Musings & Insights from our Chief Financial Officer

Reading through the various points in time laid out below, it may be possible to glean some view of the fallout, I am sure there are many aids in many Countries grappling with how to advise their PMs and Trade Ministers.

The breadth of Trump’s tariffs extends into economies that are highly integrated with the US. The sudden nature and quantum will surely create a huge shock through the US supply chain.

I can only state the obvious that these tariffs will harm growth and create instability across global markets; if there are any winners, I doubt it will be the US.

“Mr Trump sometimes sounds as if the US shouldn’t import anything at all, that America can be a perfectly closed economy, making everything at home. This is called autarky, and it isn’t the world we live in, or one that we should want to live in, as Mr Trump may soon find out.”
Wall Street Journal
            
Autarky comes from the Greek word "autarkeia" (self-sufficiency).

Previous trade wars involving the US

1930: The Smoot-Hawley Tariff

In 1929, the stock market crashed on Wall Street, sending shock waves through the US and the rest of the world. The Great Depression, a period of global economic turmoil that would last a decade, had begun.

Months later, in June 1930, US President Herbert Hoover signed the Smoot-Hawley Act into law. The law was originally aimed at imposing tariffs to protect US farmers and other producers from foreign competition.

Almost immediately, the act caused trade wars. The slowdown of trade weakened the US economy. By 1933, US exports dropped by 61 percent. Smoot-Hawley is often cited by experts as a factor which aggravated the US economic crisis.

1960s: Chicken War

In the 1960s, the US and European nations played an expensive game of chicken across the Atlantic Ocean.

As a result of rationing during World War II, the US government began a campaign to encourage Americans to eat fish and poultry instead. The US ramped up the factory farming of chicken, which lowered the price of poultry.

The period after World War II also saw the acceleration of globalisation. Europe started buying cheap chicken from the US. As a result, European farmers were scared of being priced out of the market.

In 1962, members of the then European Economic Community (EEC) imposed tariffs on American chicken.

US poultry exports to Europe fell sharply. In 1963, President Lyndon B Johnson imposed retaliatory tariffs on various food imports and also on trucks. The “chicken tax” on light trucks still remains in force.

1982: The timber war between the US and Canada

In 1982, the US argued that Canada was unfairly subsidising its softwood timber production via state-owned land, which led to several rounds of conflict, tariffs and retaliatory tariffs.

The “lumber” war continues. Canadian lumber faces an existing 14 percent tariff in the US, even before Trump’s threat to add 25 percent more.

The US imports almost half of its wood products from Canada, according to the Observatory of Economic Complexity.

1987: Tariffs on Japanese automobiles

In 1987, President Ronald Reagan imposed 100 percent tariffs on $300m worth of Japanese imports, affecting, in particular, automobiles.

The Reagan administration said it had imposed these tariffs as a result of Tokyo reneging on the terms of a 1986 semiconductor trade agreement with Washington.

Japan did not retaliate. “Hoping to prevent this issue from causing severe damage to the world’s free-trading system”.

In the 1990s, Japan fell into a recession which ended in 2002.

Prior to the tariffs, the US had a massive trade deficit with Japan. In 1986, the deficit was about $55bn. The deficit dropped slightly, to under $52bn in 1988 and $43bn in 1991. The deficit has since fluctuated, rising in recent times. In 2023, it stood at $72bn.

1993: Banana split

In 1993, soon after the EU was formed, it placed tariffs on bananas from Latin American countries to give small farmers in its former Caribbean and African colonies an upper hand in the market.

The US argued that this went against the rules of free trade. Most banana plantations in Latin America were owned by American companies whose profits were at risk.

The US filed eight separate complaints with the World Trade Organization (WTO) with various rulings and tit for tat tariffs. In 2012, the EU signed an agreement with the Latin American countries to formally end the WTO cases.

2002: Steel war with Europe

To boost the American steel industry, President George W Bush placed tariffs ranging from 8 to 30 percent on steel from foreign countries.

Imports of steel from countries affected by Bush’s tariff targets plummeted, however, the US started importing more steel from countries that the tariffs were not targeting. Overall, US steel imports grew by 3 percent in the 12 months after the tariff was imposed.

These tariffs affected the US steel industry. Some smaller steel companies either went bankrupt or were acquired by larger ones.

In retaliation, Europe threatened tariffs on a range of American products worth $2.2bn (about $3.85bn now), ranging from oranges from Florida to Harley Davidson motorbikes. Days before Europe would have imposed these tariffs, Bush lifted the steel tariffs in 2003.

2018: Trump’s first term tariff war

In January 2018, he introduced tariffs on all solar panels and washing machines. In June 2018, Trump imposed 25 percent tariffs on more than 800 products from China.

In between, in April 2018, Beijing responded with a retaliatory 178.6 percent tariff on sorghum grain from the US. These tariffs were removed in May 2018. China also imposed 25 percent tariffs on 128 US products, including soybeans and aeroplanes.

That year, Trump also slapped a 25 percent tariff on steel and a 10 percent tariff on aluminium from Canada, Mexico and EU countries.

Like China, other targeted countries also hit back.

Canada placed 25 percent tariffs and 10 percent tariffs on a range of products coming in from the US. From the summer of 2019 into 2020, the US and China imposed multiple tariffs on each other, while trying to negotiate an end to their dispute. China lost its position as the top trade partner of the US to Mexico in 2019. After negotiations between the US and China, a truce was announced in January 2020.

History suggests that tariff wars tend to disrupt trade, damage growth, and increase uncertainty. While each case differs, the economic consequences have often been negative, both for the countries targeted and for the US itself. Read on for a short note regarding stamp duty, which may be relevant to some readers.

________________________________________________________________________________________

Stamp Duty “SDLT” in relation to short-term lease renewals

As I understand, there have been some discussions around stamp duty in relation to annual renewals for those Residents who rent their apartments.

I wanted to reiterate the information provided within your original reservation form and within the Key Facts document that lays out the need for Residents to consider Stamp Duty when renewing their lease.

“7. Tenancies of a high value, including where a lease is renewed at the end of the initial term, are liable for Stamp Duty Land Tax (SDLT) and the Tenant should contact HMRC for more details where applicable.”

I would hope your legal / tax advisor is on top of any SDLT matters as the resident is obliged to arrange any required stamp duty submissions and payments as appropriate, as mentioned in the information provided.

However, I can understand that given your leases are renewable on an annual basis, this administration point may have been overlooked. We can’t provide specific advice but I wanted to make sure that residents were reminded to seek independent advice if unsure of their particular position.