245. The TACO president - Why Trump Always Chickens Out

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2:17Steph McGovern:hello and welcome to the rest is money with me steph mcgovern and me robert perston so trump he's slagged off starma he's kicked off chaos at davos i mean it is truly now the trump show and the world is watching with bated breath but what does this all mean for the world economy and for global security you know we both watched that incredible speech he made over an hour and a half long. We'll talk about that. Plus, we'll dissect that terrifying line, Britain is America's lunch at the moment. What does it all mean for us? I mean, it's hard to know where to start, but let's try. Donald Trump, like nobody on the planet, loves, craves attention.

2:58And, you know, he's had attention, you know, pretty much like no world leader ever in recent days. every speech pretty much at the World Economic Forum on the top of that mountain as the agenda has been set by the extraordinary things that he's been saying and doing and in particular his determination to take control of Greenland,

3:37part of an independent sovereign nation, Denmark. It would be, in effect, what it is, an aggressive act against a fellow NATO member. Absolutely massive consensus at the World Economic Forum. from everybody there that what Trump is doing is wrong. And yet in his press conference last night, one of the most exhausting press conferences I've ever sat through, absolutely no sign that he has regrets or is backing down. And, you know, we should go through the very serious both economic ramifications and ramifications for our security because they are absolutely related. And, I mean, I think it's probably worth actually getting on to Mark Carney's intervention right at the start.

4:47because, you know, he stood up. He is the Prime Minister of Canada.

4:53Steph McGovern:Former Bank of England governor as well during Brexit. Yeah. A man, you know, with a pretty extraordinary career. Yeah. You know, governor of the Bank of Canada before he became governor of the Bank of England, then in charge of the most important, some would say, financial stability organization in the world, the FSB. and obviously, you know, early in this term, you know, Trump was obsessed with how Canada had to be part of the United States. But Carney has, and actually that sort of massively benefited Carney in that election, which saw him because he stood up to Trump Yeah, he does stand up to him.

5:32You know, Trump in a sense did him a favour because, you know, absent Trump in the White House, it's possible Carney wouldn't have won that election. But he has been a consistently strong international figure standing up to what Trump represents. And the reason his speech was important was because he was sort of unambiguous and clear and rational on two points. One is we can't be naive. The world of globalization, people following international norms, countries like America following an international law, that's over forever. Well, forever. Certainly for the meaningful future would be what one would take away from that, certainly for years.

6:26And then secondly, talking about what middle-ranking countries like Canada, but obviously has massive implications for the United Kingdom, what they should do in those circumstances. And boiling it down, the big thing that Carney has consistently did, and my goodness, he did it in an eloquent and coherent way yesterday, he stood up to Trump, challenged him in a way, very explicitly, in a way that our Prime Minister, Keir Starmer, has not yet done. And given that we have seen a massive ramping up by Trump in terms of his aggressive rhetoric, some would even say his abusive rhetoric, against Britain and Starmer, It's going to be very interesting to see whether Starmer himself now backs away from his policy of, you know, some would call it appeasement, but essentially trying to get on with Trump in order to lessen the harm that America can do to Britain.

7:47But what Starmer has not done yet is very explicitly and publicly criticize Trump, you know, despite the fact, and you pointed this out, you know, this week, okay, he basically, you know, he wrote the most astonishingly hostile text, you know, accusing the British government of being stupid. in the deal that it's done to transfer the Chagos Islands to Mauritius and then lease them back for 100 years. And obviously threatening, well, not threatening, he's announced there'll be 10 % tariffs in February because of the way we're defending Denmark and Greenland.

8:30Steph McGovern:Yeah. Listening to that Starmer press conference, which I know you were at on Monday, it was his tone it sounded like he wanted to sound like warlike in his tone in terms of yeah I'm a great leader but he didn't actually say anything did he in terms of what they're going to do but the thing that really stood out to me was that you know he kept talking about we we have differences it sounded like he was describing a relationship where one person likes Marmite and the other one doesn't in the relationship but this is coercive control isn't it it's like we are being gas you You know, it's gaslighting.

9:02Steph McGovern:That's what we are facing as a country. But what does Starmer do? Because if he, I mean, it's great now, obviously, Carney stood up against him. And maybe that might make someone like Starmer think that they can also be a bit more forceful against Trump. But if he does, how does it play out if he and, you know, if they then do the trade tariffs and we'll come on to, you know, why they're so important for the UK? You mentioned security and even Starmer said in that presser, he said, didn't he, like security, intelligence sharing, defence. It's like the closest relationship of any two countries that we have with America on security.

9:43Steph McGovern:And it keeps us, he said, I think it keeps us safe in ways I can't even explain to you. So he's obviously talking about things like terrorism and things like that, which is a threat to our country. so what does he do because and what does it I think you even asked him this like what like at the minute he keeps talking Starmer about having rational we need to be and Rachel Reeves said this at Davos this week you know you've got to have calm level-headed conversations and negotiations how do you do that with someone who is not rational you know you yeah and Trump is not rational in anything he does he's not calm about things he's he's really hot-headed and that's not someone you can negotiate with is it so everything starmer and reeves are saying about sitting down and having rational conversations is not in reality ever going to happen yeah you're absolutely right so at the this uh emergency press conference that the prime minister um held on monday morning um to try and set out some kind of coherent position um in in the aftermath of Trump's threatened retaliatory tariffs on the UK and other European countries.

10:55You know, as you say, my question to Keir Starmer was just very straightforwardly, you are negotiating with him on the basis that he understands, you know, that he can be reasoned with, that he's rational, and that he has some, you know, affection, allegiance to the rule of law, Or, you know, what I said to Starmer is all evidence shows that neither of those assumptions are true. And so, you know, so I said, look, for God's sake, why are you persisting down this path? And the reason he is persisting down this path is actually captured in what you've just been saying about our security. And, you know, it's much worse than you are actually implying.

11:50I think we should get on in a minute or two, obviously, to the risk of a global recession from a trade war. And we will get on to that. But I think it is important to understand why the UK looks so much weaker in how it negotiates with Trump than, say, France. As chance would have it, I spent the weekend actually with a group of French ministers and securocrats and officials. For fun?

12:19Steph McGovern:Sorry? Was that for fun? That was for fun, yeah. Actually, it was. I was out with the Geordie lasses when you were with the ministers. I was with assorted members of the French elite. And it's important to understand why France's position is so much stronger and why, therefore, Macron, for example, a bit like Carney, has been much more aggressive over the recent days in his criticism of Trump and why Macron feels able to threaten very significant trade retaliations on America. And I said, we need to look at the implications of that. But the reason for it is because, and this is not, to be clear, this is not Starmer's fault, right?

13:06We have for decades trusted America to the extent that, you know, all of our security, in the most fundamental sense is hugely dependent on having a constructive relation. So let's look at two really important areas. One is intelligence. We are an integral part of an intelligence network, an anglophone intelligence network called the Five Eyes Network that consists of all the English-speaking intelligence services. So us, America, Canada, New Zealand, and Australia, France is not part of that. They have an independent intelligence service. And if you talk to our intelligence services, they are absolutely clear how important essentially working with CIA and other intelligence services in America is partly because also they have extraordinary technology.

14:07um you know we have great technology but you know you know they are an enormously valuable intelligence source in a very dangerous world but actually the scariest thing of all is our technological dependence both when it comes to conventional and nuclear weapons so although we own the warheads the missiles that carry our warheads are american technology they have to be regularly serviced by America. And if they are not regularly serviced by America, they won't work. So, you know, in a worst case rupture with America, you know, they could broadly disable our nuclear capability. Whereas France, just to be absolutely clear, has a totally independent, you know, not dependent on America, nuclear capability.

15:00Steph McGovern:Does it not work the other way as well, though? As in, like, because dependency is key to all of this, isn't it? This whole thing, this whole geopolitical nightmare is about dependency. So does America not need us, though, as part of all of this? I mean, you know, they both have better technology, they have more equipment, they have more nukes, they have more everything because they continue to invest in defence, you know, at a much greater level than any European country. One of the things, you know, one of the things Trump is right about is that in general, Europe was too parasitic on America when it came to NATO's defense.

15:35He's right about that, but we are where we are. And what we need to see from all European governments, and especially from Britain, is much more investment in an independent defense capability. Starmer has promised this, but it is ramping up incredibly slowly. So, you know, we've agreed to this commitment of, you know, depending on how you measure it, three and a half or five percent of our GDP going on defense and security. But that won't kick in until the mid 30s. And right now we are ramping up in an incremental slow way. And we just, you know, in an unsafe world, we do rely hugely excessively for our security on America.

16:21Now, as Carney said in his speech, this is the moment where, you know, it is hugely urgent to accelerate defense and security spending. I mean, you know, one other thing, when you talk to military, you know, military experts, there is also, as I understand it, some capability of America with, you know, for example, some of the aircraft we bought from them. You know, as I mean, you know, somebody out there can, you know, he's very welcome to correct me if I'm wrong about this. But certainly some of the people I've told I've talked to tell me that America can actually disable those planes. And again, you know, the advantage that France has is it just has way more independence when it comes to all of its military.

17:05This is the goallist. This is the goallist legacy. You know, historically, we traded on, in terms of our global power, the fact that we had this, you know, close relationship with both the EU as a central member of the EU and this extraordinarily so-called special relationship with America. It was one of the reasons why for years under Thatcher, under Blair, the UK punched above its weight globally, both diplomatically and to an extent economically. And we are now in this awful position, having left the European Union, where we are desperately trying to rebuild that relationship, but it's a long process.

17:50And, you know, America is putting it in, you know, mild terms and, you know, even if we think of it sort of as a friend and we had, you know, the Speaker of the House of Representatives, Mike Johnson in the UK over the past couple of days, you know, insisting that it's still an important relationship, Britain and America. But putting it mildly, Trump is at best an unreliable friend. And I'm afraid at worst, somebody whose values are utterly antithetical, utterly opposed to ours. And so, you know, the idea that that special relationship will allow us to punch above our weight is, I'm afraid, a bit of a joke.

18:39And hearing Gavin Newsom, the Democrat governor of California, literally laughing at countries like us for trying to do deals with Trump, it was humiliating.

18:53Steph McGovern:It's interesting because obviously we've got Macron pushing for the EU to activate this trade weapon they have against the US called the anti-coercion instrument, which is something that was brought in, wasn't it, in 2023? 23, yeah. And this is meant to give the EU a legal framework, I suppose, to deter and respond to anyone, any country that brings in economic pressure to the EU with punitive trade tariffs or whatever. And then what they can do is then use that law to, if they get agreement from the majority of the EU countries. But it is important. You've just made an important point there, which is unlike tariff retaliation, which requires agreement of all EU members, the innovation that was brought in with this anti-coercion instrument, it allows much faster response because it requires what's known as a qualified majority.

19:54Yes, it's a majority, not all of them. It's a majority, not all of them. So Hungary, for example, very pro-Trump, couldn't veto it.

20:00Steph McGovern:Yeah. And then what it allows them to do is to bring in things like, you know, they can increase custom duties or bring in like import or export restrictions. They can stop American companies being part of like the procurement procedures for things. And actually, there's two other things which you can do, which, you know, it can make it much more expensive, difficult for America's digital giants. From Amazon through to, you know, Meta, Alphabet, Google to trade in the EU. And those are by far their most important companies. So it can take action to massively increase the terms of the cost of trade for those important businesses.

20:44Actually, it's got an extraordinary sort of nuclear option, which is it allows Europe to ignore American intellectual property rights. So, you know, it would, you know, in a worst case, it would give the European Union the ability just to steal American technology. Yeah. So this is a very serious weapon were it to be introduced. Which Macron's pushing for. And Macron has talked very explicitly about this is a moment where it's never been, this instrument has never been used. But Macron has said very explicitly, this is a moment where it may have to be used against American companies.

21:24Steph McGovern:That's the point you've made about that's the strength in numbers as well, isn't it? And why it's such a nightmare. We're not part of the EU anymore because we could have been part of that legislation as well. I mean, look, everything we've talked about has enormous ramifications, not only for our security, but also for our prosperity. But I think I just, after the break, want to dig down, drill down more into the economic consequences of all this.

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23:19Steph McGovern:The other thing obviously going on in terms of trade tariffs is this Supreme Court ruling on whether they're even legal or not. So, you know, it's any day now we're going to find out. So the thing about the Supreme Court is there are certainly lots of rumors that we're going to get the judgment. In fact, the Supreme Court, it's very much a law unto itself. It never really says when it's going to deliver the ruling. And so there are, as you say, all these, you know, it somehow seems to be, you know, in the ether that we could get the judgment next week. and I was really interested listening to Trump at that press conference.

24:03It was a bit like, it was sort of like a Fidel Castro speech. He went on for like an hour and a half in this extraordinary rambling way before he even took questions. I don't know how much of it you listened to, but I mean, it was literally. Yeah, mind-blowing. Well, it just did your head in because it was sort of, it was really one of his most shambolic performances. So because he would repeat, you know, he would just repeat five or 10 minute segments as though he hadn't said it already. You know, whether it was about immigration or but one of the things he did repeatedly talk about was the threat of the Supreme Court overruling his tariffs or ruling his tariffs as unlawful.

24:51So he's plainly concerned about it. As I say, he brought it up without being questioned on it. So it plainly is weighing on his mind. We know with Trump that if the Supreme Court were to declare them unlawful, he would immediately try and find a way of getting around it. And that is a possibility that he will find alternative legislation.

25:16Steph McGovern:And so what I think is going to be interesting about this is how are the Supreme Court going to handle it if they do rule against him? So are they going to say something like, right, we think it's unlawful. So we're going to give you 30 days to come up with an alternative or whatever. Or are they going to say you've got to pay everyone back who you've hit with levies? Are those companies going to even bother to try and get that money back? because then that might put them up against Trump and they might think, hang on a minute, do we really want to be singled out as a company who's going against Trump?

25:48Steph McGovern:So it's not just like clear cut, is it? It's not like the Supreme Court are going to go, right, we've ruled against you, you owe all this money. Trump's going to fight back and there might be some things around it in terms of it's not just cut and dry. It is like they might be given time to try and negotiate something else. And he also has other executive powers which can essentially punish businesses. Yeah, but they're more complicated and they take longer. But for him, that would have been the clearest, easiest way to do trade tariffs. And as you say, there are other options, but they're way more complicated and cumbersome and that will take longer.

26:23Steph McGovern:So it could make a difference. But also, if you are the EU, you cannot assume that the Supreme Court's going to come to your rescue and you have to plan on the basis of what the American president is actually threatening. And, you know, even if there's a temporary hiatus in his side of the trade war, you just have to assume it's going to come back in some way. And I think it is important to just, you know, frame the economic magnitude of what we have here. If the EU simply took off the shelf the tariffs that it was threatening to impose on America. And that's the most likely thing it would do if it, as a first stage in a trade war, if it simply took off the shelf those tariffs that it, you know, put together as a package after Liberation Day, after Trump's initial round of tariffs.

27:32That would be$100 billion worth of tariffs on some incredibly strategically important American industries. You would also go back to a world in which Trump's original threat. So Trump is threatening 10 % tariffs on a number of European countries as retaliation from the fact they're not cooperating on allowing him to have Greenland. They would go up to 25 % later this year. if there's still no progress towards him getting green. But you have to remember that before that, he was threatening significantly higher tariffs than that on the EU, which undoubtedly would be reactivated. And the point is that both America and the EU are each other's biggest customers, right?