00:00Well, for more, we can speak to economist John Ashcroft. He is from the website, The Saturday Economist. John, sorry to get you in here on a Sunday, but thank you for speaking to Ferris Direct. First question here is, is Trump bullying Mexico and the EU? Is that what this is?
00:17We see it as a great manoeuvre by Trump. I mean, it's a series of actions through the year, beginning with the April 1st declarations and then the declarations in July. So it's a part of a continuation to put pressure on the negotiations.
00:31So suddenly, for the EU and for others, 10% tariff seems a pretty good deal, whereas you're moving from a comparative free trade zone between the EU and the USA. And yeah, we're at a cop 10% at the moment because 30% is an enormously high number, manufactured out of nowhere.
00:49Yeah, and the risk here is that the US president keeps moving the goalposts. So 10% doesn't seem like it's very bad, but Donald Trump might have an incentive to maybe raise that later on. So does the EU have any leverage here to prevent that?
01:03It's very difficult because Trump is so unreliable and he's so unpredictable and he just looks for, if you've got a bad news in one area of his policy, then he'll seek to pluck a headline by some other area announcement and tariffs are a great option for him on that space.
01:22But he is unreliable because we have changes in the mood and changes in policy reacting. And it's difficult for the EU, as we're hearing, to understand how to react.
01:33Should they brace up and contest and challenge, as is doing China, or should they acquiesce more like the UK has done and settle for 10%? A very difficult political dilemma and a very difficult economic calculation.
01:47Yeah, and I think that's reflected by the reactions coming out of the EU, Ursula von der Leyen. A bit careful with her words, out of Germany, though, calls for action. Have you been noticing a shift in tone by the way European officials have been responding to this ongoing trade uncertainty?
02:07Again, it's dependent on the vulnerability of the territory. For example, the Dutch have been quite aggressive in their suggested policy response, but they're not as at risk as are, say, France and Germany.
02:20Germany has a high dependency on cars going into the US. France has a high dependency on aerospace going into the US. So they have got a lot to lose.
02:28But nevertheless, it's difficult quite how to understand. And also what all this means.
02:34You know, on average, it takes about three years to secure a trade agreement.
02:38And how on earth the customs officials, the border officials can get their update by text or whatever on that day to work out what tariffs should be included on some 2,000 items coming into the country from 200 territories?
02:53It's just a bizarre nonsense. And it really is leading to a chaotic assessment of border policy and the impact on the world economy, not just the EU, but the US as well.
03:05It's a shocking development. It's quite staggeringly amazing.
03:09It really is. I'm wondering if you can put it into perspective for me.
03:12The markets are rattled. How long before this sort of trickles down to consumers?
03:18And when we look at two options here, either the EU concedes or there's brinksmanship and we move towards a trade war.
03:29If there is a trade war, what would the impact be?
03:32Well, as it is, the impact of 30% tariffs on the EU, which is suggested, would lead to reduction in the German economy and the French economy by the order of 0.25%, a quarter of 1%.
03:46For the EU overall, it's 0.111%.
03:49It's very small, actually. But for certain sectors, like big pharma, aerospace, cars, food, in the case of Italy, the sexual implications are very severe and leading to a very narrow job loss, a big job loss, job loss and a very narrow focus in the economy.
04:06So if we have to tough it out, if they have to tough it out, OK, but it cannot, it will not go on for beyond three months or six months.
04:14It has to be brought to the table to settle because the US is not immune from the impact of these tariffs.
04:21All right, John, thank you very much, John Ashcroft, economist and from the website The Saturday Economist as well.
