160. Trump Turmoil: The Latest Act Of Self-Harm

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1:13Hello and welcome to another Trump's Turmoil. Rest is Money special with me, Robert Peston. And me, Steph McGovern. Now, Robert, before we get into the meat of today, can I just clarify, because obviously I haven't been with you on the last two podcasts, but that when you are left on your own in a room, essentially talking to yourself, you're actually optimistic. Because I listened back to yesterday's episode and was shocked by your optimism at the end, you know, suggesting that all this Trump madness could be good for China and Europe. And the UK. I mean, and the UK. As I said, I've been using the word patriotism a lot.

1:51You know, the earlier one, I was talking about the need for investment institutions to be more patriotic in terms of where they put their money, including the UK. We'll come back to that perhaps later in this podcast, because they're not being patriotic enough. But no, I mean, look, how long have you known me for? Don't answer that question. People don't need to know the full gory detail. A long time. Not long we've known each other. But, you know, I'm not a pessimist. I am somebody who sort of tries to look at the sort of horrible truth in the face and then work her way through it. And I fundamentally believe that Donald Trump's policies, terrible for America, but potentially the jolt, actually more than potentially, actually the jolt that the UK, Europe needs to get its act together, to get growth going again, whether it's in terms of investing in domestic operations, whether it's in terms of taking control of defence, strategic assets and all the rest of it.

2:47And so, yeah, no, I am feeling genuinely more optimistic because I think there is the potential for change. I mean, our leaders may muck it up again, but, you know, they are at least appreciating that the status quo is just awful decline. So we've seen more happen again in the last 24 hours, haven't we, in terms of Trump and what he's doing, particularly, you know, we've talked a lot about NVIDIA. the company that makes all of these chips used in pretty much everything all of our kind of electronic devices in all sorts of sectors and there's been some news around that hasn't there in terms of trump setting limits on exports of these chips which has understandably set the share price of nvidia down they're saying it'll cost them something like 5.5 billion dollars this this kind of limit on exports.

3:46What do you make of it, Robert? It's all part of the industrial and trade war. America fears that China is catching up in terms of its tech prowess. We talked about the impressive DeepSeek, a large language model artificial intelligence service that came for most of American investors out of nowhere as a major competitor to the open AIs and the anthropics. And Trump, because he can recognize that China's responses to the trade war is actually to move up the value chain to invest more and more in high tech, including pharmaceuticals, but, you know, digital and AI. And he wants to limit the ability or slow down the ability of China to become an absolutely fearsome competitor.

4:38NVIDIA makes the best chips in the world. It's already blocked from actually sending its high-performance chips to China. It developed some more basic chips which got around those export restrictions which Joe Biden as president put in place. Trump has said, because, you know, it's pretty obvious because of Chinese ingenuity and know-how, they were able to use, you know, these more basic NVIDIA chips to nonetheless create pretty fearsome competitors in AI. Trump has now said that that can't be shipped to China. So it's another manifestation of this extraordinary economic battle between these two countries.

5:19I mean, as it happens, I think when it comes to items of genuine national advantage, and if you look at the history of China. So, you know, I've been steeped in following China for decades now. You know, China did nick an enormous amount of Western technology and never paid the developers of that technology what they, you know, under normal intellectual property rules should have been paid. I have more sympathy for an America that puts restrictions on exports of that kind of technology to China than I do with the whole tariff approach, partly because I do think in any economy that you know there are certain items that you develop as a result of your know-how that are so vital to your economic success you don't want um necessarily to to to allow your keenest competitor unfettered access to them i remember when i was working at black and decker um obviously a manufacturer of power tools um and we own dewalt as well which is the kind of more professional end of power tools and one of my jobs when I was working in the product development department was to look at all the Chinese copies of all the stuff we made you know and and it was it was just absolute blatant copies of everything you know they didn't even try and change any of it to look a bit different and you know it's interesting that that that was back then when a lot was still being manufactured here.

6:53And now, if you look at where they manufacture it, a lot of it did go to China and a lot of these power tools companies did end up moving to China. And I mentioned on the podcast a while ago, bumping into my mate who I used to work with at Black & Decker and he now runs these factories for other brands in China and they are constantly thinking about how they beat the competitors. You know, they're constantly looking at how they move, how they sell the products between different countries to avoid tariffs or even moving the factories themselves. It's really interesting how China has built a lot of its success on just copying people, as you're saying, you know, this kind of industrial espionage on a mass level of everything.

7:40You know, one of the issues that we're going to talk about today is the price of power. However, one of the reasons why solar panels are now competitive, having not been, is because China took the basic technology, massively improved it, brought down the cost, and it is now by a million miles the world leader in the manufacture of solar panels. We don't make any of them in this country. And one of the big issues around this government's new industrial strategy is why are we allowing ourselves to be so dependent on Chinese now manufactured solar panels, Chinese technology? Why do we not now start investing, for example, in indigenous rivals?

8:24Should we be doing that or have we missed the boat? So there's, you know, wherever you look, there is a Chinese sort of dilemma in this new world, which has been brought into sharp focus by Trump of, you know, essentially, it's a new version of whose side are you on, right? You know, are we with America? Are we with China? It's the big question of our age. Yeah. And then the other story we wanted to discuss today was about, you know, we've talked about minerals and the need for these kind of rare earth minerals that are critical, again, in loads of our technology. And Trump now is looking at this, looking at tariffs on critical minerals, isn't he?

9:10It's the kind of latest action in this expanding trade war. So he's looking at whether there should be a tariff on that. I mean, again, that feels like it's self-harming for America to do that because you can't just magic up these minerals. You know, that's why he's been so obsessed with like Greenland and Ukraine because of all the minerals that they have there. They're not suddenly just going to appear in America, are they? It's this bit of it. He's doing these reviews to potentially bring in tariffs on pharmaceuticals, on semiconductors and now on rare earth minerals. I can just about again see the logic.

9:52It will be very painful for American consumers if significant tariffs are introduced on semiconductors and pharmaceuticals. pharmaceuticals will be very painful for lots of british pharmaceutical companies i mean you know we are you know pharmaceuticals is an area even though it's declined a bit relative to its position in the economy you know it's say 10 years ago pharmaceuticals is still an enormously important industry for the for the uk i just don't i mean you you may have worked out what he's trying to do here but they don't as we know one of the reasons they want he wants control of greenland One of the reasons he has been doing this deal with Kyiv to basically get unfettered access to its precious minerals and metals is precisely because America's big companies, particularly in the digital space and the high tech space, don't have enough access to these absolutely critical resources.

10:48So why would you put tariffs on them? I suppose the only logic would be if you are making the assumption that quite soon, Kiev's resources are effectively America's resources. And if you can get everything you need from Ukraine under that deal and that and those extracted minerals are not subject to the tariffs. And maybe you can also somehow persuade Greenland to do a similar, if you come to a similar arrangement, let's hope he doesn't invade Greenland, you know, but, you know, maybe you can persuade. Maybe at that point, the tariffs just damaged China, because obviously China at the moment is sort of, you know, is using its enormous resources of these rare earths and other precious minerals, you know, in this economic war with America, withholding access to it, threatening, which is a great threat to many American businesses.

11:50So maybe the tariffs, once you get to that state of America controlling Ukraine and Greenland's resources, then tariffs on China in that space make sense. But we're still some way off America having that unfettered access. You know, we've talked before when we were looking at the Trump trying to make a deal with Ukraine. And this is going to be incredibly expensive and a long time off before they actually are able to get these potential minerals out of the ground as well, aren't they? You know, I remember I was talking to Alistair Campbell about this, about this is going to take an awful long time.

12:30It's not going to be, right, whack a tariff on minerals today and we'll get them all from Ukraine next week. It's going to take years before that exploration happens and they actually get out the minerals that they want for this. So again, it's that point you made as well yesterday about you can't just turn off the taps at one end and expect them to flow in America because there hasn't been the investment or infrastructure or build towards these jobs, this manufacturing they need or anything like that. So you're just going to put yourself in no matter what happens through pain, at least in the short and medium term.

13:11And that doesn't seem to make any sense. there's one other thing i just wanted to mention as well talking of all the stuff that's been going on in the states and it probably links to the chat we're about to have on energy as well and that is you know in the in the head you know this is talking more about the rich and powerful in america you'll have seen this jeff bezos of course the amazon founder has got this space tourism business or he's trying to develop it into a tourism business this private space company and he sent this rocket, this blue origin rocket, an all-female crew went in it. It was his fiancée, Lauren Sanchez, was in there along with five other women.

13:54They went on this 11-minute space trip. You know, and this had very much the vibes of Musk versus Bezos in a kind of willy-waving contest to me. I mean, even the rocket looked phallic. But anyway, I think... Hang on, have you ever seen a rocket that doesn't look phallic? I mean, give me a break. I know, I know, I know. I think that's why they're so obsessed with them, these lads, you know, these billionaires in America. And, you know, you might say from the outset, this is a smart PR move by Bezos, you know, sending a historic group of all women to do this all female flight, you know, and they kind of presented it as a feminist empowerment history making trip.

14:34And you could argue, yes, good to see all these women up there for good for the space science sector. But the headlines were all dominated by the fact that Katy Perry, the pop star, was in there. And obviously, she's a brilliant pop star. But it ended up looking like a load of rich celebs in sexy lycra suits, wasting millions of pounds on a vanity project. And, you know, the optics of it do not sit well. Because at the same time, you know, people, a lot of the critics are saying this is a distraction from what's happening to women's rights in the US. for example women having less autonomy over their bodies when it comes to things like abortion and you're sending all these women up going hey no women are great look at all the power they have and the thing that you know and again this is all about trying to show that space tourism should be an is it going to be an industry one day that you can be part of although it just really didn't play out like that and and one thing that really stood out to me in all of this is everyone focused on katie perry the pop star but also on that flight was this incredible woman called amanda nowen who is a civil rights activist she and i'm just going to quickly tell you her story because the media did not really cover this so she um grew up wanting to be an astronaut studied astrophysics at harvard interned at nasa just before she graduated she was brutally raped hospitalized because of it and then because of the horrors of that experience in the health care and legal system after this horrendous sexual assault happened, like the fact she had to pay$5 ,000 for a rape testing kit and the fact they destroyed the evidence after six months.

16:13She then set out on this mission, which led to a change in the law around survivors of sexual assault. It led to a change in the law. She was nominated for a Nobel Peace Prize. She's done a ton of other incredible stuff too. So like her being part of this trip makes sense. Her lifelong dream was to be an astronaut. And even when she got into space on this 11-minute flight, you have to take something with you as a kind of zero gravity indicator. So I think Katy Perry took a daisy because her daughter's called Daisy and she let go of this daisy. And that's what all the pictures were of. What Amanda took was a note she'd written to herself not long after the rape saying, never, never, never give up.

16:55And that's what she kind of released in this rocket. as a moment for her to say she'd done it. So my beef with all this is, is yes, okay, like Katy Perry was up there, happy days for some people that might influence into the industry. But so often we forget in these stories about the people who are actually making change behind the scenes for women's rights. Yeah, I mean, look, I think it's almost impossible to disagree with a word that you said. And, you know, Amanda Nguyen does seem to be the most impressive person. So I think that's an uplifting moment to go to a break. When we get back, let's talk about two big issues that we're obsessed by.

17:37And they're so important in the context of Trump turmoil. One is whether the UK's path to net zero is undermining the competitiveness of British industry, which is a charge that Kemi Badenok of the Tories and Nigel Farage of reform constantly make against his government. And I have to say there is something of an active debate within the cabinet about all of this. And let's also talk about why this government hasn't yet seized the imperative of making sure there are investment institutions back the great growth prospects that we are developing within the UK. It's all very well saving supposedly strategic assets like British steel, but our future cannot be British steel.

18:23It has to be new high-tech, high-knowledge industries, high-knowledge businesses, and they can't get the money in the UK. More on that after the break.

18:53gelten externe Kosten fallen an.

18:58Welcome back to A Rest Is Money, Trump's Turmoil Special with me, Robert Peston. And me, Steph McGovern. Now, Robert, on Monday, you did this brilliant explainer on British steel, just explaining why the government felt that they needed to rescue British steel. If you haven't listened to that episode, honestly, listen back to it. It went out on Monday. It's an absolute cracking listen. Anyway, in this, you know, one of the things that's come up in all of this British steel debate is where we choose to invest and things like the impact that our high energy costs have on industries like steel. You know, we know that the government's got this mission to reach net zero.

19:41There's been this argument made during the whole British steel debacle from the Tories and reform that part of the decline of steel making in this country is energy costs. and the fact that we're not investing in things like the coal mine in Cumbria, which makes this particular coal that's important for steel making, and the fact that the government are not investing generally in, I guess, non-renewables anymore. So I guess what we want to talk about is should we slow down this transition to renewables? Would that be better for the economy? And should we exploit more of the North Sea oil reserves?

20:21So, Robert, go on, give us your thoughts on this then. So what I'm going to set out now is the sort of framework for what is a really massive question, which is essentially, as you put it, whether the government's relatively fast journey to net zero. So, for example, by 2030, its plan is to make the energy system carbon neutral. So the whole energy system, I mean, there's a few percentage points off that, but let's keep it simple. By 2030, there should be no carbon dioxide emissions from our energy generation. And so a fundamental question, the charge of a Nigel Farage, the charge of a Kimi Baden-Ock is that this is making British industry less competitive.

21:23So let's just go through some basic economics about all of this and a little bit of history. So the basic economics is that, yes, if you look at international league tables, the cost of power for pretty much everybody in the UK, whether it's households or businesses, is high compared to other countries. And it is absolutely the case that the cost of power is fundamental to the competitiveness of any economy. And, you know, one of the reasons why America, one of the big drivers for America's tremendous economic success, you wouldn't think it's had a tremendous economic success if you listen to Donald Trump.

22:08But if you look, you know, America over the last 15 years compared to Europe has had tremendous economic success. One of the big drivers of that has been its exploitation of oil and shale gas. Right. Which has made it a world leader in the production of cheap fossil fuels. Equally, right now, they are investing in nuclear to power their data centers at enormous scale. Data centers, one of the biggest consumers of power on the planet. But they are, you know, because of the AI industrial revolution, they're absolutely central to all of our economic futures. And again, because they have this really aggressive policy in America.

22:48And, you know, this is actually the determination of the individual businesses. You know, these businesses that own data centers like Microsoft, they actually build their own power stations. So there's no issue that there is this absolutely massively important connection between how cheaply you can power stuff and how successful you are as an economy, your productivity, your growth. And it is a massive problem for the UK that our energy is expensive. Now, there are legacy reasons for that, and some of it undoubtedly is connected to the decision by successive governments, actually for about 20 years, to increase the share of power generation coming from renewables like solar and wind turbines.

23:39And basically, if you go back something like, you know, something like 15 years, right, governments then gave ludicrously generous deals to developers of wind turbines and actually the households that put solar panels on their roofs. They're laughing, right, because they got the most unbelievably generous terms for the power that they can then ship into the grid. Right. And, you know, basically, we are continuing to subsidize those people on scale. The kind of original deals that were done to take the power from these original wind turbine developments, again, way too generous to those developers.

24:20And those costs are still with us. But that's spilt milk. There's nothing any government now can do about any of that. The issue, however, are all the costs that are heaped on consumers for current investment in wind turbines. So, for example, you know, massive investment going on in offshore wind turbines, big plans to increase solar. And one argument, I think this is an important argument, is one of the reasons why our power is relatively more expensive is because the subsidy for all those developments comes from customers. Right. It goes on bills. Right. And it goes if you're an absolutely mega heavy user, you're pretty much exempt from that.

25:09But it does go on quite a lot of companies bills and it goes on a lot of households bills. And in other countries, if there are subsidies of that sort, it just gets paid for out of the tax system. Right. And so one of the big policy questions is, have we just got it wrong in terms of expecting customers to pay for this transition? rather than if we think in the long term, you know, we need to get to net zero. And to be clear, there is no issue around in 10 years time. If we have a power system that is basically a combination of renewables, including nuclear, we will be globally competitive because the marginal cost of that stuff, once you've got all the kit in the ground, is really low.

25:52OK, but the problem is getting from here, where our power is relatively expensive, to 10 years or 20 years from now, where if we continue on this path, we could be an absolute world leader. The problem is, if we are crippling our businesses because of costs now, we won't have any businesses left in 10 to 20 years to take advantage of this low cost energy. So that is an absolutely fundamental question. And just to put a statistic on that, the OBR are saying that the cost of subsidising renewable energy will hit£20 billion by 2030. And that, as you say, is these levies paid for by businesses and households on their energy bills.

26:37So that is a staggering amount of money, isn't it? But I guess then that the question in this is, if you turn on new taps for lower energy costs, you know, if you slow down the transition to renewable energy and instead, for example, lift the windfall tax on North Sea oil, which, as you know, came in in 2022. This was this energy profits levy brought in in 2022 as a windfall tax when prices rocketed because of the energy crisis when Russia invaded Ukraine. So I guess the question is, if you, for example, take that away, because obviously lots of companies are saying that's hampering their investment, will that lower energy costs will it enhance energy security will it reduce reliance on imports or will it just simply slow down the transition to renewable energy because it doesn't necessarily mean one leads to the other does it so again there are some massive questions here one is energy security, and another is just productivity and economic growth.

27:50These are huge issues, right? Now, as it happens, I don't think we're going to sort them out today, but as it happens, we're in the lucky position that we've got the boss of Octopus, Greg Jackson, coming on, because he's got some really interesting ideas about how to bring the energy price down. And we've got the regulators, Jonathan Brearley, coming on the programme quite soon. And what he does has a direct impact on what we all pay as individuals for our gas and electricity. So I think this is probably not the moment to say this is the this is, you know, we've got to abandon the path to net zero because I want to I think we both want to gather some more evidence on all of this.

28:24Unfortunately, we've got some experts coming in to talk to us. The thing for me, which you again mentioned on Monday was how much the North East is dependent on jobs in this sector. So there are tens of thousands of people employed in sectors directly linked to oil and gas, you know, engineering, fabrication, port operations, you know, the northeast ports are critical hubs for the movement of, you know, and exporting of crude oil. And there is, as well as this idea of this transition to renewables, which I am seeing in the area, by the way, you know, I am seeing the lads I went to school with who went to work in the oil industry and made very good money out of it you know we're talking people making 70 grand a year from working offshore and also a lot of the lads are very happy wives because they do two weeks on two weeks off so they get to you know it works for marriages in the northeast as well people who work offshore apparently but there's an interesting point about that transition and I am seeing that already I'm seeing for example there's an offshore training centre near me which trains up people on kind of ropes at heights and underwater helicopter safety training which is what you have to do when you go out to these rigs and things and they're now doing a lot more training in renewables but there is that transition point of this is going to take time you can't just cut off investment and development in oil and suddenly expect all these people to be able to move straight into renewables.

30:00This is a transition process. And, you know, we've heard, for example, the North Sea Transition Task Force. This is the North Sea Transition Task Force, which was set up by the British Chamber of Commerce in partnership with the government. And, you know, they're saying, actually, this is key. The windfall tax should be scrapped and we should reopen exploratory drilling. to preserve the transition of the workforce from oil and gas to renewables. And that, as we've been saying, because of the dependency on those jobs in the North East, it's part of the whole rhetoric around regional inequality too.

30:43So if you suddenly stop oil and gas and the money to be made there and the jobs there, you're going to leave a lot of people in the North East without work. And again, this comes back to what we talk about all the time, which is this lack of investment and support for British companies. They keep being hoovered up by foreign investors and our best tech exports end up going to America. And there's a particular story you wanted to tell us about around that, isn't there? This isomorphic labs. Tell us about that. We've been talking for months now about how challenging it is for brilliant young companies in the high tech space, in the life sciences space to get the capital they need to become world leaders if they don't go to America.

31:33Too many of them feel they cannot remain British businesses. And in the past, we've talked about what I think is almost a scandal, that DeepMind, which could now be a British-owned$100 billion plus company, sold out a decade ago for, I don't know, a few hundred million, compared to its current value of well over$100 billion, to Google, now called Alphabet. that. Anyway, we've got to create an infrastructure that provides finance to these sorts of companies to keep them British so that the profits stay onshore, the taxes stay onshore, most of the jobs stay onshore. Rachel Reeve says she gets this in theory.