Age of Deglobalisation

Reciprocal tariffs have been put on hold, but Britain must still prepare for the economic clash between America and China

Towering columns

In The Times, Julient Samuel argues that global trade imbalances certainly need to be resolved, but Trump’s universal tariffs are not the solution.

China has no good bauxite reserves and no natural wells of cheap, clean energy, but Beijing made aluminium one of its strategic industries and it employs so many people that no local politician can think of winding it down. So it goes on shipping ore from west Africa and coal from Indonesia and Australia and floods the world with the cheapest, dirtiest aluminium imaginable. It has been doing this for decades, despite every request to stop.

But here’s the flip-side. A lot of American manufacturers have thrived off this cheap metal and are now coming face to face with a new reality. In one case, highlighted by the Bloomberg pundit Joe Weisenthal, a confused poster on Reddit asks: “We have a small business and ordered $3,380 worth of aluminum parts from China… DHL requires $2,483.21 for ‘import duty’… Can this be right?” To which the answer is, yes, my friend, it is indeed “right”, and anyone who prays should pray for you and your business…

…The point is that the proper strategy for aluminium is absolutely not the same as the proper strategy for semiconductors or soya beans. Raising tariffs slightly might have helped rebalance the US away from overspending but modern factories are not built on autarky. If you want a friendly supply of aluminium for your F35s, the best bet is to tap up Canada or Iceland, which stand a chance of producing it competitively, and to tax Chinese exports collectively with your allies.

On his blog, Dieter Helm examines the difficult trade-offs between defence spending, economic growth, and net zero policies.

Let’s assume the government really is serious about defence. There is no reason to doubt the seriousness with which the Prime Minister (PM) takes this, as the realities of a Trump-led US and the Ukrainian battlefields sink in. Americans have an understandable question mark over the assumption that they will pay for the defence of Europe against Russia whilst the Europeans have shirked this obligation, despite the last four US presidents stressing the need to do so. Patience has run out, and Trump is just the messenger of this impatience.

The British defence position looks good in terms of spending as a % of GDP. But look under the bonnet at the current 2.3% number, and what emerges is rather less than some assume. Much of it goes on submarines, Trident and even pensions. Take a look at the Ukrainian battlefields and the hostile actions in the Baltic and North Sea, and the match between our spending and what would be needed to fight a Ukraine-style war is all too apparent. Drones, cyber attacks, the meat grinder of the Russian army and the cutting of the communications and energy cables are not what our armed forces are built for. We can threaten Russia with a nuclear weapon, but, as Putin has so far discovered, the threat doesn’t change much. Worse, in the British case, the British nuclear weapons are really US nuclear weapons. Trump or his successor might not be keen for us to fire one.

Britain has capabilities, especially technical ones. However, it is locked into the US defence industries, it has great supply chains exposure because most of its heavy energy-intensive industries have closed down, and very few troops. It has made itself extraordinarily dependent on the kindness of strangers to secure our energy supply through both its dependence on undersea cables and offshore wind turbines, and, by closing its North Sea oil and gas, ever more dependent on imports.

On his Substack, Sam Dumitriu responds to a NIMBY Labour amendment by explaining exactly how severe the housing crisis has become in Britain.

We have fewer homes per capita than almost all of Western Europe. Hinchliff points to dwellings per capita numbers, but neglects to mention that in 1955, the UK had a ratio of dwellings per person that was 5.5 per cent above the European average. It is now 8% below the European average. In fact, Britain has the fewest homes per capita of any large Western European country. Hinchliff mentions that we have one home for every 2.2 people, but he neglected to mention that France has one home for every 1.8 people. And that Britain is 5.6 million homes short of having the same homes per capita numbers as the average of France, Germany, Spain and Italy.

The homes we have are small by international standards. Hinchliff isn’t making an apples to apples comparison. Brits have less floorspace per dwelling than almost all European nations. When we look at it on a per capita basis, it’s stark. The average English person gets 38 square metres. In the US, they get 72 square metres. Now, the US is a big country with a lot of space. Our island is crowded by contrast. Yet, residents of an even more crowded island, Manhattan get roughly the same amount of space (36 square metres). Londoners get even less by the way…

…The problem is our planning system has made it extremely difficult to build homes where the demand is greatest. Our system of housing targets based on population growth (rather than market demand - something that recent changes are fixing) means there’s little relation between where new homes are built and where demand is. As a result, the places with the strongest local economies have not been able to expand and seen much bigger prices.

In The Times, Janice Turner believes parents have a responsibility to reduce their own screen time so children do not become digital addicts.

All energy about online harm is focused on children: we must monitor screen time, ban phones in schools, insist tech companies protect them from gore, porn or self-harm. The Netflix drama Adolescence warns us that teenage boys prowling alone online may become murderous incels. Such focus is justified: as Jonathan Haidt points out in his global bestseller The Anxious Generation, we need to protect tender, developing brains from being wired by powerful, addictive tech…

…Observe your child with your actual human eyes. Leave your phone at home occasionally when you go for a walk; stack phones in a pile at meal times; don’t give your four-year-old an iPad in the supermarket or on a journey, otherwise they won’t read books. (And books are morally superior to screen games.) Test your kids’ attention span — and maybe yours — with a full-length family movie, no phones.

It is hard, unbelievably hard, to fight the lure of phones, their soulless insinuation into every corner of life. (You may be reading this on one now.) Haidt says that childhood can only be reclaimed from tech companies if we act collectively and this is true here too. We should all walk out of restaurants that demand we scan QR codes rather than share menus; tell teachers we want our kids to write down their homework assignments, not log into Teams; demand GPs take our calls, not funnel us through incomprehensible apps.

On his Substack, Neil O’Brien considers how we should better address attainment and disadvantage in schools.

The current government see the answer as intervention from the centre. People appointed by DFE ‘RISE’ teams will go in to “stuck schools” and give advice. This idea has been tried multiple times in various ways, from “Beacon Schools” to “National Leaders of Education”. This approach reminds me of the old TV programme “Troubleshooter”, where gloriously rotund industry bigwig Sir John Harvey-Jones would go into struggling firms and tell them what to do, and then sail off into the sunset.

While this was good TV, this is not how real improvement works. It’s better for a school to become part of a really good trust. When a school is in a trust everyone is on the same side, and the relationship is for the long haul. The people who come to help from a trust aren’t going away. This avoids a perception of “us and them”, with people appearing from outside and then going away again. There are multiple other problems with the “stuck school” concept.

As Pepe Di’Iasio, general secretary of the Association of School and College Leaders, points out that it’s “unhelpful to persist with labelling hundreds of schools, in a range of different contexts, simply as ‘stuck’”. Moreover, for the stuck schools Ofsted plans to conduct five monitoring visits “within 18 months, unless the issues have been resolved earlier”. If you are a young teacher or moving up into a leadership role, will you want to go and teach in a “stuck” school which is about to have five visits from Ofsted?

At The Spectator, Chris Bayliss looks at why the BBC chose to use the religiously-charged language of ‘Muslim reverts’ in its Eid coverage.

Partially it is down to the preoccupation, occasionally bordering on the morbid, that the BBC holds for the minutiae of the lives of Muslims in Britain. Previously this usually centred around apparently spontaneous gestures of intercommunity altruism by Muslim groups, until the status of the Ahmediyyah community, who were inevitably at the centre of such stories and whom most mainstream Muslims regard as heretics, made this too awkward. Nowadays such stories tend to focus more on the tribulations of those trying to combine mundane aspects of daily life in modern Britain with strict observance of religious precepts, such as playing football while wearing a hijab. This particular article falls into the latter category, but there is something else going on as well.

While the headline and opening paragraphs focus on the story of a particular individual experiencing social isolation as a result of her decision to convert to Islam, the substance of the story is the work of a local charity that supports Muslim converts in Peterborough and surrounding area. This may seem an oddly specific story for a website that supposedly covers national and international news for a global readership, but understanding why it is there explains a lot about how the BBC functions…

…This article also demonstrates the apparent editorial reticence to look too closely at anything connected to Islam, in the way that the BBC certainly would for other faith groups. There is nothing inherently sketchy about the concept of fitra, but it has been used by fundamentalist and extremist Islamic groups to undermine the legitimacy of other religions and to justify violence against non-Muslims. If an organisation for Christian converts used a term suggesting that we had an innate tendency toward monotheism, the BBC would rightly cast a critical eye over anything else it said. But like many institutions in modern Britain that are outwardly very keen on multiculturalism, they lack the cultural awareness to make the link between that and using a term like ‘revert’.

Wonky thinking

UK Steel published its report Steel Trade Beyond 2026. Global steel excess capacity, driven by Southeast Asia and the Middle East, is more than 70 times larger than the UK market. Chinese steel exports will undermine domestic production, especially if safeguards expire in 2026 under WTO rules. It is state subsidies, not market forces, that have created this situation and require the British Government to step in and protect domestic steel producers.

Non-market excess steelmaking capacity is a major challenge for the global steel industry, driving down profits and increasing emissions. Measured as the gap between global capacity and crude steel production, global excess capacity in 2023 was estimated at 543Mt, which is over 70 times the size of the UK market. Conditions are rapidly deteriorating as capacity expansions in Southeast Asia and the Middle East are continuing at an alarming rate – these are largely state-funded, mostly for high-emission blast furnaces and often do not correspond to domestic demand trends. Indeed, steel demand is weakening in key markets, notably China, translating into rising oversupply which is dampening steel prices and spilling over into other markets. Exports from China this year are expected to reach 100Mt, the highest since 2016, when the last steel crisis saw several steel plant closures and thousands of jobs lost across steelmaking countries including the UK.

This is impacting both the profitability and the carbon footprint of the global steel industry. The average profitability of the steel sector is currently the lowest in a decade, with producers in developed economies losing market share to underpriced imports. This is clearly visible in the UK where the import share so far in 2024 has jumped to 68%, from 60% in 2023 and 55% in 2022. The sharpest import increases have come from non-EU sources, mainly India, Vietnam, China, South Korea, Turkey and Algeria. Importantly, these are also countries that have seen significant increases in imports from China or are within China’s top 10 exporting destinations.

Not only is overcapacity and oversupply undermining profitability and therefore investment, including in decarbonisation, but also actively driving up emissions across the globe. Blast furnaces, which are the more carbon intensive steelmaking technology, account for more than 74% of capacity additions in Asia, while 89% of blast furnace energy input globally comes from coal. Over two thirds of steelmaking capacity is in countries that have Net Zero targets later than 2060 or none at all.

The response to this structural excess capacity, driven and sustained by non-market forces, has been increasing protectionism across the globe, diverting trade to exposed markets. US Section 232 tariffs, placing a 25% blanket tariff on all steel imports, were introduced in 2018 and will remain in place for the foreseeable future. At the time, the EU and UK had responded to the US measures, and the trade diversion they would cause, with safeguards which introduced tariff-rate quotas, but these are due to expire in 2026. Time is therefore limited, while the impact of inaction would be devastating and potentially irreversible as we have seen before. It would in fact be much worse this time, as there are many more closedoff markets today compared to when China last exported its industrial overcapacity at scale.

The US has continued to add further tariffs on Chinese imports and strengthen its trade remedies system, Canada recently imposed a 25% tariff on steel imports from China, while several other countries are also acting to shield their industries from trade diversion through safeguards and anti-dumping measures, including South Africa, Brazil, Turkey, Vietnam, India and Malaysia. The EU is also stepping up its trade defence.

In The Telegraph, George Chesterton and Ben Butcher take a deep dive into Britain’s fertility crisis. They look at how housing and childcare costs, lifestyle choices, and falling school class sizes provide mounting evidence of the country’s demographic collapse and its consequences.

It is a demographic disaster decades in the making. The fertility rate (the number of babies born to women of child-bearing age) in the UK has been below the magic “replacement rate” of 2.1 since 1973. Yet even in 1991, 54 per cent of local authorities in the UK remained above replacement level. Now, none is. The declining birth rate has seen the proportion of the population aged under four fall from 6.6 per cent in 1991 to 5.4 per cent in 2021. In the latter year, for the first time, there were more people over 65 in England and Wales than there were children under 15.

Statistics reveal that slow demographic decline is giving way to rapid collapse. In the past 15 years, the fertility rate has fallen by a quarter, hitting a record low of 1.44. We’re not yet at the levels of some Asian nations – South Korea’s fertility rate is 0.78 and Japan’s 1.26 – but unless things change, immigration will remain the nation’s principal way of propping up the population.

Today, by looking at the number of babies born relative to the female population of “child-raising age” alongside the proportion of children aged under four in an area, The Telegraph has identified the baby deserts, finding 622 neighbourhoods across England – around one in 10 – which fall substantially below even the depressed national average fertility rate. Growing cities with young affluent professionals, such as Bristol, are particularly prone to this trend. Bristol has one of the fastest-falling birth rates in England and Wales, down 36 per cent between 2013 and 2023 to 1.14. Along with a student population of more than 70,000, Bristol’s rising house prices (at £360,000, its average is 39 per cent higher than the national figure) have contributed to parents having fewer children, later…

…The most obvious impact of declining birth rates can be seen in classrooms. Primary-school numbers in London are predicted to drop by 52,000 pupils by 2028, proportionately double the national average. “Sustained low fertility is now starting to have considerable consequences for these areas,” says Mills, the Oxford professor of demography. “Not only for their demographic composition and the culture of the boroughs, but also deep into infrastructure such as schools, health and housing.”

Boroughs such as Westminster, Southwark and Camden face primary pupil numbers declining by more than than 10 per cent. This hurts school budgets, since funding is allocated by pupil numbers. Lambeth council recognises the stress that disruption – or even just the threat of disruption – can have on parents and children whose primary school merges or closes because of falling intake…Parents at playgroups report their children being uprooted after preschool because the primary school they assumed they would be attending was to merge or was reducing the number of forms. Some schools are also mixing children of different year groups because of a lack of numbers.

Onward has released its Breaking Blue Documentary. It is the largest post-election analysis of its kind in British history, telling us that immigration is why we lost, Lib Dem & Reform defectors are similar, and the 2015 coalition isn’t coming back.

Book of the week

We recommend MITI and the Japanese Miracle : The Growth of Industrial Policy, 1925-1975 by Chalmers Johnson. The Ministry of International Trade and Industry played a crucial role in spurring Japanese growth and innovation. It provides an example of how an economic bureaucracy can facilitate collaboration between the state and corporations. The author examines its key features to define the Japanese model of the developmental state.

The first element of the model is the existence of a small, inexpensive, but elite bureaucracy staffed by the best managerial talent available in the system. The quality of this bureaucracy should be measured not so much by the salaries it can command as by its excellence as demonstrated academically and competitively, preferably in the best schools of public policy and management. Part of the bureaucracy should be recruited from among engineers and technicians because of the nature of the tasks it is to perform, but the majority should be generalists in the formulation and implementation of public policy. They should be educated in law and economics, but it would be preferable if they were not professional lawyers or economists, since as a general rule professionals make poor organization men. The term that best describes what we are looking for here is not professionals, civil servants, or experts, but managers. They should be rotated frequently throughout the economic service and retire early, no later than age 55. The duties of this bureaucracy would be, first, to identify and choose the industries to be developed (industrial structure policy); second, to identify and choose the best means of rapidly developing the chosen industries (industrial rationalization policy); and third, to supervise competition in the designated strategic sectors in order to guarantee their economic health and effectiveness. These duties would be performed using market­conforming methods of state intervention...

…The second element of the model is a political system in which the bureaucracy is given sufficient scope to take initiative and operate effectively. This means, concretely, that the legislative and judicial branches of government must be restricted to "safety valve" functions. These two branches of government must stand ready to intervene in the work of the bureaucracy and to restrain it when it has gone too far (which it undoubtedly will do on various occasions), but their more important overall function is to fend off the numerous interest groups in the society, which if catered to would distort the priorities of the developmental state. In the case of interests that cannot be ignored, deflected, or satisfied in symbolic ways—or upon which the perpetuation of the political system depends—the political leaders must compel the bureaucracy to serve and manipulate them…

…The third element of the model is the perfection of market­conforming methods of state intervention in the economy. In implementing its industrial policy, the state must take care to preserve competi­tion to as high a degree as is compatible with its priorities. This is necessary to avoid the deadening hand of state control and the inevitable inefficiency, loss of incentives, corruption, and bureaucratism that it generates. It is probable that the market­conforming methods that actually work cannot be discovered a priori but will have to emerge from conflict between the managers of the state and the managers of the privately owned strategic industries. A cooperative relationship between the state and private enterprise is not a natural one: the state inevitably will go too far, and private enterprise inevitably will resent state interference in its decisions. When either the state or private enterprise becomes clearly dominant over the other, as occurred in Japan during the late 1940's (state dominance) and during the early 1970's (private­enterprise dominance), development will falter. One clear lesson from the Japanese case is that the state needs the market and private enterprise needs the state; once both sides recognized this, cooperation was possible and high­speed growth occurred…

…The fourth and final element of the model is a pilot organization like MITI. The problem here is to find the mix of powers needed by the pilot agency without either giving it control over so many sectors as to make it all­powerful or so few as to make it ineffective. MITI itself came into being through a fortuitous process of accretion. MCI originated from the separation of agricultural and commercial­industrial administration. It developed by adding industrial functions while shedding commercial ones, obtained a planning capability when the Cabinet Planning Board was merged with its General Affairs Bureau in MM, and gained complete control over energy only when coal, petroleum, and electric power administration were com­bined during the MM era. The war also provided the ministry with micro­level intervention powers through its Enterprises Bureau. MITI itself finally resulted from the union of MCI and the apparatus for controlling international trade (the BOT). MITI has never had jurisdiction over transportation, agriculture, construction, labor, or finance, although it has had a strong influence over them, particularly over finance, through such institutions as the Japan Development Bank. The fight over Sahashi's Special Measures Law revolved primarily around MITI's efforts to extend its jurisdiction to cover industrial finance.

It is obviously a controversial matter to define the scope of the pilot agency. MITI's experience suggests that the agency that controls industrial policy needs to combine at least planning, energy, domestic production, international trade, and a share of finance (particularly capital supply and tax policy). MITI's experience also suggests the need not to be doctrinaire; functions can and should be added and subtracted as necessary. The key characteristics of MITI are its small size (the smallest of any of the economic ministries), its indirect control of government funds (thereby freeing it of subservience to the Finance Ministry's Bureau of the Budget), its ''think tank" functions, its vertical bureaus for the implementation of industrial policy at the micro level, and its internal democracy. It has no precise equivalent in any other advanced industrial democracy.

Quick links

The electric vehicle mandate was watered down slightly in response to US tariffs.

Only one in four British Muslims believe Hamas committed murder and rape on October 7th.

UK productivity fell by 0.5% between 2019 and 2024, the worst drop since the financial crisis.

The number of people jailed for rioting at a Rotherham asylum seeker hotel has overtaken those locked up for grooming gang abuse.

Minsiters are creating a new equal pay quango for race and disability.

Eritreans are the largest nationality crossing the Channel in small boats with more than 1,200 arriving so far this year.

Police are making more than 30 arrests a day over offensive posts on social media and other platforms.

Net zero insulation plans will take more than a century to deliver energy bill savings.

Around 100,000 marriages are believed to fall under the authority of sharia councils.

New images show people smoking crack cocaine on the London Underground.

After banning the opening of new coal mines, the Government is in talks to buy coking coal from abroad to keep blast furnaces open…

…while French steel is being used to build the next generation of British submarines.

Japan's Kawasaki has designed a four-legged robot, CORLEO, that runs, climbs, and that people can ride like a horse.

The dire wolf became de-extinct thanks to genetic engineering.