The UK’s trade deal

Katie Martin (0:06)

Pushkin. There's no shame in admitting these days that in relation to trade tariffs, or frankly anything else in finance and economics, you have no idea what on earth is going on. The tariffs on imports to the US are on, then they're full fat, then they're off, then there's deals kicking around. It's a mess. Now, when I want to sound clever and authoritative on this stuff, there's only one thing for it. I get up from my desk, walk along the corridor, and pick the brains of Alan Beattie, the FT's very own massive trade nerd. I've been nerding out on this stuff since way before it was cool. Today on the show, guess what? We have Alan Beattie, Alan as a service. Listeners, he's going to tell us all what we need to know so that you too can at the very least pretend you understand what's going on. This is Unhedged, the markets and finance podcast from the Financial Times and Pushkin.

I'm Katie Martin, a market economist here at FT Towers in London, where it's suddenly unbelievably cold again. What the hell? Alan is here with me in the studio. Alan, welcome, welcome back. You've done this before. You still came back.

Alan Beattie (1:18)

I have. I'd never been on it before. And now I've been on it two times in three months. I'm now being stopped in the street, asked for autographs, all sorts of stuff. This is everything I always dreamed of.

Katie Martin (1:30)

Now, I know what you're going to say. You're going to say, nobody knows anything, aren't you?

Alan Beattie (1:38)

That is my trademark saying. And let me just tell you why nobody knows anything. When I say nobody knows anything, it's just not people watching don't know anything. The people in charge don't know what they're doing either. Or at least they have a whole bunch of different motives. They have pretty much one instrument to do it with, which is tariffs, and the result is chaos.

So there is no massive fundamental plan. Anyone who says fundamentally what he's doing is this. At heart, what he's doing is this. It cannot be right because he doesn't really know either.

Katie Martin (2:09)

So we've got like this kind of kaleidoscope hall of mirrors that just are reflecting nonsense back on to each other pretty much constantly. But we're gonna try and make some sense of it. So I'm gonna propose we don't start at the beginning here because Mr. Donald J. Trump has been banging on about trade tariffs since the 1980s, when even you and I were still quite small. So let's start at the end, which is at the weekend in Geneva, the US and China held some trade talks that resulted in a massive drop in the level of tariffs on trade with China, to the extent that you can. Tell us what is going on here. What did the US extract as a concession from China to take the tariffs down from, what is it, 145-ish % to 30-ish %?

Alan Beattie (2:59)

It basically said, we all cut our tariffs, you cut yours. So China had retaliated. The US, I think, was a bit more scared by retaliation or the market reaction than it thought. And so they said, fine, we all cut ours and you got yours. So essentially, it returned it to the status quo before. So instead of being insanely, ludicrously high, they were merely insanely high.

Katie Martin (3:19)

Right. That's an important thing to remember, right. So markets are celebrating this pull back to 30-ish percent tariffs on China as if this is party time. And boring, miserable people like me and you, and also lots of fund managers are saying, okay, but 30 percent on China and a 10 percent baseline on the rest of the world, and loads of other things here and there for steel and God knows what else, still leaves the US with the highest taxes on imports since the mid-40s. Am I right?

Alan Beattie (3:56)

Depending on how you measure it, yes, I mean, certainly for a long, long time. Far be it for me to try and guess what the markets are thinking. If I could do that, I would have arrived to Unhaged yet. But as far as I can tell, they're just sort of thinking the complete madness has gone. We're not going to have an administration that's actually trying to decouple the US from China.

Because if you have... And part of these ideas are sort of embedded in different people. So you have Peter Navarro, who's in the White House, the out and out trade warrior. He really thinks that the US should not run deficits full stop. He really thinks if necessary, the US should just not be trading with China full stop. So I presume what's happened, and I agree with you, it's kind of remarkable how optimistic people are, given where we are, is that they think, okay, we're now just in a different regime. We're now in a regime of trying to manage trade, of trying to protect particular sectors in the economy. We're not in a completely mad system of trying to break the world economy apart.