Justin Urquhart-Stewart explores the disruptions in global supply chains due to tariffs.
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00:00We promised you more, Justin Urquhart-Stewart, and here he is, investment manager and business commentator.
00:06Look, how disruptive are these tariffs for the global supply chain?
00:12These are incredibly disruptive.
00:13When you just think back a few years ago, when we had one container ship blocking the Suez Canal,
00:18and yet from that, the backup in supply chain was very severe.
00:23It was impacting not this year's Christmas, but the following year's Christmas.
00:26So we have a global supply chain which is taught as an elastic band, why, for great efficiency.
00:33Anyone's like a problem.
00:34That elastic band bursts, what happens then?
00:37That's what you're seeing now.
00:38And so markets are already looking to see what are people doing to avoid the tariffs?
00:43Are they going to go to other countries?
00:45Which is why you see all companies like Cambodia and Vietnam in the list,
00:48because quite rightly people are finding alternative areas to try and produce something which wouldn't have such a tariff level.
00:54But the shipping industry has had a few runs at crisis management.
00:59You talk about the canal being blocked by one ship.
01:02We also had the Covid pandemic.
01:04So it's not as if shipping hasn't had a go at getting itself out of trouble.
01:09What's your prognosis to what lies ahead for shipping?
01:12Well, shipping is one of the oldest trades, probably the second oldest trade.
01:17Don't mention the first oldest trade.
01:19It's a family show.
01:21But making sure, therefore, that trade is easier.
01:24And that means we're regulated.
01:25And that's why, even back in the Roman days, they built actually the second Suez Canal.
01:32There was one by Darius, the Persian emperor, before that.
01:35But we'd forgotten what to do.
01:36So it was only actually in the 19th century, people said, this is actually going to improve trading.
01:42Therefore, if we're trading, we're making more profit.
01:44More wealth is being spread around the world.
01:46That's the encouragement now.
01:48So what's happened over the past few days, it has hit the one word that runs any economy.
01:53Confidence.
01:54And if people don't have confidence, I'm not going to buy that widget now.
01:57I may not be going to have supper, even if it's just a family time.
02:01But more the point, companies, I'm going to hold on on my investing.
02:04Do I actually now move manufacturing to America, or do I just hunker down here for the moment?
02:09And there are too many variants.
02:11In the meantime, therefore, the market will continue to be volatile until it can have some little sentient of fact it can try and poke itself on.
02:19But be careful, because there will be certain fashion fads coming through.
02:22And remember, this year's fashion fad is next year's tank top.
02:26And I've got a fine collection of goods.
02:27Well, speaking about you and me, then, how soon and will things just get more expensive?
02:37You'll already see that coming through.
02:39Some of the less, I don't say honest, but sharp practices, people would be adding the tariff price anyway to it.
02:47Even maybe sometimes the goods aren't covered by it, but it's a good excuse.
02:50Well, we saw this with the Nintendo Switch, with the new console.
02:53Absolutely.
02:54It came out at a higher end of analysts' expectations because the manufacturers were factoring in those extra tariffs.
03:00Absolutely.
03:01And you go back and look at it.
03:02Where do they put their prices up?
03:04Because it's a supply chain, somewhere in that supply chain, not just in America, but elsewhere, there is something which is putting up prices.
03:11So the moment we are in fog, we can't see what's happening.
03:14And therefore, markets are very nervous what should individual investors do now.
03:18The answer is probably nothing.
03:20If you've got cash, hold on to it because there will be some opportunities coming up where you'll be able to buy good quality business at a significant discount, but maybe not yet.
03:28As for the rest of your investments, you invested probably for the long term.
03:33And your primary return is not shares going up and down according to idiots in red braces, but actually the compounding of the dividends over time.
03:40That's how you create family wealth.
03:42But you say that as a seasoned investor of many years' experience.
03:47I mean, you can forgive ordinary people who've got a few dollars in investments or pensions looking at this in horror, wondering where it's going to stop.
03:58What would your advice be to them?
04:00Advice clear to them, you invested in this for the long term.
04:04You invested in this area, there will be volatility.
04:07We will be told about this.
04:08In fact, you will be reminded because the regulator tells you any movement of 10 percent, your plants have to be notified.
04:14And 10 percent movement is actually quite common.
04:17So quite rightly, therefore, businesses, some are going to be taking advantage of it.
04:21Others will be making up their minds about where they're going to move their plants or just stay with it or change product.
04:26But for all of us at the end of the supply chain, the people investing in it, they'll be looking for the long term.
04:32Look at the previous events.
04:34We've like had the market very areas going up and down with COVID, with the banking crisis, all of those elements and the dot com.
04:42So when people say millions and billions have been wiped off, yes, what's new about that?
04:48In the longer term, it'll be an adjustment.
04:50Effectively, what we've done is some of the major markets, we've merely gone back to what the valuation was midway through last year.
04:56So it's not the cream off the top, not the coffee.
04:58Do you really think, though, that businesses are going to be waiting it out?
05:04Because after all, there will be a different president in the White House.
05:07He's already, this is already Trump's second term.
05:10Or is this going to be seen as a chance for companies to accelerate their business plan and automate faster, invest more in AI and quantum computing?
05:20Oh, the good news is these days, whether you're a business or a private investor, the technology is brilliant for you.
05:25And at an easy level, the services provided are also much cheaper than they were.
05:31So whether you're a company or an individual, you're in a better position now.
05:34What companies should be doing is laying out the alternatives.
05:38What happens if my turnover drops by 20 percent, 50 percent?
05:42I could start planning for that now.
05:44Maybe for some staff have to go, may have to be pay cuts.
05:48And by the way, if there are, that starts at the top and not the bottom.
05:51Those with the broadest shoulders should take it.
05:53I know I've been in a position like that and it can be managed very carefully.
05:57So people actually recommend you to people.
05:59So that's how they did it.
06:01They protected my money at the down times and also looked after their staff and also their clients.
06:08That's the sort of thing that could really make you stand apart as opposed to some of the greedy bankers who I'm afraid some of them are still there.
06:15Justin, on that note of greedy bankers, we must stop it.
06:19Good to see you.
06:20Justin Erkart-Stewart, many thanks.