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- [00:01]
Alistair Campbell
Thanks for listening to the Rest is Politics. Sign up to the Rest is Politics plus to enjoy Ad Free listening, receive a weekly newsletter, join our members chat room and gain early access to live show tickets. Just go to the restispolitics.com that's therestispolitics.com the rest is politics is powered by our friends at Fuse Energy and when.
- [00:22]
Rory Stewart
You switch to Fuse you will now receive Trip plus membership free of charge.
- [00:26]
Alistair Campbell
That's where you can take advantage of things like ad free listening, early access to Question Time episodes, pre sale, live show tickets, and more. All you got to do is go to getfuse.com politics use the referral code politics when signing up.
- [00:40]
Rory Stewart
We will be providing many more offers for members which I think can be great, including interviews for members only and questions for members only, which I hope you'll enjoy. But the other advantage of signing up, of course is that you can protect your energy bills by fixing your electricity rates for the next year with Fuse, which is going to be very relevant. With a price cap rising by 6.4%, Fuse's new fixed tariffs undercut the April price cap by over £100, with almost £150 of savings for a typical customer on the 18 month tariff. By fixing your electricity rate, you can lock in your price today and protect yourself from any rises over the next year.
- [01:16]
Alistair Campbell
So download it now. Use the referral code politics after signing up, visit getfuse.com politics for the terms of conditions and to learn more. Welcome to a Restless Politics live stream with me, Alistair Campbell and with me, Rory Stewart.
- [01:43]
Rory Stewart
An unbelievably consequential day. Alastair, I mean I'm gonna, I think hand over to you just to for a little bit of a framing introduction. But this, I mean we often do these emergency podcasts and you know, there have been some big days that we've done. We've done, you know, Liz Truss's resignation. We've done big stuff with Donald Trump, but I think in terms of actual real world economic impact, we're dealing with something which is on a completely different level. We haven't seen anything like this for decades. Anyway, over to you.
- [02:16]
Alistair Campbell
Yeah, well, interesting. Our colleague Anthony Scaramucci, I think my tweet of the day said Donald Trump is Liz Truss. I guess that was referring to the pretty catastrophic impact of his stuff on the markets around the world. But just to start with the scale of this, I mean you're in Ohio, I'm in Paris, and I don't know about where you are, but the front pages here are still absolutely rammed with pictures of Trump and stories about Trump and the reaction. And if we go back to an interview we did recently with Michael Wolff, the author who's written four books about Trump, and he said the way to understand Donald Trump is to understand he's never really stopped being a reality TV star. And this was like, this was heaven for Donald Trump. He had literally every president in the world, every prime minister in the world, every finance minister in the world, every major media organization in the world, every business in the world hanging on his every word as he went through this bizarre show in the Rose Garden of the White House, going country by country with this, looking like a sort of bookmaker at a racecourse with his little, his cardboard graphic that had been given to him by his commerce secretary. But you talk about making the weather roaring. And, you know, I often say that one of the absolute keys to strategy and driving change is to make the weather. He has made the weather. And you could tell when he got bored and he was sort of going off the script. But it was almost like, I felt it was like half economic statement, half rally supporters from around the country mixed in with the Cabinet, the executive order signing that he loves that he almost almost forgot. But it's now just before, I don't know if you caught up with the newsroid, just before we started this live stream, China has announced 30% plus tariffs in response. So this is the kind of global trade war that people have trying to prevent. But from his perspective, it's a war of choice.
- [04:19]
Rory Stewart
Yeah. So we'll get on to the economic implications which are beyond staggering. I mean, I've been talking to Ken Rogoff, who very big Harvard economist. I've been whatsapping back and forth with UK economists. I've been speaking to my great hero, Dmitry Grozubinsky, who wrote this book, why Politicians Lie About Trade, talking to our friend Felix Martin about this. And the answer is that the implications this people aren't even beginning to be able to model. I mean, this thing is so much bigger than anybody's really done for almost 100 years that the macroeconomic models are really struggling. People will say, and we'll get onto this. People say Chinese exports, the US will drop by 80% and the Chinese economy will contract by X percent. But there are so many complicated third order implications. But let's just stick on the politics for a second because I think you're absolutely right. That's core to it. So there's your point, which is reality TV spectacle. There's the second point, which is that it's about the exercise of power. So we've often said that politicians in the modern world feel a bit powerless because, as you and I know know, often when you're in government, you want to do something and somebody says, well, I'm afraid that's not legal, or there's a treaty, or, you know, you've got to consult with this, that or the other. So in the case of tariffs in the past, when Trump tried this last time round, and this is in Wolf's book, Cohen, who's his economic adviser, says to him, to change this tariff with Canada takes 180 days and requires congressional approval. Trump has found, thanks to these Project 2025 people, partly that he's got an emergency power which was really designed to be triggered in the case of war, where if the existential security of the United States is threatened, a president can take immediate economic action. And this has been interpreted to mean he can just put tariffs up, no longer with 180 days, no longer with congressional consultation. So that's, number one, he's got this lovely lever that he can pull whenever he wants. And the second thing is the point that you've made is that it then forces everybody to come groveling to him, because he also has the soul power to change that lever. And there are two sorts of people who he now hopes are going to come groveling to him. Other countries. So he's hoping that some small nation will defy him, in which case he may well cooperate with goodness knows what, Russia to punish the country for defying him. And other countries are going to come running to him immediately in order to make a deal. You can see Trump's son, for example, Eric Trump tweeted out yesterday, I've seen this movie before. The first person to make a deal will get the best deal. The last one in line will get a rubbish deal. But as Chris Murphy, the Connecticut politician, has pointed out, it's also a brilliant way of making American businesses come on bended knees to him. So every American CEO in the world will now be queuing up outside his office saying, listen, I'm running an American car company. I'm completely dependent on this particular critical mineral which comes in from China. Can you please make an exemption on that? Or, this is how my supply chain works in Canada and Mexico. Can you just do a little carve out? And he then has the sort of Sun King ability to. To say, okay for you, sir. And presumably, along with that, extraordinary opportunities for corruption. Because one of the things that happens if you put a president, particularly a president who's very interested in making money and is very surrounded by business people in charge of making these decisions. And this is one of the reasons why people believed in liberal markets and free trade and development. Because of course, if you go back to very protectionist places, we talked about India in the last podcast when India had a very protectionist regime in place. Famously, the cars in India were not that great. They were 1940s British cars being produced and they weren't importing. They had this sort of license raj where politicians were able to kind of grant little permissions to local businesses to do little things. And it becomes an incredible source of corruption. So that's the politics. Any more on the politics?
- [08:50]
Alistair Campbell
Well, just the politics as he has framed it. So as you say, he's essentially using mechanisms that are meant to apply for times of national crisis, national emergency. You think of war and so forth. The idea that America is in some kind of economic emergency. Unemployment is at a near 50 year low, been around at 4%. GDP growth in a world that's not growing very much is at 2.4% and they've got inflation back below 3%. But what part of his narrative is to say that the American economy is absolutely screwed and the reason it's screwed is because we've allowed other countries and he used the kind of Goebbels type language of rape and pillage and the scavengers that have been feeding off us and so forth. But the other thing, there's a very, very enjoyable tweet from Larry Summers, who's the ex Treasury Secretary, says this is to economics what creationism is to biology and astrology is to astronomy. And one really important thing, so America's big in services. All of his so called mathematics on this focused on goods and what they've done. So he, when he, he had the sort of the cardboard cutout thing that Lutnick took up to him at the podium and you have this thing, you know, reciprocal tariffs, country, China, blah blah, blah, blah, European. I see by the way, that he called Taiwan a country. Very interesting for the China one country policy there. But he goes down the thing and what they've actually done is divide their trade deficit with an individual country by the imports. And then he says he's halved it, but there's nobody. And you were saying there about some of the economists that you've been talking to, Rory, I had a look at the Peterson Institute for International Economics, have gathered a lot of economists who've just given their views, and I'll just run through one or two. ADAM S. Posen, who's the president of the Institute. This will not generate a fraction of the rise in employment. It will reduce US Company's share of global car sales. MARCUS noland this will contribute to slower growth, higher prices, greater unemployment. KIMBERLY CLAUSEN these tariffs, like any principal rationale, they risk economic catastrophe will harm American investment, production and growth. And so it goes on. But what he has done, and this is the, I guess you've got to say it's a kind of genius and it is to some extent modeled, I think, on, on Putin. But of course, Putin's operating in a country that, if you like, is more easily turned into the sort of dictatorship he has now. But he's using the same methods. It's industrial scale lying, it's industrial scale boasting and it's just, and it's a show. And so I, I think that where the, the fight back. So the Chinese, they've decided they're going to just hit straight back with tariffs. They've done that. The European Union is, got a, you know, they've talked about taking weeks and months to work out a properly thought through strategy, but I think it's going to be tough. MATT the other big story in the French media today is Macron urging French investors not to invest in the United States. There'll be a lot of that going on.
- [12:04]
Rory Stewart
Well, let's, let's just go back to that point that you're making about the formula. So there is a story which has been, I mean, it's not quite that Trump isn't drawing on something. I mean, what he's done is unbelievably reckless, unbelievably damaging and simply doesn't make sense on a global scale. But underneath it, and one of the reasons that it gets going is there has been a long standing anxiety in the United States about the fact that America runs these persistent trade surpluses. And this is particularly directed, for example, towards China. And the story is that China has artificially deflated its currency and it has a whole series of hidden subsidies through state owned enterprises and cheap credit towards its labor force. And this has meant not just that American jobs have flooded to China because they can't compete, but it's also meant a world in which an enormous amount of money has flowed into the United states, particularly into U.S. treasury bonds. And the result is that the American economy is flush. And J.D. vance gave a big speech on this. I'm actually at Ohio State University. J.D. vance's alma mater at the moment, saying that what this has meant is for people like him. So he's talking about people in, for example, blue collar, ex. Blue collar workers in Ohio, around where I'm speaking. Now, what it's meant for them is that all this money flooding into the American economy has made the dollar too strong. And ultimately this has meant not just that their factories are closing, but that they can't afford their houses, there's too much credit, the rich are getting richer and the poor are stuck. So that's the sort of overall story that they're telling.
- [14:03]
Alistair Campbell
Well, Roy, you just jump in there. We talked about this when we talked about tariffs a few weeks ago in the context of a lot of the people around Trump essentially wanting a devaluation of the dollar, unable to argue for that in a kind of conventional way because the dollar remains the global reserve currency. But the one logic that might be applying here is a sense of creating all this chaos and disorder and eventually the dollar does kind of weaken. But that sounds like such a sort of strange long term strategy when we've had this sense of Trump being obsessed about the dollar being strong in the past and also about the impact and the power of the stock market. Both of those are being weakened.
- [14:49]
Rory Stewart
Exactly. So J.D. vance was saying yesterday he doesn't care about the stock market. People like him don't care about the stock market. And in his most insanely optimistic world, somehow there is temporary chaos. The stock market goes up and down, and then eventually in the long term, America emerges into a world which is more balanced, more equal, where the dollars weaken, there's less credit and there's more manufacturing in the U.S. the problem is they're not going to get there. Sorry. Well, there are two problems. Firstly, the way they've designed it doesn't actually work to do that. And secondly, they're very unlikely to get to the long term because in the short term, the markets, this is a point that my friend Felix makes, is they don't think about long term macroeconomic models. The markets price something today. So while Ken Rogoff and others are trying to work out the 5, 10 year macroeconomic pictures, which of course they can't do. Right. So people will say this, that the other, about the Chinese economy, but we don't know because as you say, just two hours before we came on air, China announces 34% reciprocal tariffs. And then all your maths goes out the window, right?
- [16:03]
Alistair Campbell
Yeah.
- [16:04]
Rory Stewart
And then people think, well, maybe people are going to relocate to Vietnam. No, you can't relocate to Vietnam because you've been hit with over 40% tariffs in Vietnam. And then you suddenly think, well, actually it's not just about Chinese companies in China. It's also about Chinese companies in Vietnam, et cetera, et cetera, et cetera. So the number of things you have to calculate to work out what the effects are are unbelievable. Meanwhile, the markets panic. So much more likely in the Short term for J.D. vance and others is big collapse in the markets, collapse in the dollar. And then pretty quickly, we're likely to find inflation going up, interest rates going up, and the global economy slowing. Because the scale of it. I think we just have to keep coming back to this. The effective tariffs on China, take the existing 20%, add 34% on top, that's 54% tariffs. And many countries are getting up into the 40%. When you get up at that level, unless what you're selling is totally irreplaceable. And that's another problem, because a lot of what China is selling very, very difficult to substitute for. So the prices will pass through. So, for example, copper processing, theoretically, the idea is that all this stuff moves to the United States. But why is copper processed in China? It's because copper processing is very, very environmentally damaging. It's horrible stuff that ends to endless slurry environmental devastation. We've kind of outsourced these things to China because we don't want to do it at home. Many, many of the things that the United States is importing, Americans may not want to work in those sectors. I mean, do they want to run garment sweatshops? Do they want to compete with Bangladesh making T shirts? Do they want to work in steel factories? But which sectors of the American economy is he trying to strengthen? Is it really the case that he imagines that America wants to become. Everybody wants to go back on the factory floor and into mines?
- [18:04]
Alistair Campbell
Well, the sector, the sector that is most likely to get hit hard, particularly when the European Union decides to act in the way that it probably will, will be the services sector, and especially I think, these tech companies. And they're going to. Because Europe has shown itself willing already to take on some of the tech giants. And that. And the service sector is massive for the States. Just on China already, somebody, a Cambridge University academic called Justin Hauga. I don't know if you can see this, but he posted this. Can you see that? Yeah, he posted this, this graphic. And so that is. That is a map where America is blue and China is red.
- [18:45]
Rory Stewart
Okay.
- [18:45]
Alistair Campbell
And it is which country in Africa trades more With America blue or China red. That's in 2003. Yeah, and, and that is today. And the only two left where America is ahead of China is Lesotho and Swaziland. And I think Lesotho is up in the 90s. What he's got against Lesotho, maybe it's just the fact they've got lots of diamonds there. I don't know.
- [19:08]
Rory Stewart
Well, can I just do just to lose Lesotho for a second, because I think it's a really interesting example. You made this point that there's a universal formula. Initially, people were very surprised. They looked at the Sutu and they said, how come Lesotho is being hit so hard with terrorists from the United States? And I had somebody say to me yesterday, it's because Elon Musk wants to launch Starlinks from Lesotho. He's a South African, he understands Lesotho very well. Nonsense. Turns out that you're exactly right, that if you reverse engineer the calculations, it's purely the relationship between the trade surplus of the country, the volume of exports divided by two, and that's how you produce the numbers for every country in the world. Which means that it's nothing to do with actually trying to analyze, is this currency too much depreciated? Are the weird state owned enterprises, are there unfair practices which are disadvantaging American companies? It's just universal. And when you get to Lesotho, why has it been hit so hard? Well, Lesotho is a very poor country, one of the poorest countries in the world. It imports about 7 million from the United States and it exports about, about 200 million to the United States. But those exports to the United States are primarily things like diamonds which are not produced in the United States. And it's not importing very much to the United States, presumably because it's a relatively low income country. Now, how does this one pan out? Well, nobody's concentrating on this very much because Lesotho is a tiny part of the global economy. But in a country like Lesotho, most of the revenue for the government doesn't come from income tax. In very poor countries, people don't really pay income tax. Most people don't pay income tax. It comes from taxes on things like diamond exports from those raw materials. If you suddenly take out the exports to the US which is about 10% of the Lesotho economy, but a much higher proportion of the government revenue, you suddenly take all the tax revenue that keeps your health service going, keeps your education service going, your services collapse, and of course you're servicing quite a lot of debt already. If you're a poor country in Africa and you can't afford your debt now, normally, what would you do? You would go to USAID or DFID for a bailout, except the American aid agency has had all its money cut. DFID has had its money cut. So then you go to the World bank or the imf. Unfortunately, World bank and IMF don't have any money at the moment, and they will now be dealing with multiple crises across 60 or 70 developing countries triggered by Trump's new tariffs. So poverty, health outcomes, all the stuff that we've been talking about recently with ATokiwande on malaria, HIV, AIDS, but just basic delivery of clinic services, will collapse because the last thing remaining for these countries, and you'll remember that one of the great cliches that my Tory colleagues always did is trade, not aid. And we heard a little bit of this from the Trump administration. We're going to cut the handouts and we're going to allow their economies to grow through hard work, through open trade. Well, he's just destroyed the trade element now. So it's neither trade nor aid, and that means poverty.
- [22:22]
Alistair Campbell
But the fact that when he was going through country by country, and it's worth remembering as well, this is one of, as you say, this is an unbelievably consequential global economic event. I'd love to know how much insider trading was going on, because this was going to be moving markets in every single part of the world. And indeed it did. And you had Lutnick, excuse me, wandering around that cardboard thing. I mean, there he is there in the front again, day two, still on the front pages. That cardboard thing. I mean, that presumably was lying around the White House, and people could take pictures of it and tell their mates and so forth. But the level of economic illiteracy that you have to have in order to buy into this is frankly stunning. So, for example, Lutnick, who he kept telling Trump, keeps telling us that Lutnick is unbelievably clever and a brilliant commerce secretary, and he's been all over television saying that just because the prices of foreign goods coming in go up, that won't necessarily mean that any prices will go up when they're applied by domestic American producers. But they're in competition. So if the overseas price is going to go up, the overseas producers have to pay their tariffs and up the price goes, then there's going to become a bigger gap and prices will go up in the domestic market as well. And the other the other thing they keep saying that this won't. This way, I can tell you in America, you've got a siren going by. They obviously won't. France, by the way, Europe is very peaceful, as you know. The. But the other point they keep making is that, you know, this won't affect everyday American goods that people rely on. And somebody was pointing out to me that coffee. Americans like their coffee, okay, but the. Apart from a tiny, tiny, tiny bit of coffee that gets made in Hawaii, that's it. Likewise, where are they going to grow their bananas? They like their bananas, right? Where are they going to grow their bananas? So they're sort of. They're trying to persuade people that this is not going to affect the kind of, you know, the MAGA people who were there as part of the audience saying, Trump's going to save their jobs and save their livelihoods. He's going to have the opposite effect.
- [24:37]
Rory Stewart
The other thing that I'm noticing on social media is that people are getting obsessed with jokes. You know, he's imposed tariffs on an island composed of penguins. But we've got to step back and look at global growth and markets, which is what makes this probably the most damaging, extreme thing that we've seen in so many decades. So global growth, really important to understand that China is the world's largest manufacturer, the world's largest exporter, that U.S. china trade is enormous, and that China controls 85% of the world's supply of critical minerals and rare earths. China dominates various industries. For example, solar panels, that China is in almost every component in every manufactured item. It's these Intermediate bolt number 36 will be made in China, even if the ultimate product is made in Canada, Mexico or the United States. And so putting 54% tariffs on China shifts the whole global economy very, very quickly. And it's not good. Even if we can't quantify exactly how bad it is, it is definitely very, very bad. Second thing, markets. Over the last 10 years, the US markets, US stock market has absolutely dominated the world. 70% now of all international investment goes into the US markets. If you're somebody listening who has an Index Fund, AJ Bell or Vanguard, 70% of your investments, if you've got a global portfolio, will be in the United States. So he has just taken a sledgehammer to market confidence in the United States. And U.S. stocks will start falling. And this will have enormous global ramifications because it's 70% of the global markets. It's been the safest thing for a decade. It isn't any Longer. So then we begin to look at financial crisis. 2008, financial crisis, 1990s financial crisis. And there we have the bigger problem, because during the 1990s, you had Larry Summers, who you just quoted, right at the heart of the response. 2008, you had people like Hank Paulson as part of the response. In other words, you had an idea that the United States was able to have these very, very smart people, very experienced, who were able to form international coalitions, reassure markets, provide credit where credit needed to be produced in order to bail out the world's financial system. But the US Is weaker relatively than it was then. There is not the sense that in Trump's top team there's that type of quality. And most importantly of all, there isn't the trust. The idea that Trump can now credibly propose himself as leading an international coalition in the way that the US was able to work with Gordon Brown in 2008 is unimaginable. So they have a triple problem, global markets, financial confidence.
- [27:49]
Alistair Campbell
Yeah, a couple of things in direct response to that. So just to give you one of the big, big stories in Le Fiero, this was yesterday. I don't know if you can see that. In other words, on the back of this, they've been speaking to European diplomats based at NATO saying they're finally beginning to say, look, let's stop pretending that we can have any sort of really serious durable alliance with this administration. And on your point about China, Rory, I don't know if you've seen the New Times yet, but Thomas Friedman, who's one of their kind of star writers, he's got a huge front page opinion piece today and the headline is the Future is Not America. He's in Shanghai. And so he's giving the Chinese perspective on what's going on. And he visited Huawei, this new research center which is the size of 225 football fields, 35,000 scientists and engineers there. And he says you've got Trump focusing on transgender teams and anti woke stuff while China's focusing on how do you. And he specifically makes the point developing and dominating AI to liberate China from interconnectedness with the American economy. And he has, I'll just give you one quote. Beijing's message, we're not afraid of you. You aren't who you think you are. We aren't who you think we are. And it was interesting, the China Daily today, I've been checking, I don't know if you know, this thing really called frontpages.com you can look at front pages around the world. And I looked yesterday just to see how many Trump was on, and it was. It was all over. Even today, virtually every front page in Australia and India is still Trump. So he loves that. That's partly why he does it. The China Daily front page, the lead headline was xi stresses key role of afforestation. And the sidebar, USA faces blowback from latest tariff hikes. And they obviously knew that the very big blowback was coming later today. But I think that this goes back to the sort of the Trump obsession with storytelling. He's got a story to tell about America. America's been ripped off by the world. He's got a story to tell about tariffs. I mean, that nonsense that he talked about. You know, if only we'd stuck with tariffs in the past, we'd never have got into this mess that we're in now. He's got a story to tell about the state of the American economy, which isn't true, and he's now got a story to tell about his impact as an individual. Whereas I think that some of these other big powers, and I think we're going to see this in Europe as well, I think that, you know, Keir Starmer and Maloney as well, they're both sort of caught between not wanting to fall out with either. But you sense in France, Germany, Orban's sort of case on his. On his own. But you sense that they're facing up possibly to a level of retaliation that really could be quite, quite start now. They know that's going to damage Europe as well. But at the same time, what it's going to lead to, I think, is a greater sense of Europe understanding. It needs to develop its own power in every single level. Every single level.
- [30:57]
Rory Stewart
Well, Alistair, let's take a quick break then, and then let's come back for some questions from the audience. Hello, I'm William Durimple.
- [31:07]
Alistair Campbell
And I'm Anita Arnand. And we are the hosts of Empire, also from Goal Hanger.
- [31:11]
Rory Stewart
And we're here to tell you about our recent miniseries that we've just done on the Troubles.
- [31:16]
Alistair Campbell
In it, we try to get to the very heart of the violent conflict in Northern Ireland that lasted from the 1960s all the way up to 1998.
- [31:25]
Rory Stewart
It's something that we both lived through.
- [31:28]
Alistair Campbell
And remember from our childhoods, but younger.
- [31:30]
Rory Stewart
Listeners may not know anything about it. And it's a time when there was division along religious and political lines. Neighbours turned against each other, residential city streets became battlegrounds, thousands were killed and the IRA bombed London, it seemed as.
- [31:47]
Alistair Campbell
If an end was out of reach. But in 1998, a peace process finally brought those 30 years of violence to an end.
- [31:55]
Rory Stewart
But the memory of the Troubles is still present, not only within Northern Irish communities who experienced it, but in international relations and political approaches to peace. And new audiences are starting to understand this national trauma through films like Belfast and Kneecap and TV shows like Derry Girls.
- [32:14]
Alistair Campbell
In fact, our guest on the miniseries is Patrick Radden Keefe. Now he's the author of the non fiction book that inspired the hit TV drama say Nothing. It's one of my favourite books.
- [32:26]
Rory Stewart
It's, I think, the kind of Inko blood for our generation, extraordinary work of nonfiction. And if you'd like to hear more.
- [32:33]
Alistair Campbell
About this very recent conflict that put.
- [32:35]
Rory Stewart
Northern Ireland on the global stage and hear from Patrick Radden Keefe, we've left a clip of the miniseries at the.
- [32:40]
Alistair Campbell
End of this epis. To hear the full series, just search Empire, wherever you get your podcasts.
- [32:52]
Rory Stewart
Digital Kenosis for real. Why doesn't everyone just impose, let me just get this, a 900% tariffs on Trump. And the implication being until he stops his tariffs. Well, the, the, it's interesting what China's done there. So what we were expecting, if you were, I know, I suppose my friend Dmitry Grossobinsky, although he's very smart on the politics of this, is that countries would respond in the way that Europe responded last time, which is that you put tariffs on things which you can replace and you don't put tariffs on things that you can't replace. So the classic example with Europe last time around was the way that they dealt with soybeans from the United States. So that's what you would have assumed China would do. It would come up with a very carefully calibrated series of responses against different sectors. But it hasn't done that. It's come back with a blanket 34% tariffs with very, very few exemptions. And that's actually almost more worrying for the global economy. And I keep coming back to this. I mean, we need to think about this not just as sort of Trump situation. This is a situation which will lead to a lot of unemployment, a lot of people losing their jobs, a lot of inflation, a lot of poverty around the world, particularly in very poor countries, but also for countries like Britain that are betting on growth. And what's happening is that it's becoming political. And you've just made this point with Europe and you're already seeing it in China. People are deciding to just punch Trump back In the face and in the Chinese case, in a way that will damage the Chinese economy, too, and makes it less likely that Trump will unravel this anytime soon. Because then the egos get involved. If China punches back with 34% tariffs, do you think the United States is going to suddenly turn around and say, oh, well, we'll drop our tariffs now? No, he'll probably go back with even more.
- [34:51]
Alistair Campbell
It's interesting, if you look at the four countries that escaped completely were Russia, Belarus, Cuba and North Korea. I mean, that is just. That is just weird. Absolutely weird. And the argue. The argument was that it's because they've already been hit by the tariffs in the war, the various sort of war and political dramas. There's a great question here from Tigger plays what, if anything, do you think the order that they listed the countries in might reflect is neither alphabetic nor numeric? I mean, that is absolutely right. It's a sort of, I think China at the top, because that is his. That was his number one enemy. European Union number two, because that's his number two enemy. But then it did get a bit random. Vietnam, Taiwan, Japan. And when he talked about Japan, he went on to a great long spiel about how much he loved Shinzo Abe and then reminded us if we'd forgotten that he was assassinated. And I almost thought you could see his brain thinking, can I talk about the assassination attempt? Can I do an attack on Biden here? You could see his brain sort of whirring away. And then somebody was saying, get back to the auto queue. And he eventually got back to the autocue. Then it went India, South Korea, Thailand and that poor old Switzerland. What was. If you. I was thinking. I was watching it live on the television. I was thinking, unless they told that. Well, they obviously didn't tell diplomats. We know that. But if you have a Keir Starmer or Rachel Reeves watching this, there you have the board and the cardboard board. But where the United Kingdom was down here, it was stuck behind the lectern as he was holding it up. So you got a little flash of percentage. And you saw United. Is it Kingdom? Is it Arab Emirates, what the hell is it? I mean, it was the most sort of bizarre, haphazard, shambolic in a way, but I just don't think they care. He loved the flags. He loved the Hail to the Chief. He loved the guy with the mustache coming up, say, yeah, well, a lot of.
- [36:44]
Rory Stewart
A lot of people in the thread have been saying that this is AI generated. And I think this is important. Too, because what we're AI Generated. No, no, no. The list. And the weird position on the list.
- [36:59]
Alistair Campbell
Because, well, somebody's been saying that they got the formula by asking ChatGPT if you wanted to do. Terrifying.
- [37:05]
Rory Stewart
Certainly what's happened is that. And this is one of the reasons why this is so profoundly worrying, which is that if you Talk to insiders 24 hours before this happened, a lot of people who claimed to be close to Trump were confidently saying, don't worry, it's not going to be so bad about 10% tariffs. It's going to be very carefully calibrated. There was a huge pushback from some Republican senators a few hours before, but the thing that was produced wasn't in any way the result of the U.S. treasury or the U.S. commerce Department spending three months doing a detailed analysis of the economic conditions and subsidies in all these countries. As you pointed out, it was a completely arbitrary formula which basically says, anybody who has a trade surplus with the United States must be ripping us off, and we will hit them exactly in proportion to the size of their trade surplus. And the reason that this is problematic is that the whole world now of trying to anticipate America is about cod psychology about Trump. So if we think about our friend Mooch, you literally go from, he's not going to be able to keep Elon Musk because he can't bear sharing the limelight with someone, and then when Musk remains, it becomes, he likes rich people. That's why he keeps him. But these are very, very cod psychology, blunt, banal statements. But the whole thing has become about trying to read the weird directions of Trump's mind, as opposed to being able to come up with some sort of internal logic which allows you to plan.
- [38:45]
Alistair Campbell
But that also goes for those people. I thought one of the most pathetic things about the whole thing was the Cabinet sitting there like nodding dogs, laughing at his jokes, glowing if he picked them out and said, rubio would love to have a surplus like that. And the Agriculture Secretary, she's doing a great job. She's got the egg prices down there. And even during this, even during his speech, he started off by saying, we've got the egg prices down by 50%. Then suddenly it went to 59% three minutes later as he was talking. And he just sort of makes this stuff up as he goes along. There's a couple of really serious questions here, or Max Proctor. This trade war could end up as a real war very soon. Many countries are going to suffer. China and Japan, for example. The USA has gone to financial war. It will not end well, as happened in the 1930s. This is unfettered capitalism at its worst. I mean, we don't want to get overly dramatic, but you sort of did feel, watching it, that the, the one thing that a lot of the world has taken for granted has been your American leadership on a military level, on a geopolitical level, without overstating it, on a moral level. And that does feel the combination of what he's done on Gaza, on Ukraine and now on this, it does feel like the complete vacation of that space.
- [40:06]
Rory Stewart
And Gillian Tett wrote quite a good article in the ft. Sorry, A very good article in the ft saying that what we're looking at is the use of this as just raw power. And Felix Martin's also drawn this analogy, saying that tariffs are the new sanctions. So the idea is that the sanctions against Russia didn't work. They were able to wriggle out. So sanctions has become, for some people in Trump's administration, the way of hitting your enemies. But the problem is, if you look at the global picture of what he's doing is it is not what you would expect your treatment of your traditional allies and your traditional enemies to be. I mean, you've just pointed out that he's exempted Russia, Belarus and Cuba, and he's hit very, very hard places like Vietnam that the US Were relying on to try to balance against China, Japan. So these are countries where theoretically, put it back just three months. The American story was supposed to be, and this was a story actually produced by JD Vance and Mike Waltz and people right in the center of his administration. China is the number one strategic adversary of the future. The US Is creating these alliances, balances to balance China, and that was supposed to be Japan, Philippines, South Korea, Australia are going to be our allies. India, India, who we're going to balance against China. But look at what he's done in the tariffs. This has not hit China and let our allies off. This has hit everybody. Punch everybody in the face simultaneously.
- [41:46]
Alistair Campbell
Well, he said throughout, there's several times in the speech he made this point. It's one of his sort of constants, is that, you know, sometimes your enemies treat you worse than your friends. What do you think about the. We've got quite a lot of questions about the UK position. JB Starmer must stand firm. And with the EU as well as other allies, I mean, you did have the, you know, Farage and the Brexit people go out and say, oh, this is the first. This is the Brexit dividend You know, we did, we got hit less hard than the European Union. But I think that's more about a bit of divide and rule.
- [42:16]
Rory Stewart
But it's also just quickly on that, I'll say it's simply that in their calculations we don't have a trade surplus with them.
- [42:22]
Alistair Campbell
Well, we don't.
- [42:23]
Rory Stewart
They sell us slightly more than we sell.
- [42:25]
Alistair Campbell
Albanese said if he actually was applying a reciprocal formula, there would be zero tariff on Australia, instead of which they've been hit as well. So no, but I, but, but I think that the, the Keir Starmer position is, is interesting because it relates to what he's been trying to do more generally of not have a choice. And I think Maloney, I'm sure Kier won't necessarily enjoy being compared in this way, but Maloney's in the same position. She essentially because she was marketing herself, projecting herself as the European leader that was closest to Trump. She was there at the inauguration with Elon Musk and all that stuff. But she's now, she was in the Italian parliament yesterday getting a very hard time. You know, are you with Europe or are you with America? Now it's easier for a way, in a way for Kier because we are sadly outside the European Union. But the big choices are going to come. And I think the, the, what the Europeans do I think is going to be central because of course the tragedy is that Britain outside the European Union isn't as economically powerful. But the European Union remains one of the economic powers in the world that the Americans have caused to fear. And they're already, there's, there's something that we probably are going to have to get used to, to hearing. And this is, this is a new acronym, the aci, which is the anti coercion instrument. And that, that is the kind of ultimate, if the European Union then they're not talking about that now, but that is the kind of ultimate step where they do tariffs, they do restrictions on trade and services, the big tech giants get hit. And, and I, I think that we're they, I think China, they'll be worried about the eu they'll be worried about India to some extent, maybe some of the bigger Latin American economies. But there's a great question we had there from, from, let me just try and find this question. It was, it was basically asking when, when are countries here we are, Lou, why aren't countries collaborating against these tariffs? Will serious conversations start? I suspect they are underway. I suspect that's what the European Union are doing that they're not going to do anything overnight. They're going to discuss it and think about it and liaise with business and then have a plan.
- [44:32]
Rory Stewart
Last one, because I know that you, you've got to go, Alistair. But one of the themes that comes across in the questions and in what Trump says is the idea, this is about relocating manufacturing back to the United States. So the idea is that, and you can see this, Bamford, for example, has just announced today that they're going to be producing more vehicles in the United States and fewer in the United Kingdom. But very few people are going to follow Bamford, despite Trump's theory. And the reason for that is there's no consistency or predictability. So if you said that, I've got bipartisan agreement, and for the next 20, 30 years, we're really going to focus on the US auto industry and we're going to put tariffs against the rest of the world and they're not going to move for 20 or 30 years. The car companies will think, okay, it's difficult, it's going to cost us billions of pounds or euros to relocate, but we'll open a factory in the United States. But if you're dealing with somebody who puts tariffs up, drops them down 36 hours later and then begins to make it clear, and he keeps saying this, I'm open for negotiation. I'll cut a deal with Vietnam, I'll cut a deal with this sector. If you are the board of the company, you're going to sit there saying, look, I'm not going to spend tens, billions of euros relocating my factories to the United States. I'm going to hope that my prime minister can negotiate an exemption. I'm going to hope that my sector is going to get an exemption, and I'm going to wait it out for three years in the hope that a new administration comes and reverses all of this. So what we're actually going to see is no investment taking place. People are going to be reluctant to invest in their own countries or in the US it's going to be difficult to get credit. So people are going to be reluctant to lend for business investing because of the uncertainty. Interest rates are going to go up and there's going to be a general slowdown in investment. And I keep coming back to the real world consequences and trying to get away from penguins. But over the next few weeks, we have to keep coming back to this because this is the makings of a global economic crisis.
- [46:39]
Alistair Campbell
And my final point, Ray? Well, a couple of final points. Breakfast in the hotel in Paris this morning. I was flicking through the papers and raging and tutting and muttering and what have you. And a couple at the next table from St. Louis, Missouri, and the woman just leant across, she says, can we just say sorry? We're really sorry. We really tried, but we're sorry. And she did say, and her husband, they both said that they live in quite a kind of Trumpian area. But they did say people feel powerless, but they are willing to fight. And she said that, you know, I've stopped holding my tongue. I say what I think and so forth. But my final point, Rory, was the other person that Trump keeps talking about when he's sort of projecting the history of this thing is this guy, the 25th American president, William McKinley. And he's constantly comparing himself and saying that McKinley was the guy. He was the guy. He was known as tariff Man. What I hadn't realized is that the day before McKinley was assassinated, or was wounded, rather, when somebody tried to kill him in the speech that he made the day before, he said this. Commercial. Wars are unprofitable. A policy of goodwill and friendly trade relations will prevent reprisals. Reciprocity treaties are in harmony with the spirit of the times. Measures of retaliation are not. So I think if even McKinley was basically after he'd had his tariff war, had reached the view that maybe that wasn't a sensible thing to do. But I think the thing you have with Trump compared to term one, he is now surrounded by people from JD Vance down who just go along with whatever he says and kind of work around him. And so I think we're in for a very. I think I agree with you what you said at the start. I think this is more serious as anything he has said and done so far. He may not know that. He may not really have thought through the consequences. And as you say, world leaders and businesses will be scrabbling to try to unwind this. But I suspect that in many, many ways, the. The die is cast.
- [48:49]
Rory Stewart
Yeah. And politics and retaliation will kick in and make things worse in ways we can't imagine. Well, thank you, Elster. Have a great day. And thank you, everybody for joining us.
- [48:57]
Alistair Campbell
See you soon. Take care. Bye. Bye. So here's a clip from our series on the Troubles. This is the strangest thing about this story is that Northern Ireland is so small. And listen, there are other. I mean, you could tell a similar story about Sarajevo or any number of other types of places where there's been a conflict. Rwanda, and then the conflict ends and everybody still kind of lives in the same community and you see these people. But, you know, there's an instance, even as adults, where Helen McConville is with her own family in McDonald's and sees one of the people who abducted her mother. There's a moment that I describe in the book where Michael McConville actually gets into the back of a black taxi in Belfast as an adult, and he sees in the mirror in the front of the taxi, he realizes that the man driving him is one of the people who decades earlier, abducted his mother. And the strangest, most eerie aspect of this is he doesn't say anything, and he doesn't even know if that guy recognizes him. And they drive in silence. And then he just pays the guy's money and leaves. To hear the full series, just search Empire, wherever you get your podcasts.