Tariff Wars and Reform In-fighting

The Investors Chronicle editor (Rosie Carr) led with an article this week on the tariff wars that have broken out – headlined with “Facing up to America First”. High tariffs (i.e. taxes on imports) are certainly extremely damaging and should be avoided if possible. They reduce trade and raise the cost of products that cannot be easily replaced by domestic production. Inflation tends to rise as a result.

She concludes with this statement: “Even if these fears are overdone, lack of diplomacy and disregard for consequences do not bode well”. But I just see it as the consequence of ignoring the trade imbalances that have been allowed to rise in recent years with unfair tariffs and taxes imposed on US products by other countries.

For example, UK car exports to the US attract a 2.5% tariff, while US exports here face a 10% tariff. This is one reason why there are not many US manufactured cars on UK roads and that has been the position for many years. With this price barrier, it is not practical for US car manufacturers to build European model cars as the market is simply not large enough.

In other words, Europe and the UK have brought US attempts to rectify the imbalances upon ourselves. Donald Trump has been right in taking steps to rebalance the situation even if he has done so rather abruptly.

The Japanese and Europeans almost destroyed the US car industry in the last 50 years by lower costs and technological innovation while protecting their own home markets by tariff and other regulatory barriers. This needs to be stopped. Other products and markets have been corrupted in similar ways.

Reform Party In-Fighting

As a supporter of the Reform Party, I am somewhat dismayed by the latest spat among the leadership. Rupert Lowe, M.P., has been making public some of the issues. But having a public debate on them is not the way to behave for a Party that wants to be seen as being a responsible organisation.

They need to all calm down and resolve their issues and complaints in private! If Rupert Lowe cannot follow the leadership he should depart to other pastures.

Roger Lawson (Twitter: https://x.com/RogerWLawson  )

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Lower Thames Crossing – An Example of UK Planning Ineptitude

The Lower Thames Crossing tunnel has been under consideration, but not actual construction, for many years. It would relieve traffic congestion on the A2 and M25 by allowing traffic to avoid the Dartford Crossing. Many people, including me, would benefit, but this is what the FT had to say recently on the planning impediments to getting the project moving forward:

“Lower Thames Crossing has cost £1.2bn even before construction starts. The scheme to build a 14-mile road and tunnel to connect Kent and Essex has become a totem of Britain’s snarled-up planning system, in which ventures are tied up with years of delays and mountains of expensive compliance documents.

The planning document for the project — the first wholly-new Thames river crossing east of London in 60 years — runs to 359,070 pages, while around 150 staff are employed on the project, as well as an eight-strong management team.”

Comment: This is a typical example of UK management incompetence with overpaid consultants creaming off enormous fees and delaying projects while environmental concerns are exaggerated by pressure groups.

See FT article here for more information: https://www.ft.com/content/917d4b7f-318e-46fe-ba44-664551ebcf13

Will I see it completed in my lifetime? It seems doubtful.

Roger Lawson (Twitter: https://x.com/RogerWLawson  )

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Political News and Defence Expenditure

Every few years, one wonders how our stupid political leaders managed to get elected. After Rachel Reeves actions to depress the economy by raising NI and other taxes, we have Keir Starmer saying that the UK was willing to put “boots on the ground and planes in the air” to defend any future Ukraine peace deal.

The PM said the UK and other European countries were willing to defend Ukraine militarily if a peace deal with Russia is agreed – that sounds like a defence agreement like Britain made with Poland before World War II which the UK had neither the resources nor geographic capability to uphold. An enormously expensive war was the result.

The PM might be trying to impress his fellow European leaders and they are probably quite happy to let the UK take the lead on spending money and killing soldiers in a war for Ukraine but it makes no sense to me. This tub-thumping rhetoric is plain daft to my mind. It will be a red rag to a bull so far as Putin is concerned.

The only positive is that shares of defence companies have soared on the prospect of more revenues and profits (for example, I hold QinetiQ – up 8% this morning). Taking the funding out of the AID budget makes sense but I would still prefer peace to war.  

I shall write to my Member of Parliament on this subject and encourage him to change the approach of his leader. I suggest you do the same. See https://www.parliament.uk/get-involved/contact-an-mp-or-lord/contact-your-mp/

Roger Lawson (Twitter: https://x.com/RogerWLawson  )

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BP About Face, Nvidia and Tesla, Ukraine Politics

The big news last week was that major UK oil company BP (BP.) is reducing investment in renewable projects and investing more in oil and gas. This is a reversal of previous strategy which I and many major investors such as Elliott welcome although it has angered some of the chattering classes.

As I have said before, I am a holder of BP shares but I have been selling the shares after profit forecasts declined and the share price fell. BP simply said it had been too optimistic in its decision to move to green energy when its rivals took a more conservative strategy.

Well it’s never too late to change your mind if a strategic decision proves to be a mistake. So congratulations to BP for making this decision. One of my stockbrokers now rates BP as a “buy” with a p/e ratio of 9.7x and a prospective dividend yield of 6.0% but I won’t be rushing in to buy back the BP shares I sold. I might even have to sell more to realise some capital gains tax losses before the end of the tax year that is looming. Turning around this giant is going to take some time. There may be better opportunities in US oil companies subject to less political interference. Now if BP was to move domicile and share listing to the USA, the story might be different……

There have been sharp falls in Nvidia and Tesla shares of late. Neither of which I held for reasons given below. There was a good article on Nvidia in Investors Chronicle the week before last. This AI semiconductor specialist is facing new competition from DeepSeek and other challengers while Tesla is seeing falling sales with Chinese competitors such as BYD moving into the electric car space with good products while the older car manufacturers are also catching up.

The big problem with shares in such technology companies is always that the competition can leapfrog with newer products and more advanced technology. It’s very difficult to predict what will happen and when. The only protection is to build an ecosystem of services around the products (as Apple have done to some extent) or have products that customers have come to rely on and are locked in with proprietary technology (as Microsoft has done). But the car market is still wide open to new and cheaper  competition.

On the war in Ukraine, it was fascinating watching the Trump/Zelensky press conference where they seemed to want to negotiate a deal in public. Trump was quite rightly in my view refusing to guarantee a Ukrainian peace settlement which he rightly said was a path to World War III. This was a big missed opportunity though to achieve some progress in halting the war.

Media comments in Europe unfortunately mainly supported Zelensky when the USA see him as the main problem, and so do I.

Roger Lawson (Twitter: https://x.com/RogerWLawson  )

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Book Reviews – J.D.Rockefeller and Ed Conway

I am currently reading a couple of books. The first is “Letters from J.D. Rockefeller to His Son”. These were written in the years around 1900 when Rockefeller was probably the richest person in the world.

He built Standard Oil into a virtual monopoly in oil production, refining and storage and also owned major parts of the US rail transportation industry. If you wish to learn how to build an industrial monopoly this is a good book to read. Taking over weaker competitors is one tactic to follow.

There are a couple of good letters on the benefit of borrowing money to finance expansion (so long as you never default on the loans), and what you can gain from business failures. As one letter says “Failure is a good thing as long as it does not become a habit”. But you can gain much from failures. He says “Once avoiding failure becomes your motivation to do things, you have embarked on a path of laziness and powerlessness”.

This is a good paragraph: “If you are afraid of failure, you will not dare to take risks and then lose the opportunities that are placed right in front of you. Therefore, my son, in order to avoid losing opportunities and retain your qualifications for competition, it is worthwhile to pay for our failures and setbacks!”

There is a lot of business wisdom in this book which is as relevant today as it was over 100 years ago. I therefore recommend this book to all budding entrepreneurs.

The books cover photo is of Rockefeller probably wearing a wig. He suffered from alopecia totalis like me so I have always felt some sympathy for him.

The other book I have been reading is “The Summit” by Ed Conway. It is a history of the Bretton Woods conference attended by all the major powers in 1944 which set out the economic framework we have been living in since then. It established a new monetary system and subsequently helped form the United Nations organisation.

A big influence on the outcome was John Maynard Keynes and the book covers his background at some length. You can understand how he came to influence economic policy in many countries.

At 454 pages the book is rather long for my liking but it certainly helps one to understand the influences that have formed the economic and monetary policies of the current world.

Roger Lawson (Twitter: https://x.com/RogerWLawson  )

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Copyright in the Modern World

Before I move on to more serious matters, is it not appalling that politicians are spending a lot of time arguing about who started the war in Ukraine? There are many sides to that argument. Actions by Ukraine, Russia and surrounding countries including the USA all contributed to pushing Russia into invading. Shots were fired well before it turned into a clear invasion. There does seem to be a willingness to try to reach a peace agreement and that needs to be urged on all parties.

Copyright and Artificial Intelligence. That is the title of a public consultation published by the Government in December which is about to close.

Copyright has historically been designed to protect and financially support the authors of literary works. But the scene is being clouded by use of AI Models trained on existing material available on the internet and used to create new “works of art”. Cribbing material from other authors is nothing new. William Shakespeare copied some of the plots of his plays from other literary works. But it’s getting more and more difficult to identify the creators of new material where AI software is being invoked.

As the foreword to the latest consultation says: “At present, the application of UK copyright law to the training of AI models is disputed. Rights holders are finding it difficult to control the use of their works in training AI models and seek to be remunerated for its use. AI developers are similarly finding it difficult to navigate copyright law in the UK, and this legal uncertainty is undermining investment in and adoption of AI technology. This status quo cannot continue. It risks limiting investment, innovation, and growth in the AI sector, and in the wider economy. It effectively prevents creative industries from exercising their rights”.

If you are the author of published books or other written material, as I am, this should concern you. I have submitted a brief response to the consultation which closes on Tuesday (the 25th Feb). But this is a very complex subject and I think it needs extensive thought and discussion before any proposals to change UK law are firmed up.

The consultation is here: https://www.gov.uk/government/consultations/copyright-and-artificial-intelligence/copyright-and-artificial-intelligence . If you have an interest in this area, please respond.

Roger Lawson (Twitter: https://x.com/RogerWLawson  )

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Ukraine and the Economy

It is good to see Donald Trump taking a vigorous approach to settling the war in the Ukraine. I have written on the subject of the Ukraine before – for example here in 2022: https://roliscon.blog/2022/03/08/ukraine-a-more-balanced-view/ . My view has not changed. There is now little chance of Ukraine winning the war militarily so they should settle for the best peace terms achievable. An enormous amount of money is being wasted on this war – including billions of pounds by the UK.

Keir Starmer has announced he is “ready and willing” to put British troops on the ground in Ukraine to enforce any peace deal. What lunacy is this? He is pretending to be able to act like a world power such as the USA when we are not. Simply delusional. Our economy can simply not support thousands of troops stationed overseas. The British army only has about 75,000 full time personnel and the number has been falling for years. One wag suggested that with all these unaccompanied male illegal immigrants they should be conscripted into the army – a good idea. You give them the option – join the army or be repatriated to where they came from!

If we want to have a growing economy we need to have a peace settlement in Europe where we stop wasting money on military equipment and munitions, and reduce the cost of energy by consuming Russian gas.

The TaxPayers Alliance recently made a very good point. The country’s GDP figures may be slightly positive overall (so small to be within the range of statistical accuracy), but individually we are getting poorer – see their press release here:  https://www.taxpayersalliance.com/taxpayers_alliance_declares_personal_recession_in_response_to_gdp_figures

Our economy is in deep doo-doo in reality with Reeve’s rise in NI meaning many companies are reducing staff and profits are falling. High taxes are leading to economic doom as the TaxPayers Alliance frequently points out. It is an organisation well worth supporting. See https://www.taxpayersalliance.com/donate

Roger Lawson (Twitter: https://x.com/RogerWLawson  )

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Bed Blocking and One Solution

Bed blocking in the NHS is a serious problem. For example, it is estimated that in 2024, over 12,000 patients in England were in hospital who no longer needed to be there. Many of these are due to care planning delays and basic lack of adequate provision for suitable accommodation, but some are due to the patient’s refusal to leave.

This was highlighted in a recent legal case where the NHS applied to the court for a possession order. That was granted. The patient had been there for 18 months and from photos of her hospital bed had clearly settled in. With free meals and other facilities this might seem to be a comfortable life but is not medically sound. Long-term lack of physical activity is not good for any patient.

A full report on this case is present here:  https://localgovernmentlawyer.co.uk/healthcare-law/174-healthcare-features/59982-bed-blocking-possession-orders-and-discharge-planning

Local Government Lawyer is a web site that reports on many interesting legal cases, particularly in local councils and other public bodies. It’s worth signing up for their free newsletter if you have an interest in such matters. With lawyers and legal decisions interfering more and more in our lives, which is much to be regretted, it’s worth keeping an eye on.

Roger Lawson (Twitter: https://x.com/RogerWLawson  )

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Unilever Results and Price Drop

Unilever (ULVR) shares dropped 7% this morning after publication of their results. As a holder of the shares they looked OK to me bearing in mind that I thought the previous forecasts were optimistic. Such a large business is unlikely to grow more rapidly than the overall economy. Perhaps there was some negative reaction to the news that the ice-cream business spin-off was progressing but that it would be listed in Holland, not the UK or USA.

Personally I support the spin-off as I think selling ice-cream is a difficult business with no barriers to entry so I would likely sell any shares I might get in the spin-off. But I thought the price drop was too pessimistic so I bought some more of the shares.

Roger Lawson (Twitter: https://x.com/RogerWLawson  )

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Saba Proposals to Convert Investment Trusts

Saba has been attacking several investment trusts – none of which I hold. Shareholder votes have so far gone against them. They have now indicated that they propose to convert the trusts to open-ended funds.

The AIC have already indicated that they oppose any such change and have commented “Once published, it’s critical for shareholders to examine these proposals and their boards’ responses and vote at any meetings. We need to ensure that all shareholders have the opportunity to vote on the future of their trust. That’s why we have recently launched our ‘My share, my vote’ campaign to change the Companies Act so that nominees, including platforms, must pass on voting rights and information to their customers”. See https://www.theaic.co.uk/aic/news/press-releases/aic-comments-on-sabas-proposals-to-convert-four-investment-trusts-into-open

Changes to the Companies Act is something that I and ShareSoc have campaigned on for a number of years. The shareholders (i.e. owners) of companies purchased on platforms where they get put in nominee accounts have been disenfranchised – voting at General Meetings is made difficult if not impossible with a few exceptions.

Proposals to convert closed-end investment trusts seems plain daft to me. The existing structure has served investors well and if there are problems in these trusts (such as high discounts to NAV) there are other solutions although many people like purchasing assets at a discount. If long-term trust performance is an issue then changing the management and the board of directors is the way to go, not converting to open-end funds which would create other potential problems.

Roger Lawson (Twitter: https://x.com/RogerWLawson  )

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