The Prime Minister was in Africa this week. All the right moves, Theresa May was obliged to dance to a foreign tune. A welcome distraction from the Brussels ballroom perhaps. The world has not seen such great steps, since Lady Penelope's puppet strings snapped at the Thunderbirds Christmas Party in 1968.
The headlines were great in the end. No one really bothered to ask about the priorities for truly global Britain and the push to become a 21st century Exporting Superpower. Was the visit to the Dark Continent really the "Right Move"?
South Africa ranked number 27 in the UK's top markets for exports in 2017. Exports were £2.4 billion slightly down on prior year. Imports were £3 billion. The UK has a trade deficit with Cape Town which is likely to increase with any new trade deal.
Nigeria, Number 37 in the export list, also featured in the itinerary. UK exports to Nigeria were valued at £1.3 billion last year, offset by a similar level of imports.
Kenya, always worth a visit, does not feature in the top fifty markets for truly global Britain. The Prime Minister was "Proud to be the first Prime Minister to visit Kenya for thirty years". Thatcher was the last to make the trip. Exports to Kenya were worth Sh27.3 billion in 2017, about £200 million. Imports were valued at Sh38 billion, almost £300 million.
The Prime Minister pledged to make the UK the biggest investor in South Africa among the G7 countries. The USA is the one to beat. China is moving up the ranks fast. It's not sure where the money will come from. UK ten year gilt yields jumped last week. The "kindness of strangers" evaporated slightly in July. Johnny Foreigner dumped government bonds in view of the gloomy outlook for the Brexit deal.
How's it going Dominic ...
The Prime Minister was able to keep in touch with the Brexit Secretary this week. "How's it going Dominic?" Would the Brexit Boy be able to pull a rabbit out of the hat in dealing with Barnier? Well at least he is talking and making the visits, which is more than can be said for his predecessor.
Macron had made a plea for a soft deal with Britain. Barnier returned to the Irish Border issue and recognition of brand rights for French cheese and Champagne.
A "soft deal for soft cheese" the slogan. There may yet be progress. Northern Ireland may have to sacrifice the annual move to British Summertime to stay in synch with the rest of Ireland through the year. Nothing in the Good Friday agreement about that. The October deadline will have to slide. Talks continue to provide the basis of agreement. The hard liners strangely silent for the moment. Rees-Mogg offered a second referendum by way of compromise, in twenty years time perhaps.
"A soft deal for soft cheese, with a glass of champagne"
In other UK news this week, Car production fell by 11% in July. Output is down by just over 4% for the year. Output for domestic sales fell by 16% in the year to date, export output was down by just 1%. Diesel does the damage. Mike Hawes Chief Exec of the SMMT said "To ensure future growth, we need political and economic clarity at home and the continuation of beneficial trading arrangements with the EU and other key markets."
Well, Amen to that ...
How's it going Donald ...
Trump threatened to pull out of the World Trade Organisation this week. He would actually need the approval of Congress to do that. It is, however, a measure of the "isolationist" trend in the White House.
The President claimed Europe was as bad as China. "It's just smaller that's all" The EU had offered to abolish tariffs on US cars completely. So what's wrong with that?
"Not good enough" the Trump response. They don't like our cars and would have to buy more. Ford has a 10% share of the UK car market and a 6% share of the EU market overall. We will have to do better!
Markets shuddered as the threat of a trade war with China escalates. Some $200 billion of China imports will be subject to tariffs in the next round. Ford decided not to import Chinese production into the USA for the foreseeable future. Seems like a good move for the moment.
Good news, the USA agreed the NAFTA deal with Mexico. The proportion of car components to be sourced from North America will increase to 75% from 62.5% currently. The deal includes a minimum wage provision and the relaxation of the "Sunset Clause", whereby the agreement is subject to formal review after a set period. Just don't call it NAFTA!
"We’re going to call it the United States-Mexico Trade Agreement. We’re going to get rid of the name NAFTA." USMoTA? Maybe we should just call it the Trump Make America Great Again Deal. Part 1. Part 2 will be the inclusion of Canada.
"Canada will start negotiations shortly," Trump said. "I'll be calling the prime minister very soon. And if they'd like to negotiate fairly, we'll do that. You know they have tariffs of almost 300 percent on some of our dairy products, so we can't have that. We're not going to stand for that." Trump needs a few good deals ahead of the mid terms.
Then comes the EU and China. Talk loudly, Twitter often and carry a big floppy stick. The President's approval ratings slumped this week.
Trump continues to rate his own performance very highly. "I give myself an A+". "How can they impeach anyone doing so well?" he asks ...
Don't Miss Our Monday Morning Markets ...
Don't forget! Monday Morning Markets is back. The update is released every Monday Morning at around 8:00am. We look at key stock markets, bond markets, interest rates and currencies every week and monitor trends and direction in key areas.
Last week our eToro "Empires of the Cloud" jumped by 4%, thanks to a great performance from Square, Amazon and Apple. Our index tracker fund was up by just 0.3%. European stocks slipped on Brexit fears. US stocks performed well across the board. The Dow and S&P rallied as NASDAQ surged.
That's all for this week, we will be back next week, with more economics. and markets.
Have a great weekend,
The Saturday Economist
John Ashcroft publishes the Saturday Economist. Join the mailing list for FREE weekly updates on the UK and World Economy.
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