Back to the 1970s: Flared trousers and tank tops. Is this the result of Trump’s tariff tantrums?

by Justin Urquhart Stewart

There are somewhere some dreadful photographs of this author wearing what we all once thought were the height of fashion and style. Generally, that decade, the 1970s, produced some frights, with flared trousers becoming “loon” pants (even wider flares) and woollen tank tops.

I live in hope that I will never have to wear such embarrassments again. However, the past few weeks of financial and economic news are providing some worrying signs that we may actually be going back to the future, a situation made immeasurably worse by President Trump’s imposition of tariffs, even if he has reined back slightly.

First a bit of history. There were far worse issues in the ‘70s because of the damage and pain that was caused not just in the UK, but across the EU and the USA, from the evil financial twins of inflation and recession.

Those who were not around back then, will never really have felt the pain and damage that higher inflation can do. Generally, since the early 1980s inflation has been at the lower end of single digits and so any problems related to it were seen as having little effect. However, for those who can recall it, the worst moment was in 1975 when Consumer Price Inflation (CPI) reached just over 24 per cent - or to put it another way, if you had a pension pot to keep you safe for your future, its value dropped by nearly a quarter, with little chance of seeing that value brought back in any time soon.

Younger generations cannot really comprehend what that felt like, although with the recent peak in October 2022 of 11 per cent, they got some foul taste of what its effect can be. Today this is often described as the “cost of living crisis” which we can all feel when looking at our rising domestic bills. If there is any small positive coming out of this, it is that making us all aware of what damage inflation can do, and what we can do to prevent its recurrence and defend our investments.

Secondly, recession. This is often described by economists as “two quarters of negative growth”. In English it is far clearer to describe it as two quarters of our economy shrinking. In the UK we had a painful double dip recession from 1973 to 1975. This was also the time when another piece of economic jargon came to light, namely stagflation. This is a poisonous potion which comes from having a receding economy combined with higher inflation which creates a lethal cocktail which is painful to live through and difficult to destroy. Then add a sprinkling of international humiliation in February 1976, when the UK went on bended knee to the IMF (International Monetary Fund) for what was then a recorded loan to the UK of $3.9 billion. Subject to currency fluctuations, the equivalent to would around £2,980,000,000 today.

Sadly, there is no instant magic potion to avoid this but rather a long and winding road requiring not just economic disciple, but also effective leadership.

So, what of our current position? We have yet to feel the real impact of the President’s tariff imposition but what history can clearly indicate is that the economic effects will not to be confined to those main protagonists, China and the USA. Putting import tariffs up will not generate mere ripples on global growth, but rather create serious financial tsunamis to include those nations with much smaller and weaker countries.

We will see a rise in inflation levels, although this will vary on the whim and whispers of the President. What he has not mentioned is that any extra costs will be passed onto the consumer, which would put further pressure on the inflation levels. If, however, the costs are absorbed by the importing companies this will effect on their own business profitability and if publicly quoted, then also effecting their share price, and eventually through to consumers pensions and investments.

Thus, the overall impact of these tariff hikes will act as a brake on the speed on the economy, and in some cases even break economic policies of those trading nations. So the overall effect of this continuing tariff skirmish will be to damage the key for the success of any country, and that is confidence. This vital for the primary driver of the US economy and that is the consumer – if they delay, reduce or even stop spending in key areas then serious damage will have already been done. The inflationary shock and recessionary fear are the evil twins to not just the US and Chinese economies, but spread as speedily as a financial equivalent of Covid.

However, we do not have to have another recession and we can reverse inflationary rises. The key problem, though, lies with the current occupant of the White House. His erratic behaviour has burst the charade and complacency of the post war economic structures, and thus they need far greater evaluation, attention and enactment.

So, we don’t need to have to go through the embarrassment of fancy flared trousers and tank tops, but what we do need to learn from the 1970s and avoid the destructive power of