The patriotic spending spree that risks leaving us all poorer

Yahoo

19-04-2025

A Tesla smashed in London. Shelves cleared of American booze in Canada. Holidays to the US cancelled en masse.
Donald Trump appears to have succeeded in reordering world trade – just not in the way he hoped.
The US president wanted his trade war to trigger lower imports, boost exports and bolster American manufacturing. Instead, an international 'buyers' strike' is emerging as grass roots groups and politicians pledge to buy local and boycott American goods.
The president seems to have forgotten that it is generally businesses and their customers whose decisions dictate large shares of world trade flows, not government diktats. And those customers are distinctly unhappy with claims they and their compatriots are 'pathetic' and have 'looted, pillaged, raped, and plundered' the US.
Trump's threats to annex Greenland and make Canada the 51st state, as well as the insults and bitter complaints about allies, have sparked consumer backlash across the world.
In Canada, stores have cleared shelves of bourbon and wine from south of the border. American brewers and distilleries are poised to lose the best part of C$1bn (£544m) of annual sales in Ontario alone, where the Liquor Control Board has blocked new orders of American booze.
The Salling Group, a Danish supermarket chain, has not removed American goods from its shelves, but has put star-shaped stickers on European-made products to encourage people to buy local. Anders Hagh, its chief executive, said the decision followed 'a number of inquiries from customers who want to buy groceries from European brands'.
More than 70pc of British shoppers plan to spend more on products from UK businesses amid the trade war, according to a survey by Barclays.
Just over a third of Germans say they will reject American products, with almost two thirds pledging to avoid specific brands such as Tesla, according to research group ECC Köln.
China has taken a more direct route and simply blocked the import of Boeing aeroplanes.
Economists at Goldman Sachs are taking the threat seriously. They have downgraded their forecasts for US growth in part because foreign customers are turning their backs on America.
Joseph Briggs at the investment bank said the 'tariff announcements and a more aggressive stance toward historical allies have hurt global opinions about the US', with boycotts set to hold back the economy's growth.
The most critical impact might come via travel – or the lack thereof.
Flights to the US from almost every region have plunged, with particularly big drops in visits from Canada, Mexico and Denmark, but also the UK.
James Knightley, the chief international economist at ING, says: 'We are seeing airline fare prices fall quite substantially in America, and hotel prices are coming down as well.
'You've got a 30pc drop in tourism coming through potentially, that means less hotels, less flights, less eating out, less shopping, all of which can have an impact on the US.'
The most high-profile victim of this buyers boycott has been Tesla, whose image has become toxic as a result of chief Elon Musk's proximity to Trump.
Sales in the EU so far this year have been cut in half compared with the opening months of 2024, according to the European Automobile Manufacturers' Association. Shares in Tesla are down almost 50pc from December's peak in response.
Despite the car-smashing stunt in the UK, sales in Britain appear relatively unaffected: so far this year they are up 6pc, almost matching the 6.4pc growth in the overall car market.
A rise in patriotic spending is political – consumers want to boost their home economies and punish the US. But there is a risk that it could backfire. Tesla has a giant factory in Germany, so European manufacturing that will bear some of the hit from lower sales on the Continent.
A sustained rejection of American goods could also hurt Britain.
'It is about consumer choice,' says Neil Shearing, at Capital Economics. 'Think about the UK in the 1970s. The car industry was notorious for poor quality cars produced by UK firms. Then you got an influx of Japanese cars in the 1980s. Suddenly, not only does the relative price come down because of competition, but the quality goes up.'
Rachel Reeves made exactly this point when rejecting calls for a 'buy British' campaign.
'If every country in the world decided that they wanted only to buy things produced in their country, that would not be a good way forward,' the Chancellor said. 'Our country has benefited hugely from access to global markets, and we will continue to want to be able to do that, because that is in our national interest.'
Some US products are also difficult to avoid. Britain imported £15bn of fuels from the US last year, for instance. Nobody at the petrol pump questions the source of the fuel being poured into their tank.
Similarly liquefied natural gas (LNG) from America was a lifeline in the energy crisis, and the UK bought £2.5bn of gas from the States last year. Not many people are turning down their radiators or buying a heat pump to prevent some slice of their bills going to the US energy industry.
Avoiding foreign goods is tough, says Shearing, noting that almost all advanced semiconductors are made in Taiwan, for example. There is little prospect of Britain ever developing a cutting-edge chip industry. iPhones are not going to be made in Britain, nor are mass-market trainers.
Mark Carney, the Canadian prime minister, has launched a 'buy Canadian' campaign intended to boost patriotic spending. But elsewhere, there is little political enthusiasm for such campaigns.
Britain's equivalent is limited to the Liberal Democrats. Daisy Cooper, the party's Treasury spokesman, said Britain must support hard-pressed businesses in the face of the trade war.
'We have to speak the only language that Trump understands – the language of strength – and help them save thousands of jobs,' she says, calling on the Government to launch a full campaign to 'buy local, back Britain'.
'Buying British is just one of the ways we can all show our support whilst also sending a message that we won't take Trump's tariffs lying down.'
Ironically for a president who wants to reduce trade deficits, Trump could instead pump them up by driving away tourists in the US and prompting consumer boycotts across the globe.
'The trade balance could actually deteriorate significantly this year,' says Knightley. 'In the first half of the year it is because imports are surging because US companies are trying to get ahead of the tariffs. And from now on we could see a decline in US export demand.
'It is not just tariffs, but his antagonism to other countries, be it Canada as the 51st state, taking over Greenland, berating Europe in terms of being weak, perceived support for Russia – all of these factors are culminating in potentially an 'avoid America' narrative.'
In turn, that risks enraging Trump and pushing him to launch more tariffs. Brace for backlash after backlash, which risk leaving us all poorer.
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