Economy

Well, would you look at Mark Carney. Just three months ago I described the incoming prime minister of Canada and former governor of the Bank of England as ‘a fish-out-of-water technocrat’ who made little public impact over here and was swiftly forgotten after he left in 2020. When I once came across him hunched and dark-suited in the Pret queue at King’s Cross, midway through his Bank tenure, I actually felt sorry for him. But here he is, beer-swigging in an Ottawa bar with Sir Keir Starmer; cutting Donald Trump short in a press call before the G7 meeting; shedding his eco-credentials to champion Canadian oil and gas; and generally looking the statesman at ease with his people. What happened?

The Chancellor’s promise of £14 billion for the Sizewell C nuclear power station in Suffolk is hardly news. The project has been talked about for 15 years while the existing UK nuclear estate has gradually been shut down and the only other new station, Hinkley Point in Somerset, has stumbled to a decade-long delay and £28 billion of budget overruns. Quite some optimism – verging on Milibandian delusion – is required to embrace the idea that Sizewell will come quicker and cheaper because it will replicate Hinkley Point while avoiding its mistakes. And since Chinese money has been ruled out, it’s still a mystery as to who else will pay for the project beside HMG and the French utility company EDF.

How was your Liberation Month? It’s been almost 30 days since Donald Trump stood in the Rose Garden of the White House and announced a shocking set of massive tariffs on the world. The event caused huge convulsions in the economic universe: trillions were wiped off the stock market and, under huge pressure, Trump did agree to a 90-day pause on reciprocal tariffs. After that he exempted electrical goods, though his standard 10 percent remains, and the heads of most financial analysts are still spinning trying to figure out what it all means. Yet for all the angst and the apoplexy, yesterday the S&P 500 index closed just 1 percent down from where it was at the beginning of the month.

The following is a transcript of a speech delivered yesterday by the Treasury Secretary Scott Bessent. In the final months of World War Two, Western leaders convened the greatest economic minds of their generation. Their task? To build a new financial system.  At a quiet resort high up in the mountains of New Hampshire, they laid the foundation for Pax Americana.  The architects of Bretton Woods recognized that a global economy required global coordination. To encourage that coordination, they created the IMF and the World Bank.   These twin institutions were born after a period of intense geopolitical and economic volatility.

“Don’t be a PANICAN,” the President shared on his Truth Social account this morning, as the Dow was dropping 900 points. This is Donald Trump’s new word for his tariff critics, who he has grouped together as the “new party based on Weak and Stupid people!” There is another way, the President insists: “Be Strong, Courageous, and Patient, and GREATNESS will be the result!” It’s another post in a long line of all-caps messages shared by the President over the weekend. “ONLY THE WEAK WILL FAIL!” was Friday’s update. “WE WILL WIN. HANG TOUGH,” was Saturday’s inspirational message.

So the big question is: will it work? Will Trump’s protectionist policies, announced with some fanfare at a Rose Garden event at the White House yesterday, increase American prosperity? Or will they harm the economy?  Opinion on that matter is sharply divided. In one corner we have the free traders. They are wringing their hands and warning about higher prices, disruption of international trade and a trade war no one can win.  In the other corner are – what to call them? Most are not “anti-free traders” or “economic protectionists” (though some are).  Let’s call them “fair traders.” They like the idea of free trade – in theory. What they don’t like is the ethic of “free trade for thee but not for me.

The stock market, traditionally a leading indicator, entered correction territory last week. But does that indicate that a recession is coming? Well, it’s an old saying on Wall Street that the market has predicted ten of the last three recessions. Markets hate uncertainty, and no one knows how President Trump’s efforts to use American tariffs to force our trading partners to lower theirs will turn out. But foreign trade is increasingly important to all countries, so it’s likely that, after some political Sturm und Drang, deals will be struck and international trade will continue the strongly upward path it has been on since the end of World War Two. By definition, a recession is two consecutive quarters of contraction.

London’s capital market needs a kick in the pants, as I write every week, and ‘activist investors’ are no bad thing if they provoke sharper corporate performance. The assault by the New York hedge funder Boaz Weinstein on seven UK investment trusts – demanding shareholder votes to replace directors with his own people and take the management of the trusts into his own firm, Saba Capital – looks like the kind of intervention that might bring positive change to the UK’s historic investment trust sector, which accounts for a third of FTSE 250 companies but according to critics offers lacklustre returns, with share prices too often stuck at discounts to the underlying value of trusts’ asset portfolios (NAV).