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[00:00]
Steph McGovern
This podcast is brought to you by Carvana. Car shopping shouldn't feel like preparing for
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Robert Peston
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Steph McGovern
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Robert Peston
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Steph McGovern
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[00:58]
Robert Peston
Most unpopular President in living Memory he can pretend as much as he can that everything's going great for Americans, but Americans daily lives, particularly on the inflation front and the living standards front, is inconsistent with his positive message and they don't believe him.
[01:12]
Steph McGovern
What was your take home from it? Because everyone's just worried about what he's going to say next and what that's going to mean. Whether it's Iran or whether it's tariffs or whether it's Greenland.
[01:21]
Robert Peston
He always makes the claim that tariffs are not paid by the American people, but they are paid by the American people because they very often add to the cost of what the American people are buying. It's pure Trump. You wouldn't do it if there weren't some people who are fooled by it.
[01:35]
Steph McGovern
We're delighted to say that this year the Rest Is Money is being powered by Octopus Energy. And that means we get to welcome back the founder of Octopus Energy, Greg Jackson, now CEO of it. Time for a quick fire question. What's the one bit of advice you give a young entrepreneur? Maybe it's stuff that people don't normally talk about.
[01:54]
Greg Jackson / Stephen Phipson
Don't be arrogant, but do be confident. Almost by definition, as an entrepreneur, you're doing stuff that other people didn't think is going to work or that they've discounted or dismissed. So you have to be confident to believe in your own ideas and your ability to deliver them. But you should still listen to everyone else and learn from them and not be arrogant. I think that is the secret to being able to build something special but successful.
[02:22]
Steph McGovern
Well, cheers Greg and thank you for powering this episode of the Rest Is Money. Hello and welcome to the rest is money. With me, Steph McGovern.
[02:39]
Robert Peston
And with me, Robert Perston.
[02:40]
Steph McGovern
So, loads to talk about today, focusing on Trump. Robert's going to give us his thoughts on his big State of the Union speech overnight. That was a whopper. Loads in it to talk about, but also tariffs. The Supreme Court has now ruled that Trump overstepped his authority when he brought out the trade tariffs. That has not stopped him, however, from introducing more. So we're going to talk about how he's doing that, what impact it has, and also what it means for the UK as well. Where does this leave Starmer on all those deals he negotiated? Well, that's all to come on the show, but let's start with this State of the Union speech. Robert, what did you make of it?
[03:15]
Robert Peston
So I've just recovered from just under two hours of Donald Trump's State of the Union message and, oh, my God. Surprise, surprise. You know, it's the greatest American economy ever. It's the greatest America. Despite all the incredible economic setbacks that he has suffered, including the Supreme Court ruling his tariffs, or the central part of his tariffs, illegal, he's behaving, as you would expect, as though nothing could indeed have gone better. And, you know, there's this priceless moment where he says it's very hard for the American people because they're just not used to so much winning. I mean, you couldn't. The optimism of the guy is extraordinary, isn't it?
[04:05]
Steph McGovern
Yeah. Although it's interesting. Do you remember when we were talking to Karen Maud about, you know, what Trump has been good at is just making people feel better off by giving them tangible stuff like the big beautiful bill. And that has meant that they've got more money, more income recently because of, like, not having the taxes on tips and things like that. So what he's a master of is giving people a tangible sense that their life is getting better, even though at the same time he might be giving them more money, he's increasing inflation and he's, you know, making their life harder in lots of other ways. So he, despite the fact that, yeah, he does. It's totally irrational. And it is, you know, you've got to discount a lot of what he says from a. From an American point of view, people think. There are still quite a lot of people who think he's doing a good job, aren't there? And that's. That's the scary thing here. He's. He's good at that.
[04:55]
Robert Peston
I guess so. I mean, look, you and I were very critical of the negativism of the British government, Starmer and Reeves, strictly at the start of the Parliament, where they were constantly talking down the state of the economy and blaming the Tories and, you know, even, even though they did inheritance a difficult situation, I think people were in a mood to hear from the government about how things were going to get better, and it just took them way too long. Well, some would say they still haven't got a compelling message about how things are going to get better for the majority of British people. And, and, and, and certainly contrasting that with Trump's optimism, and if you believe, as I do, that what Keynes called animal spirits matter, that is the mood of businesses and people, does have a direct impact on whether people spend and invest approach of being more positive, you know, is, is definitely something that would have a, you know, and on the margin, a positive impact on American prospects. The problem is that people are also aware of what they're paying for goods and services. And Trump is incredibly, you know, Trump is by most measures pretty much the most unpopular president, you know, in living memory at this stage of the electoral cycle. He is set to lose the midterm elections in November. And he can talk up, you know, he could, he can pretend as much as he can that everything's going great, you know, going great for Americans. But Americans don't. America's daily lives, particularly on the inflation front and the living standards front, is inconsistent with his positive message. And they don't believe him because he's not, he's not describing their lives, although you say that.
[06:45]
Steph McGovern
And I know the polls are really important things, but, like, I'm still hearing from a lot of people who think he's great. I was with some business people recently, and they were all talking about how great Trump is. I was really shocked. But they were genuinely. It was a room of several hundred people, and a lot of them in there were like, pro Trump, pro reform. Like, they were just like, yeah, these are the people who are going to make our lives better.
[07:09]
Robert Peston
So what was this, a crypto conference?
[07:10]
Steph McGovern
No, it wasn't. It was, it was an insurance conference, so. Which is ironic, given they analyze risk and, you know, try and work out how to, you know, the, the security risks of things. But anyway, so, I mean, in terms of that, that speech, then, what was your take home from it, in terms of what happens next? Because everyone's just worried. He just. What about what he's going to say next and what that's going to mean, whether it's Iran or whether it's tariffs or Whether it's Greenland or, you know, whatever thing is, is, is, you know, in his mindset at that moment.
[07:42]
Robert Peston
It was certainly less warmongering about Iran than I had feared, particularly after the Secretary of State, Marco Rubio, gathered together the sort of relevant senior people from Congress to brief them on possible military conflict with Iran. That said, you know, it's quite clear that Trump is preparing for a possible military strike on, on Iran. I mean, he says he would rather have a negotiated settlement, but he's, he's very pessimistic about that. So I think, you know, in terms of the stability of, of everything important, including the stability of the economy, I think we have to brace ourselves for the, the very significant probability that there will be an American attack on, on Iran within possibly even coming days. But as I say, he was, he was less gung ho about it than perhaps one might have. Might have expected tariffs. And we're going to come on later and talk about the economic and business impact of tariffs. There was no hint of him backing off his ambitions to keep tariffs at a very high level despite the Supreme Court ruling. That is central, his central policy in terms of raising tariffs is illegal. And him having to essentially abandon all of that. I mean, he made this ludicrous claim, I mean, genuinely ludicrous claim that tariffs will, you know, one day, as a result of his policies, mean that all income tax in America is abolished. I mean, it's an absolutely. Tariffs, you know, even before the Supreme Court ruling were raising a fraction of what America raises in income taxes. There's absolutely no possibility of tariffs replacing income taxes. And it should also. There's also what you might call a category error here because he seems to, he always makes the claim that tariffs are not paid by the American people. Well, they are paid by the American people because they, they very often add to the cost of what the American people are buying. So the idea that this is somehow this great nirvana where Americans stop paying tax is completely, is literally on all fronts absurd. But it's pure Trump and there are obviously some people. He wouldn't do it if there weren't some people who are fooled by it.
[10:24]
Steph McGovern
Yeah, yeah. It's probably just worth reminding everyone as well what actually has happened in the last few days with, with trade tariffs, as you mentioned, the Supreme Court. And this was a ruling you and I have been waiting for. We talked a couple of episodes about what the chances were of them ruling against Trump and then what he would do next. And it's kind of played out exactly as we predicted. So The Supreme Court's ruled that Trump overstepped his authority when he introduced all the trade tariffs because he used this specific thing called the International Emergency Economic Powers act to impose these broad tariffs. But now the Supreme Court's ruled that was actually out of his jurisdiction essentially. But obviously Trump's made a huge thing out of tariffs in this second term. He's not going to let it go. And as we predicted, he's now just using different legislation to bring in this kind of broad brush tariff of what started as 10% and he quickly ramped it up to 15%. And he's using for, for the people who like to know section numbers out there, section 1, 2, 2 of the Trade act of 1974. So this is this 15% tariff, that's a global tariff, which are for 150 days. And obviously there's lots of questions around what will happen after that. But this has, I mean it's again, it's this uncertainty it creates. Everyone's trying to scramble and work out whether what that means for them. And what's interesting about it is for a country like the UK it's bad news because this actually increases our tariff. We'd negotiated a 10% tariff and yet the enemies of America like China are better off from this new global tariff deal. It's quite interesting when we need to look at the impact on the uk. But what, first of all, Robert, is your reaction to this, of this new global tariff that's coming?
[12:14]
Robert Peston
Yeah, I mean, I think it is quite important to say that the Supreme Court and the Chief Justice Roberts left him absolutely no wriggle room on this. I mean, Roberts said explicitly that there was absolutely nothing in the legislation that he used which suggested that the government of the time would ever have wanted a president to use it to introduce tariffs in the way that he did. So, you know, that method of introducing tariffs is dead to him. And that is really significant in terms of his political power. We'll get on later to the economics of this and whether there are other ways that he can raise the tariffs and raise the money from the tariffs. But the reason he loved introducing tariffs under these so called emergency economic powers was because he could pick off countries that he didn't like or he wanted something out of and he could threaten them. You know, so, you know, when, when Brazil was threatening legal action against his friend Bolsonaro, he, you know, whacked enormous tariffs on them as punishment. He can't do that kind of thing anymore because under the alternative tariffs that he's now Introducing. And this has also got huge political consequences for the UK which will come. And economic consequences which will come onto. He can no longer say to Brazil or say to China or say to Canada, I'm going to punish you because I don't like you. His political power vis a vis other countries whom he wants to hurt or he wants to get something out of, is massively reduced because under the tariff regime that he now, now is trying to export, there are only two routes for him. One is this general tariff on everybody. So, as you say, China gets now the same tariff regime as the UK Is China perceived as an enemy, the UK Perceived as a friend. And we do need to discuss whether this completely undermines Starmer's whole approach of trying to be friendly with Trump.
[14:53]
Steph McGovern
But.
[14:53]
Robert Peston
And then the other route he can take is he can launch investigations against particular countries if he thinks there are unfair trade practices going on there. But that requires quite a lot of research into the industrial policies of that country. And it can't just be used to immediately punish a country that he doesn't like. It requires preparation over weeks and, and months. So poor old Donald Trump, who loves being the most powerful person in the world, Supreme Court, some would say, certainly on the international stage, has somewhat cut him down to size.
[15:27]
Steph McGovern
It's not a shock that. I mean. Or is it a shock that he's not come out and slag them off? He has a little bit, but he's not done, like, what he's done with the Fed, where he, you know, really went for Jay Powell's and, you know, questioned his independence, has all called him all sorts. He hasn't done the same with the Supreme Court, has he? And why do you think that is?
[15:47]
Robert Peston
I think it's probably because he doesn't want to remind. Didn't want to remind the American people last night that he was humiliated. I mean, you know, it's not a good look for him that the Supreme Court has, you know, as I said, limited his powers in a very significant way. And he's obviously not going to want to relive his humiliation. I mean, the other thing, though, is to go back to the popularity question. Tariffs are not popular in America. Again, all the polling shows that people understand that tariffs make them poorer. The American people are not stupid.
[16:28]
Steph McGovern
Yeah, I was listening to npr, the National Public Radio in America, and there was some really interesting small business owners there talking about the impact of tariffs on them. And there was one lady who runs. She sells, like, backpacks and things like that, you know, bags and stuff. And she was saying she's paid out about $35,000 in these tariffs, but also she spent a ton of time just trying to work out how to, you know, go through the bureaucracy of it all. It's meant that at times her products have been out of stock, and it's really impacted her business in, in loads of ways. And so she's been, she describes how she's been desperately, like, refreshing the Supreme Court every day to try and work out when this ruling was going to come and whether she'll get a refund. Because ob, There's a big question now about whether people will get back this money, this tariff, money that was essentially illegally taken off them. And, you know, they were talking about how at the moment, if, when you, with those tariffs before it changed, if, for example, you filled out your custom form wrong, you could easily get a refund. So these small businesses were talking about, you know, would we be able to get it like that? Is it going to be an easy refund? And all the lawyers are saying, no, we're gonna, you're probably gonna have to sue. And, you know, this is going to be a really litigious process and it's going to be expensive, it's going to be time consuming. And the chances are for a lot of those businesses, and it won't just be American companies, obviously, but this, this particular group who've kind of formed a bit of a coalition, we're saying that for them, they just can't afford to even try and get those refunds back. So, you know, we're hearing from companies like FedEx who have now filed a lawsuit to, to, to get their money refunded. But for all these small businesses, there's no chance. And that is, that's really bad as well, isn't it? So it might be like, oh, Trump, you've lost that, that tariff where you were create, you know, getting money through those tariffs. But now you've, you're shafting loads of small American businesses, too. Like this woman was saying, she, if she got that money back, she'd rehire people. And yet she can't because she, she's probably never going to get it back. And so the impact is much more hardly, you know, harshly felt by people then probably Trump is giving it any credit for.
[18:50]
Robert Peston
Yeah, I mean, and I've also been talking to leaders of bigger businesses, and I mean, they are, some of them anyway, in two minds as to whether to sue to get the money, because, you know, putting it in simple terms, they're terrified of Trump. I Mean, what they don't want is for Trump to not, you know, if they are dependent on his goodwill, you know, particularly if they, they've got regulated products, if they're dependent on him for, you know, his goodwill, do they actually want to, you know, potentially make an enemy of him by, in a very high profile way, suing the American government to get, you know, what could be, relative to their overall turnover? Not that much money. I mean, there is going to be inevitably, as we always see in these cases, a sort of business created from financiers and hedge funds. I'm sure that, you know, in fact, I imagine this is already happening. They will be, but they will be buying up the liabilities for refunds of businesses big and small and then taking on the court cases. And of course, they'll buy. They'll buy. So if, if, if, let's just say you paid 100 million in tariffs. If, if, if you did, they'll be buying them at 50 million, you know, hoping to recoup the whole hundred million when the court case is over. Actually, whether, whether Ind 50, you know, $0.50 on the dollar or rather less, given that there are quite a lot of American lawyers who wonder whether the American government will ever pay out. I don't know. You know, they may be paying even less than that. I'll look into that before the next episode. About what the, what we think the value of this possible future payout is in an investment sense.
[20:35]
Steph McGovern
It's where there's blame, there's a claim. It's that classic, isn't it? It's, you know, it's all, everyone comes out and creates an industry out of, of other people's turmoil. And, you know, you see it with all kinds of things, don't you, whether it's PPI or car finance, miss selling, whatever it is, people then come out and make a business out of it.
[20:56]
Robert Peston
Obviously, we do want to look specifically at the impact on the UK before we move on to that. I did think it's just useful to remind people that Trump did make huge claims about the positive impact that tariffs would have. So, for example, he insisted it would massively reduce America's trade deficit. Quite a lot of people think that that was a, you know, a balmy ambition anyway. But if you think it's a good, it would have been a good thing. It hasn't done that. The trade deficit in 2025 was more or less the same as in the previous year. It has not reduced America's trade deficit. Yes, there have been quite a lot of companies saying that they were going to invest more in the US but actually the reality of that has not yet kicked in. So investment last year in, in America was not significantly greater than it was under Biden. So much of, of what he wanted has not materialized. Now, one should also point out that there were genuine fears that this would lead to a very serious economic downturn in America. And, you know, I was one of those who on this podcast express those fears. We should point out that the economic damage has been less than some of us thought would be. I mean, we are seeing inflation that is stickier than it would otherwise be. And that is a cost. And it's also a political cost to him, as we talked earlier, because it means that the cost of living for Americans is still rising. But he has been bailed out for now by the AI investment boom. And the massive investments in data centers and in energy as a result of the AI boom means that the American economy has grown at a pretty reasonable rate. I would argue nothing to do with him because of the AI boom. The tariff, the negative tariff impact on America has been less than it would otherwise have been.
[23:04]
Steph McGovern
Yeah, that's really interesting, isn't it? So we should definitely talk about the impact on the UK then, and what it means for obviously the, the deals that Starmer negotiated and whether they're worthless now. But first, let's go to a quick break.
[23:19]
Robert Peston
Close your eyes, exhale, feel your body relax, and let go of whatever you're carrying today.
[23:27]
Steph McGovern
Well, I'm letting go of the worry that I wouldn't get my new contacts in time for this class. I got them delivered free from 1-800-contacts. Oh, my gosh, they're so fast.
[23:35]
Robert Peston
And breathe.
[23:36]
Steph McGovern
Oh, sorry. I almost couldn't breathe when I saw the discount they gave me on my first order. Oh, sorry. Namaste.
[23:44]
Robert Peston
Visit 1-800-contacts.com today to save on your first order.
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Steph McGovern
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Robert Peston
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Steph McGovern
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Robert Peston
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Steph McGovern
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Robert Peston
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[24:16]
Steph McGovern
This episode is brought to you by Vanguard. Now, when it comes to your finances, you want to work with companies you trust, don't you? It can be really complicated when you're investing, you know, trying to Work out where your money' and it can be confusing, can't it? And that's where Vanguard comes in because they always put investors first and they're delivering on that promise for 50 million investors worldwide with a wide range of funds and a platform that keeps costs low and makes investing simple. You can also open an ISA or a self invested personal pension, choosing investments yourself or letting Vanguard choose them for you. Search Vanguard Investor to find out more. Now, when investing your capital is at risk, tax rules apply. We're going to talk now about the impact of Trump's tariff changes and this Supreme Court ruling which has meant he's now using other legislation to bring out this kind of broad brush global tariff of 15%. We've talked about, you know, the impact in terms of global economics, but we should focus on the UK because obviously Starmer spent quite a bit of time getting that deal over the line. We were the first country to get a deal deal with America on trade tariffs. And obviously lots of businesses in the UK are now going, well, what does this mean for us as exporters? And, and one of those which is, is big in all of this is manufacturing. So before we talk about what we think on it, we wanted to hear from Stephen Phipson, who, who is the, the dg, the Director General of Make uk and that's the body which represents manufacturers in all forms of manufacturing, whether it's aerospace or automotive or right down to, you know, small companies in the supply chain making widgets or whatever it is. It's a, you know, an organization that's been going for a long, long time. Funnily enough, side note, when I was one young engineer for Britain, it was them in their former when they were called eef, the Engineering Employees Federation, who gave me the award. Really important voice in manufacturing. So this is what Stephen Phipson had to say about the trade tariff changes.
[26:20]
Greg Jackson / Stephen Phipson
The recent announcements about U.S. tariffs as again causing instability I think would be the watchword in the manufacturing sector in the the US is our single biggest export market and if you start playing with the tariff regime, that means the pricing changes across the border and then it's a question of who's paying. Often if they're on a fixed term, that means that the cost of the additional tariffs goes to the manufacturer. That means the people in the UK are suffering lower margins in already a very, very difficult scenario. So for them it causes that sort of confusion. And also the other thing we've noticed, every time Donald Trump stands up and changes the tariff regime, the US Customs is thrown into confusion and they don't know which bit of paperwork to use. We have delays at the borders, often attracts penalties if you're in the supply chain because you're committed to delivering in a certain time. So it's already quite a tough sector in terms of margins and getting that business to work. The US is our biggest partner, but this just creates an enormous amount of uncertainty and instability in the system. Many of those supply chain companies in particular are now looking at other markets, trying to find other markets which look more stable to them to try to export their products and capability too. So we're having a big pickup of interest, for example, in India, in the Middle east, and could they pivot some of that away from the unstable US situation and try and get more stability into the system? So for manufacturing, it's all about a stable business environment. And at the moment we're not sure that's where the US is. It seems to be changing on a regular basis.
[27:48]
Steph McGovern
So that's Stephen Phipson there from Make UK making that really important point there. It's about the uncertainty as much as anything else, because, you know, as Stephen explained, this global levy doesn't impact tariffs on specific sector agreements, you know, so it doesn't impact the deals we got on steel and aluminium, pharmaceuticals, automotive and aerospace. They're not going to be affected. But it's just the general, like, drama of A, might that change and B, lots of business people contacting him, trying to work out what it all means. And it's that uncertainty which is a real, you know, disease in, in business when it comes to investment and everything else, isn't it? Robert?
[28:29]
Robert Peston
I'm afraid I'm less optimistic than Stephen, is that these carve out deals for the UK will survive. Because if you look at the legislation under which Trump has now introduced, I mean, he's introduced a 10% tariff that has been published. He has said he's going to increase that to 15%. What that legislation says is you cannot discriminate. All countries have to be treated equally. And so, you know, if you are the European Union, for example, or if you are China, you might well go to court in America, or if you're one of those businesses, you know, located there, you might go to court in America and say, look, you know, this tariff is unfair because it is not being applied equally. You know, it is not, for example, being applied to, you know, you know, the UK in the way that it's being applied to us. And so there is a risk that what he will do is not Rip up. Because why would he want to do that? The trade agreement with the UK. But he might have to impose the extra 10% on top of the 10% that British auto manufacturers are already paying. Right. Or add another 15%. I mean, there is a gen. You know, I've been told to lawyers about this, there is a genuine risk of, of, of all of that. And I know the motor manufacturers themselves are deeply uneasy. And, and, you know, I mean, there have been manufacturers wondering, should they actually, at the moment be putting their cars on ships to America? The last thing they want is for the, you know, for their luxury cars to arrive there and be whacked not with the 10% they thought they'd negotiated, but with 25% or 20%.
[30:41]
Steph McGovern
Yeah. And, and it's the point again, that Stephen made about lead times, you know, when, when these, and I remember this at Black and Decker, when you'd work on a product that was being manufactured in front of you, but it would be sometimes years before it would be actually in the shops and things. So, as you say, so much can change in that time. So how do you price it in the first place if, if you're not sure whether there's going to be an additional 10% on a tariff on the, on the, on the cost of the product, and, and that inevitably it's that thing that stops, stops investment. Because people go, well, hang on, if we don't know, if there's too many variables and we can't work out our costs, how do we know how much money we have to invest in all of this? So what, so what do you think Starmer's going to do? Because obviously there's lots of talk the EU are fairly much more aggressive, I would say, in all of this, in terms of potential retaliatory tariffs. Whereas the UK government have, you know, they've really sat on the fence a bit like the business bosses we talked about a minute ago. They don't want to upset Trump. You won't get a minister saying publicly what they really think of Trump. You know, everyone just really plays this anodyne view of, of, of, of Trump. And is that what's likely to happen, do you think? What's Starmer going to do?
[31:56]
Robert Peston
I think this is a real embarrassment for Starmer because, you know, if you just look at the immediate impact of what was announced by the Supreme Court last week, massively reduces tariffs paid by, for example, you know, Brazil and China and massively increases, particularly if the 15% rate is introduced, what the UK would play and it blows up months and months and months of, you know, effectively the British government sucking up to Trump. And given that that is politically within the uk, not a very good look for the government if at the end of it, they don't. Better, you know, preferential treatment. You know, I think many British voters will say, what the hell was that all about?
[32:48]
Steph McGovern
Yeah, yeah. And it's that. It's also just what it says generally to people about letting bullies win. It really is. You know, it's really hard to explain, like, for example, to my kids and to kids about why Trump's allowed to do what he does. And, you know, we just look really weak in moments like this. And I know this, where it's complicated and it's all to do with this dependency we have on them for trade, but not just trade, it's about security and it's about a million other things that you don't, you know, we're not necessarily talking about when we talk about trade, but it does make us look weak. And should we be thinking about this as a way to just stop having such a codependency on America and look at, you know, the EU more closely? And I know we're out of the European Union, but it just feels like this is the time when we should just stand up for ourselves and look at another way through this that doesn't involve us being bullied.
[33:45]
Robert Peston
Yeah. I mean, look, if you. If in the end, we face a very similar tariff regime to the EU and Canada, you know, against a backdrop where, you know, Macron of France has stood up to. To Trump in a way that Starmer didn't and Carney has stood up to Trump in the way that Starmer didn't. You know, I think there will be enormous political pressure on whoever is the British Prime Minister. And let's be absolutely clear, there are quite a lot of people in Parliament who wonder whether Starmer is going to remain Prime Minister for that much longer. But whether it's Starmer or a successor, you know, there will now be enormous pressure on the UK to have a rethink of what is the best way of conducting commercial and diplomatic relations with America and whether we should, you know, look a little bit less fawning and be a bit. A bit tougher. I mean, we had the extraordinary image of the former US Ambassador, Peter Mandelson being arrested the other day. He was the sort of living embodiment of the, you know, the Starmer approach of, you know, in essence, sucking up to Trump and his colleagues. You know, Starmer Today will be thinking, well, I didn't get a lot of commercial benefit out of that. And the political damage of seeing my appointee, you know, know, being, you know, arrested, interviewed by the police in Wandsworth, and then returned at 2 in the morning. Those are images that are going to haunt his time in office for as long as he's in office. And it is all of a piece because it was all driven by this idea that you had to placate Trump rather than standing up to him. And if, at the end of the day, as I say, the economic benefit of, of placating Trump turns out to be negligible, you know, it's just another aspect of essentially his big approach just disintegrating in his own hands.
[36:02]
Steph McGovern
When I was talking to Sir Michael Moritz last week, you know, we were talking about the business leaders who are not necessarily standing up to Trump, and, you know, Michael was explaining how they have no choice and their job is to do business and to look after the business. And as it stands to do that, they just have to, you know, take whatever Trump throws at them and not stand against him. But there does come a point where, and this is what I asked him is when does your morals and humanity become, like, more important than business? Or just. Does it never. Is it just always that, you know, we've, We've. We've just got to suck it up because life otherwise would just be too destructive, and that would lead to much greater problems than dealing with a bully. And, and that. I find that really depressing.
[36:54]
Robert Peston
And what did he say? Was there.
[36:55]
Steph McGovern
Was.
[36:55]
Robert Peston
Is there ever a line for business?
[36:57]
Steph McGovern
Yeah, well, he kind of didn't answer it, to be honest. He was just kind of saying they, you know, because he was very. He's very vocally anti Trump. I think he called him a buffoon on, on the podcast. It's worth listening to that interview, actually, if you haven't heard it very much. But, you know, one of the previous episodes, he just reiterates the point about. Yeah, yeah, I mean, it was a long pause first when I asked him that question, but he just made the point that, I guess, and this is valid as well, that these businesses employ, you know, thousands and thousands of people. You put in their jobs at risk and their lives at risk, if you challenge someone who might make your business then really difficult to function. And I guess that is the same thing. It's weighing that up. Star's got to weigh up. What are the consequences going to be? And. Yes, your point that. Well, actually, we've not had any benefit from it. But maybe we haven't had the negativity we. We might have had if we'd have stood up to him more. I don't know, I. It just feels depressing. And I know I've said that twice now, but I. I'm a life's optimist, but I feel like we're in a really bad rut at the minute and it's just not getting any better, especially for, you know, know, diversity and for general human rights and. And living standards and everything else. It just feels like we're going backwards rather than forwards.
[38:14]
Robert Peston
Oh, gosh. Well, look, I'm going to cheer us up by saying, as usual, I know
[38:18]
Steph McGovern
I didn't give you anywhere to go there. One positive thing. Your point, though, which I think is really true about. You were talking about AI and how actually all of the growth that's come from AI has kind of, you know, basically massively masked the negativity of the trade tariffs. And that is what I do think happens. You know, I think we have the potential. We've talked before about how we're the third, you know, we look, you know, the third best in terms of AI potential after America and China. And if we capitalize on that, we might circumvent all the negativity from the politics and actually just win with business and technology and we will find our way through it without out, you know, by ignoring the chaos and just getting on with what we're really good at, which is creating new companies, new stuff, new tech. And that's my positive note on which I will end this on. Yeah.
[39:12]
Robert Peston
Also, there's. It's inevitable, given the. The uncertainties around dealing with America that Stephen Phipson so intelligently encapsulated, that we are going to pivot to having closer trade relations with the European Union. That is absolutely inevitable. It is, as he said, as a trading area, it is a bigger market than the U.S. that is a positive. And since you've mentioned AI, I think we should come back to this in an episode soon. Yes, of course. There are lots. We've had so many interesting conversations about how well placed the UK is to take advantage of this technological revolution. There are still, we should point out, enormous uncertainties for jobs and living standards in this industrial revolution. I was staggered. I don't know if you saw, there was a blog. I think it's a blog put out by an organization called Citrini, which came up with this sort of fictional account of how we were heading for a Great Recession as a result of AI and it actually had an enormous impact on the stock market, which in a negative sense, or a significant impact on the stock market in a negative sense. So it shows you, you know, really. And this goes back essentially to Trump's State of the Union, where we started, and how he tries to buoy people up against a backdrop of enormous uncertainty, uncertainties that he created. People are just very, very anxious at the moment. There is an enormous amount of uncertainty. And if a single blob. Blob, not blob. Blog, the single blog can shake investors. You know, a blog, I have to say, which when I read, I did not think was particularly compelling. It shows you we are, you know, there are very good things about the state of the British economy, but we just live in a time of considerable unease and anxiety, I'm afraid.
[41:10]
Steph McGovern
I tell you who's going to do well over the next few years, though. Lawyers. Lawyers are going to do so well from all this litigation and all the, the, you know, the everything else, working out what it all means and suing governments and everything else. So good luck to the lawyers.
[41:25]
Robert Peston
I'm not sure that isn't necessarily a. Not sure. That is a silver lining. And if you are listening and you're of an age where you're thinking about a career, there are quite a lot of lawyers in the world. So, I mean, it may, it may, it may sound attractive, but if you can think of something else to do, I'm not going to dissuade you.
[41:38]
Steph McGovern
Okie dokie. Right, that's it from us on this episode. Thank you very much. Bye bye.
[41:44]
Robert Peston
All the best. Goodbye.
[41:51]
Steph McGovern
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Summary6 min read

Podcast Summary: The Rest Is Money, Episode 255: "Trump Trade Tariffs – Who is Calling the Shots?"

Hosts: Robert Peston & Steph McGovern
Date: February 26, 2026
Theme: A deep dive into Donald Trump’s approach to tariffs—especially in light of a landmark Supreme Court ruling—and what this means for the US, the UK, and global trade. The episode explores the economic, political, and business ramifications for both sides of the Atlantic.

Episode Overview

Robert Peston and Steph McGovern unpack the fallout from Donald Trump's recent State of the Union speech and an unprecedented Supreme Court decision that limited his authority on imposing trade tariffs. The conversation focuses on how Trump’s trade maneuvering affects US businesses, UK exporters, and the political standing of parties on both sides of the Atlantic—especially in the context of the UK’s negotiated deals and the broader question of whether anyone can meaningfully influence Trump’s trade policy.

Key Discussion Points & Insights

1. Trump’s State of the Union: Optimism vs. Reality

Trump’s perennial optimism contrasts sharply with economic realities faced by ordinary Americans.
Peston calls out the disconnect:

"He can pretend as much as he can that everything's going great...but Americans' daily lives, particularly on the inflation front and the living standards front, is inconsistent with his positive message and they don't believe him." (00:58)
Steph reflects on Trump’s mastery at “giving people a tangible sense that their life is getting better,” while potentially worsening long-term fundamentals like inflation (04:05).

Memorable Quote:

"There’s this priceless moment where he says it’s very hard for the American people because they’re just not used to so much winning." – Robert Peston (03:14)

2. Supreme Court Ruling: Limits on Presidential Trade Powers (10:23)

Supreme Court ruled Trump overstepped using the International Emergency Economic Powers Act to impose tariffs.
Trump pivots to using a different legislative tool:
Section 122 of the Trade Act of 1974—permitting a 15% global tariff for 150 days.
Practical upshot: Less ability to target or punish individual nations with tariffs; must resort to general tariffs or lengthy investigations for "unfair trade practices".

Notable Commentary:

"Chief Justice Roberts left him absolutely no wriggle room on this...That method of introducing tariffs is dead to him." – Robert Peston (12:14)

3. Business Impact: Uncertainty, Litigation, and Real-World Costs

a. American Business Reactions (16:28)

Small businesses are overwhelmed by compliance costs, cash flow hits, and the bureaucratic confusion prompted by shifting tariffs.
A business owner’s experience:

"She’s paid out about $35,000 in these tariffs, but also...spent a ton of time just trying to work out how to go through the bureaucracy. It’s meant that at times her products have been out of stock, and it’s really impacted her business." – Steph McGovern

b. Legal Fallout

Many businesses—big and small—must now decide whether to engage in costly, uncertain litigation to reclaim tariffs collected in the now-illegal regime.
Hedge funds may buy up these claims cheaply, betting on court payouts (18:50).

c. Inequity in Refunds

Large companies might litigate, but “for all these small businesses, there’s no chance”—they can’t afford the legal fight (16:28).

4. Tariffs: Economic Reality vs Rhetoric

Trump claims tariffs could one day abolish income tax—a notion both hosts dismiss as "ludicrous" (07:42, 10:23).
Tariffs have not cut the US trade deficit or substantially boosted US investment; positive impact has been masked by an AI investment boom and not Trump’s trade policies (20:56).

5. Impact on UK and Starmer’s Dilemma (26:15)

a. Manufacturers’ Concerns

Stephen Phipson (Make UK) Interview [26:20]:
- Tariff shifts create chaos & uncertainty for UK manufacturers.
- Delays at US customs and unpredictable costs undermine long-term investments.
- Some UK firms are exploring new markets (India, Middle East) for stability.
Quote:

"...Every time Donald Trump stands up and changes the tariff regime, the US Customs is thrown into confusion...Many supply chain companies are now looking at other markets which look more stable." – Stephen Phipson

b. Threat to Existing UK Deals

Robert Peston is skeptical UK carve-outs on specific sectors (steel, pharma, automotive) will survive due to legislation requiring equal treatment for all countries (28:29).
Potential for UK goods to have extra tariffs applied, jeopardizing previously negotiated deals.

c. Political Fallout for Starmer

Starmer's government may be seen as having "sucked up to Trump" for no gain—now facing higher tariffs than US rivals, along with domestic political embarrassment (31:56).
The perception of "letting bullies win" may damage public trust and calls into question UK’s dependency on US relations (32:48).

Quote:

"It blows up months and months…of the British government sucking up to Trump." – Robert Peston (31:56)

d. Strategic Choices for the UK

Growing political pressure for the UK to reconsider its diplomatic and commercial posture.
Possible pivot back towards closer EU alignment as US trade instability grows (39:11).

6. Big Picture: Uncertainty, AI Boom, and Lawyer Bonanza

Despite Trump’s trade maneuvering, America’s continued growth owes more to AI-driven investment than tariffs.
Irony: Legal industry may be the real winner as wave of litigation sweeps US and UK businesses (41:09).

Notable Quotes & Moments (with Timestamps)

On Trump’s optimism:
"You know, there's this priceless moment where he says it's very hard for the American people because they're just not used to so much winning." – Robert Peston (03:14)
On Supreme Court curbing Trump:
"Chief Justice Roberts left him absolutely no wriggle room." – Robert Peston (12:14)
On business uncertainty:
"It's already quite a tough sector...but this just creates an enormous amount of uncertainty and instability." – Stephen Phipson (26:20)
On Starmer’s predicament:
"It is all of a piece because it was all driven by this idea that you had to placate Trump rather than standing up to him." – Robert Peston (33:44)
On leadership and business morals:
"When does your morals and humanity become more important than business?" – Steph McGovern (36:53)

Segment Timestamps

| Timestamp | Segment | |-----------|--------------------------------------------------| | 00:58 | Opening remarks on Trump’s unpopularity | | 03:14 | State of the Union recap – “so much winning” | | 10:23 | Supreme Court ruling explained | | 12:14 | Analysis of Trump’s power post-ruling | | 16:28 | Real-life business tariff impact (NPR example) | | 18:50 | Litigation – businesses weighing legal risks | | 20:56 | Tariffs vs. trade deficit & investment | | 26:20 | Stephen Phipson/Mfg. sector UK reaction | | 28:29 | Will UK carve-outs survive new tariffs? | | 31:56 | Political fallout & Starmer’s strategy | | 36:53 | Morality vs. business – Michael Moritz anecdote | | 39:11 | Pivoting to EU/AI as strategic alternatives | | 41:09 | Closing reflections, legal sector as winners |

Tone and Takeaways

The conversation is candid, sometimes wryly comic, and consistently incisive as it examines the mismatch between Trump’s public narrative and hard economic realities. There’s concern for small businesses, skepticism about the effectiveness of political “sucking up,” and a recurring focus on uncertainty as a corrosive force in business and politics. Both hosts close on a note of cautious optimism in the UK’s technological potential, even as they acknowledge the profound challenges of the tariff wars.

Final Thoughts

Trump’s trade strategy is increasingly constrained by the courts; his rhetoric remains forceful, but the substance is eroding.
The UK government’s attempts to curry favor have yielded little concrete gain and exposed them to domestic political vulnerability.
For businesses, the landscape is one of complexity, litigation, and growing anxiety—with many already looking elsewhere for more reliable markets.

The episode is essential listening for anyone wanting to understand the ripple effects of American trade policy, the real-world burdens for business, and the strategic crossroads facing the UK.

Loading summary

Transcript63 lines

[00:00]
Steph McGovern
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Robert Peston
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Steph McGovern
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[00:21]
Robert Peston
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Steph McGovern
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[00:58]
Robert Peston
Most unpopular President in living Memory he can pretend as much as he can that everything's going great for Americans, but Americans daily lives, particularly on the inflation front and the living standards front, is inconsistent with his positive message and they don't believe him.
[01:12]
Steph McGovern
What was your take home from it? Because everyone's just worried about what he's going to say next and what that's going to mean. Whether it's Iran or whether it's tariffs or whether it's Greenland.
[01:21]
Robert Peston
He always makes the claim that tariffs are not paid by the American people, but they are paid by the American people because they very often add to the cost of what the American people are buying. It's pure Trump. You wouldn't do it if there weren't some people who are fooled by it.
[01:35]
Steph McGovern
We're delighted to say that this year the Rest Is Money is being powered by Octopus Energy. And that means we get to welcome back the founder of Octopus Energy, Greg Jackson, now CEO of it. Time for a quick fire question. What's the one bit of advice you give a young entrepreneur? Maybe it's stuff that people don't normally talk about.
[01:54]
Greg Jackson / Stephen Phipson
Don't be arrogant, but do be confident. Almost by definition, as an entrepreneur, you're doing stuff that other people didn't think is going to work or that they've discounted or dismissed. So you have to be confident to believe in your own ideas and your ability to deliver them. But you should still listen to everyone else and learn from them and not be arrogant. I think that is the secret to being able to build something special but successful.
[02:22]
Steph McGovern
Well, cheers Greg and thank you for powering this episode of the Rest Is Money. Hello and welcome to the rest is money. With me, Steph McGovern.
[02:39]
Robert Peston
And with me, Robert Perston.
[02:40]
Steph McGovern
So, loads to talk about today, focusing on Trump. Robert's going to give us his thoughts on his big State of the Union speech overnight. That was a whopper. Loads in it to talk about, but also tariffs. The Supreme Court has now ruled that Trump overstepped his authority when he brought out the trade tariffs. That has not stopped him, however, from introducing more. So we're going to talk about how he's doing that, what impact it has, and also what it means for the UK as well. Where does this leave Starmer on all those deals he negotiated? Well, that's all to come on the show, but let's start with this State of the Union speech. Robert, what did you make of it?
[03:15]
Robert Peston
So I've just recovered from just under two hours of Donald Trump's State of the Union message and, oh, my God. Surprise, surprise. You know, it's the greatest American economy ever. It's the greatest America. Despite all the incredible economic setbacks that he has suffered, including the Supreme Court ruling his tariffs, or the central part of his tariffs, illegal, he's behaving, as you would expect, as though nothing could indeed have gone better. And, you know, there's this priceless moment where he says it's very hard for the American people because they're just not used to so much winning. I mean, you couldn't. The optimism of the guy is extraordinary, isn't it?
[04:05]
Steph McGovern
Yeah. Although it's interesting. Do you remember when we were talking to Karen Maud about, you know, what Trump has been good at is just making people feel better off by giving them tangible stuff like the big beautiful bill. And that has meant that they've got more money, more income recently because of, like, not having the taxes on tips and things like that. So what he's a master of is giving people a tangible sense that their life is getting better, even though at the same time he might be giving them more money, he's increasing inflation and he's, you know, making their life harder in lots of other ways. So he, despite the fact that, yeah, he does. It's totally irrational. And it is, you know, you've got to discount a lot of what he says from a. From an American point of view, people think. There are still quite a lot of people who think he's doing a good job, aren't there? And that's. That's the scary thing here. He's. He's good at that.
[04:55]
Robert Peston
I guess so. I mean, look, you and I were very critical of the negativism of the British government, Starmer and Reeves, strictly at the start of the Parliament, where they were constantly talking down the state of the economy and blaming the Tories and, you know, even, even though they did inheritance a difficult situation, I think people were in a mood to hear from the government about how things were going to get better, and it just took them way too long. Well, some would say they still haven't got a compelling message about how things are going to get better for the majority of British people. And, and, and, and certainly contrasting that with Trump's optimism, and if you believe, as I do, that what Keynes called animal spirits matter, that is the mood of businesses and people, does have a direct impact on whether people spend and invest approach of being more positive, you know, is, is definitely something that would have a, you know, and on the margin, a positive impact on American prospects. The problem is that people are also aware of what they're paying for goods and services. And Trump is incredibly, you know, Trump is by most measures pretty much the most unpopular president, you know, in living memory at this stage of the electoral cycle. He is set to lose the midterm elections in November. And he can talk up, you know, he could, he can pretend as much as he can that everything's going great, you know, going great for Americans. But Americans don't. America's daily lives, particularly on the inflation front and the living standards front, is inconsistent with his positive message. And they don't believe him because he's not, he's not describing their lives, although you say that.
[06:45]
Steph McGovern
And I know the polls are really important things, but, like, I'm still hearing from a lot of people who think he's great. I was with some business people recently, and they were all talking about how great Trump is. I was really shocked. But they were genuinely. It was a room of several hundred people, and a lot of them in there were like, pro Trump, pro reform. Like, they were just like, yeah, these are the people who are going to make our lives better.
[07:09]
Robert Peston
So what was this, a crypto conference?
[07:10]
Steph McGovern
No, it wasn't. It was, it was an insurance conference, so. Which is ironic, given they analyze risk and, you know, try and work out how to, you know, the, the security risks of things. But anyway, so, I mean, in terms of that, that speech, then, what was your take home from it, in terms of what happens next? Because everyone's just worried. He just. What about what he's going to say next and what that's going to mean, whether it's Iran or whether it's tariffs or Whether it's Greenland or, you know, whatever thing is, is, is, you know, in his mindset at that moment.
[07:42]
Robert Peston
It was certainly less warmongering about Iran than I had feared, particularly after the Secretary of State, Marco Rubio, gathered together the sort of relevant senior people from Congress to brief them on possible military conflict with Iran. That said, you know, it's quite clear that Trump is preparing for a possible military strike on, on Iran. I mean, he says he would rather have a negotiated settlement, but he's, he's very pessimistic about that. So I think, you know, in terms of the stability of, of everything important, including the stability of the economy, I think we have to brace ourselves for the, the very significant probability that there will be an American attack on, on Iran within possibly even coming days. But as I say, he was, he was less gung ho about it than perhaps one might have. Might have expected tariffs. And we're going to come on later and talk about the economic and business impact of tariffs. There was no hint of him backing off his ambitions to keep tariffs at a very high level despite the Supreme Court ruling. That is central, his central policy in terms of raising tariffs is illegal. And him having to essentially abandon all of that. I mean, he made this ludicrous claim, I mean, genuinely ludicrous claim that tariffs will, you know, one day, as a result of his policies, mean that all income tax in America is abolished. I mean, it's an absolutely. Tariffs, you know, even before the Supreme Court ruling were raising a fraction of what America raises in income taxes. There's absolutely no possibility of tariffs replacing income taxes. And it should also. There's also what you might call a category error here because he seems to, he always makes the claim that tariffs are not paid by the American people. Well, they are paid by the American people because they, they very often add to the cost of what the American people are buying. So the idea that this is somehow this great nirvana where Americans stop paying tax is completely, is literally on all fronts absurd. But it's pure Trump and there are obviously some people. He wouldn't do it if there weren't some people who are fooled by it.
[10:24]
Steph McGovern
Yeah, yeah. It's probably just worth reminding everyone as well what actually has happened in the last few days with, with trade tariffs, as you mentioned, the Supreme Court. And this was a ruling you and I have been waiting for. We talked a couple of episodes about what the chances were of them ruling against Trump and then what he would do next. And it's kind of played out exactly as we predicted. So The Supreme Court's ruled that Trump overstepped his authority when he introduced all the trade tariffs because he used this specific thing called the International Emergency Economic Powers act to impose these broad tariffs. But now the Supreme Court's ruled that was actually out of his jurisdiction essentially. But obviously Trump's made a huge thing out of tariffs in this second term. He's not going to let it go. And as we predicted, he's now just using different legislation to bring in this kind of broad brush tariff of what started as 10% and he quickly ramped it up to 15%. And he's using for, for the people who like to know section numbers out there, section 1, 2, 2 of the Trade act of 1974. So this is this 15% tariff, that's a global tariff, which are for 150 days. And obviously there's lots of questions around what will happen after that. But this has, I mean it's again, it's this uncertainty it creates. Everyone's trying to scramble and work out whether what that means for them. And what's interesting about it is for a country like the UK it's bad news because this actually increases our tariff. We'd negotiated a 10% tariff and yet the enemies of America like China are better off from this new global tariff deal. It's quite interesting when we need to look at the impact on the uk. But what, first of all, Robert, is your reaction to this, of this new global tariff that's coming?
[12:14]
Robert Peston
Yeah, I mean, I think it is quite important to say that the Supreme Court and the Chief Justice Roberts left him absolutely no wriggle room on this. I mean, Roberts said explicitly that there was absolutely nothing in the legislation that he used which suggested that the government of the time would ever have wanted a president to use it to introduce tariffs in the way that he did. So, you know, that method of introducing tariffs is dead to him. And that is really significant in terms of his political power. We'll get on later to the economics of this and whether there are other ways that he can raise the tariffs and raise the money from the tariffs. But the reason he loved introducing tariffs under these so called emergency economic powers was because he could pick off countries that he didn't like or he wanted something out of and he could threaten them. You know, so, you know, when, when Brazil was threatening legal action against his friend Bolsonaro, he, you know, whacked enormous tariffs on them as punishment. He can't do that kind of thing anymore because under the alternative tariffs that he's now Introducing. And this has also got huge political consequences for the UK which will come. And economic consequences which will come onto. He can no longer say to Brazil or say to China or say to Canada, I'm going to punish you because I don't like you. His political power vis a vis other countries whom he wants to hurt or he wants to get something out of, is massively reduced because under the tariff regime that he now, now is trying to export, there are only two routes for him. One is this general tariff on everybody. So, as you say, China gets now the same tariff regime as the UK Is China perceived as an enemy, the UK Perceived as a friend. And we do need to discuss whether this completely undermines Starmer's whole approach of trying to be friendly with Trump.
[14:53]
Steph McGovern
But.
[14:53]
Robert Peston
And then the other route he can take is he can launch investigations against particular countries if he thinks there are unfair trade practices going on there. But that requires quite a lot of research into the industrial policies of that country. And it can't just be used to immediately punish a country that he doesn't like. It requires preparation over weeks and, and months. So poor old Donald Trump, who loves being the most powerful person in the world, Supreme Court, some would say, certainly on the international stage, has somewhat cut him down to size.
[15:27]
Steph McGovern
It's not a shock that. I mean. Or is it a shock that he's not come out and slag them off? He has a little bit, but he's not done, like, what he's done with the Fed, where he, you know, really went for Jay Powell's and, you know, questioned his independence, has all called him all sorts. He hasn't done the same with the Supreme Court, has he? And why do you think that is?
[15:47]
Robert Peston
I think it's probably because he doesn't want to remind. Didn't want to remind the American people last night that he was humiliated. I mean, you know, it's not a good look for him that the Supreme Court has, you know, as I said, limited his powers in a very significant way. And he's obviously not going to want to relive his humiliation. I mean, the other thing, though, is to go back to the popularity question. Tariffs are not popular in America. Again, all the polling shows that people understand that tariffs make them poorer. The American people are not stupid.
[16:28]
Steph McGovern
Yeah, I was listening to npr, the National Public Radio in America, and there was some really interesting small business owners there talking about the impact of tariffs on them. And there was one lady who runs. She sells, like, backpacks and things like that, you know, bags and stuff. And she was saying she's paid out about $35,000 in these tariffs, but also she spent a ton of time just trying to work out how to, you know, go through the bureaucracy of it all. It's meant that at times her products have been out of stock, and it's really impacted her business in, in loads of ways. And so she's been, she describes how she's been desperately, like, refreshing the Supreme Court every day to try and work out when this ruling was going to come and whether she'll get a refund. Because ob, There's a big question now about whether people will get back this money, this tariff, money that was essentially illegally taken off them. And, you know, they were talking about how at the moment, if, when you, with those tariffs before it changed, if, for example, you filled out your custom form wrong, you could easily get a refund. So these small businesses were talking about, you know, would we be able to get it like that? Is it going to be an easy refund? And all the lawyers are saying, no, we're gonna, you're probably gonna have to sue. And, you know, this is going to be a really litigious process and it's going to be expensive, it's going to be time consuming. And the chances are for a lot of those businesses, and it won't just be American companies, obviously, but this, this particular group who've kind of formed a bit of a coalition, we're saying that for them, they just can't afford to even try and get those refunds back. So, you know, we're hearing from companies like FedEx who have now filed a lawsuit to, to, to get their money refunded. But for all these small businesses, there's no chance. And that is, that's really bad as well, isn't it? So it might be like, oh, Trump, you've lost that, that tariff where you were create, you know, getting money through those tariffs. But now you've, you're shafting loads of small American businesses, too. Like this woman was saying, she, if she got that money back, she'd rehire people. And yet she can't because she, she's probably never going to get it back. And so the impact is much more hardly, you know, harshly felt by people then probably Trump is giving it any credit for.
[18:50]
Robert Peston
Yeah, I mean, and I've also been talking to leaders of bigger businesses, and I mean, they are, some of them anyway, in two minds as to whether to sue to get the money, because, you know, putting it in simple terms, they're terrified of Trump. I Mean, what they don't want is for Trump to not, you know, if they are dependent on his goodwill, you know, particularly if they, they've got regulated products, if they're dependent on him for, you know, his goodwill, do they actually want to, you know, potentially make an enemy of him by, in a very high profile way, suing the American government to get, you know, what could be, relative to their overall turnover? Not that much money. I mean, there is going to be inevitably, as we always see in these cases, a sort of business created from financiers and hedge funds. I'm sure that, you know, in fact, I imagine this is already happening. They will be, but they will be buying up the liabilities for refunds of businesses big and small and then taking on the court cases. And of course, they'll buy. They'll buy. So if, if, if, let's just say you paid 100 million in tariffs. If, if, if you did, they'll be buying them at 50 million, you know, hoping to recoup the whole hundred million when the court case is over. Actually, whether, whether Ind 50, you know, $0.50 on the dollar or rather less, given that there are quite a lot of American lawyers who wonder whether the American government will ever pay out. I don't know. You know, they may be paying even less than that. I'll look into that before the next episode. About what the, what we think the value of this possible future payout is in an investment sense.
[20:35]
Steph McGovern
It's where there's blame, there's a claim. It's that classic, isn't it? It's, you know, it's all, everyone comes out and creates an industry out of, of other people's turmoil. And, you know, you see it with all kinds of things, don't you, whether it's PPI or car finance, miss selling, whatever it is, people then come out and make a business out of it.
[20:56]
Robert Peston
Obviously, we do want to look specifically at the impact on the UK before we move on to that. I did think it's just useful to remind people that Trump did make huge claims about the positive impact that tariffs would have. So, for example, he insisted it would massively reduce America's trade deficit. Quite a lot of people think that that was a, you know, a balmy ambition anyway. But if you think it's a good, it would have been a good thing. It hasn't done that. The trade deficit in 2025 was more or less the same as in the previous year. It has not reduced America's trade deficit. Yes, there have been quite a lot of companies saying that they were going to invest more in the US but actually the reality of that has not yet kicked in. So investment last year in, in America was not significantly greater than it was under Biden. So much of, of what he wanted has not materialized. Now, one should also point out that there were genuine fears that this would lead to a very serious economic downturn in America. And, you know, I was one of those who on this podcast express those fears. We should point out that the economic damage has been less than some of us thought would be. I mean, we are seeing inflation that is stickier than it would otherwise be. And that is a cost. And it's also a political cost to him, as we talked earlier, because it means that the cost of living for Americans is still rising. But he has been bailed out for now by the AI investment boom. And the massive investments in data centers and in energy as a result of the AI boom means that the American economy has grown at a pretty reasonable rate. I would argue nothing to do with him because of the AI boom. The tariff, the negative tariff impact on America has been less than it would otherwise have been.
[23:04]
Steph McGovern
Yeah, that's really interesting, isn't it? So we should definitely talk about the impact on the UK then, and what it means for obviously the, the deals that Starmer negotiated and whether they're worthless now. But first, let's go to a quick break.
[23:19]
Robert Peston
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Robert Peston
And breathe.
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Oh, sorry. I almost couldn't breathe when I saw the discount they gave me on my first order. Oh, sorry. Namaste.
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Robert Peston
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Steph McGovern
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Steph McGovern
This episode is brought to you by Vanguard. Now, when it comes to your finances, you want to work with companies you trust, don't you? It can be really complicated when you're investing, you know, trying to Work out where your money' and it can be confusing, can't it? And that's where Vanguard comes in because they always put investors first and they're delivering on that promise for 50 million investors worldwide with a wide range of funds and a platform that keeps costs low and makes investing simple. You can also open an ISA or a self invested personal pension, choosing investments yourself or letting Vanguard choose them for you. Search Vanguard Investor to find out more. Now, when investing your capital is at risk, tax rules apply. We're going to talk now about the impact of Trump's tariff changes and this Supreme Court ruling which has meant he's now using other legislation to bring out this kind of broad brush global tariff of 15%. We've talked about, you know, the impact in terms of global economics, but we should focus on the UK because obviously Starmer spent quite a bit of time getting that deal over the line. We were the first country to get a deal deal with America on trade tariffs. And obviously lots of businesses in the UK are now going, well, what does this mean for us as exporters? And, and one of those which is, is big in all of this is manufacturing. So before we talk about what we think on it, we wanted to hear from Stephen Phipson, who, who is the, the dg, the Director General of Make uk and that's the body which represents manufacturers in all forms of manufacturing, whether it's aerospace or automotive or right down to, you know, small companies in the supply chain making widgets or whatever it is. It's a, you know, an organization that's been going for a long, long time. Funnily enough, side note, when I was one young engineer for Britain, it was them in their former when they were called eef, the Engineering Employees Federation, who gave me the award. Really important voice in manufacturing. So this is what Stephen Phipson had to say about the trade tariff changes.
[26:20]
Greg Jackson / Stephen Phipson
The recent announcements about U.S. tariffs as again causing instability I think would be the watchword in the manufacturing sector in the the US is our single biggest export market and if you start playing with the tariff regime, that means the pricing changes across the border and then it's a question of who's paying. Often if they're on a fixed term, that means that the cost of the additional tariffs goes to the manufacturer. That means the people in the UK are suffering lower margins in already a very, very difficult scenario. So for them it causes that sort of confusion. And also the other thing we've noticed, every time Donald Trump stands up and changes the tariff regime, the US Customs is thrown into confusion and they don't know which bit of paperwork to use. We have delays at the borders, often attracts penalties if you're in the supply chain because you're committed to delivering in a certain time. So it's already quite a tough sector in terms of margins and getting that business to work. The US is our biggest partner, but this just creates an enormous amount of uncertainty and instability in the system. Many of those supply chain companies in particular are now looking at other markets, trying to find other markets which look more stable to them to try to export their products and capability too. So we're having a big pickup of interest, for example, in India, in the Middle east, and could they pivot some of that away from the unstable US situation and try and get more stability into the system? So for manufacturing, it's all about a stable business environment. And at the moment we're not sure that's where the US is. It seems to be changing on a regular basis.
[27:48]
Steph McGovern
So that's Stephen Phipson there from Make UK making that really important point there. It's about the uncertainty as much as anything else, because, you know, as Stephen explained, this global levy doesn't impact tariffs on specific sector agreements, you know, so it doesn't impact the deals we got on steel and aluminium, pharmaceuticals, automotive and aerospace. They're not going to be affected. But it's just the general, like, drama of A, might that change and B, lots of business people contacting him, trying to work out what it all means. And it's that uncertainty which is a real, you know, disease in, in business when it comes to investment and everything else, isn't it? Robert?
[28:29]
Robert Peston
I'm afraid I'm less optimistic than Stephen, is that these carve out deals for the UK will survive. Because if you look at the legislation under which Trump has now introduced, I mean, he's introduced a 10% tariff that has been published. He has said he's going to increase that to 15%. What that legislation says is you cannot discriminate. All countries have to be treated equally. And so, you know, if you are the European Union, for example, or if you are China, you might well go to court in America, or if you're one of those businesses, you know, located there, you might go to court in America and say, look, you know, this tariff is unfair because it is not being applied equally. You know, it is not, for example, being applied to, you know, you know, the UK in the way that it's being applied to us. And so there is a risk that what he will do is not Rip up. Because why would he want to do that? The trade agreement with the UK. But he might have to impose the extra 10% on top of the 10% that British auto manufacturers are already paying. Right. Or add another 15%. I mean, there is a gen. You know, I've been told to lawyers about this, there is a genuine risk of, of, of all of that. And I know the motor manufacturers themselves are deeply uneasy. And, and, you know, I mean, there have been manufacturers wondering, should they actually, at the moment be putting their cars on ships to America? The last thing they want is for the, you know, for their luxury cars to arrive there and be whacked not with the 10% they thought they'd negotiated, but with 25% or 20%.
[30:41]
Steph McGovern
Yeah. And, and it's the point again, that Stephen made about lead times, you know, when, when these, and I remember this at Black and Decker, when you'd work on a product that was being manufactured in front of you, but it would be sometimes years before it would be actually in the shops and things. So, as you say, so much can change in that time. So how do you price it in the first place if, if you're not sure whether there's going to be an additional 10% on a tariff on the, on the, on the cost of the product, and, and that inevitably it's that thing that stops, stops investment. Because people go, well, hang on, if we don't know, if there's too many variables and we can't work out our costs, how do we know how much money we have to invest in all of this? So what, so what do you think Starmer's going to do? Because obviously there's lots of talk the EU are fairly much more aggressive, I would say, in all of this, in terms of potential retaliatory tariffs. Whereas the UK government have, you know, they've really sat on the fence a bit like the business bosses we talked about a minute ago. They don't want to upset Trump. You won't get a minister saying publicly what they really think of Trump. You know, everyone just really plays this anodyne view of, of, of, of Trump. And is that what's likely to happen, do you think? What's Starmer going to do?
[31:56]
Robert Peston
I think this is a real embarrassment for Starmer because, you know, if you just look at the immediate impact of what was announced by the Supreme Court last week, massively reduces tariffs paid by, for example, you know, Brazil and China and massively increases, particularly if the 15% rate is introduced, what the UK would play and it blows up months and months and months of, you know, effectively the British government sucking up to Trump. And given that that is politically within the uk, not a very good look for the government if at the end of it, they don't. Better, you know, preferential treatment. You know, I think many British voters will say, what the hell was that all about?
[32:48]
Steph McGovern
Yeah, yeah. And it's that. It's also just what it says generally to people about letting bullies win. It really is. You know, it's really hard to explain, like, for example, to my kids and to kids about why Trump's allowed to do what he does. And, you know, we just look really weak in moments like this. And I know this, where it's complicated and it's all to do with this dependency we have on them for trade, but not just trade, it's about security and it's about a million other things that you don't, you know, we're not necessarily talking about when we talk about trade, but it does make us look weak. And should we be thinking about this as a way to just stop having such a codependency on America and look at, you know, the EU more closely? And I know we're out of the European Union, but it just feels like this is the time when we should just stand up for ourselves and look at another way through this that doesn't involve us being bullied.
[33:45]
Robert Peston
Yeah. I mean, look, if you. If in the end, we face a very similar tariff regime to the EU and Canada, you know, against a backdrop where, you know, Macron of France has stood up to. To Trump in a way that Starmer didn't and Carney has stood up to Trump in the way that Starmer didn't. You know, I think there will be enormous political pressure on whoever is the British Prime Minister. And let's be absolutely clear, there are quite a lot of people in Parliament who wonder whether Starmer is going to remain Prime Minister for that much longer. But whether it's Starmer or a successor, you know, there will now be enormous pressure on the UK to have a rethink of what is the best way of conducting commercial and diplomatic relations with America and whether we should, you know, look a little bit less fawning and be a bit. A bit tougher. I mean, we had the extraordinary image of the former US Ambassador, Peter Mandelson being arrested the other day. He was the sort of living embodiment of the, you know, the Starmer approach of, you know, in essence, sucking up to Trump and his colleagues. You know, Starmer Today will be thinking, well, I didn't get a lot of commercial benefit out of that. And the political damage of seeing my appointee, you know, know, being, you know, arrested, interviewed by the police in Wandsworth, and then returned at 2 in the morning. Those are images that are going to haunt his time in office for as long as he's in office. And it is all of a piece because it was all driven by this idea that you had to placate Trump rather than standing up to him. And if, at the end of the day, as I say, the economic benefit of, of placating Trump turns out to be negligible, you know, it's just another aspect of essentially his big approach just disintegrating in his own hands.
[36:02]
Steph McGovern
When I was talking to Sir Michael Moritz last week, you know, we were talking about the business leaders who are not necessarily standing up to Trump, and, you know, Michael was explaining how they have no choice and their job is to do business and to look after the business. And as it stands to do that, they just have to, you know, take whatever Trump throws at them and not stand against him. But there does come a point where, and this is what I asked him is when does your morals and humanity become, like, more important than business? Or just. Does it never. Is it just always that, you know, we've, We've. We've just got to suck it up because life otherwise would just be too destructive, and that would lead to much greater problems than dealing with a bully. And, and that. I find that really depressing.
[36:54]
Robert Peston
And what did he say? Was there.
[36:55]
Steph McGovern
Was.
[36:55]
Robert Peston
Is there ever a line for business?
[36:57]
Steph McGovern
Yeah, well, he kind of didn't answer it, to be honest. He was just kind of saying they, you know, because he was very. He's very vocally anti Trump. I think he called him a buffoon on, on the podcast. It's worth listening to that interview, actually, if you haven't heard it very much. But, you know, one of the previous episodes, he just reiterates the point about. Yeah, yeah, I mean, it was a long pause first when I asked him that question, but he just made the point that, I guess, and this is valid as well, that these businesses employ, you know, thousands and thousands of people. You put in their jobs at risk and their lives at risk, if you challenge someone who might make your business then really difficult to function. And I guess that is the same thing. It's weighing that up. Star's got to weigh up. What are the consequences going to be? And. Yes, your point that. Well, actually, we've not had any benefit from it. But maybe we haven't had the negativity we. We might have had if we'd have stood up to him more. I don't know, I. It just feels depressing. And I know I've said that twice now, but I. I'm a life's optimist, but I feel like we're in a really bad rut at the minute and it's just not getting any better, especially for, you know, know, diversity and for general human rights and. And living standards and everything else. It just feels like we're going backwards rather than forwards.
[38:14]
Robert Peston
Oh, gosh. Well, look, I'm going to cheer us up by saying, as usual, I know
[38:18]
Steph McGovern
I didn't give you anywhere to go there. One positive thing. Your point, though, which I think is really true about. You were talking about AI and how actually all of the growth that's come from AI has kind of, you know, basically massively masked the negativity of the trade tariffs. And that is what I do think happens. You know, I think we have the potential. We've talked before about how we're the third, you know, we look, you know, the third best in terms of AI potential after America and China. And if we capitalize on that, we might circumvent all the negativity from the politics and actually just win with business and technology and we will find our way through it without out, you know, by ignoring the chaos and just getting on with what we're really good at, which is creating new companies, new stuff, new tech. And that's my positive note on which I will end this on. Yeah.
[39:12]
Robert Peston
Also, there's. It's inevitable, given the. The uncertainties around dealing with America that Stephen Phipson so intelligently encapsulated, that we are going to pivot to having closer trade relations with the European Union. That is absolutely inevitable. It is, as he said, as a trading area, it is a bigger market than the U.S. that is a positive. And since you've mentioned AI, I think we should come back to this in an episode soon. Yes, of course. There are lots. We've had so many interesting conversations about how well placed the UK is to take advantage of this technological revolution. There are still, we should point out, enormous uncertainties for jobs and living standards in this industrial revolution. I was staggered. I don't know if you saw, there was a blog. I think it's a blog put out by an organization called Citrini, which came up with this sort of fictional account of how we were heading for a Great Recession as a result of AI and it actually had an enormous impact on the stock market, which in a negative sense, or a significant impact on the stock market in a negative sense. So it shows you, you know, really. And this goes back essentially to Trump's State of the Union, where we started, and how he tries to buoy people up against a backdrop of enormous uncertainty, uncertainties that he created. People are just very, very anxious at the moment. There is an enormous amount of uncertainty. And if a single blob. Blob, not blob. Blog, the single blog can shake investors. You know, a blog, I have to say, which when I read, I did not think was particularly compelling. It shows you we are, you know, there are very good things about the state of the British economy, but we just live in a time of considerable unease and anxiety, I'm afraid.
[41:10]
Steph McGovern
I tell you who's going to do well over the next few years, though. Lawyers. Lawyers are going to do so well from all this litigation and all the, the, you know, the everything else, working out what it all means and suing governments and everything else. So good luck to the lawyers.
[41:25]
Robert Peston
I'm not sure that isn't necessarily a. Not sure. That is a silver lining. And if you are listening and you're of an age where you're thinking about a career, there are quite a lot of lawyers in the world. So, I mean, it may, it may, it may sound attractive, but if you can think of something else to do, I'm not going to dissuade you.
[41:38]
Steph McGovern
Okie dokie. Right, that's it from us on this episode. Thank you very much. Bye bye.
[41:44]
Robert Peston
All the best. Goodbye.
[41:51]
Steph McGovern
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