Tariff special with Times political editor Steven Swinford

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0:41We look forward to seeing you there. If you don't make your product here, then you will have to pay a tariff, a very substantial tariff, when you send your product into the United States. And by the way, you know, for years they knocked the word. The word tariff, properly used, is a beautiful word. One of the most beautiful words I've ever heard. It's music to my ears. A lot of bad people didn't like that word, but now they're finding out I was right.

1:16Hello and welcome to the Business Leader Podcast with me, Graeme Ruddick. And me, Dougal Shaw. Me, Sarah Vizard. And me, Josh Dombraker. Today we're going to bring you a special episode where we look at the basically the one story in town at the moment, which is Donald Trump's tariffs and how they're affecting the business world. We're going to be joined by Steve Swinford, the Times political editor and also business leaders, political expert to discuss what's going on behind the scenes, how this could all play out and what it means in both politics and business. Quick summary of where we are now is the average tariff rate in the US has gone from 2.5 % in 2024 to a staggering 24%, which is the highest in the world, ahead of people like Iran, Venezuela, every other country in the world.

2:04So it's a dramatic shift in terms of the global markets. The US obviously is the biggest economy in the world. There is a whole host of UK businesses trying to get their products and services into the US. Within that tariff rate of 24%, there are obviously big differences across industries, but also across countries. So the UK tariff is at 10%, which is half what it is for Europe, which stands at 20 % for the EU. Unsurprisingly, there's been a massive impact in financial markets. The FTSE is down about 10 % since the tariffs were announced on what President Trump branded as Liberation Day. And trillions of dollars has been wiped off financial markets.

2:47delighted to welcome Steve Swinford the political editor of the times to the business leader podcast Steve first question is sort of what I think I'm most fascinated in right now which is what what is the mood in in Westminster and in particular what is the mood within the government who obviously have a lot to deal with already and now have this on their plate so it is weirdly optimistic they think that they can make an opportunity out of this crisis they can see how it's affecting everyone and Keir Starmer has been struggling to find a narrative for his premiership what's it about and people are saying that he thinks he can actually define himself through this and how he sees it is look if I can get a deal done a trade deal done with the US of some form then we will cut the tariffs further and the UK can become a kind of low tariff destination for investment and we can have good relations with the EU and good relations with the US and sit in the middle and we can kind of do well from that.

3:44And Keir Starmer seems to really enjoy moments of international crisis. So he actually seems very motivated by it. What I would say is it's a really high risk approach. There's a lot that can go wrong. And the underlying fundamentals for the economy are getting worse, not better. So it's possibly a little bit too optimistic at this stage. But we'll see. Who's leading the day to day work on this? Is this something the Prime Minister himself has turned himself to? Or has he put someone in charge of leading the work on this? So Johnny Reynolds is technically in charge of the day-to-day work. He's been working with Howard Lutnick, the Commerce Secretary in the US, and also his counterparts in the US to try to secure this deal.

4:21He's been assisted by a guy from number 10 called Varun Chandra, who's doing the kind of business advisory role. And there's a couple, Michael Ellum, who's the second permanent secretary, who was originally here to kind of do post-Brexit trade deals and has been seconded onto this. So they've got their team. They're dealing, obviously, with the US side with Howard Lutnick, because I mentioned, but they're also dealing with this extraordinary guy in London called Mark Burnett. Now, Mark Burnett has known Donald Trump since he produced The Apprentice. He's a British producer, television producer, and he worked with Trump and helped make him a star in the US.

4:55And he's been handed this extraordinary role as Donald Trump's representative, his man on earth in London. And he's been to dinner with Starmer and Morgan McSweeney, the Prime Minister's chief of staff. and actually during one of those dinners took a phone call directly from Trump as a sign of his kind of influence, power and sway. So he's been involved in the talks as well. So that's the kind of rough class list that you've got. And then Starmer comes in on top of that and is supposed to kind of seal the deal effectively to get it over the line, which they're doing with this extraordinary charm offensive where they won't say anything rude about Trump at all at any step along the way.

5:32You wrote this fantastic piece in The Times this week about the options available to the government could you just explain which of those you think is most likely and which ones are least likely so the most likely thing is they're going to cut regulation we've already seen a bit of that this week on electric vehicles they make it easier to kind of for car manufacturers to move and as part of that transition so that's the kind of tier one that's a given we're going to hear more on that later this week there's some stuff on planning coming up there's some stuff we think coming up on energy as well and that's fine It's low-hanging fruit.

6:05The government was always intending to do it. They've just brought those plans forward. I think what industry, and I'm sure you're hearing similar, what I'm hearing from industries that are affected like car manufacturers, is they want proper subsidies effectively. They want tax discounts for people buying electric cars. Let's take that example or other examples. They want some cold, hard cash. And the steel industry in particular is like looking in a very difficult position at the moment. and there are questions around whether they'll get money. And the problem is there is obviously not much money to go around.

6:35And it's an incredibly tight spring statement anyway. And the spending review is going to be even more difficult. So is there going to be actually any money to help those industries? The other options on the table, we've talked about the trade deal. That is the plan A, plan B and plan C from what I can see. They want to get an economic deal with the US over the line at all costs. That deal, we know the rough shape of it. It looks at they are going to water down stroke drop the digital services tax, which is currently imposed on US tech firms, predominantly on US tech firms. And they are also going to lower tariffs on agricultural imports from the US.

7:12So things like beef, lamb and chicken are going to reduce that. So there's some significant concessions. The government thinks the deal is great. They think it's ready to go. It has been ready to go for some time. The only trouble they've had is actually getting the US to sign it. so they are optimistic that they can get it done by the end of the month but one of the challenges they face is okay this was a deal that was kind of broadly agreed before april the 2nd before world tariff day or liberation day as donald trump calls it and the question is is trump now going to come back for more because he's got this huge position of leverage for what it's also worth i'm hearing that from the u.s end of things trump is under immense pressure i know he's putting on this whole display of this kind of very strong display don't panic it's your you know he's sticking to his gums it appears but behind the scenes he's obviously under immense pressure to get a deal over the line some kind of trade deal with some country so as a kind of proof point and so there's a couple of countries that are in line for that obviously Israel's potentially in line for that Australia's in line for that and we're in line for that and we want to be the first let's make no bones about that we want to get there first because we think we'll get the best deal.

8:19Is Trump ready to go there? Not yet, but they're hopeful that he will do in some weeks. So that is our main plan. That's what we're pursuing. What we're not going to be doing at all is retaliatory tariffs. So they are categorically behind the scenes ruling that out. They are playing a game where they are saying we're going to consult businesses. Here's a list of 8 ,000 products from everything from live bees to frozen goats, all things that are imported from the US. and they're saying we're going to consult business and ask business if they want retaliatory tariffs on those items. The answer is emphatically no behind the scenes.

8:54Every business that has contacted government, every FTSE 100 company we've spoken to are all saying, please do not make the situation worse. We don't want more uncertainty. So it's almost a kind of symbolic exercise, but they are not going to impose retaliatory tariffs. So the chances of that are very low. Does the situation with Trump potentially create tension for us with the EU in the sense that we've kind of got a better deal than them at the moment? And maybe that prevents us from wanting to collaborate with them against the tariffs. We think that from the point of view of the government, the EU and the UK are pretty aligned.

9:29So Starmer had a call with Ursula von der Leyen at the weekend. And what he was saying to her was, don't do tariffs. We need to keep free trade. Now, the EU agrees with that in principle. it may be about to do a load of its own retaliatory tariffs but I think it's significant it hasn't done so yet they haven't gone down the China route of announcing unilateral tariffs so we'll see where that ends up but at the moment Starmer thinks that he's been really successful in resetting relations with the European Union they feel very positive about it I think the king is in Italy at the moment which believe it or not is part of our soft power we use the monarchy as a form of resetting ties so they think there's business to be done and they're really hopeful that we can become this kind of low tariff destination for investment from Europe and the US.

10:10Do you think there's a risk you talked about sort of the UK government are keen on an all cost deal with the US? Is there a risk to that? You know, people in the UK are sort of possibly not as keen on Trump. Is there a risk to sort of going too far and to appease the US? So there is a risk, but there are red lines. So let's take one of the things they're doing. They are going to lower tariffs by the looks of things on agricultural imports. But what they're not going to do is last time the talks with the us were derailed by a row about a chlorine washed chicken and hormone treated beef which doesn't sound very savory and that obviously put off a lot of consumers now they are they have said that our sps standards which are the hygiene and animal welfare standards that we subscribe to are not up for negotiation so we i think they are trying to avoid stuff but look there will be things in that deal which people don't like there will be things that are criticized.

11:01I can't imagine farmers will be happy, for example, with that. They're going to need to find those revenues from the digital services tax. If they're not taxing the US Silicon Valley giants as much, where is that money going to come from? Because that's£800 million in the public finances a year. They're going to need to find that money from somewhere else. So there are lots of unpalatable things in there. What I would say on the other side is 10 % tariffs is a huge hit. 25 % tariffs on steel, 25 % tariffs on car manufacturing. and we think that Trump is about to do another 25 % of pharmaceuticals, which would have huge repercussions for Britain, given how much we export to the US on that front.

11:37So there is a price to doing a deal, but there is also a huge, huge price to not doing a deal. Obviously, the US and China now engaging in this trade war. What does it mean for the UK's position? If we can do a deal with the US, does that do anything to our relationship with China? How do you see that playing out? Sorry for the bongs in the background. I think it's a very delicate phase with China at the moment. So one of the things that is most exercising people I'm talking to in government is this potential glut of cheap consumer goods that we're going to get from China. So China is obviously losing its main market, the US.

12:16They could be sending some very cheap technology, cars, you name it, all to the UK. And that, in the short term, weirdly, is a boon for consumers. people will get cheaper goods and that sounds great but obviously has a huge risk for British companies and British manufacturing so the question is what are we going to do in terms of trade defence are we going to impose what are called trade remedies so in this case it would be quotas on imports it'd be potential tariffs on things now weirdly the signals I'm getting at the moment from government is they're not going to do that they're not in that frame of mind and they We don't want to exacerbate the situation.

12:52But that could become unavoidable if we get this sudden, if our market suddenly becomes a dumping ground for really cheap stuff from elsewhere in the world. And then the government could be forced to act. But they're not in that space at the moment. Steve, you mentioned that the government's definitely trying to position themselves to take advantage of this move and all the moves that Trump's doing. What is the reception from businesses? Have you heard any kind of, you know, whether there is an appetite for or from American businesses for this move? I think there definitely is. I'm hearing that relations are really good between U.S.

13:26negotiations, the British negotiations, but also with U.S. businesses, because, look, you can see there are huge splits in the U.S. administration over this. You've got Elon Musk kind of doing these various videos he's putting out now about the importance of free trade. And he has clearly been cautioning against this behind the scenes there. You've got different figures in the administration saying completely different things. Some are saying these are negotiable. Some are saying they're not negotiable. So there is clear divisions in at a political level and also huge pressure from businesses to relax these tariffs, to move away from that.

14:00So it does feel like there is scope for that from what I can see. So is this going to help Labour and Keir Starmer, you know, given his troubles at the moment? So there's a limit to how much this is going to help Labour. So Keir Starmer thinks it can reposition his premiership. He thinks he can find definition through it. But look, politics is actually quite simple in my experience. It comes down to economics and it comes down to the cost of living. And the problem for Starmer is that however well he handles it is going to make Britain poorer. It is going to, he has a central pledge to put more money in people's pockets.

14:35And it looks like he's going to fail in that because growth is going to be more anemic. What little headroom, the tiny amount of headroom, this is the cushion for additional spending that Rachel Reeves left in the spring statement, we think will be gone before long. And she's probably going to have to come back for more spending cuts and more tax rises. And you know what? People don't like those. They're not very popular. And given that Labour has already had this kind of extraordinary decline in the polls, there has been almost nothing like it in the history of governments. You have to go back to major, probably, for a new government that collapsed so dramatically.

15:10It's a real problem. So I think people could say he's statesmanlike, he could say all of those things. But when they look at the central question, am I better off than I was five years ago, there's a real risk that they'll feel that they aren't. There's lots of talk on the other side of the pond that there's changes to interest rates and other economic fallout. How much of that do you think will end up affecting the UK? I think it could be really significant for interest rates. So, you know, I'm sure a lot of our listeners probably have mortgages and are thinking about, are they going to go down?

15:41And if you look at what the markets are doing, the markets are all pricing in more interest rate cuts now. And you've got Donald Trump directly challenging the Fed. Jerome, he keeps saying, cut, cut the cut, cut interest rates. Look, you know, we need to cut them. And so that appears to be part of Trump's strategy. So weirdly, there are circumstances where in the short term, if you are a consumer or a homeowner, you could benefit from cheaper prices and potentially lower mortgage deals because interest rates are going to fall because they're going to need to do something about growth. So there is a positive, oddly, amidst all this carnage.

16:15It's not all big, scary stuff that is bad for people. So how big is all this for politics more broadly? I mean, free markets has been the political orthodoxy since the 1980s. What does this mean now for how we think about politics and economics? It's huge. I mean, this is politics dictating economics, which is normally the other way around. And it's hard to take your eyes off. And there is also a degree of impotence as governments around the world try to deal with this, because there are so few people that are genuine players that are holding the cards here. And those people are obviously Trump and China and the EU as a bloc more broadly.

16:52So Keir Starmer is playing the very best game he can. there is a political consensus around this broadly so if you look at the three of the parties at least the Labour, the Tories and reform all favour negotiating with Trump and talking to him the only outliers to that are the Liberal Democrats who are making a lot of noise saying that we should absolutely be imposing retaliatory tariffs and condemning Trump at every level, now they're doing that because that appeals to their base but it is very hard to see what else Keir Starmer could do in these circumstances. But it's, yeah, this is a massive geopolitical tectonic plates are moving and we're trying to do our best to kind of move along with that.

17:39Thank you very much to Steve Swinford, the political editor of The Times and business leaders, political expert and columnists. You've been listening to the Business Leader Podcast with me, Graeme Ruddick. Me, Dougal Shaw. Me, Sarah Vizard. And me, Josh Donbrek. For more Business Leader case studies and masterclasses, please check out businessleader.co.uk. And if you enjoy this podcast, please follow us on Apple or Spotify and you'll get updates when new episodes go live.

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