Why the device you’re reading this on shows how Trump’s tariffs could herald one of the most painful episodes in modern times
Of course this is dramatic. Of course markets are slumping.
Because if you take Donald Trump at his word (something investors are now finally beginning to do), he is attempting single-handedly to reverse and uproot decades worth of economic history in the space of a few months.
Because if this really is “the end of globalisation”, as a few politicians, including Keir Starmer, are now calling it, it constitutes one of the most wrenching, painful episodes in modern times.
Money: Petrol prices could tumble within 10 days
To see what I mean, the best place to begin is by pondering the hidden life of the device you’re reading this on. I’m assuming it’s a smartphone, specifically the latest iPhone, but most of the following applies for other smartphones and, indeed, many laptops or desktop computers.
The display was made in South Korea or Japan. The camera module was made by Sony in Japan (who have a particular expertise in this type of specialised silicon that few other companies have been able to match). The batteries (for the latest iPhone at least) are made in India, though these days, the vast majority of the world’s cells are made in China.
On it goes – the memory chips from South Korea, which has a near monopoly on solid state storage silicon. The logic chips – the ones that help the device “think”- made in Taiwan, albeit with intellectual property (IP) from all over the world, including America and even Britain. Some of the chips do indeed come from the US – in particular the modem, though the company behind them (Qualcomm) sometimes manufactures in Taiwan. But there are some from Europe too – most notably the spatial sensor chips that come from Bosch in Germany.
Globalisation is in your hands
If you are looking for an example of “globalisation”, you couldn’t do much better than the smartphone. But even this potted geography lesson understates it because those fabrication plants in Taiwan and South Korea, turning out those silicon chips that help the phone think and remember stuff, are totally dependent on machines made by a company called ASML, based in the Netherlands. Those Dutch machines, in turn, contain components from hundreds of other companies around the world, including in Germany and the US. On it goes.
Nor is this degree of interconnectedness solely to be found in high-tech equipment. The other day, I was up in Scunthorpe at the blast furnaces of British Steel. It turns out the iron they smelt there doesn’t just go into the rails that striate this country. They also make the steel that go into the tracks of Caterpillar trucks.
Trump tariffs latest: UK stock market suffers
Politics latest: Trump tariffs ‘bad news’ for global economy, cabinet minister
That’s right: the iconic tracked diggers – for many people the most American of all things – are all mounted on steel “track shoes” made in the North East of England (the plant is a little further north of Scunthorpe, in Skinningrove).
The further you look around the world of manufactured products, the more you realise that nearly everything you touch on a daily basis has, in the months before it arrived in your life, been on a long trip from factory to factory, taking it all around the world. That device you’re reading this on may say “made in China” on the back, but that’s an enormous over-simplification. It was made more or less everywhere.
This is the way the world works today – like it or not. In a sense it’s the ultimate extension of what Adam Smith discussed back in the earliest days of economics, when he described a “pin factory” where the work of making a simple pin was divided up between different people, with each worker specialising in a particular task rather than trying to make the whole pin themselves.
The swings and roundabouts of globalisation
Today, we have a sort of international division of labour. Today, nearly everyone goes to China to get their batteries. They go to South Korea to get their memory chips. The upshot is these factories have become ever more efficient at making their products. And – here’s where it matters for the rest of us – the price of making and buying this stuff goes down.
Today, the reason one can buy what would once have been classified as a supercomputer for a few hundred pounds is because of this division of labour. Globalisation made everything, from computers to Caterpillar trucks to T-Shirts, that bit cheaper than they would have been had we attempted to manufacture them all in a single country.
Trader Christopher Lagana. Pic: AP
But the ugly side of this economic shift is that those regions that used to do the manufacturing – be it the “rust belt” of America or the Midlands and North East of England – have seen much of their traditional work disappear. And while economists have insisted that cheaper products make everyone better off in net terms, the reality is that these parts of our countries haven’t got better off. They have been hollowed out. And in time, resentment about globalisation has built up – for good reason.
Trump’s aspiration
This is the world we inhabit today. Unpicking it will be phenomenally difficult and phenomenally expensive. Trying to relocate all those functions – factories and labour markets with expertise that has built up over decades – would be incredibly difficult and would take a long time. But that seems, as far as anyone can tell, to be the aspiration of Donald Trump. That appears to be the objective of his tariff policy.
Up until now, most investors had assumed that the president wasn’t entirely serious about this – that he merely intended to scare a few Asian companies into opening factories in key swing states. And who knows – that may well turn out to be the case. But he certainly seems more serious this time around – and less phased by the negative market reaction.
In the meantime, we are left with those tariffs.
Costs will go up
Think back to that iPhone. Think back to those Caterpillar tracks. All those components now face swinging tariffs when they arrive in the US. That will push up the cost of buying pretty much anything in the US and will accordingly push down the demand for those goods. And since America is the world’s consumer of last resort – the biggest importer of goods anywhere – that has an enormous bearing on demand around the world.
So, yes, of course, this is dramatic. Of course, markets are slumping. No one knows what the US president will do next. But either way, what happened last week in the Rose Garden will reverberate for a long time to come.
Donald Trump has said he will be “involved” in the decision on whether Netflix should be allowed to buy Warner Bros, as the $72bn (£54bn) deal attracts a media industry backlash.
The US president acknowledged in remarks to reporters there “could be a problem”, acknowledging concerns over the streaming giant’s market dominance.
Crucially, he did not say where he stood on the issue.
Money latest: The cheapest days to travel by plane
It was revealed on Friday that Netflix, already the world’s biggest streaming service by market share, had agreed to buy Warner Bros Discovery’s TV, film studios and HBO Max streaming division.
The deal aims to complete late next year after the Discovery element of the business, mainly legacy TV channels showing cartoons, news and sport, has been spun off.
But the deal has attracted cross-party criticism on competition grounds, and there is also opposition in Hollywood.
Please use Chrome browser for a more accessible video player
Netflix agrees $72bn takeover of Warner Bros
The Writers Guild of America said: “The world’s largest streaming company swallowing one of its biggest competitors is what antitrust laws were designed to prevent.
“The outcome would eliminate jobs, push down wages, worsen conditions for all entertainment workers, raise prices for consumers, and reduce the volume and diversity of content for all viewers.”
File pic: Reuters
Republican Senator, Roger Marshall, said in a statement: “Netflix’s attempt to buy Warner Bros would be the largest media takeover in history – and it raises serious red flags for consumers, creators, movie theaters, and local businesses alike.
“One company should not have full vertical control of the content and the distribution pipeline that delivers it. And combining two of the largest streaming platforms is a textbook horizontal Antitrust problem.
“Prices, choice, and creative freedom are at stake. Regulators need to take a hard look at this deal, and realize how harmful it would be for consumers and Western society.”
Paramount Skydance and Comcast, the parent company of Sky News, were two other bidders in the auction process that preceded the announcement.
The Reuters news agency, citing information from sources, said their bids were rejected in favour of Netflix for different reasons.
Paramount’s was seen as having funding concerns, they said, while Comcast’s was deemed not to offer so many earlier benefits.
Paramount is run by David Ellison, the son of the Oracle tech billionaire Larry Ellison, who is a close ally of Mr Trump.
The president said of the Netflix deal’s path to regulatory clearance: “I’ll be involved in that decision”.
On the likely opposition to the deal. he added: “That’s going to be for some economists to tell. But it is a big market share. There’s no question it could be a problem.”
Business
Young people may lose benefits if they don’t engage with help from new £820m scheme, government warns
Young people could lose their right to universal credit if they refuse to engage with help from a new scheme without good reason, the government has warned.
Almost one million will gain from plans to get them off benefits and into the workforce, according to officials.
Latest updates from the Politics Hub
Pic: iStock
It comes as the number of young people not in employment, education or training (NEET) has risen by more than a quarter since the COVID pandemic, with around 940,000 16 to 24-year-olds considered as NEET as of September this year, said the Office for National Statistics.
That is an increase of 195,000 in the last two years, mainly driven by increasing sickness and disability rates.
The £820m package includes funding to create 350,000 new workplace opportunities, including training and work experience, which will be offered in industries including construction, hospitality and healthcare.
Around 900,000 people on universal credit will be given a “dedicated work support session”.
That will be followed by four weeks of “intensive support” to help them find work in one of up to six “pathways”, which are: work, work experience, apprenticeships, wider training, learning, or a workplace training programme with a guaranteed interview at the end.
However, Work and Pensions Secretary Pat McFadden has warned that young people could lose some of their benefits if they refuse to engage with the scheme without good reason.
“Doing nothing should not be an option,” he told Sky News’ Sunday Morning with Trevor Phillips.
“If someone just took that attitude, yes, they would then be subject to, you know, the obligations that are already part of the system.”
“What I want to see is young people in the habit of getting up in the morning, doing the right thing, going to work,” he added.
“That experience of that obligation, but also the sense of pride and purpose that comes with having a job.”
Some young people on benefits will be offered job opportunities in construction. Pic: iStock
Read more from Sky News:
Child poverty strategy unveiled – but not everyone’s happy
Universal credit claimants soar by over million in a year
The government says these pathways will be delivered in coordination with employers, while government-backed guaranteed jobs will be provided for up to 55,000 young people from spring 2026, but only in those areas with the highest need.
However, shadow work and pensions secretary Helen Whately, from the Conservatives, said the scheme is “an admission the government has no plan for growth, no plan to create real jobs, and no way of measuring whether any of this money delivers results”.
She told Sky News the proposals are a “classic Labour approach” for tackling youth unemployment.
Please use Chrome browser for a more accessible video player
Youth jobs plan ‘the wrong answer’
“What we’ve seen today announced by the government is funding the best part of £1bn on work placements, and government-created jobs for young people. That sounds all very well,” she told Sunday Morning with Trevor Phillips.
“But the fact is, and that’s the absurdity of it is, just two weeks ago, we had a budget from the chancellor, which is expected to destroy 200,000 jobs.
“So the problem we have here is a government whose policies are destroying jobs, destroying opportunities for young people, now saying they’re going to spend taxpayers’ money on creating work placements. It’s just simply the wrong answer.”
Ms Whately also said the government needs to tackle people who are unmotivated to work at all, and agreed with Mr McFadden on taking away the right to universal credit if they refuse opportunities to work.
But she said the “main reason” young people are out of work is because “they’re moving on to sickness benefits”.
Ms Whately also pointed to the government’s diminished attempt to slash benefits earlier in the year, where planned welfare cuts were significantly scaled down after opposition from their own MPs.
The funding will also expand youth hubs to help provide advice on writing CVs or seeking training, and also provide housing and mental health support.
Some £34m from the funding will be used to launch a new “Risk of NEET indicator tool”, aimed at identifying those young people who need support before they leave education and become unemployed.
Monitoring of attendance in further education will be bolstered, and automatic enrolment in further education will also be piloted for young people without a place.
-
Sports2 years agoStory injured on diving stop, exits Red Sox game
-
Sports3 years ago‘Storybook stuff’: Inside the night Bryce Harper sent the Phillies to the World Series
-
Sports2 years agoGame 1 of WS least-watched in recorded history
-
Sports3 years agoButton battles heat exhaustion in NASCAR debut
-
Sports3 years agoMLB Rank 2023: Ranking baseball’s top 100 players
-
Sports4 years ago
Team Europe easily wins 4th straight Laver Cup
-
Environment3 years agoJapan and South Korea have a lot at stake in a free and open South China Sea
-
Environment1 year agoHere are the best electric bikes you can buy at every price level in October 2024