Friday 28/03/25

In war-related news, US pushes for expansive new deal to control Ukraine’s minerals and energy (Financial Times, Christopher Miller and Paola Tamma) shows that negotiations are continuing between the US and Ukraine regarding the control of the latter’s critical minerals and energy assets, with the Americans pushing to take even more without providing anything in return. * SO WHAT? * The Americans will no doubt argue that they are just recouping at least some of the billions they’ve poured into the war effort while the Ukrainians are probably getting more nervous about their own sovereignty and how reliant they are going to be on the whims of Washington. Here’s a thought – what if Trump makes a controlling deal with Ukraine and then effectively hands over what Russia wants whilst keeping the assets for itself? There would be nothing that anyone could do about that apart from look on in horror…

Meanwhile, Europe’s reassurance force in Ukraine to take shape in 3-4 weeks, says Emmanuel Macron (Financial Times, Leila Abboud, Adrienne Klasa, Christopher Miller and Henry Foy) shows that Europe is gradually attempting to get its act together as President Macron is now talking about the structure of a “reassurance force” of European troops for post-war Ukraine. This was the conclusion he made after hosting President Zelenskyy and over 30 countries yesterday in the “coalition of the willing”. Clearly, there’s a lot of detail still to be hammered out but it sounds like some progress is being made…

I thought I’d mention If there is a ‘kill switch’ in the F-35, it’s as likely to be British as American (Daily Telegraph, Lewis Page) because it provides an interesting perspective on why America’s doing what it’s doing and whether the US weapon “kill switch” is a realistic threat. Regarding the first matter, the article asserts that there is no reason to doubt America’s support if Russia attacked and it is only fair that Europe needs to step up to pay a lot more for its own defence rather than spend all its money on welfare and expect Americans to pick up the bill – or as US Defense Secretary Peter Hegseth said last month, “You defend your neighbourhood, and the Americans will come alongside you in helping that defence”. The article dismisses “kill-switch” talk, although I’ve talked before about there not being such a switch per se – but that the effect of a lack of updates or spare parts would have the same effect. The writer asserts that this doom-talk is just about European suppliers, like Airbus, scaring everyone into buying European equipment. Overall, the article observes that suddenly “buying European” isn’t possible and that European planes, weapons etc contain American parts while American planes, weapons etc contain European parts – so one excluding the other is neither practical nor likely (certainly in the short and medium term). * SO WHAT? * I personally find this article to be very informative but overly dismissive about the importance of Europe supporting European defence manufacturers. Although it is unlikely that America will completely abandon Europe, for me the trust has been irrevocably damaged because of Trump’s actions and we all need to wake up to this reality. Why WOULD buying European fighters, weapon systems and other things be a bad thing?

Then in Donald Trump targets law firm WilmerHale in latest executive order (Financial Times, Myles McCormick and Stefania Palma) we see that Trump’s battle with law firms is continuing. This time, he’s trained his sights on a law firm that has connections with the prosecutor who investigated allegations of Russian interference in the 2016 presidential election, describing it as “yet another law firm that has abandoned the profession’s highest ideals and abused its pro bono practice to engage in activities that undermine justice and the interests of the United States”. * SO WHAT? * This latest attack follows on from Trump’s targeting of Paul Weiss, Perkins Coie and Covington Burling. When will this end?? I wonder whether Trump is doing this to scare law firms from interfering in his current presidency. The thing is that, at the moment, his time in office is limited whereas I’d argue law firms’ memories are long. I would have thought they’d all be queuing up to knife him in the back at the first opportunity when his power wanes. That won’t be for years, though, so in the meantime they’ll just have to suck it up.

Meanwhile, Beijing punishes Hong Kong tycoon for sale of Panama Canal ports to US (Daily Telegraph, Louis Goss) shows that Beijing is not above a bit of vindictiveness as it punished 96-year-old Li Ka-shing by directing its state-run companies not to do any deals with his CK Hutchison conglomerate. This was retribution for his company selling two ports in the Panama Canal to Trump following his assertion that the US should “take back” the ports to reverse

growing Chinese influence. * SO WHAT? * This means that the deal with BlackRock could be reversed. Such a reversal could have widespread repercussions because the deal with “Hutch” also includes 43 other ports in 23 countries around the world including our largest seaport, Felixstowe. We’ll just have to see how this plays out!

Chinese Exporters Hunt for Alternatives to ‘Irreplaceable’ U.S. Buyers (Wall Street Journal, Yoko Kubota) takes a look at how Chinese exporters are now having to seek out other export destinations as the US gets increasingly hostile to trade with China. The country has spent the last few decades exporting to the US but it feels like it has reached a turning point and so it was interesting to see that hundreds of exporters attended the Global Cross-Border E-commerce Selection Exhibition last week in the manufacturing hub of Shenzhen which focused on showing merchants how to sell more in Russia. * SO WHAT? * The deterioration of US-China trading relationships is catastrophic for many manufacturers because they have relied so much on the US market for so long. While some seek out other markets in Southeast Asia and South America that can help to make up for the loss of US business, others are looking to retrench production to places like Cambodia or Vietnam to help them get around tariffs on Chinese-made goods. Thus far, Trump’s tariffs have made Chinese goods 20% more expensive and many US retailers are putting pressure on Chinese suppliers to cut their prices to offset at least some of the additional costs. The problem is that this could decimate some Chinese factories who operate on wafer-thin profit margins. Unfortunately for Chinese exporters, the US is irreplaceable as a single market – and even if efforts to boost exports to Russia work well, they won’t be enough to completely offset what they lose. Tricky times ahead for Chinese manufacturing…

In Vladimir Putin warns of growing competition for Arctic supremacy (Financial Times, Max Seddon and Richard Milne) we see that Putin is acknowledging increasing geopolitical competition in the Arctic just as JD Vance goes to visit Greenland amid threats by the US to take Greenland from Denmark. He added that he was open to co-operation with western countries in this region but warned that “NATO countries in general are increasingly designating the far north as a springboard for potential conflicts”. Meanwhile, Canada races to secure its Arctic frontier (Financial Times, Ilya Gridneff) shows that Canada is also feeling pressure from its part of the Arctic Circle from both Putin and Xi. As a result, PM Mark Carney has committed troops to “take on a greater, sustained and year-round” Arctic presence and is buying a lot of new kit to improve its defences. * SO WHAT? * As the ice continues to melt, the Northwest Passage is becoming a busier shipping lane while Russia and Canada value the minerals that are being mined in the region. This is why everyone is looking to stake their claim!

Elsewhere, Mark Carney says old Canada-US relationship is ‘over’ (Financial Times, Ilya Gridneff) shows that Carney is leaning into his spat with Trump (presumably to get votes for the upcoming election!). He promised a “broad negotiation of our security and trade relationship”, implying that he is calling into question the future of the USMCA trade deal that was negotiated between the US, Canada and Mexico the last time Trump was in power. * SO WHAT? * I’ve been wondering whether the EU could try to get closer ties with Canada to form a deeper “alternative” transatlantic alliance given Trump’s increasingly isolationist moves. It’s a bit early for this as Carney needs to win the election, but given his deep and practical understanding of the UK and Europe and Trump’s antagonism of the latter you would have thought that both sides would be up for this…

Talking about elections, Australia’s Anthony Albanese calls May 3 election in battle for second term (Financial Times, Nic Fildes) shows that Australia’s PM has called an election for May 3rd, kicking off a five-week campaign. Albanese was elected in 2022 and will try to avoid being a one-term PM by winning the election that will be held less than a week after Canada’s! * SO WHAT? * Albanese’s Labour party’s popularity in the polls has increased a lot over the last few weeks as he has been fighting back against Trump’s policies. His main opponent, Peter Dutton, has been nicknamed “Temu Trump” and although he’s reined in the strength of his messaging, the anti-Trump backlash has become a boon to Albanese to such an extent that his party would get an increased majority if it held an election this week, according to the latest Roy Morgan poll.

Yesterday was the day that Trump imposed 25% tariffs on car imports and Trump tariffs wipe billions off European carmakers (The Times, Martin Strydom) highlights the immediate effect on the share prices of Mercedes-Benz, BMW, Porsche, VW and Stellantis who all weakened – along with many others around the world! Almost 50% of the cars sold in the US last year were imported, so the tariffs are going to be a tough pill to swallow. Mexico, Canada, Japan and Korea hit hardest by US vehicle tariffs (The Times, Jack Barnett) highlights those with most to lose, although the EU accounts for 21% of US automotive imports – with half of those coming from Germany – while Car tariff wacky races will still produce some winners (Financial Times, Lex) shows that some makers will actually benefit. Those who produce their vehicles in the US, like Tesla, should do well from this, as should makers who sell very little there, like Renault and the Chinese manufacturers. Also, makers whose cars are already expensive, like Ferrari, aren’t expected to suffer too much. US car tariffs help Chinese EVs to race ahead (Financial Times, The Editorial Board) emphasises how companies like BYD will benefit because Trump’s tariffs will

push other manufacturers further behind but Trump Warned U.S. Automakers Not to Raise Prices in Response to Tariffs (Wall Street Journal, Josh Dawsey and Ryan Felton) shows that the president is willing to punish makers who raise their prices as a result of the newly-imposed tariff. Buyers’ tariff fears could put the skids under car sales to US (The Times, Louisa Clarence-Smith, Tom Saunders and Robert Lea) says that high-end dealerships are fielding concerned calls from customers who want to know whether their existing orders will be affected by the tariffs although, as I said above, these customers are most able to absorb any higher costs. Still, the dealerships are worried that clients will avoid buying on principle. * SO WHAT? * In theory, Trump has three reasons to impose these tariffs (which he has said are “permanent”). He wants to raise revenue, encourage more domestic manufacturing and prioritise local makers over foreign ones. The problem is that although US makers make more of their cars locally than others, they are still exposed because of the parts and the way that cars are made.

CoreWeave raises $1.5bn in scaled- back IPO as investors’ AI enthusiasm cools (Financial Times, George Steer and Tabby Kinder) highlights yesterday’s flotation of the cloud computing provider. It had originally hoped to raise $4bn, but it cut that to $2.7bn on the investor roadshow and then actually raised $1.5bn yesterday. It sold 37.5m shares at $40 each versus initial hopes of selling around 49m for between $47 and $55 each. CoreWeave fails the IPO ‘hair test’ (Financial Times, Lex) says that the company wasn’t trouble-free and that’s what the eventual numbers reflected. * SO WHAT? * Other companies such as Klarna, Chime, eToro and StubHub are waiting in the wings for their own respective IPOs, so they will have been watching this flotation closely. I would tentatively suggest that CoreWeave had its own particular issues with loan repayments, the size of its debts and its dependence on Nvidia, which I believe dented the valuation. Because this is company-specific, I don’t think this somewhat underwhelming performance will have damaged sentiment too much at this stage.

EU looks to hit Big Tech in crackdown on US services exports (Financial Times, Andy Bounds, Barbara Moens and Henry Foy) highlights the EU’s intentions to put further pressure on US

services exports, including Big Tech’s business, in response to Trump’s 25% tariffs on car imports. This is in addition to the extra taxes of up to €26bn on US goods that were put in place in response to the steel and aluminium tariffs. Potential measures at the EU’s disposal include restricting the IP of Big Tech companies and banning Starlink from winning government contracts. The tariff madness continues…

In gaming-related news, Mario Time: Nintendo readies crucial Switch 2 launch (Financial Times, David Keohane and Leo Lewis) shows that Nintendo is expected to release details of its much-anticipated follow-up to the wildly successful Switch next week on “Liberation Day”. Elsewhere, Ubisoft Gets $1.25 Billion Investment From Tencent for New Gaming Unit (Wall Street Journal, Adria Calatayud) shows that Ubisoft is putting together a new unit that would contain its Assassin’s Creed, Far Cry and Rainbow Six franchises with Tencent, which would hold a minority stake in it. This should held to bolster its balance sheet and take the pressure off a bit.

In a quick scoot around some of today’s other interesting stories, Next warns Labour’s worker rights reforms threaten ‘huge burden’ for employers (Financial Times, Laura Onita) shows that while the company published some decent results yesterday, as it breached £1bn in annual profits for the first time, and outlined a positive outlook. However, the CEO expressed concerns about the increased burden that retailers would have to bear as a result of the government’s plan to strengthen workers’ rights. He said that he wasn’t against them per se, just that the bar should be set at the right height not to have a detrimental effect on the sector.

In contrast, H&M blames weaker sales on inflation and tough trading climate (The Times, Emma Taggart) shows that the Swedish fashion retailer had a tricky Q1 and fell short of market

expectations. It blamed a rise in discounting, higher marketing spend and “negative external factors” as the main drains on profit. * SO WHAT? * The company is still in cost-cutting mode to improve margins and I guess that marketing spend takes time to filter through to sales.

Then in Lululemon Outlook Misses as Consumer Confidence Falls (Wall Street Journal, Connor Hart) we see that the upmarket sportswear retailer reckons that increasingly cautious customers will result in slower sales growth this year. It plans to fight back against the slowdown by improving its brand recognition which has a lot of room for improvement, particularly in China. Having said that, the recent quarter’s performance sounded pretty good!

This looks like a very tricky puzzle indeed! Can you solve it??