…July 2025

Britain has mostly been experiencing global warming in July – starting off the month with a heatwave – but ending with rain. As the French king Louis the 15th is said to have remarked – apres moi le deluge – apparently expressing his general indifference rather than moaning about the British weather, but either sentiment would have fitted this July; even the Prince of Darkness bowed out, such has been this last month. 

There’s been a constant backdrop in the news cycle throughout the month of Palestinian civilians being injured or killed whilst attempting to access aid and basics such as water. The UN says that so far 859 Palestinian civilians have been killed at or around Israel’s Gaza Humanitarian Foundation aid stations. This has mostly been blamed on the Israel Defence Force by independent aid workers despite testimony from a former GHF contractor that his colleagues shot indiscriminately at civilians.

The UN also says there is growing evidence of famine and starvation in the Gaza Strip. Even the US president Donald Trump says he has seen the TV pictures though he must have access to far more detailed intelligence reports. The Israeli government has simply denied all this, prompting several countries, including Britain, France and Canada, to offer conditional recognition of Palestinian statehood in an effort to jump start the talks on a two-state solution. 

There is continuing disquiet in most Western democracies as those governments seek to support Israel while their voters are horrified at the indifference to the suffering in Gaza. In the midst of this, the UK has designated the Palestine Action protest group, based in Britain, as a terrorist organisation. So the British government is now in the faintly ridiculous position of supporting a two-state solution between Israel and Palestine, yet expecting the police to arrest anyone who displays the flag of one of those states, namely Palestine. 

The war in Ukraine continues with little evidence that either side is willing to negotiate an end, largely due to Russia’s insistence that it can prevail. Nonetheless, Trump appears to slowly be coming around to the European view of Russia as the aggressor, having failed in his efforts to either pressure Ukraine into giving in or to force Russia to the negotiating table. He initially gave the Russian president Vladimir Putin a further 50 days before cutting this down to “10 or 12 days.” Ukraine responded to this by offering a further round of peace talks, while the Russians simply fired more missiles at civilian targets in Kyiv. The British prime minister Keir Starmer has confimed that a ‘coalition of the willing’ has drawn up plans for a peacekeeping force to be sent to Ukraine in the event of a ceasefire, including troops on the ground.

Trump is now threatening India with secondary tariffs for importing Russian oil, which supports the Russian war effort. This is in addition to a 25 percent trade tariff that Trump has threatened to apply to Indian exports to the US in an effort to reduce America’s $45 billion trade deficit with India. This could knock 0.2 percent off India’s GDP for this year.

However, India has signed an elusive trade deal with the UK. This will see India reduce its tariffs on some British exports, including whisky, cosmetics, high value cars and some aerospace, electrical and medical devices. In return, the UK will accept more clothing, footwear and jewellery as well as some foodstuffs and cars. It’s worth noting that while the UK is the world’s sixth largest economy, India is the fifth largest and expected to become the third-largest within a few years.

Meanwhile, Trump has continued sowing chaos for global trade markets. Having set a 9th July deadline for his tariff decisions, he delayed this to 1 August for many countries, as most commentators had predicted. And today – 1 August – there have been new tariffs complete with further delays, apart from an immediate 35 percent tariff on Canadian imports, which is partly as a punishment for Canada’s support for Palestinian statehood.

Trump is claiming vindication for his tariff policy based on increased revenues for the US government. But this money raised is really a tax on US citizens; this tax may make it harder for other nations to export to the US but it’s Americans that are paying the tariffs. 

Nonetheless, Trump has had some success in striking new trade deals. Japan has agreed to accept a general tariff of 15 percent applied to all Japanese goods entering the US, which is better than the 25 percent tariff that Trump had threatened Japan with. 

Trump has also agreed a deal with the EU, which will also accept a US tariff of 15 percent for all EU imports. As part of this deal, the EU will forego its own threats of retaliation on US goods and has promised to buy more American military equipment and energy though this is quite vaguely worded. Many European leaders are unhappy with the agreement, some having characterised it as a surrender, but it could give European manufacturers some certainty. 

However, as with all of the deals that Trump has personally agreed, these are not comprehensive trade agreements but just frameworks for further threats and discussion. The deals have no legal status as far as the US is concerned since Trump is simply exercising his executive privilege and can change the terms whenever he feels like it.

Already there are disagreements with the EU over pharmaceuticals, which will particularly hit Ireland, as well as semi-conductors and steel tariffs, which will have an impact on some printing presses. At this stage, it appears that Trump simply enjoys the game too much to stop and will probably continue playing a variation of this throughout his presidency.

One further sticking point is the efforts from all the European nations to rein in the worst excesses of the international tech giants, which are mostly American. France, for example, has launched a criminal probe into the X platform, alleging that algorithms were manipulated to promote more divisive content. Then there is the EU’s Digital Services Act, which seeks to curb online hate speech but has been characterised by Americans as an attack on free speech. 

Britain has just implemented an age verification system designed to stop children accessing porn but the BBC has found that some US platforms have also used this to limit access to content on the conflicts in Gaza and Ukraine. At the same time, the British Home office has asked Apple for access to customer’s encrypted data, ostensibly to crack down on communications within organised crime groups and to stop sex offenders sharing illicit images. Apple has pushed back on this as the privacy of customer data is a major part of its offering. The US Vice president, JD Vance, has signalled his government’s willingness to take action in support of Apple, forcing the UK government to look for a face-saving way to back down.

This is all part of another, even more dangerous aspect of Trump’s presidency, as he seeks to use tariffs to influence or even to pervert the justice system in other countries. His efforts to bully Brazil into dropping charges against his ally Jair Bolsonaro by threatening 50 percent tariffs appear to have backfired. Bolsonaro is alleged to have masterminded a botched coup attempt after losing the 2022 presidential election. But the threat has given the leftwing president, Luiz Inacio Lula da Silva, a boost in the polls and helped push the country closer to its main trading partner, China.

And despite the chaos to global trading that Trump has caused, he is right about one thing; the developed economies cannot continue to eliminate manufacturing jobs whilst also hoping to expand the consumer spending that they are dependent upon to grow those economies. Forcing voters to play musical chairs for their livelihoods is leading them to more extreme politics that threaten the social infrastructure of those countries. 

This is true for even a relatively conservative country like Japan, where the ruling coalition government lost its majority in this month’s election. It’s a huge blow for the Liberal Democratic Party though its leader, Shigeru Ishiba, has vowed to stay on as prime minister. The election also saw some success for the right wing Sanseito party, which is now the fourth largest party in Japan. This has echoed Trump with its own Japanese First agenda. In theory, such nationalism could lead to a turning away from American culture in favour of Japanese traditions, despite taking its lead from the US leader. Then again, one of the things that always surprises me in Tokyo is how the ubiquitous easy going Japanese coffee houses that I found on my first visit in 1990 have now all disappeared and instead there is a Starbucks on every corner. 

Meanwhile July has brought yet more problems for the British economy as the latest GDP figures for May show that the economy contracted by 0.1 percent. This has also hit the value of the Pound, which fell relative to the US dollar as investors were put off by the poor economic news and opted for the dollar as a safe haven. The Office for National Statistics, or ONS, has put UK inflation in June at 3.6 percent, as measured by the Consumer Price Index, up from 3.4 percent in May. This is mostly due to prices in food and transport having gone up.

A survey by the British Retail Consortium has found that food prices have risen across the UK by around 4 percent for this year up to July, largely due to increased costs of raw materials, which itself is partly caused by climate change and extreme weather damaging crops. This follows prices having risen last month by 3.7 percent in the year to June and is a major part of the overall inflation affecting the UK. Some experts predict that food inflation could hit 6 percent in the UK by the end of this year. 

More figures from the ONS show that Government borrowing for June is £20.7 billion, which is £6.6 billion higher than June last year. Borrowing for the first three months of the current fiscal year is £57.8 billion. The interest payments on this debt rose to £16.4bn in June 2025, which was nearly double the amount paid in June 2024, due to rising inflation. This is putting further pressure on the government’s finances. 

These economic figures are driving expectations of further tax rises in the autumn. However, the government has ruled out the wealth tax that many of its supporters and its own MPs have called for. There is a fear that taxing the wealthy will cause them to leave the country, though it’s hard to see how that would be a bad thing.  

There was an interesting lesson in the relationship between government policies and market reactions, when the government was forced to abandon its welfare bill. This led some people to conclude that the chancellor’s job was on the line, since Rachel Reeves’ fingerprints were all over the welfare bill. Starmer’s failure to back her at first led almost immediately to government bonds going down, pushing up the government borrowing, which only fell when Starmer made clear that Reeves’ job was safe. But it underscores that the market likes Reeves’ disciplined approach to balancing the nation’s finances. And it’s a useful reminder that the shadow of Liz Truss’ reckless budget still haunts the markets.

Nonetheless, Reeves used her annual Mansion House speech to call for a relaxation of the banking regulations that were put in place after the 2008 banking crash. The theory is that this will allow the banking sector to reap the rewards from taking more risks. It will almost certainly lead to a period of some growth, with a lot of people getting rich, followed by a crash that the rest of us will have to pay for. Surprisingly, many banks were less than enthusiastic in their support for relaxing these regulations.

Reeves has made a number of missteps that have hit the economy more or less in real time. These include claiming the Tories had left a blackhole in the economy, which sparked fears of tax rises and caused businesses to pause investment. That was followed by increasing employers National Income contributions, which has caused many companies to cut staff numbers and pause new hirings.

Also in July, the British government revealed an extraordinary cover-up after a database listing Afghans that had worked with British forces, plus the identities of British spies and special forces soldiers, was distributed far more widely than it should have been. This led to a secret, and very expensive, scheme to evacuate some of those Afghans to the UK, with Parliament and the electorate as a whole being misled in an effort to prevent harm coming to those named in the leak. No one is happy at the way the democratic conventions were trashed, yet no one has been able to suggest an alternative way to deal with this leak.

Elsewhere, the Dalai Lama has celebrated his 90th birthday, raising fresh questions about the future of Tibetan buddhism. It’s not possible to appoint a successor, since Tibetans believe that each Dalai Lama is a reincarnation of the last. Instead he has stated that only his office within the Tibetan government in exile has the right to identify the reincarnated Dalai Lama. It means that his passing will leave a political vacuum for the Tibetans in exile while they await the discovery of the new incarnation. And of course the Chinese government will exploit this and attempt to name its own puppet Dalai Lama in its ongoing attempts to crush the will of the Tibetan people. 

The Chinese government says that Tibet is part of its territory and it has the right to control Tibet. This is the same argument that China advances over Taiwan, and that Russia has used to justify its invasion of Ukraine. The US secretary of state, Marco Rubio, said in a statement that was read at the celebrations in India, that Washington was “committed to promoting respect for the human rights and fundamental freedoms of Tibetans”. Perhaps in time the American administration will offer the same sentiments to the Ukrainians, Palestinians and many other peoples that are currently fighting for those very things.