Blain’s Morning Porridge July 8th 2025 – Trump Tariffs part 2. Yawn. Get over it.
“Markets are unchanging. But they never stop evolving because the world never stays the same.”
Trump has been sending “for your immediate attention”, letters to former friends and allies hiking tariffs and threatening retribution if they retaliate. Yawn. Who cares? The Global economy gets it. America is no longer America. Global trade is shifting. Excellent – that spells opportunity!
We get used to everything – and we adapt faster in times of strife. A year ago the idea a sovereign nation would blithely impose crippling global tariffs on its long-established friends, allies and competitors, and expect them to bend over and say; “thank you sir, can I have some more…” would be dismissed as the mad haverings of a dystopian crackpot….
Today it’s happening and no one bats an eyelid. Trump is busily sending letters via social media to Korea, Japan and the rest telling them larger 25% tariffs will be imposed, and doubled if they dare reciprocate. In the fine print, after the “thank you for your attention to this matter” sign off, is the small print: Your nation has till August 1st to do a deal – any deal – with the USA. By way of a footnote, any nation that dares make the ultimate anti-American protest of aligning itself with BRICS will be slapped by an additional 10% tariff.
No one thinks it strange anymore. That’s Trump. We shrug. We get on with it. The markets barely blink. The S&P 500 dipped 1%. The market thought about it. Concluded its just another TACO Trump ploy, deals will get done, and resumed its upwards trajectory. The bottom line is no one expects the global trading economy to disappear in a sudden puff of logic because Trump delights in throwing spanners in the works. History shows global trade is resilient to both hot and cold conflict, and swiftly adapts.
However, there are always consequences – and these are what will matter for long-term markets.
There appear to be two ways of looking at the outlook for the Global Economy at present.
- The first is fear – panic about how geopolitics has changed and how there are rising risks of conflict, while dithering about how new alignments will crush global trade and impact future investment returns.
- The second is to figure out how the current ructions change the immediate corporate outlook and sovereign risks in terms of where to invest now to reap ongoing upside from how the world adapts.
I will go with the second. Change is opportunity. There will likely be the small matter of a potential global recession, a bout of inflation, and even some market instability from the economic consequences of Trump’s disruption of global trade to factor in – but again, that’s an opportunity. The damage will be short-term, and less than our worst fears. The world adapts. Get over it.
It’s unclear what the new geopolitical world might look like – but the nations likely to dominate the future will be trade driven, because that’s what creates wealth, not military adventurism or conflict. China is not a clear successor to the USA, it is not exactly a bright shining beacon of economic prosperity at present. But the entirety of the South East Asian economy could be – which is one reason the BRICS concepts of a post America economic order is potentially so interesting – I must write about this some more; what follows America.
Trump’s combative trade policies are accelerating change. The choice for allies is only now becoming clear as they come to understand the new MAGA America First. Once the world was defined by those who stood with and against America. Today, all these relationships are strained, meaning there is nothing to stop Europe or others from embracing new relationships. This is an opportunity for new trading ties to form – not necessarily between Europe and China, but between Europe, the Middle East and Asia, sans America.
Trump supporters say the way Canada caved into to the threat of immediate tariffs is a sign of strength. My Canadian chums say it was an easy way to get rid of the distraction America has become.
Fundamentally, wealth is not about tanks, but about widgets – the fundamental building blocks of everything and anything – and who is buying them. The axis of global wealth is already moving to South East Asia – the greatest concentration of growing consumer and industrial wealth. As America contracts, these nations will become the world’s richest and most influential. I doubt they will forget Trump in a hurry. Or how America behaved in these dying days of American Empire.
Even Europe, the somnambulant continent of faded baroque palaces and state mandated lunch breaks, is waking up to the new reality that America stopped being America on January 20th. Trump is a picture of how a new America, no longer aligned to Freedom or Democracy, would quite happily sell us down the river to Russia for a few dollars more.
But the reality is Russia looks an increasingly hollow threat. A Russian Minister apparently shot himself yesterday after being caught in a corruption crackdown. The oligarchs are grumbling about their wealth being seized to fund the war. Ukraine is a stalemate – Russia still pretending it’s a mere police action, but it’s a war they simply look incapable of winning. State corruption means they will never be honest or rich enough to afford victory. That gives Europe the time it needs to rearm and realign itself, and maybe even become economically relevant again after rearmament triggers economic rebirth.
Meanwhile, global commerce is changing. I’ve been fascinated to watch the bidding war in AI. Facebook/Meta is willing to pay top AI engineers millions to jump ship, the latest being a raid on Apple to secure its AI head. That will leave Apple’s already struggling AI efforts well behind – it’s apparently considering outsourcing smart-Siri. But where is all that cash really going?
The cost of American AI and Tech that should be worrying investors. Over the last decade Tesla is not the only American mega-tech stock that’s spent billions to make millions. We are so fascinated by the increasing prices of American stocks, that we don’t actually look at the bottom line of how much they are actually making. In many case, the returns from these stratospherically priced stocks are sufficient, but hardly enough to justify their current valuations.
The problem likely to end the era of American stock exceptionalism is the issue of excessive capital abundance. America is where firms go to list, because they can achieve higher valuations, even though their businesses are just the same. America is where start-ups and growth firms go for access to Private Equity Capital – because that’s where the money is.. In the USA capital is cheap so founders and executives get rich and wealthy and distracted… and that’s maybe why Chinese EV makers and AI start-ups like Deepseek are doing it faster, smarter and cheaper because their capital has a cost.
Fundamentally, that is what is really going to change the world – when the nations that once bought America start to realise there is a wider choice…. And the rest of the world wakes up to the fact they can do it better.
So, nothing to panic about then. Just start looking at the rest of the world rather than just Trump’s America?
If only…. I suspect the trickster gods of markets are not finished with us yet.
Financial markets are oft detached from the real world they exist in. We were reminded how closely they are linked by the Pandemic in 2020. We’d be wise to remember threats, like climate change, which I raised yesterday about warmer oceans fuelling greater climate chaos, and how heat-waves, drought and famine could trigger even great migrations… and a time when warming unstable temperatures, and the fact America has pulled global aid and defenestrated WHO, could unleash new pandemics…
Just saying… As a grumpy Scotsman I didn’t want to end this morning’s porridge sounding too enthusiastic…
Out of time, and back to the day job…
Bill Blain
Author, The Morning Porridge
Partner Shard Capital
