Donald Trump maelstrom likely to leave US economic model unrecognisable | Heather Stewart
Donald Trump observed blithely last week that if his cherished tariff regime is struck down by the US supreme court, he may need to “unwind” some of the trade deals struck since he declared “liberation day” in April,It was a reminder, as if it were needed, that nothing about Trump’s economic policy is set in stone,Not only does the ageing president alter his demands on a whim, but it is unclear to what extent he has the power to make them stick,Yet even if the “reciprocal” tariffs first announced on 2 April are rolled back, they are only one aspect of a much wider assault on the last vestiges of what was once known as the “Washington consensus”,To name just a few of Trump’s recent interventions, he has taken a 10% government stake in the US tech company Intel, demanded 15% of the revenue of Nvidia’s chip sales to China and suggested the chief executive of Goldman Sachs should go.
This was at the same as taking a sledgehammer to Federal Reserve independence by lobbing insults at the chair, Jerome Powell, and trying to sack Lisa Cook from the central bank’s board.The head of the Bureau of Labor Statistics was removed by Trump after a run of poor jobs data; the chief of the National Labor Relations Board, Jennifer Abruzzo, was fired, too.The tech bros who back Trump loathe the NLRB for its role in upholding workers’ rights – mandating unionisation ballots at Amazon warehouses, for example.Trump’s approach is simultaneously systematic, in its determination to smash existing norms, and utterly chaotic.It is hard to categorise: corporate America is being unleashed – through the wilful destruction of environmental and labour standards, for example – and brought to heel.
The leftwing senator Bernie Sanders welcomed Trump’s efforts to take a stake in Intel in exchange for government grants, for example – something he advocated in the Guardian back in 2022 – while some Republicans have condemned the approach as (heaven forbid) “socialism”,Partly because it coincides with the AI-fuelled stock boom that has propelled the value of tech companies into the stratosphere, the market response to this torching of the status quo has so far been modest,Whatever emerges from another three and a half years of this maelstrom is likely to be unrecognisable as the US economic model of recent decades,Its destruction has not happened overnight,The days were already long gone when the US, as the world’s undisputed economic superpower, could export free market, financialised capitalism worldwide.
After the 2008 crash, the conditions for which were created in Wall Street boardrooms, any moral or practical claim the US had to offer an economic example to other nations evaporated.As the turmoil rippled out through the global economy, and the US government responded by bailing out large chunks of its financial sector, the lie of laissez-faire was laid bare.The crisis exposed the risks of turbocharged capitalism to countries outside the US, too – not least in the former Soviet bloc – that had been advised to adopt the model wholesale.As Ivan Krastev and Stephen Holmes put it in their compelling polemic The Light that Failed, “confidence that the political economy of the west was a model for the future of mankind had been linked to the belief that western elites knew what they were doing.Suddenly it was obvious that they didn’t.
”Sign up to Business TodayGet set for the working day – we'll point you to all the business news and analysis you need every morningafter newsletter promotionBack home in the US, meanwhile – as in the UK – the perception that banks had been bailed out, while the galaxy brains behind the crisis got off scot-free, sowed the seeds of a corrosive sense of injustice,Similarly, even before the crash, the idea that ever-expanding free trade brings economic benefits was bumping up against the fact that even if that is true in aggregate, for workers across the US rust belt, just as in the UK’s former manufacturing heartlands, it brought deindustrialisation and unemployment,This was fertile ground for Trump’s populist economic message,His first-term China tariffs were, with hindsight, a relatively modest stab at, as he saw it, tilting the playing field back towards the US,Joe Biden did not unwind those tariffs, which went with the grain of geopolitics, as any hopes that economic liberalisation would bring China into the fold of democracies were sadly dashed, and President Xi’s regime took on an increasingly authoritarian bent.
Biden also took a muscular approach to the state’s role in the economy, with the billions in grants and loans distributed under the Inflation Reduction Act linked to national priorities of cutting carbon emissions and creating jobs.So the idea that before Trump arrived on the scene, free market US capitalism was motoring along unchallenged is misleading, but the pace at which he is crushing its remaining norms is extraordinary.There is ample ground for legitimate disagreement here: taxpayer stakes in strategic companies are much more common in European economies, for example.Trump may be laying down tracks that future US governments with different priorities could follow.Given that it is so unclear even what kind of economy he is groping towards, the overriding sense for the moment is of radical uncertainty.
Friday’s weak US payrolls data, with the unemployment rate close to a four-year high, suggested companies may be responding with caution.Investors appear to have decided to avert their eyes for now, buoyed up by the prospect of Fed rate cuts, and the mega returns of the tech companies.However, with every chaotic week that passes, the risks must increase – and as the UK has learned in the wake of the Liz Truss debacle, economic credibility is quicker to lose than to rebuild.
Pret a Manger to take on supermarkets by trialling meal deals
Pret a Manger is finally caving in to competition from supermarkets by launching meal deals, after the value of the chain was slashed by a third amid “intense strains” on the hospitality industry.The sandwich and coffee chain said it intends to test the meal deal format in the last quarter of this year, as a medium-term strategy to grow the Pret brand and return to sustainable profits. It did not say how much the meal deals will cost.In the UK, meal deals will be tested across two parts of the day – a croissant and coffee for breakfast; crisps and a bread-based sandwich; and also any lunch main, snack and a drink.In January Pret launched a meal deal in France, which is performing well
Reform UK would axe any high-speed northern rail schemes, says Richard Tice
A Reform government would axe any high-speed rail schemes earmarked for the north, the party’s deputy leader has warned.Richard Tice said companies considering bidding for contracts should “not bother” as the party would “spend the money instead on things the country needs more”.Labour is expected this month to announce it is reviving Northern Powerhouse Rail (NPR), with leading figures backing a new £17bn Liverpool-Manchester line as a first step in a full railway running across the north.The NPR scheme was originally backed by the previous government – but the line linking Liverpool and Manchester was due to share parts of the HS2 northern leg axed by Rishi Sunak in 2023.Labour has yet to confirm its plans but the chancellor, Rachel Reeves, hinted at news in her budget speech, and sources last month told the Guardian that the government would announce its commitment before the start of the party conference, shoring up northern support
Meta hid harms to children from VR products, whistleblowers allege
A group of six whistleblowers have come forward with allegations of a cover-up of harm to children on Meta’s virtual reality devices and apps. They say the social media company, which owns Facebook, Instagram, and offers a line of VR headsets and games, deleted or doctored internal safety research that showed children being exposed to grooming, sexual harassment and violence in its 3D realms.“Meta knew that underage children were using its products, but figured, ‘Hey, kids drive engagement,’ and it was making them cash,” Jason Sattizahn, one of the whistleblowers who worked on the company’s VR research, said in a statement. “Meta has compromised their internal teams to manipulate research and straight-up erase data that they don’t like.”Sattizahn and the other whistleblowers, all current or former Meta employees, have disclosed these findings and a trove of documents to Congress, according to the Washington Post, which first reported the allegations
Amazon fires 150 unionized third-party drivers, Teamsters says
Amazon has fired more than 150 unionized drivers working for a third-party contractor in Queens, New York, according to the Teamsters union.Workers rallied at the company’s DBK4 facility in Queens on Monday after the company fired the drivers, who worked for Cornucopia, a delivery service provider (DSP) that Amazon contracted with to make deliveries. Amazon works with more than 3,000 DSPs around the world who deliver the company’s packages.The Teamsters said the firings were in retaliation for unionizing.“Amazon is breaking the law and we let the public know it,” said Antonio Rosario, a member of local 804 and a Teamster organizer, in a statement
Unprecedented strike shows racing unified to send pre-budget message to Labour over betting duty crisis
There was just a single day of racing in Britain between 22 December and 9 March during the famously bitter winter in 1962-63 and dozens of blank days during the foot-and-mouth outbreaks in 1967 and 2001. Even in the era of racing on Polytrack and Tapeta, which dates back almost 40 years, there are occasional days when, to the delight of headline-writers, the so-called “all-weather” surfaces cannot cope.But there has never been a day throughout those decades when a scheduled programme of racing has been called off voluntarily, so the decision to “strike” on Wednesday, when meetings were due to be staged at Lingfield, Carlisle, Uttoxeter and Kempton, is a sign of how seriously racing’s administrators and stakeholders view the threat to the sport’s finances from a government proposal to “harmonise” the rate of duty charged on profits from betting on sport and other uncertain events, and fixed-margin casino products such as online slots where the operator takes a guaranteed percentage of turnover.Martin Cruddace, the chief executive of Arena Racing Company, one of Britain’s two major racecourse operators alongside Jockey Club Racecourses, has described the proposal as representing an “existential threat” to Britain’s second-biggest spectator sport.That might seem a little overwrought given that the current rate of betting duty is 15% of an operator’s gross profits, while the rate for gaming products is 21%
Surrey all out for 246, McKinney punishes Essex: county cricket day one – as it happened
It was one of those soul-soaring autumn days in the East Midlands, trees like overripe broccoli, skies huge and blue. On the bright green benches of Grace Road, a man filled out the crossword, while the County Championship resumed for its final three-round act. Nothing is decided, not even next season’s schedule – to be voted on later this month – with a choice of a 13-game two-division playoff compromise or the status quo.Leicestershire, the runaway stars of Division Two, are in touching distance of promotion for the first time since 2003, but this was one of their more forgettable days. They are without Rehan Ahmed (England), Ben Green (Somerset), Liam Trevaskis and Tom Scriven (injured) and Gloucestershire were able to make merry – with a stylish hundred for Graeme van Buuren and half-centuries from Ben Charlesworth, Miles Hammond and James Bracey
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