The War in Europe

A Letter From London

It’s a beautiful spring morning in London. A blue sky, budding and blooming, promise-of-summer kind of day. I hope the same is true in Washington because we all need good news. Unfortunately, promises of an early summer may be premature. China, Canada, and the EU all responded to Trump’s economic bomb with bombs of their own. This was not supposed to happen. In Trump’s world, 75 countries have lined up to genuflect and take the knee to negotiate deals with the artist. He can’t name them, principally because they don’t exist. And so the promise of an early summer as seen in the green shoots on Wall Street and the LSE, and a feeling that a snap freeze has been avoided is premature.

For the US, a big bomb has gone off.

You may have heard of the neutron bomb. This was a weapon designed by the US at the height of the Cold War. It was an enhanced radiation device, designed to emit most of its output as gamma rays that would leave buildings and machines intact but kill all living things. This weapon was hugely destabilising because it suggested that a nuclear war could be fought and won on economic grounds. Yes, a lot of people would die, but the victors of a neutron war could move into enemy territory with ease, gaining from all that had been left behind.

As a result of its destabilising effect, international pressure from enemies and allies alike led to the shelving of the neutron bomb.

The bomb that has gone off is the economic equivalent of a neutron bomb. Everything is left standing, but all life in the economy has been killed. Like radiation sickness, it will take time for the effects of the bomb to be felt. Money is flowing out of the USA to other shores. We can expect China to shed its dollar debt, and there can be no surprise that Canada and the EU are doing the same, but Japan, the USA’s staunch ally, is selling US bonds. This is an unprecedented phenomenon. In times of crisis, the world usually seeks security in US bonds, but today the US is the crisis.

The tariffs on China remain because Trump is forced to play the ‘China very bad’ card. If you are down to one card it is probably time to fold, but Trump can’t do that because its the only hand he has left. so we need to take a look at what the effect will be.

​In 2024, the United States imported approximately $438.9 billion worth of goods from China, marking a 2.8% increase from the previous year. This figure represents a significant portion of the U.S.'s total imports, underscoring the substantial trade relationship between the two nations.​United States Trade Representative

Breakdown of U.S. Imports from China in 2024:

• Electrical and Electronic Equipment: $127.06 billion​Trading Economics

• Machinery (including nuclear reactors and boilers): $85.13 billion​Trading Economics+1Trading Economics+1

• Toys, Games, and Sports Equipment: $32.04 billion​Trading Economics

• Plastics and Plastic Articles: $21.53 billion​Census.gov+3Trading Economics+3Statista+3

• Furniture, Lighting Signs, and Prefabricated Buildings: $20.94 billion​Trading Economics

• Vehicles (excluding railway and tramway): $17.99 billion​Trading Economics

• Articles of Iron or Steel: $13.17 billion​Trading Economics+1Census.gov+1

• Optical, Photographic, Technical, and Medical Apparatus: $12.34 billion

As of yesterday, you can more than double the cost of those imports due to Trump’s 120%. So does that mean that the cost to US consumers of Chinese goods will double?

Here is how it works, using Apple as an example:

A 54 percent tariff on a $1,599 iPhone 16 Pro Max could technically push retail prices north of $2,400. Assuming the increase follows the same pattern, a 120% tariff will push that original $1,599 to over $3,000.

Apple and other manufacturers will try to absorb as much of the increase as they can but there is only one direction for costs. These costs will filter through to Main Street in many ways. Take cars as another example. Cars will cost more—not just the cars built in China, but the cars made in the US as well. The use of Chinese steel, Chinese plastic, and Chinese electrical and electronic components appears all through the American automotive industry.

But the plan is to bring all this back onshore, remember?

That might have worked given time. It takes years to rebuild the infrastructure and train the workers to replace the industries that the US offshored in the ’80s and ’90s. And it will cost a trillion or two to achieve. And these costs would inevitably filter through to the sticker price of all of the products onshored. That’s the time and cost it took to offshore in the first place, but that was a sure bet because wage rates were so low in China that a cheap and profitable product was inevitable. Onshoring cannot produce a similar result because wage costs in the US are that much higher. Economically, the US is in serious trouble. It will take time for the damage to appear, but bombs never create a better landscape.

But what has this got to do with the War in Europe?

Everything.

Putin can now depend on the US being distracted and weakened, at least for the next few years. Ukraine has disappeared from the US agenda, replaced by the turmoil and growing danger of a disrupted economy and the inevitable political confusion that will follow. That means, even more urgently, Europe needs to advance its plans and replace the US in Europe completely. It means that tentative considerations of a new free-world axis, encompassing Australia, the EU, Canada, and Japan, need to accelerate to formal policy and action.

These are the critical days and weeks. In one direction lies a united, inclusive coalition of the free, open to countries who share our values. In the other lies a new, technologically empowered dark age.

The future changes every day.