The Social World

Tag: Tariffs

  • Will Trump’s tariffs trash the film industry?

    Will Trump’s tariffs trash the film industry?

    One feature of President Trump’s second term in office is that when he says he’ll do something, he usually does it, no matter how outlandish or cockamamie it might seem. So it has proved with his threat to impose 100 percent tariffs on any films that have been filmed outside the United States. He first said that he would do this in May, and many industry pundits rushed to say that his scheme was impractical, unworkable, etc. Yet veteran Trump watchers would know that once he has an idea, it will not rest.

    He has now repeated himself, with greater vigor, writing on Truth Social that “our movie making business has been stolen from the United States of America, by other Countries, just like stealing ‘candy from a baby.’ California, with its weak and incompetent Governor, has been particularly hard hit! Therefore, in order to solve this long-time, never-ending problem, I will be imposing a 100 percent Tariff on any and all movies that are made outside of the United States.” In other words, Trump – a figure with a long-standing distrust of Hollywood, despite or perhaps because of the number of films that he has made cameos in – is attempting to Make Hollywood Great Again, and damn the pernicious industry types who would say anything otherwise.

    It is unclear how this plan will work in practice. The audience for foreign-language pictures has always been relatively small in the United States, meaning that if Far Eastern and European distributors believed that it would be financially ruinous to operate in the arthouse circuits on the East and West coasts, they would simply skip releasing them altogether. The Trump-voting base and the kind of people who would seek out the new Jacques Audiard picture at their local independent cinema are not, in all honesty, likely to have huge overlap. What is much more damaging for the industry is the idea that films such as The Avengers or The Batman – large-budget, American-funded pictures shot mostly in Britain for tax reasons – would become impossible to make in their current form. Budgets for these films are already sky-high, and audiences are unwilling to spend yet more money on their tickets.

    Publicly and privately, industry figures are doubtful that the tariffs will come off. As one one such figure told Variety, “He’s the president, so you have to treat it seriously, but people are mostly just confused by this.” The British producer Phil Hunt went even further, remarking that “It’s just hot air again. It’s his brand of Looney Tunes. I can’t see it helping North America. He doesn’t understand the detail of film being a global business.” While something like the recent Paul Thomas Anderson epic One Battle After Another is US-set, produced and funded, many more pictures have money from all over the world, whether it’s Britain, the Middle East or (increasingly seldom now) China. The idea of imposing punitive tariffs on all pictures seems ridiculous, but that does not mean that it won’t happen.

    And if it does, what then? It is hard not to feel that the decision has been taken as an attack on the “weak and incompetent” Gavin Newsom, to try and achieve political points. It is amusing that one of Trump’s “ambassadors to Hollywood”, the ever-controversial Mel Gibson, is currently filming his eagerly awaited Passion of the Christ sequel in Rome, which presumably would be hit by tariffs, but it seems inevitable that an exception would be made for this picture on both spiritual and economic grounds. Yet if this plan is to work and have any serious effect on the film industry’s outsourcing both filming and financing elsewhere, it would need far greater clarification and thought-through action. The shock and awe have now been achieved. Next must come the details, and only then will it be possible to see whether this has any chance of working.

  • Bessent’s private message reveals a Milei gamble

    Bessent’s private message reveals a Milei gamble

    The first lesson for Treasury Secretary Scott Bessent is that digital photography has totally changed politics, as wiser practitioners have long since realized. You might have got away with reading private communications in public 30 years ago, but you can no longer do so. The second lesson is that if you build an administration on the promise that you will always serve the American interest, certain foreign policy decisions become difficult.

    Bessent has been caught reading a message on his phone from Agriculture Secretary Brooke Rollins expressing her anger at the Trump administration’s deal to establish a $20 billion loan facility with Argentina, or “the Argentine” as Rollins prefers still to call it. How did Argentina’s embattled President Milei respond to being thrown a lifeline? In the words of Rollins, they “removed the export tariffs on grains, reducing their price, and sold a bunch a soybeans to China, at a time we would normally be selling to China.”

    In fact, a “bunch” was 20 shiploads of soybeans, eagerly bought up by China as it tries to sidestep US producers in the midst of a US-China trade war.

    In vain has the White House argued that Argentina’s agricultural produce would even cheaper if the country was allowed to go bust. As far as American soy bean farmers are concerned they have been shafted. 

    That is the reality of a trade war. It might seem like a straightforward battle between one country’s producers and another’s, yet the victims of tariffs imposed by your own government are as likely to reside in your own country – and they are not going to be the least bit happy. But the incident also raises questions about the Trump administration’s support for Milei’s government. As far as Trump is concerned, Milei is a rare friend in a world which often seems mostly hostile towards him. Milei in some ways is cut from the same cloth – he is of the “move fast and break things” school of governing.  Or in his case, slice through them – he famously appeared at political rallies using a chainsaw as a prop, symbolizing what he intended to do to Argentina’s bloated state. He did not disappoint. Whole government departments were expunged in a blizzard of executive orders which possibly left even Trump in awe.

    Milei achieved his first goal of taming runaway inflation, although it is still far from healthy levels – it is down to 33 percent from over 200 percent in 2023 when Milei took office.

    Trouble is, when you start off like that you tend to make many enemies along the way. And now Milei has slipped up – he has cleared out Argentina’s currency reserves in trying to prop up the peso, hence the need for a bailout. It is natural that Trump might want to help out an ideological soul mate in need, but spending US taxpayers’ dollars doing this is not necessarily going to win him many friends at home. If you are a US soybean producer, Argentinian farmers are your rivals, not friends deserving of a bailout.

    If Milei burns through his latest lifeline, he may find himself relying on the IMF alone. The White House vaults are not likely to be opened to him again.

  • Trump’s new pharma tariffs will punish Americans

    Trump’s new pharma tariffs will punish Americans

    Donald Trump has punished European pharmaceutical companies by imposing 100 percent tariffs on their branded products unless they are prepared to set up a manufacturing plants in the US. That is one way of putting it, but why is the issue of tariffs so often seen from the point of view of the producers and so rarely seen from the position of the consumers? Besides punishing drugs companies, the President has also whacked the American public – or at least that section of the population which relies on patented medicines made outside the US. The cost of treatment for many of these patients will soar as a result. Does Trump think that people will somehow fail to realize this?

    If he had imposed punitive tariffs on imports of generic medicines – those whose patents have expired and can be manufactured by any company, anywhere in the world – while leaving branded medicines alone, it would have made some kind of sense. It wouldn’t have left consumers untouched, because they would no longer be able to source medicines so cheaply from India, where many generic drugs are made, but US producers would be able to step up production of generic medicines and hope to compete with overseas competition. It wouldn’t cause mass upheaval for consumers. But instead Trump has done the opposite: he has left generic medicines untouched, while whacking tariffs on patented medicines. Patented medicines can only be manufactured by the company which holds the patent, or by anyone who is licensed by that company.

    Will drugs companies which currently make patented drugs overseas shift production to the US, as Trump intends? Maybe some will, but it is almost certain that some will not, forcing Americans who are seriously unwell to pay a punitive tax to the US government for the right to continue to use life-saving drugs. Some drugs companies will make the calculation that Americans are a captive market for their products and that consumers will simply have to pay whatever it costs to obtain them – so why go to the expense of building a manufacturing plant in the US to sidestep the 100 percent tariffs? In any case, Trump has shown himself to be so inconsistent on tariffs – and other policies for that matter – that deciding to invest in the US in response to this week’s announcement would present a serious commercial risk: Trump might well have changed his mind by the time you get your plant open, making your investment pointless.

    The same is true of all the tariffs which Trump has announced since “Liberation Day” in April. They are good news for some producers, who are now better able to fend off foreign competition. But that only comes at the price of punishing consumers, who face less choice and more expensive goods as a result. And it is not just end-of-the-line consumers who suffer, either – many manufacturers rely on imported components, tariffs on which drive up their costs.

    We might appreciate the double-sided effects of tariffs a bit more if we started calling them by what they really are: import taxes. That would refocus minds on their effect on the consumer, and make it harder for Trump, or any other protectionist, to present them as a win-win solution to a country’s economic malaise. 

  • Can India’s economy survive Trump’s 50 percent tariffs?

    Can India’s economy survive Trump’s 50 percent tariffs?

    President Trump’s 50 percent tariffs on India kicked in yesterday. The timing could not be worse: in May, India overtook Britain, Germany and Japan to become the fourth largest economy in the world. According to a report by EY only this week, it was already set to become the second largest globally by 2038, behind only China. After a decade of liberalization and rapid industrialization, it has witnessed exceptionally strong growth. And now, it looks like Donald Trump may kill off the Indian economic miracle.

    Over the last 20 years, India’s growth has averaged 6.9 percent, a rate that puts almost every other country in the world firmly in second place. A generation of Indian multinationals has emerged, and over the last five years alone, the benchmark BSE Sensex equity index has more than doubled. With a healthy demographic – the median age is just 28 – there was a strong argument that it was only a matter of time before it overtook China as the main rival to the US. 

    American tariffs look likely to kill Indian economic growth stone dead

    And yet that could be about to end. The US has imposed tariffs of 50 percent on everything India sells to them. The reason? It already faced 25 percent levies, like most other countries, but President Trump has imposed an extra 25 percent to punish it for importing oil and other commodities from Russia.

    This will hurt. India exports goods worth $86 billion a year to the US, and while some sectors such as pharmaceuticals will be exempt from the full 50 percent rate, around two-thirds will be subject to the full tariff. Exports to the US are about to fall off a cliff. That will be bad enough. But the knock-on impact will be just as serious. With what effectively amounts to a trade embargo in place, business ties with the US will start to wither away, investment will be hammered and Indian companies and entrepreneurs will be frozen out of the world’s most important market. 

    Of course, India can start to mitigate that. It has long-standing links with Russia that stretch back to independence, but it can gradually sever those. It has been buying up cheap Russian energy that was sanctioned elsewhere in the world, and while that was an attractive deal – so long as you don’t mind funding the war in Ukraine that is – there is plenty of oil and gas available on the global market. But given that Russia supplies 40 percent of its oil, that will take time, and it will lose an ally in the process.

    American tariffs look likely to kill Indian economic growth stone dead. It could take many years to recover from that – and until then China will extend its lead over its main emerging rival.

  • Does Trump’s handshake deal with the EU put America first?

    Does Trump’s handshake deal with the EU put America first?

    What’s really at stake in these trade deals? That is what we are slowly discovering as Donald Trump’s handshakes with America’s trading partners are turned into specific and detailed agreements. Today we are getting the details of one of the biggest deals struck so far: a trade agreement with the famously protectionist European Union, which agreed in principle to a deal back in July, with the caveat on both the US and EU side that taxes on key sectors were still up for discussion.

    Those discussions, it seems, have produced some details. Despite early threats that America would impose tariffs of 250 percent and 100 percent on EU imports of pharmaceuticals and semiconductors respectively, the headline duties for both have been reduced to 15 percent. Indeed, most goods flowing from the EU’s 27 countries into the US will be subject to a 15 percent tariff. Still, there are some disputes. Trump is keeping the tax on EU-made vehicles at 27.5 percent until the EU drops many of the tariffs it has placed on American goods. Unlike trade deals secured with Indonesia and the Philippines, where both countries slashed their tariffs on US products, the EU has been reluctant to go as far.

    While it’s admittedly refreshing to watch the European Union grapple with the harms of protectionism – similarly to what it’s forced other countries to endure in past decades – who is really emerging as the winner? While the huge drop in proposed taxes on pharmaceutical imports is being chalked up as a good deal for the bloc, it’s perhaps better described as a less bad deal for American importers, who will be paying the new and higher taxes on these medicines and materials as they make their way from the EU to the US.

    It’s a curious tax hike from President Trump, who has been insisting that drug prices need to come down for American consumers. As my colleague Michael Simmons points out in the UK magazine this week, prices of weight-loss jabs in Britain are starting to soar as drug companies work to rebalance where their profits come from in an attempt to lower prices for these drugs in America (a little, anyway). But if Trump’s goal is to bring down the cost of drugs in the US, slapping higher taxes on imported medicine is an odd move. 

    Of course, in Trumpworld, trade-offs don’t exist. There’s no downside, no losing. There’s only “winning.” And you can bet his administration is delighted this week with a New York Times report revealing a mass exodus of registered Democrats from the party. The Democrats are “hemorrhaging” voters, according to the Times, in every one of the 30 states that tracks voters by political party. An estimated 2.1 million people abandoned their “Democrat” registration between 2020 and 2024, while an estimated 2.4 million voters signed up as Republicans.

    We didn’t necessarily need hard numbers to confirm that the Democratic party is in the midst of a crisis (the 2024 election result was evidence enough), but these figures from suggest an even bigger problem for the left: one that appears to have been brewing long before Joe Biden was switched out for Kamala Harris. Even when the Democrats were winning elections and mid-terms, they were losing parts of their base, including people who were so on message that they were happy to register their affiliation with the cause.

    One wonders if snide remarks about working Americans, or a full-fat socialist agenda, will bring left-leaning voters back home. It seems unlikely.

    This article first appeared in Freddy Gray’s Americano newsletter. Subscribe here.

  • Can tariffs replace income taxes?

    Can tariffs replace income taxes?

    Can tariffs replace income taxes paid by Americans earning an income under $200,000 annually, as President Trump has suggested?

    We seem to have entered a new world in 2025, or rather, reincarnated an older America whose tax receipts were heavily built on tariff payments. U.S. Secretary of Commerce Howard Lutnick recently stated that tariffs could replace income taxes paid by Americans making up to $150,000 per year.

    And certain economic nationalists have urged that there is a vital causal connection here worth recalling in an “American system” of tariffs and protectionism, and the growth of American industry. They argue that America’s Gilded Age wasn’t regressive economically; in fact, the country exploded in growth, commerce and inventions.

    So, is the postwar age of free trade we have lived in for 80-plus years one that no longer makes sense? If so, what other dominoes would fall besides free trade? Will America’s fiscal policy consist of replacing the hated income tax for most American taxpayers with tariffs, a policy that will build domestic industry at the same time via protectionism? And, most importantly, who would object to that?

    None of it is workable, though. It’s not just the relative difference in receipts between income taxes and tariffs; more substantially, it’s a tax base problem. Specifically, the income tax base is much broader than the tax base on which tariffs are built. How much larger? Nearly twelve trillion dollars larger. In a paper for the Tax Foundation, economists Erica York and Huaqin Li found that Americans reported $15 trillion in income in 2021, on which they paid $2.2 trillion in income taxes for an average tax rate of 14.9 percent. In the same year, goods imports were $2.8 trillion, generating $80 billion in revenue on an effective tax rate of 2.9 percent. The tariff rate would need to be much, much higher to replace lost income tax revenue, so high that it would easily destroy the import business upon which the taxes are collected. The power to tax is the power to destroy, and this scenario would demonstrate it. Alternatively, we could drastically cut spending by reducing the size of the federal government to Gilded Age levels to make it work. Right.

    York and Li also explored the results of not having an income tax for individuals with annual incomes under $200,000, while letting them keep refundable tax credits. Their model showed that lost revenue would equal around $737.5 billion annually, and approximately $8.5 trillion over 10 years. While it’s difficult to pin down precisely the tariff rates at the moment, given the freestyle model of imposition that Trump has utilized, as of April 2025, Trump’s tariff schedules would equal nearly $167 billion in new tax revenue in 2025. That’s almost $600 billion less than tax revenue income in one year. We need to deal in reality instead of wishful thinking.

    Tariffs are a foolish form of taxation. They raise consumer prices, and increase prices for intermediate goods that American companies import and further refine into finished goods for consumption. This reduces the value of worker income, private sector output and returns to investors. While tariffs operate on the import slice of the economy, they impose negative effects throughout the broader economy.

    Americans should be asking what a tax system that aspired to collect decent revenue but proceeded neutrally across economic sectors would look like. In short, what is needed is a pro-commerce tax policy, a taxation system that doesn’t unduly impede the supply of goods and services, and ensures that individual initiative reigns supreme in the economy. Taxes should be low and broad, spread out equally across the economy and not targeted at specific sectors, nor progressively imposed on particular earners. Production, supply, investment and employment should be incentivized on an equal basis. Prices should freely adjust to consumer demand, not influenced by special interests attacking or favoring certain parts of the economy. Americans need a tax system that does not target sectors of the economy for privilege or punishment. Pro-supply, neutral basis policy could be a consumption tax, an income tax, or a corporate income tax, imposed at reasonably low levels and on an equal basis. Here is the wisdom behind a flat tax rate, for example. And ideally, we would only have one of these forms of taxation.

    Tariffs do the opposite. They are taxes not only on imported consumer goods but also on intermediate capital goods. They undercut the wages and incentives of workers by making certain goods more expensive. They reduce the productivity of companies and capital by raising the price of goods used in business operations, while sheltering domestic industry and permitting it to raise prices, resulting in inefficiencies and job losses in other sectors that typically dwarf the gains accrued to domestic producers.

    The tariff and income tax switcheroo builds on the bipartisan desires of Americans to have numerous and generous entitlements and services from the federal government, while not paying the requisite taxes for them. Those burdens are for the next generation to shoulder. The notion of tariffs becoming our chief revenue generator participates in this fiction because we are being told that Americans don’t pay the tariffs, only foreigners. We can have the government we want and make foreigners pay for it, and get something for almost nothing. But this is false empirically on every level of analysis. If we attempt such tariff plans, we’ll get something much worse, and we’ll get it good and hard.

  • The fog of tariffs

    It was an all-caps kind of evening for the President. “RECIPROCAL TARIFFS TAKE EFFECT AT MIDNIGHT TONIGHT!” Donald Trump wrote on Truth Social last night, minutes before the clock struck 12am. “BILLIONS OF DOLLARS, LARGELY FROM COUNTRIES THAT HAVE TAKEN ADVANTAGE OF THE UNITED STATES FOR MANY YEARS, LAUGHING ALL THE WAY, WILL START FLOWING INTO THE USA. THE ONLY THING THAT CAN STOP AMERICA’S GREATNESS WOULD BE A RADICAL LEFT COURT THAT WANTS TO SEE OUR COUNTRY FAIL!”

    The Santa imagery is interesting, and fitting. For decades now, one could be forgiven for thinking some kind of magic was being conjured up, as consumer choice skyrocketed while prices plummeted at the same time, and once-deemed luxury items became accessible for the vast majority of households. Not quite a bearded man, “LAUGHING ALL THE WAY,” dropping them down through the chimney. But not far off.

    No one knows if Trump those yuletide blessings of free(ish) trade have come to an end. Very early evidence suggests US businesses have been trying to swallow the costs of the universal 10 per cent tariff on imported goods, which came into effect this spring. Slowly but surely, that cost looks like it’s getting passed onto American consumers. 

    Nor do we know what the fallout will look like in the coming hours, and weeks, as the “receipriocal tariffs” go into effect for dozens of America’s trading partners. Attempts are ongoing to get trade deals over the line, which would reduce some of the headline tariff rates. It’s a move Trump has signalled he is still open to. Were deals to keep rolling in after tariffs take effect, it would help ease the mixed market reaction that appears to be taking place: a market rally this morning was essentially erased by this afternoon.

    The confusion is understandable. No one really knows the details of what’s coming into effect. Even countries that have secured trade deals have not firmed up many of the specifics, especially around key areas like pharmaceuticals, which the President has his eye on. Meanwhile Trump is dramatically changing tariff rates here and there, as well as announcing new ones for specific sectors: India had an additional 25 per cent tariff added just yesterday for its decision to keep using Russian oil. The decision to put a tariff of “approximately 100 percent on chips and semiconductors” was also announced yesterday.

    This makes it far harder for investors to grasp the full scale of the New World Order: one which Trump and his administration are counting on to return manufacturing and output to US soil. This has prompted some headline announcements, including this week that Apple would invest an additional $100 billion into its US manufacturing. Yet the picture overall suggests tariffs are stifling companies: economic activity connected to manufacturing is actually down since Trump took office for the second time in January. The only certainty so far is that these tariffs are indeed bringing in revenue, as Trump has been boasting today on social media. The part left out is that it’s not other countries, but American business and consumers that are paying for it. 

    What is being billed as the largest tax hike on Americans in modern history has been fully ushered in today – one that Trade Secretary Howard Lutnick is estimating could bring in “$50 billion a month in tariff revenue.” It’s a kind of stealth tax that might make Zohran Mamdani or AOC green with envy. Let’s see how America stomachs it. 

  • Tariffs and the psychodrama of Trump diplomacy

    Tariffs and the psychodrama of Trump diplomacy

    A bleached white conference room, somewhere near Jeddah in Saudi Arabia. On one side sits Volodymyr Zelensky, the Ukrainian leader, in his soldier-boy outfit. On the other, Russian President Vladimir Putin in dark suit and tie. And in the middle, a beaming President Donald J. Trump. “People said this could never happen,” he says, as Zelensky and Putin stare awkwardly at the floor. “But it’s a beautiful thing.” A White House memo lands in inboxes across the world: “THE PEACEMAKER-IN-CHIEF…”

    Pure fantasy, perhaps, but Trump does have an almost cosmic ability to get what he wants – and he really wants to end the war in Ukraine.

    Last night, having spent weeks telling the world how “disappointed” he was with Putin, Trump abruptly announced “great progress” in US-Russia dialogue. His special envoy, Steve Witkoff, had just spent several hours talking to Putin in Moscow, and it promptly emerged that Trump and Putin could meet as early as next week for a preliminary sit-down ahead of a possible three-way session between Trump, Putin and Zelensky. Putin and Trump have not met since their infamous encounter in Helsinki in 2018 and, then as now, European leaders will be very nervous about the two men getting on. On the other hand, as Trump has always said, he just wants “people to stop dying.” And if he can achieve a meaningful peace deal in Ukraine, he should perhaps be rewarded with the Nobel Peace Prize that everyone says he craves.

    Call it the psychodrama – not madman – theory of international relations. The personal is political and, as we’ve seen with Kim Jong-un, Emmanuel Macron, Zelensky and now Putin, Trump likes falling out and making up with world leaders. It makes for great headlines, plus the emotional rollercoaster helps advance his agenda because statesmen have to worry about what’s in the news.

    The difficulty is that Putin is an exceptionally cold fish who doesn’t care about being hated outside of Mother Russia. The reason earlier peace initiatives failed is that Putin is not losing the war. Putin could “tap,” as Trump put it, America along because, having largely frozen Russia out of the international community, the West doesn’t have much clout over him.

    Trump understands the concept of leverage, which is why last month he agreed to provide new arms to Ukraine. That didn’t seem to intimidate Russia, so Trump also targeted India, the leading buyer of Russian seaborne crude oil, with punishment tariffs. And he ostentatiously dispatched two nuclear submarines towards Russia at the weekend.

    The India tariffs, in particular, appear to have brought the Kremlin back towards the peace table. But who is playing whom? It’s possible that Putin believes Trump’s trade aggression is pushing America’s rivals closer together, which is very much in Russia’s interest. The Kremlin has long believed that America’s hegemony is waning and that, while Trump’s theatrics might dazzle the world, in the long run the BRICS (Brazil, Russia, India, China and South Africa) are in the ascendancy. India’s Prime Minister Narendra Modi, for instance, shows no sign of breaking off trade relations with Russia in the face of Trump’s threats.

    “IT’S MIDNIGHT!!!” Trump barked on Truth Social at 11:58 p.m. ET last night, as his latest tariff program kicked into effect. “BILLIONS OF DOLLARS IN TARIFFS ARE NOW FLOWING INTO THE UNITED STATES OF AMERICA!”

    If only things were that simple. It’s no coincidence that Trump’s most punitive duties are now being imposed on India, Brazil and South Africa (the China and Russia tariff deadlines are upcoming). The White House believes that America still has enough financial muscle to disrupt the BRICS and play them off against each other.

    But, similar to Canada and Europe, the BRICS countries regard America as an increasingly unreliable mercantile power. The biggest downside to Trump’s tariffs, then, may turn out to be geo-strategic rather than economic – as a brave, new multipolar world increasingly tries to get along without America. Politics is personal. And the psychodrama is exhausting, after all.

  • Will Trump kill Britain’s pharma industry?

    Will Trump kill Britain’s pharma industry?

    The global trading system is adjusting to the tariffs levied by the United States: for most goods they look likely to settle at roughly 15 percent. The microchip industry will carry on much as before, the auto manufacturers will adjust, and even if it means drinking more Californian instead of French wine, the drinks trade will settle down. There is just one exception: pharmaceuticals. President Trump is determined that drugs should be manufactured on American soil. And if he follows through on that, Britain risks losing one of its last major industries.

    The tariffs on pharma imports will start with just a few percentage points, but the plan is for them to escalate very quickly. “In one year, one and a half years maximum, it’s going to go to 150 percent and then it’s going to go to 250 percent because we want pharmaceuticals made in our country,” Trump said yesterday. It is a punitive level, and one that will force the major drug companies to shift production to the US, or else see their sales and profits wiped out.

    In fairness, the President has a point. The drugs industry has long treated the American market as a source of easy profits, with prices for the same medicine on average 2.7 times higher in the US than in the rest of the world. In effect, it keeps the entire global industry afloat. Even worse, it has also side-stepped American corporate taxes by manufacturing elsewhere, declaring the bulk of the profits in other countries and shipping the final pills across the Atlantic. Ireland in particular has created a booming industry making drugs for the American market – Ringaskiddy in County Cork is even known as Viagra village – but so have Switzerland and the UK. Overall, it is a bad deal for American consumers, and it is easy to see why Trump wants to change it.

    The trouble is, unless we can find a way to carve out an exemption, the UK looks like it will be one of the major losers. Life sciences is one of our few remaining major industries, led by giants such as AstraZeneca and GSK. AZ’s CEO Sir Pascal Soriot has already discussed moving the company’s headquarters and listing to the US. True, drugs companies can always just ramp up their manufacturing operations in the US, as both Astra Zeneca and GSK have said they will, but with the bulk of their revenues, research and profits in the US, it may only be a matter of time before they relocate completely.

    Trump may be mistaken in believing that domestic manufacturing is a matter of national security, although he is right that US prices are too high.

  • Trump has brought the Swiss to heel

    The Swiss president and economy minister are rushing to Washington in a last-ditch attempt to reverse Donald Trump’s decision to impose a devastating 39 per cent tariff on Swiss exports. That decision landed in Bern with the force of a punch to the stomach. Officials were blindsided and the stock market and Swiss franc slumped. The tariff, higher than what the EU or UK received, threatens the very foundations of Switzerland’s export-led economy. With just one days before the tariffs come into effect, the mood in Bern is one of quiet panic.

    Right up until the announcement Switzerland thought it had done everything right. It sent billions in investment to the US and removed nearly all industrial tariffs on American goods. It signed up early to US-led sanctions against Russia, and in recent years all but dismantled its once-sacrosanct banking secrecy regime at Washington’s request. Switzerland went from being a truly neutral country to towing the line on pretty much everything the US requested. And now none of this deference appears to have counted at all. The Swiss have been hit with one of the harshest tariffs imposed on any US trading partner. In truly humiliating fashion, the new tariffs were announced by Trump on Switzerland’s national day. Now, in a move that smacks of desperation, the Swiss president is making a last-minute, uninvited dash to Washington to plead for mercy. Her mission is so urgent it was launched without a formal White House invitation, in the hope perhaps of securing a face-to-face meeting.

    The blow could hardly have landed harder. The US is by far Switzerland’s largest export market. Pharmaceuticals, luxury watches and precision machinery are all heavily reliant on American buyers. Shares in flagship companies like UBS, Richemont and Roche tumbled after the announcement. Analysts immediately downgraded growth forecasts. The Swiss franc fell. What was once a model trade relationship now threatens to upend the country’s economy. Swiss officials had expected perhaps 10 or 15 per cent tariffs, but nothing on this scale.

    What makes the blow even harder to swallow is who got off lightly. The EU, of which Switzerland isn’t a member, secured a 15 per cent tariff in its deal with Washington. The UK got a 10 per cent rate. Swiss officials entirely expected to be treated on similar terms, if not better. Switzerland had gone further than most, scrapping all industrial tariffs on US imports and pledging nearly $150 billion in American-bound investment. Instead, it was hit with a 39 per cent levy, one of the highest Trump has imposed on any country. The sense of humiliation is acute. Switzerland believed it was a trusted ally. It’s now wondering if that trust was hopelessly naïve.

    The humiliation wasn’t just economic. It was personal. Last Thursday President Karin Keller-Sutter held what officials now describe as a “disastrous” phone call with Trump. For weeks, Swiss negotiators believed they were on track to secure a deal close to the UK’s 10 per cent at most. Instead, Trump made it clear that was off the table. “The woman was nice, but she didn’t want to listen,” he told reporters after the call. He raged about the trade deficit. Reports from Washington suggest that all Trump had focused on was that Switzerland’s deficit was “stealing money” from the US. The next day, when he imposed the 39 per cent tariff, the Swiss press called it Keller-Sutter’s “greatest fiasco”. Blick compared it to the country’s worst military defeat, at the Battle of Marignano in 1515, when Swiss forces were decisively defeated by the French.

    A country that once prided itself on independence is learning that deference earns no favors in the age of Trump

    At the centre of Trump’s wrath is Switzerland’s vast pharmaceutical sector. Companies like Novartis and Roche dominate Swiss exports to the US. Pharmaceuticals alone account for nearly 50 per cent of Swiss exports. Trump wants the Swiss to cut prices and shift production to America. But the real trigger for the tariffs was the trade imbalance: a $39 billion deficit. Much of that imbalance comes from gold bullion, which merely passes through Switzerland to be refined. More confusing still, both gold and pharmaceuticals are, at least for now, exempt from the new tariffs. Which leaves the Swiss scratching their heads – if the problem isn’t what’s being taxed, what’s Trump punishing them for?

    The answer may be that Switzerland was playing by the wrong rulebook. In Bern, officials approached the talks with the US as technocrats, expecting that transparency, fairness, and compliance would be rewarded. They believed in offers that made sense on paper, pledging investment, scrapping tariffs, and upholding the international order. But Trump didn’t focus on that. Perhaps he just wanted spectacle. Perhaps he just wanted to win. “The problem is the Swiss believe we have to make reasonable and honest offers,” one person close to the negotiations told the Financial Times. “We are not good at international power politics”. That misreading of the moment has left Switzerland exposed and scrambling. The goal now appears to be to offer Trump something, anything, that might convince him to reverse course.

    Behind closed doors, the Swiss government is hurriedly assembling a package of concessions. Agriculture is said to be on the table, despite fierce opposition from Swiss farmers who have already vowed vehemently to fight any changes. There’s also talk of revisiting the contentious deal for the F-35 fighter jets Switzerland ordered from Lockheed Martin, after Washington requested up to 1.3 billion Swiss francs more than the agreed price. Analysts say opening the contract to further concessions could become part of Bern’s pitch. Officials are also said to be pushing pharma giants to pledge fresh investment in the States, and to lower prices of pharmaceuticals sold there, though the Swiss government has no legal means to compel them. Energy purchases, particularly American LNG, may also be part of the mix. However, Switzerland is a landlocked and nuclear-powered country, and barely uses gas. In short, it seems the Swiss now are preparing to offer a little bit of everything. Whether that’s enough for Trump remains to be seen.

    The deeper reckoning is with Switzerland’s foreign policy. In recent years, Switzerland has gradually surrendered its cherished neutrality, not just in rhetoric but in action. It caved on bank secrecy when Washington demanded it. It signed up to US-led sanctions on Russia, aligning itself with Nato positions it once studiously avoided. The once proudly neutral country has become, in effect, a loyal US satellite state, but without the protection or reciprocity the Swiss government thought that status was supposed to guarantee. And now, the Swiss find themselves targeted with the harshest tariffs. It turns out that compliance may not afford privileges. A country that once prided itself on independence is learning that deference earns no favours in the age of Trump. Analysts speculate that Trump’s tariff is less about economics and more about projecting strength against an easy target.

    The spectacle of Switzerland grovelling for a better tariff rate, rushing to Washington with watches, LNG pledges and budget sweeteners, is more than a diplomatic embarrassment. It marks the end of an era.  A small, rule-abiding country can no longer rely on predictability in global affairs. Switzerland believed that concessions would shield it from geopolitical storms. But it now finds itself alone, humiliated, and economically exposed. Trump’s tariff is a brutal reminder that global trade isn’t governed by fairness, it’s governed by leverage. And in this game, the Swiss have discovered, deference counts for nothing.