Photo by Uran Wang on Unsplash
Yes, this is a picture of Manchester. But, no, I wasn’t there. Nevertheless, I had the opportunity to be in the UK for super family holiday time – in fact in London. And it was indeed, lovely.
So, why the image of Manchester? Well, It’s because the ‘King of the North’, Andy Burnham, the former mayor of Greater Manchester recently took the leadership of the Labor Party and became, asa result, the newest Labor Prime Minister in the UK.
A New and Not So New Politics in the UK
This newest Prime Minister has been received, it seems, cautiously and I suspect not without reason. What is needed for the UK is not really what the UK public desires. Pessimistically ,The Economist reflects on Burnham’s early statements:
“Yet Britain’s new leader wants to wind back the clock. Andy Burnham became prime minister on July 20th after winning the endorsement of 94% of Labour MPs.
“The new man was folksy, and brimmed with the belief that he can get stuff done. But a prime minister’s first address is the moment to tell voters the truth about the
hard choices that a sunnier future demands. Mr. Burnham used his to hawk a
soothing mix of nostalgia and giveaways.”“Mr. Burnham gets Britain’s malaise back to front. The problem is not that Britons are being lashed by the winds of globalisation. It is that they change jobs, switch between sectors and move home for work less than they used to. Stagnation, not disruption, is the disease.”
“Then came the giveaways. Mr. Burnham says his priority is giving the public “breathing space”, with energy bills and bus fares subsidised by “reprioritising” long-term government programmes. His arithmetic is shoddy and (again) his diagnosis is faulty. To blame high nominal prices for the country’s woes is to look at the wrong side of the ledger.”
“The underlying problem is years of stagnant real wages, owing to weak productivity growth. Mr. Burnham’s prescription—scrapping tomorrow’s reforms for sweeties today—is a recipe for further stagnation. It will do nothing for Britain’s economic funk, but it will feed a cynical politics that tells voters the best they can ask for from their leaders is money-off vouchers.”
“The hardest truth is that Britain is living beyond its means and the bond markets have the Treasury on notice. Sir Keir [Starmer] failed above all because he could not reconcile his promises to avoid tax rises, reduce borrowing and repair public services. Instead of untying this knot, Mr. Burnham is pulling it tighter.”
“The danger is that nostalgia and handouts work for Labour. If Mr. Burnham gets the poll bounce he craves, he will double down. But here Labour’s interests diverge from Britain’s. The road to productivity growth and better living standards lies in reforms that make Britain an attractive place to invest and nurture businesses. Turn backwards, and the rewards from a world moving ever faster will pass Britain by.”
And then there is Brexit. The costs of that action will be tallied for years to come.
Judah Grunstein at WPR, pointed out, as did several others, that achieving sustained growth in the UK, which is a must, while providing ‘goodies’ for electoral success is not likely to end well:
“Burnham must somehow fund all these priorities while under the watchful eye of the bond market, and investors already consider the British government to be over-indebted. With no fiscal room for maneuver, Burnham could possibly redistribute the tax burden from lower-wage to wealthier earners, providing the relief he has promised without resorting to further borrowing. But that risks alienating the wealthy investors ostensibly needed to jumpstart the sluggish
economy, for results that, like the savings on electricity taxes, may not even
be noticed by wage-earners.”“All of that makes for a very difficult circle for Burnham to square, at a time when Reform UK had been the fastest-growing party in the country (at least until its leader Nigel Farage was tarnished by a recent string of financial scandals). Burnham himself called his premiership Labour’s “last chance” to get it right upon accepting the party
leadership position four days ago.”“In this, Burnham faces a similar conundrum to France’s Emmanuel Macron, Germany’s Friedrich Merz, and other mainstream European leaders facing challenges from the insurgent anti-immigrant far right. Without growth, popular anger is only likely to surge further.”
Improving and sustaining growth is a must. Unfortunately, the politics there, and indeed in lots of places, makes improving productivity a political reach too far.
Tariffs, Tariffs and More Tariffs
And then there is the continuing tension between the Carney Liberal government and President Trump. Early in the week the Trump administration imposed new tariffs on one of Trump’s favorite targets – the 51st state – Canada. As described by Ana Swanson and Ian Austen in the NYTimes:
“President Trump on Monday signed orders to impose a 50 percent tariff on a wide range of Canadian goods, claiming that Canada had discriminated against the United States in key industries.”
“The tariffs, which go into effect in 30 days, would be imposed on a range of Canadian exports, including wine, hockey sticks, cement, dairy products, plywood, paper and furniture. Administration officials said the taxes were punishment for Canadian discrimination against three U.S. industries: motor vehicles, dairy and alcohol.”
“The new tariffs will be imposed under an obscure legal provision, Section 338 of the Tariff Act of 1930, which Congress wrote as the Great Depression deepened. The law allows the president to put tariffs of up to 50 percent on imports from countries that discriminate against U.S. commerce uniquely, as compared to other countries.”
The Section 338 tariffs are the newest effort by this Administration to find a legal basis to impose tariffs principally on allies and major trading partners. As the Canadian Prime Minister pointed out, these most recent tariffs:
“… were the latest in a series of U.S. actions that are in “in direct violation” of the trade agreement between the two countries and Mexico.”
“The tariffs will not apply to energy products, potash, certain fish and minerals, or products that are already subject to national security tariffs ranging up to 50 percent, like steel. Yet unlike previous rounds of U.S. tariffs, there would be no exemptions for Canadian goods covered by the United States-Mexico-Canada Agreement, the free-trade deal that Mr. Trump negotiated and signed into law during his first term, a senior administration official said.”
And in fact, according to Raisa Patel at the Toronto Star, there is more than a little conjecture, and suspicion that these tariffs are in part all about the trilateral trade negotiations.
“Nearly one in six products captured by U.S. President Donald Trump’s latest tariff spree are goods Canada
doesn’t export to the United States, Canadian officials recently told Ottawa’s
economic advisory council — something experts say may shed light on the
thinking behind Washington’s strategy.”“Jean Simard, head of the Aluminium Association of Canada and a member of Prime
Minister Mark Carney’s Canada-U.S. advisory council, told the Star on Tuesday
that officials conveyed to members that 85 of the 555 targeted products are
goods Canada does not sell to the United States.”“For Simard, that was evidence that Trump’s newest trade escalation had “all the
makings” of a pressure tactic designed to squeeze Canada further.”
Larry Herman, a trade specialist from Canada certainly views the tariff list suspiciously:
“However, despite the seemingly haphazard nature of the list, which also includes products like horsehair and flower bulbs, Herman said he believes the conscious targeting of certain provinces and sectors shows the slate was carefully curated.”
And so does Danielle Kurtzleben of NPR:
“Well, the White House has been straightforward in saying these new tariffs are a way of getting back at Canada.”
“Well, in response to Canadian tariffs on U.S. cars, the administration has a wide range of products they’re targeting. There are some types of plywood, essential oils, even tulip bulbs. I mean, really, across these different tariff proclamations, there are long, very specific lists of goods. For example, digging through, I noticed a few very Canadian pieces of sports equipment being tariffed – hockey sticks, ice skates and fishing rods. But that brings me to something important. There’s a wide range of goods being tariffed and at 50%, which is high, but it’s still not a huge amount of goods.”
Kurtzleben “bottom-lined” Trump administration actions with a view, expressed by Kathleen Claussen, a professor at Georgetown University law school who suggested:
“I think about them as leverage in the USMCA negotiations because these are areas that have been irritants for the bilateral relationship.”
But wait we are not yet done because as we cruise toward the weekend, the Administration has announced a new set of tariffs as the current Section 122 tariffs come to a statutory end. These new tariffs apply now. As described, again by Ana Swanson in the NYTimes:
“The Trump administration will impose tariffs of around 10 percent on goods from more than 80 countries on Friday, its latest effort to put in place an expansive protectionist policy that has been repeatedly challenged in court.”
“The tariffs will range from 10 percent to 12.5 percent and take effect at 12:01 a.m. on Friday, replacing a global 10 percent duty set to lapse at the same time. Mr. Trump issued that earlier tariff in February, after the Supreme Court struck down duties he imposed last year.”
“The duties will be issued under Section 301 of the Trade Act of 1974, which allows the president to impose tariffs on foreign countries that engage in unreasonable or discriminatory trade practices. The administration has cited the failure of foreign countries to pass or enforce laws banning the importation of goods made by forced labor into their own countries, saying that disadvantages U.S. businesses that do follow such laws.”
As for Canada:
“Canada, which will be subject to a 10 percent tariff under the arrangement, already prohibits importing forced labor goods. The European Union, also at 10 percent, has a ban that is scheduled to take effect in December 2027. But Trump officials say that the governments have not effectively enforced those laws.”
Having said that though, there are exemptions applicable to Canada
“The new tariffs will exempt oil and gas and certain national resources, as well as goods already covered under the United States-Mexico-Canada Agreement, or national security-related tariffs Mr. Trump has imposed on cars, steel and other goods.”
It is evident, however, that this Administration is determined to use tariffs, from wherever they may come, to construct the following:
“Testifying in Congress Wednesday, Mr. Greer said that the administration remained intent on imposing tariffs, regardless of the legal approach.”
““The specific authorities this administration is using have changed, but the trade strategy has not,” Mr. Greer said. “We are committed to continuing to use tariffs and to negotiate deals to support the re-industrialization of our economy, protect American workers and increase their wages and shrink our trade deficit.””
Like our friend, the ‘King of the North’, Trump and Burnham wish for industrial rejuvenation. However , no matter how these leaders may long for, and try to secure greater and sustained manufacturing growth, it is unlikely to return. Meanwhile, many will suffer including most consumers from the UK and the US chasing after a world that has, I’m afraid, long departed.