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Saturday, 30 June 2018

G.M. Says New Wave of Trump Tariffs Could Force U.S. Job Cuts (NYT)

"General Motors warned Friday that if President Trump pushed ahead with another wave of tariffs, the move could backfire, leading to “less investment, fewer jobs and lower wages” for its employees.

The automaker said that the president’s threat to impose tariffs on imports of cars and car parts — along with an earlier spate of penalties — could drive vehicle prices up by thousands of dollars. The “hardest hit” cars, General Motors said in comments submitted to the Commerce Department, are likely to be the ones bought by consumers who can least afford an increase. Demand would suffer and production would slow, all of which “could lead to a smaller G.M.”

The president has promoted tariffs as a way to protect American businesses and workers, aiming at dozens of nations with metal tariffs, as well as bringing broader levies against Chinese goods. But companies, which rely on other markets for sales, production and materials, have been increasingly vocal about the potential damage from his policies.

The warning by G.M., echoed in comments by trade groups and other automakers, could test the president’s aggressive approach to trade and his commitment to business. In the past, Mr. Trump has lauded General Motors for its job creation and vowed to defend the auto industry.

A G.M. spokeswoman, Dayna Hart, said that the company had no contingency plans calling for job cuts, but that such a move was “something that could happen.”

“We are still assessing the impact,” she added.

The White House did not respond to a request for comment.

G.M. and other industry leaders are caught in the middle of an escalating trade war that has prompted retaliation from the European Union, Mexico, Canada and China.

Last month, Mr. Trump ordered an investigation into whether imported cars and automotive components pose a national security risk, calling for penalties expected to be as high as 25 percent. The administration has already put levies on imported steel and aluminum, and is about place tariffs on $34 billion worth of Chinese goods.

G.M. and other automakers rely heavily on parts and materials from overseas to build their cars. The president’s threat to pull out of the North American Free Trade Agreement could hurt the industry’s supply chain, which integrates operations in the United States, Canada and Mexico.

“If there’s a full-blown trade war, it will be pretty tough for the auto industry and consumers,” said Michelle Krebs, an analyst at

“Consumers are already facing headwinds in credit and average prices going up,” she said. “If you add a tariff, my guess is a lot of people just won’t buy new cars.”

The increasingly global nature of automotive supply chains has left manufacturers especially exposed.

This week, Harley-Davidson said it would move some of its productionoutside of the United States to avoid retaliatory measures by the European Union. The company said it was the only “sustainable option” to “maintain a viable business in Europe.”

The decision invoked the ire of the president, who quickly threatened punitive taxes. He accused the Wisconsin-based motorcycle maker, which he had cited as a poster child of American manufacturing, of having “surrendered.”

Fiat Chrysler Automobiles, which has several plants in the United States, is also considering other manufacturing options, according to a Bloomberg interview with Bob Lee, an executive overseeing powertrains for the company.

“It’s contingency planning on a massive scale — supply-based planning, logistics planning, vehicle-build location planning,” Mr. Lee told Bloomberg on Thursday. “This is not trivial, and it’s been going on for awhile.”

G.M. and its chief executive, Mary T. Barra, have been at odds before with the Trump administration.

Last year, after Mr. Trump blamed both white supremacists and the groups protesting them for violence in Charlottesville, Va., Ms. Barra and other executives weighed disbanding an elite council formed to advise the president on economic issues. Mr. Trump shut down the group before they could dissolve it.

In January, Ms. Barra said Nafta should be modernized, but not scrapped entirely. Mr. Trump has suggested that the United States withdraw from the trade pact or renegotiate it.

In criticizing prospective auto tariffs, G.M. played heavily on its position as one of the country’s largest employers. The company said it had 47 manufacturing locations, 25 service-part facilities and 110,000 employees in the United States, where it conducts most of its research and development, design, engineering and other work.

G.M. suggested that additional tariffs would put American companies at a disadvantage in the midst of a “fast-paced transportation revolution led by cutting-edge technologies.” Its investments in jobs and operations at home, the carmaker said, are critical to this effort. “The economic fortitude of companies like ours directly supports the economic strength of the nation, which, in turn, contributes to the security posture of the United States,” the company said.

The Commerce Department will hold public hearings in a few weeks on the auto tariffs, before it releases the results of its investigation. The government said it had received 2,500 comments already and expected more by the deadline on Friday.

“The purpose of the comment period,” the commerce secretary, Wilbur Ross, said in a statement, was “to make sure that all stakeholders’ views are heard, both pro and con.”

“That will enable us to make our best informed recommendation to the president,” he added.

In a highly intertwined, global car industry, a trade war can play out in unexpected and costly ways. American automakers, which export an estimated two million vehicles, increasingly rely on global sales as a buffer in tough times. Retaliatory tariffs from Europe or China could weaken their overseas business.

They also depend heavily on parts from foreign suppliers. G.M. has said that its supply chain sprawls across 20,000 businesses worldwide and is an operation of “great breadth, scope and complexity.”

European and Japanese automakers are major employers in the United States, supplying hundreds of thousands of jobs. Daimler, the maker of Mercedes-Benz cars, recently issued a profit warning, in part blaming tit-for-tat measures for weakness in its sales of S.U.V.s, which are built in Alabama.

The German automaker BMW, which has a large factory in South Carolina, said in a comment about tariffs that the protectionist approach would make American companies less incentivized to improve their productivity.

“The deeper the economic ties from trade and integrated value chains, the more costly conflict would be, and therefore the more unlikely it is to occur,” BMW said.

Toyota wrote in its submission to the Commerce Department that the cost of its popular Camry sedan would rise $1,800 if subject to new tariffs. The car is built in Kentucky while sourcing 30 percent of its materials from abroad.

The Japanese automaker said that the tariff, if approved, would be terribly timed. The auto industry is at a vulnerable point in its sales cycle, exiting a long stretch of record growth and heading into a period of weaker demand.

The Alliance of Automobile Manufacturers, a Washington-based trade group that represents foreign and American companies, was more specific.

With a 25 percent tariff, the average price of an imported vehicle would rise by $5,800, the group said in a statement. Annual sales would slide by one to two million vehicles. And production would slip 1.5 percent, causing 195,000 workers in the United States to lose their jobs."


Trump’s 1990 Playboy interview perfectly lays out his view of the world (BI)

"US President Donald Trump and Japanese Prime Minister Shinzo Abe held talks in the Oval Office on Friday, February 10, after which they flew to Palm Beach, Florida for a weekend at Trump’s Mar-a-Lago resort.

Ahead of the meeting, Japanese officials reportedly prepared by, among other things, reading Trump’s 1990 interview with Playboy Magazine, during which he rails against Japan on trade, according to the Wall Street Journal’s Jacob M. Schlesinger and Alastair Gale.

Although reading a quarter-century old article from Playboy in preparation for talks may at first seem to be somewhat unorthodox, in the interview Trump discusses many talking points about foreign policy and economics similar to those he pitched during his campaign for the White House.

At the time, he told Playboy that he was “one hundred percent sure” he does not want to be president unless he saw “this country continue to go down the tubes.” Nevertheless, he did answer a variety of questions regarding what he would do as president and how he, at the time, perceived other countries and leaders.

We put together three of his comments on various subjects from 1990 and compared them to what he said and did in 2016-2017.

On the first thing he would do upon entering the Oval Office:

What Trump said in Playboy in 1990: “Many things. A toughness of attitude would prevail. I’d throw a tax on every Mercedes-Benz rolling into this country and on all Japanese products, and we’d have wonderful allies again.”

What Trump did in 2016-2017:Trump madethe debate over free tradeone of the central topics of his campaign, although he focused more on China and Mexico, followed by Japan. He argued in favor of ripping uptrade deals and once even suggested putting a 45% tariff on Chinese imports.

Upon entering office, he swiftly signed an executive order regarding his intent to pull the United States out of the Trans-Pacific Partnership (TPP) trade deal and emphasized his intention to renegotiate the “very unfairNorth American Free Trade agreement (NAFTA).

On America:

What Trump said in Playboy in 1990: “I like [President] George [H. W.] Bush very much and support him and always will. But I disagree with him when he talks of a kinder, gentler America. I think if this country gets any kinder or gentler, it’s literally going to cease to exist. I think if we had people from the business community – the Carl Icahns, the Ross Perots – negotiating some of our foreign policy, we’d have respect around the world. […]

“[A president Trump] would believe very strongly in extreme military strength. He wouldn’t trust anyone. He wouldn’t trust the Russians; he wouldn’t trust our allies; he’d have a huge military arsenal, perfect it, understand it. Part of the problem is that we’re defending some of the wealthiest countries in the world for nothing…. We’re being laughed at around the world, defending Japan.”

What Trump said and did in 2016-2017: Trump has repeated the idea that America is a “laughing stock” numerous times since the 1990s. For example, in November 2016 he said, “Our country is a laughingstock. All over the world, they’re laughing.” A few months earlier, hesaid that Hillary Clinton would not be capable of negotiating with Russian President Vladimir Putin: “Hillary likes to play tough with Russia. Putin looks at her and he laughs, OK. He laughs. Putin looks at Hillary Clinton and he smiles.”

Moreover, over the course of his campaign, Trump repeatedly commented on the North Atlantic Treaty Organization (NATO), saying that it is “costing us a fortune and yes, we’re protecting Europe but we’re spending a lot of money” and that it “is unfair, economically, to us, to the United States. Because it really helps them more so than the United States, and we pay a disproportionate share.”

Notably, Trump did select businessmen for his Cabinet, including former Chairman and CEO of ExxonMobil Rex Tillerson for secretary of state, billionaire investor Wilbur Ross to head up the Commerce Department, and former Wall Street banker Steve Mnuchin for treasury secretary. (Ross and Mnuchin have not been confirmed yet as of this publication.)

On leadership:

What Trump said in Playboy in 1990 about former leader of the Soviet Union Mikhail Gorbachev and the Tiananmen Square protests: “Russia is out of control and the leadership knows it. That’s my problem with Gorbachev. Not a firm enough hand. […] Yet Gorbachev is getting credit for being a wonderful leader – and we should continue giving him credit, because he’s destroying the Soviet Union.”

“When the students poured into Tiananmen Square, the Chinese government almost blew it. Then they were vicious, they were horrible, but they put it down with strength. That shows you the power of strength. Our country is right now perceived as weak … as being spit on by the rest of the world-.”

What Trump said about Russian President Vladimir Putin in 2016: Trump has spoken about Putin on various occasions over the course of his campaign and his new presidency, echoing his earlier interest in the “strength” of leaders.

In an interview with NBC’s Matt Lauer in September 2016 he commented on his leadership style, saying: “He is really very much of a leader. You can say, ‘Oh, isn’t that a terrible thing,’ I mean, the man has very strong control over his country. Now, it’s a very different system, and I don’t happen to like the system, but certainly in that system he’s been a leader, far more than [President Barack Obama] has been a leader.”

Check out Donald Trump’s full interview with Playboy Magazine from 1990 here."

Thermostats, Locks and Lights: Digital Tools of Domestic Abuse (NYT)

"The people who called into the help hotlines and domestic violence shelters said they felt as if they were going crazy.

One woman had turned on her air-conditioner, but said it then switched off without her touching it. Another said the code numbers of the digital lock at her front door changed every day and she could not figure out why. Still another told an abuse help line that she kept hearing the doorbell ring, but no one was there.

Their stories are part of a new pattern of behavior in domestic abuse cases tied to the rise of smart home technology. Internet-connected locks, speakers, thermostats, lights and cameras that have been marketed as the newest conveniences are now also being used as a means for harassment, monitoring, revenge and control.

In more than 30 interviews with The New York Times, domestic abuse victims, their lawyers, shelter workers and emergency responders described how the technology was becoming an alarming new tool. Abusers — using apps on their smartphones, which are connected to the internet-enabled devices — would remotely control everyday objects in the home, sometimes to watch and listen, other times to scare or show power. Even after a partner had left the home, the devices often stayed and continued to be used to intimidate and confuse.

For victims and emergency responders, the experiences were often aggravated by a lack of knowledge about how smart technology works, how much power the other person had over the devices, how to legally deal with the behavior and how to make it stop.

“People have started to raise their hands in trainings and ask what to do about this,” Erica Olsen, director of the Safety Net Project at the National Network to End Domestic Violence, said of sessions she holds about technology and abuse. She said she was wary of discussing the misuse of emerging technologies because “we don’t want to introduce the idea to the world, but now that it’s become so prevalent, the cat’s out of the bag.”

Some of tech’s biggest companies make smart home products, such as Amazon with its Echo speaker and Alphabet’s Nest smart thermostat. The devices are typically positioned as helpful life companions, including when people are at work or on vacation and want to remotely supervise their homes.

Some connected device makers said they had not received reports of their products being used in abuse situations. The gadgets can be disabled through reset buttons and changing a home’s Wi-Fi password, but their makers said there was no catchall fix. Making it easy for people to switch who controls the account of a smart home product can inadvertently also make access to the systems easier for criminal hackers.

No groups or individuals appear to be tracking the use of internet-connected devices in domestic abuse, because the technology is relatively new, though it is rapidly catching on. In 2017, 29 million homes in the United States had some smart technology, according to a report by McKinsey, which estimated that the number was growing by 31 percent a year.

Connected home devices have increasingly cropped up in domestic abuse cases over the past year, according to those working with victims of domestic violence. Those at help lines said more people were calling in the last 12 months about losing control of Wi-Fi-enabled doors, speakers, thermostats, lights and cameras. Lawyers also said they were wrangling with how to add language to restraining orders to cover smart home technology.

Muneerah Budhwani, who takes calls at the National Domestic Violence Hotline, said she started hearing stories about smart homes in abuse situations last winter. “Callers have said the abusers were monitoring and controlling them remotely through the smart home appliances and the smart home system,” she said.

Graciela Rodriguez, who runs a 30-bed emergency shelter at the Center for Domestic Peace in San Rafael, Calif., said some people had recently come in with tales of “the crazy-making things” like thermostats suddenly kicking up to 100 degrees or smart speakers turning on blasting music.

“They feel like they’re losing control of their home,” she said. “After they spend a few days here, they realize they were being abused.”

Smart home technology can be easily harnessed for misuse for several reasons. Tools like connected in-home security cameras are relatively inexpensive — some retail for $40 — and are straightforward to install. Usually, one person in a relationship takes charge of putting in the technology, knows how it works and has all the passwords. This gives that person the power to turn the technology against the other person.

Emergency responders said many victims of smart home-enabled abuse were women.

Connected home gadgets are largely installed by men, said Melissa Gregg, a research director at Intel working on the implications of smart home technology. Many women also do not have all the apps on their phones, said Jenny Kennedy, a postdoctoral research fellow at RMIT University in Melbourne, Australia, who is researching families that install smart home technology.

(One in three women and one in four men have been victims of physical violence or stalking by an intimate partner, according to a 2010 Centers for Disease Control report.)

The people who spoke to The Times about being harassed through smart home gadgetry were all women, many from wealthy enclaves where this type of technology has taken off. They declined to publicly use their names, citing safety and because some were in the process of leaving their abusers. Their stories were corroborated by domestic violence workers and lawyers who handled their cases.

Each said the use of internet-connected devices by their abusers was invasive — one called it a form of “jungle warfare” because it was hard to know where the attacks were coming from. They also described it as an asymmetry of power because their partners had control over the technology — and by extension, over them.

One of the women, a doctor in Silicon Valley, said her husband, an engineer, “controls the thermostat. He controls the lights. He controls the music.” She said, “Abusive relationships are about power and control, and he uses technology.”

She said she did not know how all of the technology worked or exactly how to remove her husband from the accounts. But she said she dreamed about retaking the technology soon.

“I have a specific exit plan that I’m in the process of implementing, and one of my fantasies is to be able to say, ‘O.K. Google, play whatever music I want,’” she said. Her plan with the smart thermostat, she said, was to “pull it out of the wall.”

When a victim uninstalls the devices, this can escalate a conflict, experts said. “The abuser can see it’s disabled, and that may trigger enhanced violence,” said Jennifer Becker, a lawyer at Legal Momentum, a women’s rights legal advocacy group.

Eva Galperin, director of cybersecurity for the Electronic Frontier Foundation, a digital rights group, said disabling the devices could also further cut off a victim. “They’re not sure how their abuser is getting in and they’re not necessarily able to figure it out because they don’t know how the systems work,” Ms. Galperin said. “What they do is they just turn everything off, and that just further isolates them.”

Legal recourse may be limited. Abusers have learned to use smart home technology to further their power and control in ways that often fall outside existing criminal laws, Ms. Becker said. In some cases, she said, if an abuser circulates video taken by a connected indoor security camera, it could violate some states’ revenge porn laws, which aim to stop a former partner from sharing intimate photographs and videos online.

Advocates are beginning to educate emergency responders that when people get restraining orders, they need to ask the judge to include all smart home device accounts known and unknown to victims. Many people do not know to ask about this yet, Ms. Becker said. But even if people get restraining orders, remotely changing the temperature in a house or suddenly turning on the TV or lights may not contravene a no-contact order, she said.

Several law enforcement officials said the technology was too new to have shown up in their cases, though they suspected the activity was occurring.

“I’m sure that it’s happening,” said Zach Perron, a captain in the police department in Palo Alto, Calif. “It makes complete sense knowing what I know about the psychology of domestic violence suspects. Domestic violence is largely about control — people think of physical violence but there’s emotional violence, too.”

Some people do not believe the use of smart home devices is a problem, said Ruth Patrick, who runs WomenSV, a domestic violence program in Silicon Valley. She said she had some clients who were put on psychiatric holds — a stay at a medical facility so mental health can be evaluated — after abuse involving home devices.

“If you tell the wrong person your husband knows your every move, and he knows what you’ve said in your bedroom, you can start to look crazy,” she said. “It’s so much easier to believe someone’s crazy than to believe all these things are happening.”

Asking everyone in a home to understand smart home technology is essential, researchers said.

“When we see new technology come out, people often think, ‘Wow, my life is going to be a lot safer,’” said Katie Ray-Jones, chief executive of the National Domestic Violence Hotline. But “we often see the opposite with survivors of domestic violence.”


Friday, 29 June 2018

Decoupling of Business and Politics (3)

My March 16 and June 28 blogs on the decoupling of Business and Politics made me wonder about similar events in history. A decoupling of 2 Belief systems in the Power domain of the 7 Belief systems is highly unusual as both have a (strong) symbiotic relationship.

Recent examples of a decoupling of Money (eg, business, finance) and Politics include:

Both the UK and USA have a deeply divided population with a near 50/50 outcome on key issues like Brexit and Trump’s election as 45th President. These deep divisions are all about the 7 Belief systems: Love (eg, LGBT), Money (eg, inequality, poverty), Philosophy (eg, independence, supremacy), Politics (eg, Nationalism), Religion (eg, Islam), Science (eg, climate change), and the Truth (eg, what is - and who tells - fake news).

For (very) many centuries, the Power domain within the 7 Belief systems has been represented by 3 Belief systems: Money, Politics and Religion. Within the Power domain, Religion is already slowly being replaced by Technology. Technology is a derivative of Science from the Knowledge domain. See my 2018 blog on this (paradigm) shift.

A decoupling of Money (eg, business, finance) and Politics would be another paradigm shift. The symbiotic relationship between Money and Politics works like this: Politics needs Money to sustain; Money needs a Winner to thrive. Money supports Power and follows its shifts. A decoupling between Money and Politics must thus be a forewarning.

The causes for the Fall of the Roman Empire are intriguing: (i) Antagonism between the Senate and the Emperor, (ii) Heavy Military Spending, (iii) Barbarian Knowledge of Roman Military Tactics, (iv) a Government constantly threatened by bankruptcy, (v) Unemployment of the Working Classes, (vi) Decline in Ethics and Values. Hence, Rome’s enemies became stronger and stronger.

To paraphrase the similarities between the Roman Empire and the USA: (i) deep divisions -or antagonism - in beliefs between the population and its politicians, (ii) heavy military spending, (iii) economic and military IP theft by frenemies, (iv) record annual deficits and record national debt, (v) extreme poverty for the working class, (vi) moral decency (eg, child separation policy).

Americans love to see the European Union as one (1) - and a failing - State (my blog). They forget that the EU is a project (my blog), run by 28 European countries (speaking 24 languages) with common and diverging interests (eg, migrants, trade). Perhaps, the EU may indeed need to go back to its core (free trade), which would indeed be a failure in its other aspects.

Recently, the frontman of the American "industrial rock" band Nine Inch Nails made a striking comment: “I think you’re seeing the fall of the empire of America in real time, before your eyes” (Guardian, 2018). American historian Alfred W. McCoy has a similar view in his 2017 book.

The Rise and Fall of Ziggy Stardust and the Spiders from Mars (1972) by David Bowie

Note: all markings (bolditalicunderlining) by LO unless stated otherwise

US steel users file legal challenge to Trump’s tariffs (FT)

Subtitle: "Move is part of growing backlash by US business groups and pro-trade Republicans"

"A group of steel users has filed the biggest legal challenge so far to steel tariffs imposed by Donald Trump earlier this year.

In a suit filed with the US Court of International Trade in New York on Wednesday the American Institute for International Steel and two of its member companies argue that the US president’s move is unconstitutional and challenge his invocation of a 1962 law to impose the 25 per cent tariff on grounds of national security. 

The group says the Cold War law itself that Mr Trump employed to levy the duties amounts to an unconstitutional delegation of Congress’ trade powers to US presidents. 

The move comes amid a growing pushback by US business groups and pro-trade Republicans in Congress against Mr Trump’s tariffs and the resulting trade wars with China as well as allies in the EU. 

The cost of those trade wars has been illustrated this week by Harley-Davidson’s decision to shift production outside of the US to avoid EU retaliatory tariffs. 

Beyond the tariffs on steel and aluminium Mr Trump is due to start collecting import taxes on $34bn in trade from China next week. He also is threatening a 20 per cent tariff on auto imports from the EU under the same national security provision used for the steel tariffs. 

Some pro-trade Republicans with backing from the US Chamber of Commerce and other business groups are pushing to rein in Mr Trump’s ability to impose tariffs without the approval of Congress. 

Republican leaders in Congress, however, have so far been reluctant to take on the president over one of his signature issues. 

Under Article 1 of the US constitution Congress has responsibility for regulating US international commerce. But the legislative branch has, over decades, steadily delegated more and more trade powers, including in the 1962 law Mr Trump invoked for his metals tariffs."


Thursday, 28 June 2018

Decoupling of Business and Politics in the UK (2)

On 15 March 2018, industrial conglomerate Unilever announced scrapping its dual headquarter structure, and created a single HQ in Rotterdam, Netherlands (my blog). Both Unilever and the UK government denied any Brexit link (Guardian).

Excerpt from my 16 March blog on Unilever - decoupling of business and UK politics:
"In my concept of the 7 Belief systemsMoney sides with Politics, its natural ally. The Unilever move shows (i) a decoupling between business (ie, Money) and unpredictable and unstable UK politics, and (ii) a coupling of business with predictable and stable Dutch politics. Money prefers arrogant Globalism / Internationalism over ignorant Nationalism (my 2017 blog)."
In June 2018, other UK conglomerates warned the UK government on Brexit: AirbusBank of AmericaBMW, and Siemens. This time the UK government response was different:

The remark by the UK Foreign Secretary led the FT to conclude: "The foreign secretary’s outburst reveals commerce has lost out to nationalism". Note LO: bold markings in quote by me. This conclusion is an affirmation of my thesis about a decoupling between business and politics in the UK. Such a decoupling would have disastrous consequences.

Businesses tend to have a rational view, although some of their projects may well be based on an emotional spur of the moment. Decisions are mostly based on a risk / return trade-off, and only some are based on a gut feeling. Businesses seldom continue with disastrous projects, although they dislike communicating its consequences (eg, write-offs). Silence is golden.

There's plenty of evidence that the Brexit "project" has been run the other way around: Brexit is an emotional view without any pre-Brexit impact analysis (Guardian-2017). A subsequent post-Brexit impact analysis revealed that the "U.K. will be worse off in every scenario after Brexit" (Politico-2018). Brexit appears to be purely based on a gut feeling by some loud-voiced politicians with shady international contacts (eg, Russia, Trump).

In the rational minds of UK businesses, it's incomprehensible that UK politics would really ruin UK business through a no deal Brexit. Hence, continued disbelief and a posture of "seeing is believing". The big conglomerates in the UK now realise that time is running out for any Brexit deal. A no deal Brexit would complete the decoupling between Business and Politics in the UK.

Running on Empty (1978) by Jackson Browne

Running on, running on empty
Running on, running blind
Running on, running into the sun
But I'm running behind

Note LO: all markings (bold, italic, underling) by LO unless stated otherwise

Boris Johnson's outburst reveals commerce has lost out to nationalism (FT)

Main title: "Boris Johnson’s Brexit explosion ruins Tory business credentials"
Subtitle: "The foreign secretary’s outburst reveals commerce has lost out to nationalism"
Subtitle on FT's Facebook post: "This is the strategic nihilism of a spoiled child – in this case, also the UK foreign secretary – lashing out."

“Fuck business.” Never was the Brexit manifesto more succinctly captured than in Boris Johnson’s impromptu aside. As slogans go, it has everything. It surfs the populist wave of anger towards elites. It is easy to understand. Hell, it’s even shorter than “take back control”.

The UK’s foreign secretary apparently outlined his new business strategy at a private reception, when challenged about the clamour from Airbus and BMW over the threat to jobs and investment. Mr Johnson’s aides say the remark was aimed at business lobbyists. It makes little difference. (He has now fled to Kabul to avoid having to resign rather than vote with the government for a new runway at Heathrow. The foreign secretary had said he would lie down in front of the bulldozers. It turns out he preferred to lie low.) 

“Fuck business.” It may have been a casual aside but it was also a revealingly contemptuous one, not least in its indifference to the fate of Airbus’s UK staff. This is the strategic nihilism of a spoiled child lashing out. After two years of failing to offer up even a scintilla of a plan, relying on magical thinking and the belief that if Britain just held its nerve, Europe would fold, this is all he had left — a petulant explosion. 

It is only a few weeks since Mr Johnson was caught saying much the same thing about Ireland as its complexities threatened the simplicity of his Brexit. So f*** business, f*** Northern Ireland — there is no workforce too large to sacrifice, no damage too great to endure as long as someone else does the enduring. 

Mr Johnson’s oratorical outrages have become so numerous that we have learnt to discount them. But he is still one of the leading lights of the Conservative party, the party of business, of free trade, of low taxation and getting the dead hand of the state out of the way of the nation’s wealth creators. For a Tory to be declaring “fuck business” should be as unlikely as Labour leader Jeremy Corbyn yelling something similar about the workers. 

If this were only Mr Johnson, one might disregard it as the latest effusion from an increasingly marginalised figure. But he was articulating a broader strand of opinion. Nigel Farage’s response to Airbus was that “manufacturing is 10 per cent of the UK economy”. So, manufacturing can get lost as well. The message that you did not see on the side of the Leave campaign bus is that economic pain is a price worth paying. For all the pretence of new business opportunities, this was always their view. 

Mr Farage, of course, is not a Conservative. So let us consider Jeremy Hunt, the health secretary and born-again Brexiter (a condition not entirely unrelated to considering himself a leadership contender). Challenged about Airbus’s comments, Mr Hunt said it was “completely inappropriate” for business to be voicing fears for the future of its workforce because it could undermine the prospects for a good deal. You have to wonder at some of this. Does Mr Hunt imagine that the EU was unaware of the issue? Does he envision a breathless Eurocrat reading about Airbus and thinking: “Oh wow. This could be really useful in the negotiations.” 

There has always been a tension in Conservatism between nationalism and commerce. Wiser Tories kept the two strands in harmony, recognising that a wealthy nation is more likely to be a strong (and indeed, stable) one. But Brexit has brought the tension back to the fore. Mr Johnson will not let a grubby thing like business inconvenience higher ideals. This ambivalence is why, for example, Brexiters are happy to forgo the planned cut in corporation tax to fund their Brexit pledge on health. 

Ranged against Mr Johnson’s new romantics are the less dashing realists such as Philip Hammond at the Treasury, Greg Clark, business secretary, and Theresa May’s deputy, David Lidington. The prime minister, herself no friend of unfettered capitalism, also sees economic chaos as a sub-optimal outcome. As one minister put it: “Whenever policy decisions come to the fore, facts trump ideology.” 

For now the realists are in control, but this fissure goes beyond Brexit. One need only listen to leavers raging at the chancellor or the Bank of England to know a Tory Rubicon has been crossed. 

This then is the state of British politics. A Labour party which has fallen to anti-capitalists and a Conservative party, infected by a strain of economic denialism and with a core — though not yet a majority — who place little store in business-friendly policies. 

For the first time in 40 years business cannot be sure that either major party cares about its interests. The nation must hope that global businesses making investment decisions and hearing of Mr Johnson’s remark do not plump for the obvious reply."


Wednesday, 27 June 2018

Trump threatens Harley-Davidson with taxes ‘like never before’ and predicts its eventual collapse (WaPo)

"President Trump on Tuesday threatened the iconic motorcycle company Harley-Davidson with severe taxes and predicted a public revolt that he said would eventually put the 115-year-old firm out of business, blasting the Wisconsin company for a plan to move some operations outside the United States as a way to avoid getting caught in the middle of an escalating trade war.

Trump also accused Harley-Davidson, without providing any evidence, of intentionally misleading Americans by saying the firm was moving some operations out of the United States in response to new tariffs imposed by the European Union.

The intensity of these attacks, which he typically reserves for political opponents, came in Twitter posts.

He alleged that Harley-Davison’s Monday announcement that it would move some more operations outside the United States was long planned and that it was using Europe’s new tariffs as an excuse. He threatened to hit the company with an unspecified tax if it attempted to sell motorcycles in the United States that were made outside the country.

Harley-Davidson had long planned to open a new plant in Thailand, a decision that predated the trade war between Trump and the leaders of a number of other countries. But the firm said Monday that it was shifting more production overseas specifically to blunt the impact of the tariffs imposed by Europe.

These E.U. tariffs on specific U.S. products were imposed in retaliation against Trump’s tariffs on steel and aluminum imports from the E.U.

Tuesday marked Trump’s second straight day of leveling attacks at Harley-Davidson. The company’s announcement sparked a massive sell-off in the stock market amid fears that other companies might follow suit, worried about getting caught in the middle of Trump’s trade war with Europe, Canada, Mexico, China, Japan and possibly India.

In his Tuesday morning Twitter posts, Trump wrote that “Harley must know that they won’t be able to sell back into the U.S. without paying a big tax!”

It was unclear what he meant. He has threatened such a tax since the 2016 campaign, but he hasn’t imposed one, and Congress has blocked his efforts to craft such a tax. He could be referring to the tariffs he is attempting to unilaterally impose on imports.

It was also unclear what he was referring to in this post:

In fact, Trump has tried to threaten numerous countries with tariffs if they do not reduce their own tariffs and other trade barriers, but so far most of those discussions have ended in acrimony and frustration. Numerous countries are moving forward with retaliatory tariffs against the United States, such as the ones European leaders have leveled at Harley-Davidson, to try to exert political pressure on Trump to back down.

Trump also suggested Tuesday morning that his adversarial approach to trade policy had only begun.

The completion of the study Trump cited could logistically provide him with a means to unilaterally impose tariffs on automobiles manufactured in Europe and shipped to the United States, potentially driving up the costs of cars made in Germany, for example. Trump has said he will follow through on these tariffs unless European leaders agree to remove tariffs they have on U.S. auto imports, but so far Europe’s leaders have mostly shown signs of meeting Trump’s tariffs with tariffs of their own."


“America First” President threatens to destroy American company (Vanity Fair)

Subtitle: "Trump is not handling Harley-Davidson’s post-tariffs announcement well."

Last Friday, in a move everyone expected because it was announced a month prior, the European Union slapped tariffs on $3.2 billion worth of U.S. goods in retaliation to Donald Trump’s levies on steel and aluminum. In an effort to hit President “America First”—not to mention Wisconsin Congressman Paul Ryan—where it hurts, the tariffs specifically targeted Wisconsin-based motorcycle company Harley-Davidson with a 25 percent tax increase. That, naturally, led Harley to crunch the numbers and determine that the levy on its products would increase the cost of every motorcycle exported from the U.S. to the European bloc by $2,200. Rather than pass that cost on to its dealers and retail customers, which the company felt would “have an immediate and lasting detrimental impact to its business,” it announced in a filing Monday that it would shift some production of its bikes overseas, saying the move “represents the only sustainable option to make its motorcycles accessible to customers in the E.U. and maintain a viable business in Europe.”

This is, of course, the sort of business decision you may have expected a self-described genius businessman—particularly one who manufactured most of his products overseas—to understand. But as we all know, Trump only played a genius businessman on TV. And spoiler alert: he did not take the Harley-Davidson news well. In his initial tweet on the matter, the president criticized the company for making a determination based on factors that would impact its bottom line, suggesting it was surrendering to the enemy:

But he evidently gave the matter some more thought overnight, and ultimately decided that an outright lie was a better way to go, telling his followers Tuesday morning:

In fact, per Bloomberg, Harley’s decision to build a factory to supply markets in Southeast Asia was made on the basis of another of Trump’s dumb decisions: in this case his withdrawal from the Trans-Pacific Partnership. Later in the morning, the president suggested Harley-Davidson was not long for this world, apparently due to a combination of factors including pissing him off, losing “The Aura,” and being taxed when selling back to the United States.

Never mind the fact that Harley is unlikely to import motorcycles to the U.S. from overseas plants, meaning Trump’s threat that the company will be “taxed like never before!” is little more than an angry old man shouting into the wind."


Trump Says Harley Move Abroad Would Be ‘Beginning of the End’ (Bloomberg)

“President Donald Trump appeared to turn on an iconic American company he once embraced, accusing Harley-Davidson Inc. of using new tariffs on trade as cover to shift some production abroad as he threatened the motorcycle manufacturer with a "big tax" on bikes imported to the U.S.

"A Harley-Davidson should never be built in another country - never!" Trump tweeted Tuesday. "Their employees and customers are already very angry at them. If they move, watch, it will be the beginning of the end - they surrendered, they quit! The Aura will be gone and they will be taxed like never before!" (Note LO: text of Tweet 1)

During his first month in office, Trump credited Harley-Davidson workers for having "supported us big league" during the election when he welcomed executives from the company to the White House. But that lovefest ended Monday when the company said in a government filing that it may move some production outside the U.S. in response to European retaliation for the president’s tariffs on imported metals.

Trump went on the attack and that continued Tuesday morning.

"Early this year Harley-Davidson said they would move much of their plant operations in Kansas City to Thailand. That was long before Tariffs were announced. Hence, they were just using Tariffs/Trade War as an excuse. Shows how unbalanced & unfair trade is, but we will fix it," Trump tweeted.

Tweet 2Tweet 3 (Note LO: copy of Tweet 1)

The president followed up by warning the company that goods produced overseas and imported back into the U.S. could be taxed. “Harley must know that they won’t be able to sell back into U.S. without paying a big tax!" Trump said in another Twitter posting. (Note: LO: text part of Tweet 2)

Harley’s Chief Executive Officer Matt Levatich said in April that the factory in Thailand was a "Plan B" that the company employed after the U.S. abandoned the 11-country Trans-Pacific Partnership free-trade agreement Trump withdrew from last year. He’d said they didn’t relish the investment, which he also said was needed to maintain access to a key market.

The high-profile spat pits the president against one of the best-known manufacturers in Wisconsin, a state of high political importance to Republicans. Trump won the state’s 10 electoral votes by a narrow margin of just over 22,000 votes in 2016, and has repeatedly focused his attention on bolstering the state’s economy while in office.

On Wednesday, Trump is expected to travel to Wisconsin to attend the ceremonial groundbreaking of a Foxconn Technology Group factory set to open by 2020 that proponents say could eventually result in 13,000 jobs. State leaders, including Republican Governor Scott Walker -- who is facing a tough-reelection bid this fall -- offered the LCD display manufacturer up to $3 billion in government assistance for locating the plant in the state.

The early-morning missive from the president marked the second consecutive day Trump took aim at the motorcycle maker, after the company said in an SEC filing on Monday that tariffs enacted by the European Union in response to Trump’s penalties on imported steel and aluminum would add as much as $100 million a year to its costs.

“To address the substantial cost of this tariff burden long-term, Harley-Davidson will be implementing a plan to shift production of motorcycles for EU destinations from the U.S. to its international facilities to avoid the tariff burden,” the company said.

Harley shares fell almost 1 percent in early trading Tuesday in New York after tumbling 6 percent Monday, the biggest drop in almost five months. The stock is down 18 percent this year.

On Monday, Trump said he was surprised the motorcycle manufacturer "would be the first to wave the White Flag."

“I fought hard for them and ultimately they will not pay tariffs selling into the E.U., which has hurt us badly on trade, down $151 Billion," Trump continued. "Taxes just a Harley excuse - be patient!”

In a subsequent tweet, Trump said the U.S. is managing to get other countries to lower existing tariffs and barriers that he said have been in place for years trough bad deals. "We are opening up closed markets and expanding our footprint. They must play fair or they will pay tariffs!" he said in the post.

Michael Pflughoeft, a Harley spokesman, didn’t immediately respond to requests for comment on Trump’s tweets. The White House also didn’t immediately respond to questions about whether the president was seriously planning additional tariffs targeting motorcycles beyond the metals tariffs that have already been announced."

Donald Trump 'surprised' Harley-Davidson will 'wave white flag' in battle over EU tariffs (Telegraph)

“Harley-Davidson is to shift production of some of its iconic motorbikes out of its US plants as it falls victim to the trade war between America and Europe.

The Milwaukee-based company said a rise in tariffs from 6pc to 31pc on its motorbikes exported to European customers would result in a “tremendous” cost increase of approximately $2,200 (£1,656) on each bike.

The business has seen its products hit with punitive import levies by the EU as it retaliates against a 25pc tariff the US placed on imports of steel and 10pc on aluminium.

To avoid passing on costs to its customers in Europe the company said it would relocate production of bikes bound for the EU to “international facilities to avoid the tariff burden”. The company pointedly referred to the EU levies being “imposed in response to US tariffs”.

The relocation could take nine to 18 months to complete as factories outside the US take time to gear up. The move highlights the unintended risks posed to the US by President Donald Trump’s introduction of levies.

Reacting on Twitter, Mr Trump criticised the company for its decision.

"Surprised that Harley-Davidson, of all companies, would be the first to wave the White Flag," he wrote. "I fought hard for them and ultimately they will not pay tariffs selling into the EU, which has hurt us badly on trade, down $151 Billion. Taxes just a Harley excuse - be patient!"

The tariffs are part of a campaign pledge Mr Trump made to protect US industrial jobs, saying that America is unfairly burdened by current trade arrangements. He has vowed to “level the playing field” for US companies.

However, as other nations react with their own levies, his strategy risks backfiring and harming the US economy.

Harley-Davidson said it “maintains a strong commitment to US-based manufacturing” and relocating production is “not the company’s preference, but represents the only sustainable option to make its motorcycles accessible to customers in the EU and maintain a viable business in Europe”.

For such a high-profile company as Harley-Davidson to directly link its decision to Mr Trump’s tariffs is a blow for the current administration.

Harley-Davidson said that if it passed on the cost increase from tariffs to dealers and customers it would have “an immediate and lasting detrimental impact to its business in the region, reducing customer access to Harley-Davidson products and negatively impacting the sustainability of its dealers’ businesses”.

The decision will mean a “significant impact” on the business, estimated at between $30m and $45m for the rest of this financial year, and up to $100m a year on an annual basis."

Dealmaker-in-Chief cuts deal to annihilate American Business (VF)

Subtitle: "This is not how those tariffs were supposed to work out."

"When Donald Trump was running for president, he spent an incalculable number of hours grousing about how America was getting taken for a ride, and Uncle Don was the only one who could put a stop to it. “We need a leader that wrote The Art of the Deal,” he said while announcing his candidacy in 2015. He elaborated during a 2016 Republican debate, falsely insisting, “I’ve done very well over the years through negotiation.” Of particular importance to the would-be president was trade, on which he was fond of proclaiming America was “getting killed.” In addition to trashing agreements like the Trans Pacific Partnership and NAFTA, and promising to use his aforementioned deal-making prowess to strike new, better deals, Trump vowed to slap indiscriminate tariffs on countries around the world, in order to show everyone who’s boss. Seventeen months into the job, how’s that working out? Not great!

On Monday, motorcycle manufacturer Harley-Davidson announced that it will shift some production of its bikes overseas in order to avoid the tariffs imposed by the European Union in response to Trump’s steel and aluminum levies. In a filing, the company—which Trump has previously touted as a “true American icon”—estimated that tariffs on its products would increase the cost of every motorcycle exported from the U.S. to the European bloc by $2,200. “Harley-Davidson believes the tremendous cost increase, if passed on to its dealers and retail customers, would have an immediate and lasting detrimental impact to its business in the region, reducing customer access to Harley-Davidson products and negatively impacting the sustainability of its dealers’ businesses,” the Wisconsin-based company wrote. “Increasing international production to alleviate the E.U. tariff burden is not the company’s preference, but represents the only sustainable option to make its motorcycles accessible to customers in the E.U. and maintain a viable business in Europe.”

Unsurprisingly, Wisconsin’s Paul Ryan was irked about the news, saying in a statement that “this is further proof of the harm from unilateral tariffs.” Chad Bown, a senior fellow at the Peterson Institute for International Economics, told The New York Times that other companies will likely take a page from Harley-Davidson’s playbook as they deal with the one-two punch of higher production costs on raw materials and a tax on exporting to Europe. “I think we can expect to see this same kind of activity every time that President Trump tries to impose new tariffs,” Bown said. Later in the day, Trump tweeted that he couldn’t believe a company would make business decisions based on factors that would impact their bottom line—a move he characterized as “waving the White Flag.” But as it turns out, Harley isn’t the only U.S. company getting dinged by the Dealmaker-in-Chief’s “good” and “easy to win” trade war:
  • Mid Continent Nail Corporation, the largest producer of nails in the country, said last week that it would most likely be forced to lay off half of its employees, and may go out of business thanks to the increased cost of the steel it imports from Mexico;
  • American whiskey makers are worried the E.U.’s retaliatory 25 percent duty on whiskey will obliterate its export business, with Scott Harris, a founder of Catoctin Creek Distillery, telling the Times, “We are just launching into the European market now in a big way, and . . . we’re probably going to see all of our European sales now come to a screeching halt”;
  • Annie Tselikis, executive director of the Maine Lobster Dealers’ Association, expects a major impact on business and jobs from the 25 percent tariff on American lobster set to go into effect next month. Ironically, the measure could help Canada’s lobster market—China reportedly buys 15 to 20 percent of American lobster exports, and Canadian companies won’t face the same tax when selling to Beijing;
  • Cranberry and peanut farmers are expected to take a hit from the E.U.’s tariffs, and given the fact that the U.S. and China are the biggest exporters of peanut butter in the world, the tariff on the U.S. product will probably give China an edge;
  • Nicholas Lardy, a senior fellow at the Peterson Institute, has predicted that “qualitative” measures taken to retaliate by the Chinese could involve U.S. companies facing “increased inspections, further delays of regulatory approvals, and an uptick in nationalist sentiment with a goal to get Chinese consumers to shun U.S. products,” meaning Apple’s $40 billion iPhone market in China “could quickly collapse”;
Small potatoes, you say? Fear not—there’s still plenty of opportunity for foreign nations to pulverize American companies. China’s president, Xi Jinping, who is currently engaged in his own special trade war with Trump, told a group of American and European multinational chief executives that he does not plan to back down in the face of the U.S. president’s actions, saying, “In the West you have the notion that if somebody hits you on the left cheek, you turn the other cheek. In our culture we punch back.” And speaking of getting punched in the face, the Dow fell nearly 500 points today before closing the day down 328.09. No, it’s not really fair to tie the rise and fall of the stock market to the president . . . except for when it totally is."


Tuesday, 26 June 2018

Self pity

I feel much better as my food poisoning recovery is nearly finished. Saturday evening, I felt a sudden bruising near my chest, which did not make any sense. Several hours later, it turned into feeling a heavy brick inside my stomach. Soon afterwards, vomiting started which continued well into early Sunday morning. I felt a lot of self pity that day.

Self pity was on my list of topics. I waived it because I couldn't find the (starting) words. Moreover, self pity is pretty personal and perhaps even too invasive. Self pity is (probably) related to our Dark Side, which stores our Doubts and Fears. Self pity also creates that victim role in which you are craving for attention and rejecting it when it comes.

My main fear, when being sick, is about being old, all alone and helpless while no one even knows that I'm sick. That scenario may not be (very) plausible but fears are often irrational. In reality, I need and want my privacy when I'm sick. The last thing I need is a mother-like-type who keeps asking "are you okay" whenever I cough, moan, sneeze, or run to the toilet.

I now really understand why my girlfriend went back home about a week ago. She needs and wants her privacy in order to deal with the increasing pain, following the end of her radiation treatment. Her night & day schedule is (very) disrupted and she sleeps whenever she needs and wants. Being alone allows for that kind of privacy. 

Self pity feels like an emotional (brain) wave: it comes and goes as it pleases. I don't like this feeling of self pity as it makes me a less pleasant person than I am and want to be. I like being a stable person, who doesn't show emotional peaks and troughs. Deep inside, I am a (very) emotional person however. My self control prevents me from showing volatile emotions.

My choice for self control took away my self pity and before my recovery did. I don't need or want self pity in my life as I don't need or want the Dark Side (back) in my life. Self pity is comforting for a while but when the Dark Side takes over, discomfort suddenly becomes a wishful feeling. 

The start of an emotional (brain) wave, like self pity, may not be our Choice but ending it, is. Life is full of minor - and sometimes major - choices. We will never know the outcome of alternative choices. Hence, the "What-If" question is meaningless and - moreover - dangerous

Three of the governing principles of Life, Nature and the Universe are ChangeSymmetry and Balance. Self pity might just be an emotional wave (ie, Change) disturbing an emotional balance. There is, however, always a Choice between "riding" a wave and restoring balance.

To quote Boris Yeltsin: "We don't appreciate what we have until it's gone. Freedom is like that. It's like air. When you have it, you don't notice it." Just replace freedom by emotional wellbeing

Until It's Gone (2014) by Linkin Park - artists, lyrics, video, Wiki-1, Wiki-2

Note: all markings (bolditalicunderlining) by LO unless stated otherwise

Monday, 25 June 2018

Harley-Davidson to shift some production outside US over EU tariffs (FT)

FT: "Motorcycle maker warns of ‘tremendous cost increase’ due to tariffs".

"Harley-Davidson said it will shift production of EU-bound motorcycles away from its US-based manufacturing sites as a result of Brussels’ decision to retaliate in kind against Washington’s tariffs on imported steel and aluminium.

The famed maker of motorcycles said the financial impact of the EU tariffs would be up to $100m per year. This makes the Milwaukee-based manufacturer one of the first US companies to detail the financial impact of the escalating trade tensions between Washington and its allies, and follows hard on the heels of Daimler, which last week issued a warning that its profits would be hit by new Chinese tariffs on US imports.

“Harley-Davidson believes the tremendous cost increase, if passed onto its dealers and retail customers, would have an immediate and lasting detrimental impact to its business in the region, reducing customer access to Harley-Davidson products and negatively impacting the sustainability of its dealers’ businesses,” the group said in a filing on Monday morning.

As a result, it said, it would not “raise its manufacturer’s suggested retail prices or wholesale prices to its dealers to cover the costs of the retaliatory tariffs.”

Instead, it will “be implementing a plan to shift production of motorcycles for EU destinations from the US to its international facilities to avoid the tariff burden.”

Tariffs imposed by the EU on various US-manufactured products became effective on June 22 and have pushed up the levy on Harley-Davidson motorcycles exported from the US to the EU to 31 per cent from 6 per cent. While this was itself a response to Washington’s decision to impose levies on steel and aluminium imports from the EU, Canada and Mexico, US President Donald Trump threatened in a tweet on Friday “if these Tariffs and Barriers are not soon broken down and removed, we will be placing a 20% Tariff on all of their cars coming into the US. Build them here!”

The tariffs are expected to add $2,200 per average motorcycle to affected vehicles, the company said in a filing on Monday.

Harley said it will bear the cost of this increase in the near-term, and expects to take a hit of $30m to $45m for the remainder of 2018. On a full-year basis, the aggregate annual impact of the EU tariffs would be about $90m to $100m.

The company said ramping-up production at non-US plants, which are located in India, Brazil and Thailand, will require additional investment and take at least nine to 18 months to complete. Earlier this year, Harley said it would close its Australia-based plant.

Harley said in April it was refining a plan, to be released over the summer, to boost performance and shareholder value over the next five years.

The company sold 44,935 motorcycles in the Europe, Middle East and Africa region last year, amounting to 18.5 per cent of global sales, or nearly half of its sales outside the US.

Shares were down 2.7 per cent at $43 in pre-market trading on Monday, an implied move that would leave the stock 15.5 per cent lower for 2018."


Saturday, 23 June 2018

Theresa May casts doubt on UK status as ‘tier one’ military power (FT)

Subtitle: ‘Shockwaves’ at MoD as PM challenges defence secretary to justify spending plans

"Theresa May has asked Gavin Williamson, the defence secretary, to justify Britain's role as a “tier one” military power, throwing Ministry of Defence (Note LO: MoD) plans to modernise the armed forces into disarray just weeks before a crucial Nato summit.

At a tense meeting this week, the prime minister said Mr Williamson needed to rethink the capabilities needed to be a modern military force and focus more on Britain’s cyber warfare capability to meet new threats, including Russia

Senior officials said Mrs May’s intervention created “shockwaves” at the MoD, with some claiming she appeared to be questioning Britain’s role as a global military player. “People have their head in their hands,” said one official. 

Downing Street acknowledged that Mr Williamson’s plans had been challenged by Mrs May in Tuesday’s meeting but dismissed suggestions that she was arguing for a reduction in Britain’s military status. 

“It is categorically untrue to suggest that the UK’s current position as a leading defence nation is somehow in question,” a spokesman said. “The prime minister is strongly committed to the United Kingdom’s armed forces and to maintaining their strength and their ability to deter and where necessary defeat the threats we face.” 

MoD officials are urgently working on a paper that will set out what it means to be a top-tier power alongside the US, Russia, China and France. 

Although there is no formal definition of what constitutes a tier one power, the MoD has interpreted it as having a full spectrum of military capabilities, including an independent nuclear deterrent and a navy, army and air force capable of being deployed anywhere in the world.

Mr Williamson has fought a high-profile campaign in Whitehall for more cash for the armed forces as the MoD faces a funding shortfall of up to £20bn over the next decade. But in the “trilateral” meeting, he faced resistance from Mrs May and Philip Hammond, the chancellor.

According to one official briefed on the talks, Mrs May’s doubts were raised near the end of the meeting, after General Sir Nick Carter, the new chief of the defence staff, set out the threats the UK is facing, with a particular focus on Russia.

Gen Carter detailed the capabilities required to meet those threats and touched on some of the cost implications, prompting the prime minister to raise the question of tier one status and request a fuller review.

“The PM was simply asking, ‘Are you sure this is the right way to proceed’?” said a second government official with knowledge of the meeting.

Mrs May said this week that the NHS is the government’s “priority” and Mr Hammond has told colleagues that the plan for £20.5bn in extra health spending by 2023 will mean tighter settlements for other departments in a spending review next year.

The chancellor will on Thursday say in his annual Mansion House speech that he is committed to reining in borrowing and sticking to his fiscal rules, including raising taxes “a bit” to pay for higher NHS spending.

Mr Williamson is pressing for more cash and wants to make an interim statement on his “modernising defence programme” before next month’s Nato summit, at which President Donald Trump is again expected to demand US allies boost military spending.

But the pushback by Mrs May and Mr Hammond has put the statement on hold. “More work needs to be done,” said one senior official. The modernisation review is scheduled to conclude in the autumn.

Britain is one of only five Nato countries which meet the alliance’s spending goal of committing 2 per cent of gross domestic product to defence. The current UK defence budget stands at £37bn a year.

Britain is also committed to spending a further £178bn on new defence equipment over the next 10 years — but the MoD’s budget remains under strain and Mr Williamson and military chiefs are seeking more.

The shift in tone from the prime minister comes after hopes were raised that defence would be granted extra money beyond the current commitment to increase the MoD’s budget by 0.5 per cent above inflation each year.

Earlier this week a report by the defence select committee called for ministers to raise defence spending to nearer 3 per cent of GDP.

On Wednesday, General Mark Carleton-Smith, the new head of the army, said sacrificing conventional war fighting capabilities to pay for new capabilities like cyber was “flawed”.

In a speech to the Rusi land power conference in London, Mr Carleton-Smith said it was wrong to believe that “the answer lies somehow in disruptive technology and the quicker we can field those technologies the less useful the traditional measures of combat power become as indicators of national power”."