I talked a bit about Trump’s tariffs yesterday, but there were some interesting bits in the press today about the ongoing knock-on effects they are having.
On the US side, it seems that many of the farming supporters he courted on his election campaign are feeling rather disappointed that his trade war has resulted in demand drying up completely from China.
They will be OK in the short term because they are covered by crop insurance and a $12bn buffer from the government to cover interim losses but the longer this goes on the more exposed they will become.
This is something that will be more of an issue over time.
On the OTHER side of things, it looks like some Asian countries may stand to benefit from the tariffs as companies look to source from places other than China for raw materials.
For instance, tech companies in Vietnam and Malaysia could get benefit and other imports such as shoes, toys and textiles could be sourced from Vietnam, India, Bangladesh and Indonesia.
It seems to me that industries tend to take a long hard look at their supply chains in the event of a natural disaster – but this is very much a man made one!
The problem is that the longer this impasse goes on, the higher the chances of countries and industries finding alternative suppliers that will persist in the long term. This happened in America in the Jimmy Carter era with grain exports and caused American farmers a great deal of long term pain.
UK Services sector
The other thing I wanted to mention today was the sluggishness of the UK services sector as the latest IHS Markit and CIPS PMI survey showed a slowdown in business activity over the last month.
Given that it accounts for 80% of our country’s GDP, a slowdown is a source for concern especially as we enter the Christmas season and then Brexit. After a surprisingly good summer, it seems like we might be entering a bit of a chilly winter.