Transcription
Things are bad in the UK, but they're about to get a lot worse. Donald Trump is about to start his second trade war, and this trade war is going to hit the UK very painfully. The British economy has already been stagnating for the last 20 years. High cost of living, poor quality of life became a fundamental part of the British economy. But that's just the beginning.
When Donald Trump imposed tariffs on the European Union, the EU immediately retaliated by imposing countermeasures against the United States. When Donald Trump imposed tariffs on China, China immediately retaliated. When Donald Trump imposed tariffs on Japan, Japan promised to retaliate. But when Donald Trump imposed tariffs on the United Kingdom, the British prime minister is flying to the Oval Office every single week to calm Trump down, instead of taking drastic measures against the United States, just like the European Union did. That's because the British economy got so weak that it doesn't have the influence and the power to have any meaningful impact by imposing countermeasures against the United States. The British economy is going to shoot itself in defeat, and that is going to make the already dire situation much worse.
So, here in this video, let's break down how painful Trump's tariffs are going to be on the United Kingdom, and is there a chance for the British economy to survive the storm? If you're ready, give this video a thumbs up, and let's get right into it. The United States is the largest trading partner of the United Kingdom, where 15% of all the exports goes directly into the United States. And by imposing so many tariffs on the British goods, that is going to have devastating consequences on many British businesses. Suddenly, overnight, the British goods are no longer going to be price-competitive in the United States.
Unlike other countries, the UK cannot possibly replace the United States with China. So, even though that China is a major trading partner for the UK, the relationship between China and the UK aren't literally that great, and they're getting deteriorated every single year. And who knows where those relationships are going to be in a couple of years from now? And since the United States is hitting painfully the UK, it could be a chance for China to put the last nail in the coffin and just bury the United Kingdom.
Unlike the UK, the European countries have a much larger market. Because if you compare the European Union compared to the United Kingdom, the United Kingdom is like a $3 trillion economy, while the entire European Union is worth more than $15 trillion, or something closer to like $19 trillion. So, by losing the United States, the EU is going to suffer dramatically, but that is not going to be as big as it's going to hurt the United Kingdom. And since the UK left the European Union, they no longer enjoy these privileges that they had prior to that.
So imagine what happens to British cars that are being exported to the United States. Suddenly, maybe the European Union are going to say, "Listen, the UK, we've been friends all this time, but we're going to be hit as much as you." And in order for us to protect our industries, we are going to impose tariffs on the UK cars, since we want to actually give more opportunity to German cars within the entire European Union. And that could be another blow. I actually see that happening in the foreseeable future, if they won't reach an agreement with the United States. Cars are the largest exporter of the United Kingdom. So, by imposing a 25% tariff on every car that comes out of the UK and enters the United States, that is going to be a major blow. Of course, the British car are some of the most expensive cars out there, and they're selling to the highest luxury consumers, where a 25% increase isn't going to have much of a difference. But if you look at the overall sales, any time when there is an increase in price, they're going to lose competition to those who are actually making similar cars at a slightly cheaper price.
And if you look at the sales, for example, of the largest British car company, which is Jaguar Land Rover, you will quickly realize that North America represents the largest market for them. And when you say North America, that's primarily the United States. Most of what the UK produces is mostly being exported to wealthy countries, and we're talking about gas turbines, pharmaceutical products. Right now, they might be able to compete with some of the companies in the United States because they're actually offering price-competitive products. But suddenly, when you're actually imposing a 20% tariff or a 25% tariff, those products in the US are no longer going to be competitive. And for any economy, losing the US market is going to be a devastating blow. Since the United Kingdom have already lost the European Union since 2016, losing the US is going to be a major blow, just like it was back in 2016 when they lost the European Union. And the UK is simply going to be an isolated economy that barely survives, and its chances to compete with any major economy is simply going to go to zero.
The second problem that UK is facing is that industries are disappearing, and the entire tariff situation is going to make it a lot worse. If you look at the productivity of the British economy or the British population, you will see that it has been stagnating for a very long time now. Germany and the United States have been at the top of the list for many years, but the UK has been sliding down and became as productive as Italy and Spain. Now, nothing against Spain or nothing against Italy, but those countries are not very that productive, and they're not very that competitive if you compare them to Germany, where they actually manufacture and build very high technology, where they build BMWs and Mercedes. And if you compare that to the US, then there is literally no comparison between Spain and the United States when it comes to productivity. And for some time, the UK actually caught up with the United States, especially if you go to the year 2000s, but then suddenly changed something, and that productivity began to stagnate, especially since the 2008 financial crisis. And you can even clearly see that in the GDP growth, like the British economy hasn't been growing since 2008. So you can frankly say that the British economy right now is as big as it has been back in 2008. And that leads many people to ask the question, what have we been doing the last 18 years? Why didn't we even grow the economy slightly? I mean, that's 18 years. When you have a recession, when you have like a financial crisis, and it lasts like 6 months, one year, or two years, that is understandable. Even if you go like to the greatest crisis in the history of the US, which is like the Great Depression, it lasted 10 years. And now the British crisis that has started from 2008 hasn't been done yet, and 18 years has passed. So this is twice worse than the Great Depression of the United States back in 1930s. Do you see how devastating the British economy right now is? And all of this has been happening when there have been very great favorable trade agreements between the United Kingdom and the United States, and that is going to be over. And I can't even probably imagine how bad it can possibly get for the United Kingdom.
Now take the steel industry, for example. The steel industry have already been suffering in the UK, and without steel, there aren't many things that you can actually produce. Look around, the fridges, the cars, the ACs, even houses, when you're building them, you need a lot of steel. And over the last 50 years, multiple steel businesses have been closing down, and there are many actually left, and there is literally one steel industry right now that is being owned by Chinese. They're also shutting down. It's literally one of the largest. Since the United States is imposing a 25% tariff on all steel, that means that Britain no longer can export this steel to the United States. Where are you going to sell that steel? The European Union? Well, I don't think so, because the European Union also has a 25% tariff to protect their own industries, and there are multiple steel factories in the EU that can actually meet the demand that exists there. You want to compete with China? Well, China is the largest producer of steel in the world, and their prices are much more competitive. And that could be literally the end of the steel industry in the United Kingdom.
The second industry that that has been disappearing is the automative industry. All of the major British car brands have been acquired by foreign companies. Rolls-Royce is being owned by BMW, Jaguar and Range Rover are being owned by Tata Motors, which is an Indian company. McLaren is being owned by some kind of a Middle Eastern company. If you look at any auto brand in the United Kingdom, it's literally being owned by a foreign company, or by a foreign government, or by a foreign financial institution. And when you have an environment where the United Kingdom no longer enjoys those trade agreements that it had with the United States, and there is going to be a tariff on every car that is being shipped from the UK to the US, what do you think the owners of Range Rover are going to do moving forward? Will they keep their plants in the United Kingdom and pay a 25% tariff when their largest market is the United States? Put yourself as the head or the CEO of Range Rover. You're not a British company, even though that you started in Britain, but right now you're being owned by Tata Motors. What are you going to do? You will say that it's much profitable for me to move my plants into the United States and avoid the 25% tariff. If you're Rolls-Royce and you're being owned by BMW and your largest market is the United States, you will literally just open your plants in the United States and close them in the UK. Especially if the UK is not going to take measures against the United States and it will keep it the same way that it is, then bringing those cars from the United States into the UK is going to be much cheaper. So moving those plants to the US is most likely going to be a matter of time. And now ask yourself how many jobs the United Kingdom is going to lose, how much productivity the United Kingdom is going to lose, how much investments are going to flow out of the United Kingdom and will go to the United States.
The second problem is that the good old days are over, and they're no longer going to be low interest rates. If you look at the situation with the Bank of England, you will clearly realize that they're literally following the rates in the United States. And for a very long time, the rates in the UK, just like in the US since 2008, have been pretty much at around zero. The maximum that they raised the interest rates was almost 1%, and that was right before 2020. And then 2020 happened, and they lowered down the rates to 0% again for 2 years, then raising them to like 5% or something like that when they realized that we have created massive inflation, like any other country. When you have super low interest rates, you only have one mentality: I'm going to get out of this crisis by printing my money out, because the logic is very simple that I'm going to print massive amount money, I'm going to stimulate the economy, and the economy is going to grow, and I'm going to have a larger GDP, and then a a smaller percent of that larger GDP is going to pay off for the debt. It actually worked for the United States. If you look at the US GDP, you will see that in 2008 there has been a recession, and then massive printing of money, and that led the GDP to grow. And the United Kingdom wanted to follow the exact same trajectory, but it didn't work. First of all, the GDP didn't increase at all since 2008. The GDP of the UK right now is as much as it was in 2008. But if you look at the debt to GDP ratio, it's at around 100% right now. There has been periods where the debt to GDP has been much higher, and we're talking about World War II, but this was like an exponential threat to the United Kingdom. That was the moment where the UK was almost wiped out from the face of the earth. But over the last 20 years, it hasn't been any kind of a major war. It was simply an economic disaster where they literally just kept borrowing money to grow the economy, but the economy did not grow, but they have accumulated so much debt that the GDP right now or the debt to GDP ratio is around 100%. And you moving forward, as I have explained in one of the previous videos, the United States is not going to have low interest rates, because that era is absolutely over. The age of low interest rates, where we are going to have like 0% or 1% or maybe even 2%, are over, at least for the next couple of decades, at least for the next 10 to 20 years. And now the British economy has to follow the interest rates in the United States because it has no other option, which means that moving forward forward the United Kingdom is going to allocate a larger share of their budget into paying off the interest on their debt. At the same time, they have to grow the economy. At the same time, right now they're going to face very serious competition since every country right now is actually imposing tariffs since Donald Trump started this trade war. Given the fact that they couldn't actually solve it in the last 20 years when they had so much money and it was much more stable and they had much more favorable trade agreements, I actually have no idea whatsoever how is it going to be possible in the next couple of years.
And that's just the beginning, because the UK is about to lose its major crown, and that is the financial center of the world. London has always been the financial center of the world. It was the place where every dollar used to pass through. So if you want to do business in the US and you are in the European Union, then you would do that through London, because money somehow had to flow from the European Union into the United States and vice versa. A lot of Asian countries use London as the place in as the financial hub that they used to transfer their money. And even today, London still remains the second largest financial capital of the world after the United States. But with each passing day, the influence of London is going down and down. And that's because, up until recently, the United Kingdom had very favorable trade agreements with the United States and the European Union. Now let's go back to pre-2016, when the UK was part of the EU. It was much easier to do business with the United Kingdom, and that's why a lot of European capitals or a lot of European countries and governments and companies simply use London as the financial hub. But since the United Kingdom left the European Union, it's no longer much more favorable. Asian economies have been growing tremendously over the last 60 years, and now Shanghai and Hong Kong and Singapore and the UAE all became a fundamental part of the global financial system, and they no longer actually need the British banks to do business with the United States. Even though that London still remains one of the largest markets in the world, but if the United Kingdom right now is actually going to start a trade war with the United States and retaliate, just like the European Union did, retaliate just like China did, it might actually lose all of its positions, and most importantly, that could actually cost it its position as the global financial system. And if something like that is going to happen, then I guess that is simply going to be the end of the British economy, and it's never actually going to recover. And that's why you see that Britain is not retaliating to the United States; it's simply swallowing everything that Trump is doing; it's simply swallowing everything that Trump says. And whatever you want, the United States, we are ready to do that, but please do not actually stop the trade agreements that we have with you. Yes, if you want us to change the trade trade agreements, we're going to slightly change them; we're going to make them a bit more favorable to the United States, but please keep us in the game, because without that we're going to lose our most important asset, and that is being the global financial hub of the world.
So what's going to happen next with the British economy is that the stagnation is going to continue; there is not going to be any kind of economic growth. The way that governments right now work is that since they have so much debt and they don't have the money to pay off that debt every single month, every single day, or every single year, they consistently borrow money in order to pay their older debt. And whenever they borrow money, they borrow money at the current rate. So, for example, if the interest rates right now are 5%, and they're borrowing money at 5% interest rate in order to pay off their older debts, their current payments for the debt payments are going to be much higher than the debts that they have borrowed, for example, back in 2020 when interest rates on those bonds were less than 1%. Which means that a bigger share of their budget payments are going to go into the debt payments instead of spending that money on better boats, instead of spending that money on better health care, instead of spending that money on simply growing the economy.