Donald Trump has plenty of economic issues to hit before he gets to the UK
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Version 0 of 1. Donald Trump mined deep discontent running through America and struck gold. The political outsider drew derision when he announced his bid for the US presidency. But Trump’s protectionist, anti-immigration rhetoric and a pledge to be the “greatest jobs president that God ever created” struck a chord. Momentum built and nothing could stop the Trump juggernaut, not his open xenophobia, nor claims about his tax payments – or lack thereof – and not even a sexual harassment scandal. So the electoral upset of the century has happened and for the next four years at least, the reality TV star will be swapping Manhattan’s Trump Tower for the White House. In the year that the UK voted to leave the EU, Trump’s triumph over Hillary Clinton was yet another outcome that pundits and pollsters had failed to predict. On financial markets, initial shock gave way to guesswork. In the post-truth world Trump has helped to build, investors are left to puzzle over what he will do once in power. Which of his most outlandish policies will become reality? Will there be a wall along the border to Mexico? Will he really target millions of immigrants for deportation? To get a flavour of the uncertainty, look no further than the stock markets, which have struggled to find a clear direction since Trump’s victory was declared. Economic forecasters are being coy about whether his effect on growth will be positive or negative. A big-spending, tax-cutting president could well lift GDP. But things could go the other way if Trump follows through on his anti-trade stance and new tariffs raise costs for businesses and consumers. On the campaign trail, Trump made trade a central theme. He played into rising anger among voters who felt the spoils of globalisation were unevenly shared. For those who saw their wages depressed or their jobs move overseas, the era of free trade did more harm than good. It seems pretty certain that a Trump presidency will stall the process of trade liberalisation. He wants to renegotiate, or possibly scrap, the North American Free Trade Agreement, or Nafta, which lowers trade barriers between the US, Canada and Mexico. Other deals in doubt are the Trans-Pacific Partnership (TPP), between 12 countries around the Pacific rim excluding China, and a proposed agreement between the US and Europe, known as the Transatlantic Trade and Investment Partnership (TTIP). On Nafta, Trump holds all the cards. Mexico needs the US more than the US needs Mexico. But when it comes to Trump’s pledge to curb China’s trading might, it is not so obvious he will have the upper hand. Not only is China one of the biggest economies in the world, it is a big holder of US debt. Any attempt to browbeat China, could well backfire on Trump. Time will tell whether the tycoon wants to risk a trade war with China. Just as hard to predict is what this all means for the UK as it undergoes its own upheaval and potentially breaks away from a market of 500 million people. With Trump, the UK is no longer at the back of the queue for trade deals, as Barack Obama threatened it would be during the EU referendum campaign. The incoming president has talked of his affection for Britain, so perhaps he could go for a bespoke trade deal between the US and UK. But Theresa May and her Brexiter trade minister Liam Fox will have to accept that the vastly bigger US will have the upper hand in any such talks. However, it’s just as likely that trade deals of any kind will not be a priority for a president who campaigned on a pledge to put up walls. The UK might not be at the back of the queue, but it won’t feature near the top of Trump’s to-do list either. As we enter a new era of looking inwards, those who sought power on a protectionist platform should hope that their policies do not end up doing yet more harm. M&S must change approach to clothes Everything that happens at Marks & Spencer, the 132-year-old high street retailer, causes more drama than its peers. Predictably, the news last week that M&S plans to close 30 UK stores and convert 45 others into food-only locations created quite a stir. The retailer’s shops are the bedrock of high streets in towns and cities across the country, and have been for years, so any change is noticed by the locals. The closures are an admission of defeat: that M&S cannot make its clothing popular enough to justify the amount of space dedicated to selling it across the country. It is a costly admission too: it will cost M&S £150m to rework its UK shops over the next three years and another £200m to shut struggling shops abroad. However, it was the right move by Steve Rowe, the M&S chief executive. If anything, he should have been more radical. In an online world where marksandspencer.com is the company’s biggest shop, it would be foolish for the retailer to stick with a business model from a previous generation. M&S has significantly more stores than rivals John Lewis and Debenhams, and significantly larger ones than rivals that, like M&S, only sell own-brand clothing, such as Zara and H&M. One of the reasons that M&S’s clothing range can look so dowdy is that there is so much retail space to fill: it can’t possibly get everything right. In contrast to M&S’s clothing, its food business has a clear upmarket position. This Christmas, families will flock to M&S for their festive fare. With Tesco, Asda, Sainsbury’s, Morrisons and Waitrose dramatically cutting back investment, M&S has a glorious opportunity to expand. Having said all this, M&S should not start treating its clothing arm as a secondary consideration within the group. Cutting the amount of the space dedicated to clothing gives the company an opportunity to rethink its approach to fashion. Rowe must surely follow the success of the food business and make M&S clothing more aspirational. A year of revolt There is more in common between Sir Philip Green, Mike Ashley and Donald Trump than their body shapes and wealth. Trump’s victory has sparked dismay – not just at the election of a man recorded making sexist remarks but at how, when coupled with Brexit, it suggests the west has turned its back on trade. The scandals involving BHS and Sports Direct highlight why people may have come to question the benefits of tariff-fee imports and exports. While business leaders like Green and Ashley have filled their boots and expanded empires, the workers who have driven their stores’ success have not shared their wealth. Green and Ashley are billionaires, but 11,000 BHS workers have lost their jobs and part of their pensions, while Sports Direct staff are stuck on zero-hours contracts. Those who have taken advantage of the freedoms offered by globalisation and the free markets have a lot to answer for in 2016. |