration's sweeping tariffs.

"The economy is facing considerable turbulence," Dimon wrote. "We are likely to see inflationary outcomes. Whether or not the menu of tariffs causes a recession remains in question, but it will slow down growth."

Economists had already started sounding alarms about the possibility of slower economic growth combined with higher prices, even before President Donald Trump’s announcement of the largest increase in tariffs in U.S. history sent American and global markets tumbling and stoked recession fears. Those fears may have been stoked by Trump’s team to persuade the Fed to perform a preemptive rate cut.

That scheme may have backfired since it seems likely that Jerome Powell would rather walk away from his role as Chairman of the Central Bank than betray his moral responsibility.

A rate cut now would be considered a disaster, given the inflationary blow that tariffs are sure to deliver. The FOMC may well be feeling that the bias has shifted over the past week towards higher inflation.

The dollar index has recovered a semblance of poise following a tumultuous week in which it looked like it was falling through the 100 level. It reached a high of 103.28 yesterday and closed at 102.99

It has been said already, but the entire European Union, from Helsinki to Lisbon and Dublin to Tallinn, should be thanking Donald Trump for forcing it to face up to the reality of what was happening to the largest single trading bloc in the world.

Isabel Schnabel was right when she said recently that the EU was not created to “screw” the U.S.since the U.S. was busy screwing itself.

Brussels saw no reason to hurry to create a unified manufacturing base since it saw no competition from the U.S. since it had already ceded responsibility to Asia and expensive European factories simply could not compete on either price or quality.

The US imposed a 20% tariff on the European Union last week. Given the wobbly state of the bloc's economy, this may be enough to tip it into a recession.

On the other hand, the impact of the massive German fiscal stimulus, and others that will probably follow, may be enough to counteract at least some of the contractionary impact of trade.

The main issue here, of course, is that the impact on the growth of the tariffs will be almost immediate, whereas the fiscal stimulus measures will take time to filter through to the economy and may not be felt in earnest until 2026.

This will leave a gap which a recession could fill. Will the ECB want to cut rates even further, possibly after the summer, when it was expected to pause permanently?

The dovish shift, which was happening towards the end of 2024, has all but petered out as inflation has begun to fall again. However, if the region is facing a wholesale recession rather than one or two individual nations facing a downturn as Germany has, due to some specific reasons, the Governing Council may be pushed into driving rates even lower than they had been expected to go.

Europe must get rid of its dependence on American and Chinese platforms like Visa, Mastercard, PayPal, and Alipay and launch a payments revolution, according to European Central Bank President Christine Lagarde.

Lagarde said that Europe needs to develop its alternative to secure financial sovereignty. In her view, a fully unified capital market could pave the way for deeper fiscal integration, potentially generating up to €3 trillion in added value annually. She emphasized Europe’s reliance on foreign digital payment infrastructure.

“Visa, MasterCard, PayPal and Alipay are all controlled by American or Chinese companies. We should make sure there is a European offer,” she said.

Her remarks come in the context of the EU’s broader initiative to create a single capital market across member states - a move aimed at boosting investment and improving access to financing for companies while helping citizens save more efficiently.

The cost of such an undertaking may be prohibitive, but it is an essential building block to allow Europe to compete globally.

The Euro has fallen back into familiar territory. It fell to a low of 1.0906 as it shies away from another incursion above 1,10 where further selling pressure awaits. The single currency did exhibit a little more strength late in the day to close at 1.0978.

Have a great day!