Blain’s Morning Porridge 28^th July, 2025: European Trade Deal provides a glimpse of the future.

“The Atlantic is no longer a pond, but has become an ocean once more.”

There are deals and there are deals. Some are good. Some are bad. Some are necessary – but will ultimately change everything. The US/Europe trade deal – much like the deals struck with the UK and Japan – is better than the alternative of no-deal, but at heart it’s a bad deal. There will be consequences.

Welcome to a new week in global markets. Perversely I woke up this morning thinking.. wow… it might be a normal week… what can possibly go wrong….? I wish…

One of the things’ I’ve learnt this year is how any doubts as to the wisdom of the US President immediately gets one labelled as suffering Trump Derangement Syndrome (TDS). It’s a real thing… but not the way his supporters use it.

Trump’s dominance of the US political scene is unparallelled – but there will be consequences in the way he’s completely re-written the script to reflect who he is, his values and what he believes. Embracing division, naked greed, self-interest and protectionism, are all in direct conflict with the values businesses ascribed the success of capitalism and subsequent growth to. Yet, he has succeeded in dominating the agenda to a degree no President has ever done before.

It really is extraordinary how swifty his perspectives have become the new American mainstream! To fully understand them, go to talk to a shrink who can explain his personality, and grasp why Trump’s Brand of America First policies are so repulsive to America’s allies.

For the sake of clarity let me describe the consequences of President Trump’s very real delusional syndrome as to what the rest of the world clearly sees. Let’s call it Trump Ergot  to describe the consequences of what underlies Trump’s dominance of the US political economy. Ergot is a fungal rot found on grains that causes madness, convulsions and craziness in Humans. It became famous in the Middle-ages when whole communities danced themselves into oblivion after becoming infected. I think that pretty much describes what we’ve been watching in Washington recently.

Over the weekend I became convinced the rest of the world are now in Stage 5 of Trump Ergot. Since the election, we’ve gone through all the stages: i) the Shock, ii) the Disbelief and Denial, iii) the Anger, iv) the Bargaining (trying to deal and make sense of it),  and v) now we have Acceptance of the Trump presidency. It is what it is – get used to it.

The good news is it’s now likely we are not going to see the World’s trade dissolve into nothingness. We are not about to see Trump’s Liberation Day tariffs trigger the worst global recession since the 1930s. There is less talk about seizing Greenland, invading Canada or revoking NATO treaty obligations. There are still the convulsions about Epstein revelations, the “trumped” up charges Obama is a traitor, and a host of other stupidities running unchecked in DC, all to come.

Markets are going to love it. The trade deals mean US stocks will no doubt continue to run higher – convincing themselves of the future value of the AI narrative, the irresistible rise of crypto, that American exceptionalism is going to reap all the returns, buoyed by the outlook for the economy, and the rate cuts soon to come as Trump bullies the Fed into submission.

Markets will blithely ignore the concentration risks and sheer unsustainability of current valuations. US treasuries? Nothing to see here… move along. They may be in for a rude awakening when/if the real costs of tariffs start to bite.

But, this is also where Trump Ergot is forking into two quite different  things – international and domestic.

Internationally, Trump Ergot has changed, utterly, the way the USA is now perceived globally. My generation grew up on a diet of American cartoons (I still love Top Cat), Cowboy films, and series like Star Trek where it was clear who the good guys were. My kids grew up watching Friends – a lifestyle now unimaginable for most European young workers trapped in flat-lined wages, rising debt and unaffordable rents.

That was a very different America to what we see today. American First. A protectionist, vaguely dystopian proto-police state, riven by lies and bigger lies and fake news – which are left unchallenged. It is not Camelot. It is not even Hazard County.

Over the weekend, the EU accepted the new reality. It made the call it is acceptable for the EU to sign a US-centric and focused trade deal that will charge US consumers/European firms (they will split the impact between them) 15% on European imports, but charges US exports zero. Its blatantly lop-sided, and it will inevitably further widen the divide the West.

EU President Ursula von der Layen shrugged and said it was the best they could get. She’s herded the 27 European Union members into a deal to give them some stability, avoid a more damaging deep trade driven recession to accept a smaller hit on EU competitiveness. It is not a good deal. It is a deal. It was stability at a cost. It is not a good deal.

Alongside the 15% tariffs on European goods, Europe has apparently promised Trump they will buy lots of Boeings, American cars, armaments (which we are doing anyway to give to Ukraine, because Trump has claimed the credit, but its Europe that’s paying for them) and American chlorinated chicken. Europeans will do none of these – Airbuses crash less often, American cars are not as good and don’t fit Europe’s narrow roads, and we’ve plenty of food we want to eat.

Across Europe the clients I work with will reckon it’s a bad deal – but marginally better than the alternative of all-out trade war between the US and Europe at a time when Europe’s primary goal is to build and secure its own security. It is a deal, but not one founded in trust, mutual admiration or faith in each other – it was a deal cobbled together to avoid no deal.

And Americans themselves are changing. A Democrat chum was over at the weekend. Naturally he was asked lots of questions. Perversely, he found himself defending Trump and the New America. By the end of day he admitted he was beginning to sound like a complete Trumptard himself.

When the Democrats start to behave like the Republicans, it sums up the new, new US reality – it has changed, and changed utterly. And, that is, sadly, the new American reality. Increased political polarisiation, distrust, fake news, lawfare taken to the 9nth degree. That means the global investment approach to investing in the US needs to change to accept that new reality.

Out of time, and back to the day job…

Bill Blain

Author, The Morning Porridge

CEO Windshift Capital

Partner Shard Capital