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China has, as expected, hit back at Donald Trump’s imposition of a 10% tariff on its exports to the United States.

Beijing has slapped levies of between 10-15% on a range of energy products that imports from the US.

But what has surprised observers – particularly when Mr Trump kicked off the trade war over the weekend – has been the president’s comparatively lenient treatment of China and, moreover, Beijing’s calm response.

While America’s two closest neighbours, Canada and Mexico, were hit with 25% tariffs (falling to 10% for Canadian energy exports) – since put on ice – China was merely hit with a 10% levy.

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That struck many observers as curious since China is regarded as a bigger trade adversary by the US than Mexico and Canada, with the latter traditionally seen as a close friend to the US, particularly through the pair’s involvement in the ‘Five Eyes’ security alliance along with Australia, New Zealand and the UK.

The big question raised by this is what motivated Mr Trump to do this.

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The thinking is that the president was trying to bring China to the negotiating table and that, by initially hitting a close ally like Canada harder, he was trying to send a message to China’s leaders as to what they might face further down the line.

That impression was reinforced by Mr Trump’s overnight description of his 10% tariff on China as an “opening salvo”.

Why is China so calm?

That is not the only curiosity concerning this affair.

The other is the relatively calm response from Beijing. While Canada immediately responded with retaliatory measures and Mexico indicated that it would, China merely murmured in the first instance about taking “necessary countermeasures” and indicated that it would raise a complaint about the US with the World Trade Organisation.

Since then, Beijing has of course hit back with tariffs of its own on US energy imports, as well as launching an antitrust investigation into Google and adding the parent company of Tommy Hilfiger and Calvin Klein on a blacklist of “unreliable entities”.

That gives Chinese president Xi Jinping something to take back off the table if, as expected, he speaks to Mr Trump in coming days as the pair seek to de-escalate this row.

But it all feels relatively restrained and raises the question of why China has responded in this way.

There is certainly a view in Beijing that, with Mr Trump’s first moves, China got off rather lightly compared with the Canadians and Mexicans.

That sanguine response may also indicate that Beijing knows it has other weapons it can deploy other than retaliatory measures.

Cards in China’s back pocket

For a start, China owns $769bn worth of US Treasury bonds. Dumping some of those aggressively – while hurting the Chinese – would push up America’s implied borrowing costs.

Alternatively, Beijing could allow its currency, the renminbi, to weaken on the foreign exchange markets, just as it did during Mr Trump’s first term of office.

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Trump tariffs: What is America’s trade position?

Either way, Mr Trump’s latest measures are unlikely to change the way Chinese businesses operate, particularly the country’s manufacturers.

They have become accustomed over several years, dating back to Mr Trump’s first term, to aggression from the US. They have adapted the way they do business accordingly, for example by shipping a lot of their exports to the US via third countries, most notably Vietnam.

Chinese businesses relieved

Even Chinese companies specifically targeted by Mr Trump – the e-commerce giants Temu and Shein – may not be too badly affected.

They were both singled out as the president closed the so-called “de minimis” loophole, dating back to 1938, which allows goods worth less than $800 to be sent directly to US consumers without incurring import duties or rigorous customs inspections.

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This has been a constant thorn in the side of US retailers and its removal helps explain why, for example, shares of Walmart were on Monday spared the spanking meted out to other US stocks.

Yet Shein and Temu are said to be taking the news calmly.

They may even be calculating that this is a short-term squall that will soon blow over – or calculating that, such is the enormity of their buying power and supply chains, they can simply ship inventory elsewhere in the meantime or even just warehouse it.

It is also worth noting that Shein, having been banned by India in 2020, has just begun selling in the country again.

Overall, then, Chinese businesses have reacted with relief to what has happened. They know it could have been worse.

It explains why, even though the Chinese economy is presently misfiring, the authorities in Beijing have reacted relatively calmly to what Mr Trump has done.

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L&G to kick off hunt for successor to Kingman

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L&G to kick off hunt for successor to Kingman

Legal & General (L&G), the FTSE-100 insurance and asset management group, is preparing to kick off a search for a successor to chairman Sir John Kingman.

Sky News has learnt that the company, which this week announced a major corporate deal in the US, is close to appointing headhunters to oversee the appointment process.

City sources said this weekend that Sir John was likely to step down from the L&G board and retire as chairman at its annual meeting next year.

That timetable will give the company, which will mark its bicentenary in just over a decade, about 15 months to identify and appoint its next chair.

It was unclear on Saturday whether any of L&G’s existing non-executive directors would be in contention for the role.

Sir John has become one of the City’s most prominent figures over the last decade, having been a surprise appointment in 2016 to replace interim chair Rudy Markham.

Since then, he has become chairman of Barclays’ UK ring-fenced bank subsidiary, which replaced an earlier role he held as chairman of Tesco Bank.

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He also presided over a landmark review of audit regulation in the UK in the aftermath of accounting scandals at companies such as BHS and Carillion.

Prior to his career in business, Sir John was a long-serving Whitehall mandarin, playing a leading role to Britain’s response to the 2008 financial crisis.

Following the bailouts of Lloyds Banking Group and Royal Bank of Scotland – now NatWest Group – he was named the first chief executive of UK Financial Investments, the agency set up to manage the taxpayer’s bank stakes.

While in that role, he oversaw the effective defenestration of Sir Victor Blank as Lloyds’ chair – a move which stunned the City.

Following that, he moved to Rothschild as an investment banker.

For most of Sir John’s tenure as L&G chair, the company was run by Sir Nigel Wilson, who oversaw a big push by the company into financing urban regeneration projects across the UK, and expanding its pension risk transfer business.

Sir Nigel’s successor, the former HSBC and Santander executive Antonio Simoes, has announced a number of efforts to slim down the group’s operations.

He sold Cala Homes last year for £1.4bn, and on Friday announced the sale of L&G’s US insurance business to its partner, Japan’s Meiji Yasuda, for $2.3bn.

As part of the deal, Meiji Yasuda will also acquire a 5% stake in the FTSE-100 group.

L&G said it would expand its share buyback programme by £1bn once the deal closes.

L&G said in December when it announced a series of board changes that Henrietta Baldock, who was named senior independent director-designate, would “lead the Board succession process for the Chair”.

It has not made a public announcement about the timing of the recruitment process to replace Sir John.

On Friday, shares in L&G closed about 1.2% higher at 241.7p, giving the company a market capitalisation of £14.24bn.

An L&G spokesperson declined to comment further.

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Billions for ‘unproven’ carbon capture technology will have ‘very significant’ impact on energy bills, MPs warn

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Billions for 'unproven' carbon capture technology will have 'very significant' impact on energy bills, MPs warn

The government is spending £22bn on “unproven” technologies which will have a “very significant effect” on energy bills, according to an influential committee of MPs.

There has been no assessment of whether the programme to capture and store carbon from the atmosphere is affordable for billpayers, said a report from the Public Accounts Committee (PAC) of MPs.

The financial impact on households of funding the project has not been examined by government at all, the PAC said.

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Even if the state’s investment pays off, the technology is successful and makes money, there is no way for profits to be shared to bring down bills, it added.

Private sector investors, however, would recoup investment, according to committee chair Sir Geoffrey Clifton-Brown.

“All early progress will be underwritten by taxpayers, who currently do not stand to benefit if these projects are successful,” he said. “Any private sector funding for such a project would expect to see significant returns when it becomes a success.”

That’s despite the vast majority (two-thirds) of the £21.7bn investment coming from levies on consumers “who are already facing some of the highest energy bills in the world”, it said.

But there is no evidence to say the programme will be successful despite the government “gambling” its legally mandated net zero targets on the tech, committee chair Sir Geoffrey added.

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PM to invest £22bn in carbon capture

There are no examples of carbon capture, usage and storage (CCUS) operating at scale in the UK, according to the PAC report.

As part of its work, the PAC heard the technology may not capture as much carbon as expected.

International examples show the government’s expectations for its performance are “far from guaranteed”, it heard as part of its inquiry.

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A threat to net zero

This lack of proof of the technology working is a threat to the UK reaching its net zero 2050 emissions targets.

Last year the government downgraded the amount of carbon it expects to store each year as the goals were seen as “no longer achievable”, but no new targets have been announced, creating a shortfall in the path to net zero.

It is now “unclear” how the government will reach its goal, the PAC report said.

“Our committee was left unconvinced that CCUS is the silver bullet government is apparently betting on”, Sir Geoffrey said.

The £22bn investment was due to be made over 25 years and into five CCUS projects.

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Interest rate cut – but economic growth forecast slashed in blow to chancellor

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Interest rate cut - but economic growth forecast slashed in blow to chancellor

The Bank of England has cut interest rates by another quarter percentage point, bringing down the cost of borrowing to 4.5%.

And in a sign that households can expect more cuts in the months to come, two members of the Bank‘s Monetary Policy Committee said they would have preferred to reduce rates even more, by a full half percentage point.

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However, the Bank slashed its forecast for economic growth, forecasting that the economy will skirt clear of a formal recession only by the narrowest margin in the coming months, and downgraded its estimate of the economy’s ability to generate income. And in a further blow to the chancellor, it said her latest growth plans, unveiled in a speech last week, will add nothing to gross domestic product growth in its forecast horizon.

The Bank’s governor, Andrew Bailey, said: “It will be welcome news that we have been able to cut interest rates again today. We’ll be monitoring the UK economy and global developments very closely and taking a gradual and careful approach to reducing rates further.

“Low and stable inflation is the foundation of a healthy economy and it’s the Bank of England’s job to ensure that.”

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UK interest rate cut to 4.5%

The Bank’s forecasts seem to indicate that there will be at least two further rate cuts in the coming years and that that will be enough to bring inflation down towards its 2% target. However, investors are betting on more cuts.

The Monetary Policy Report and Bank forecasts released alongside the decision today signal that the economy is due to have another few years of weakness. They cut the forecast for economic growth this year, next year and the following year, as well as raising the inflation forecast. The Bank also said that the economy’s potential growth rate had dropped, down from 1.5% this time last year to 0.75% at the moment.

It said that while it expected last October’s budget to boost economic growth by 0.75%, thanks largely to greater public investment, it also expected the National Insurance rise to weigh down on activity, in particular by pulling down employment.

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It also warned that the tariffs threatened by Donald Trump on various economies posed a risk for economic growth in the coming years, though it has yet to incorporate them into its models.

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