Aurelia Butler

Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldShow video infoPrime Minister Mark Carney said on Thursday that Canada’s old relationship with the United States was “over” and vowed that there would be a “broad renegotiation” of the trade agreement between the countries.Speaking in Ottawa after meeting the nation’s provincial premiers, Carney said the tariffs imposed by US President Donald Trump would force Canada to rethink and reshape its economy and seek “reliable” trading partners.“The old relationship we had with the United States, based on deepening integration of our economies and tight security and military co-operations, is over,” he told reporters. “The time will come for a broad renegotiation of our security and trade relationship.” Carney’s comments appear to call into question the future of the USMCA, which was negotiated between the two countries and Mexico during the previous Trump administration and has been hailed as one of the world’s most important trade deals.Carney said Canada would fight American tariffs with retaliatory trade actions of its own “that will have maximum impact in the US and minimum impacts in Canada”. On Wednesday Trump said the US would impose a 25 per cent tariff on imports of foreign-made cars in a move he said was intended to boost the US auto industry. While USMCA-compliant components are temporarily exempt from the tariffs, the levy could have a big impact on the Canadian economy.Trump’s tariffs are intended to boost US industry, but shares in General Motors fell 7.4 per cent on Thursday. Shares in Ford, which manufactures fewer vehicles in Mexico and Canada than its rival, were down 3.9 per cent.Earlier this month Trump offered a reprieve to Canadian and Mexican carmakers when he temporarily exempted all goods that complied with the USMCA from new tariffs.“We will fight back with everything we have to get the best deal for Canada. We will build an independent future for our country, stronger than ever,” Carney said.The prime minister said the Canadian economy and its supply chains in critical sectors such as the auto industry would have to fundamentally change to insulate themselves from further tariffs and US hostility. “We are gonna have to do some things very differently,” he said.Tiff Macklem, governor of the Bank of Canada, has said US tariffs would likely put Canada in a recession and a “new crisis” was looming due to the trade war with the US.“Depending on the extent and duration of the US tariffs the economic impact could be severe; the uncertainty alone is already causing harm,” he said earlier this month as he announced another cut to interest rates.  Carney said Canada’s auto sector could survive Trump’s tariffs but would require “access to other markets”, and the country needed to “reimagine the auto sector and rebuild [and] retool”. He recently travelled to London and Paris, his first trip as prime minister, in a bid to beef up trade with other partners in the wake of US hostilities. Carney, who is in the middle of an national election campaign ahead of a vote on April 28, said he would speak to Trump in “the next day or two”.Some Canadian cabinet members could also head to Washington to meet their counterparts, he said. He added that the US president’s tariffs would “end up hurting American workers and American consumers”. More

This article is an on-site version of our FirstFT newsletter. Subscribers can sign up to our Asia, Europe/Africa or Americas edition to get the newsletter delivered every weekday morning. Explore all of our newsletters hereGood morning, happy Friday and welcome back to FirstFT Asia. In today’s newsletter we’re covering:Chaos in the car industryA ruthless bonus day at HSBCGeopolitical competition over Canada’s Arctic frontierThe global car industry has been thrown into turmoil by Donald Trump’s decision to impose 25 per cent tariffs on imports of foreign-made cars and parts. The move was the US president’s most aggressive trade policy move to date. Global reaction: Asian, European and North American countries warned of possible retaliation. French finance minister Eric Lombard attacked the US for “completely shifting its economic policy” and said “the only solution for the EU will be to raise its own tariffs on American products”. Japan’s Prime Minister Shigeru Ishiba said “every option” was under consideration while South Korea promised an emergency response.‘Devastating’ consequences: It quickly became clear that every carmaker, including Tesla and the US Big Three of General Motors, Ford and Stellantis, would be affected. Almost half of vehicles sold in the US are imported, while those assembled in the US on average source nearly 60 per cent of their parts from overseas. Bernstein analysts said the policy could introduce up to $110bn in annual tariff costs for the carmakers. The tariff policy, which analysts and investors have described as “a worst-case scenario”, “heavy-handed” and “devastating”, is unparalleled in its reach and scale.The tariffs are intended to boost US industry but shares in Ford and GM fell as much as 4.4 per cent and 8.2 per cent respectively yesterday morning in New York.What comes next: The tariffs will take effect from April 2, alongside reciprocal levies against US trade partners that are expected to be unveiled on the same day. Market research company Cox Automotive predicted that the confusion in the supply chain would lead to vehicle production in North America being disrupted by mid-April, resulting in US plants making 20,000 fewer vehicles per day, or about 30 per cent less than now. Here’s what else we’re keeping tabs on today and over the weekend:Economic data: Japan reports trade statistics while Canada and the UK release GDP estimates.Greenland: US vice-president JD Vance is set to visit an American military base in Greenland today, as Washington its pressure on the geopolitically crucial island.Results: PetroChina, Industrial & Commercial Bank of China and China Construction Bank report full-year 2024 results today.US-Japan relations: Trump’s defence secretary visits Japan for high-level talks on Sunday, which could cover whether Tokyo will raise its planned spending on defence.How well did you keep up with the news this week? Take our quiz.Five more top stories1. HSBC fired bankers on the day they were due to learn their bonus figures and gave no bonuses to many it let go. The move, which affected some staff at vice-president level and above in its UK investment banking unit, is a sign of how the lender is taking a more ruthless approach to costs under new chief Georges Elhedery.More financial news: Private credit is “not a bubble”, Apollo Global Management president Jim Zelter said at an event in Hong Kong yesterday. Read more of Zelter’s comments.2. Chinese financial authorities have told some companies and advisers that they can begin the process of launching mainland initial public offerings once more, in an early sign of a rebound in listings in the country’s economy. Groups in the technology, advanced manufacturing and consumer sectors have been told in the past few weeks that they can file IPO paperwork. Here’s why Beijing has shifted its approach to listings.3. The US is pushing for a sweeping new deal to control Ukraine’s critical minerals and energy assets, while offering Kyiv no security guarantees in return. The new draft deal seen by the FT is an aggressive expansion of Washington’s previous demands, as Trump pushes to end Russia’s invasion of Ukraine and recoup billions of dollars’ worth of military assistance.4. TSMC’s pledge to spend $100bn will do little to help the US restore its global lead in chipmaking, said former Intel chief Pat Gelsinger. While Taiwan Semiconductor Manufacturing Company announced plants in the US recently, its research and development was still in Taiwan, he said. “If you don’t have R&D in the US, you will not have semiconductor leadership in the US.”5. The US’s federal debt burden is set to surpass the peak it reached in the wake of the second world war in coming years, Congress’s fiscal watchdog has warned. The projections underscore growing concerns over America’s public finances and come just days after Moody’s delivered a warning about the sustainability of the country’s fiscal position.News in-depth© FT montage/Getty ImagesThe Trump administration’s cuts to the federal workforce are raising worries over the quality and credibility of US economic data. Economists are concerned that Elon Musk’s cost-cutting drive will undermine officials’ ability to collect, analyse and research statistics on the world’s biggest economy, dealing “a death blow to already very stretched survey operations”. We’re also reading . . . Map of the dayCanada’s Arctic frontier — an inhospitable tundra 200km north of the Arctic Circle — is emerging as the new frontline in a geopolitical contest with the US, Russia and China. The region’s increased accessibility as a result of climate change and Trump’s expansionist rhetoric are putting it higher on Canada’s military agenda.Take a break from the news . . . Heathrow’s chief executive reportedly knocked off at 12.30am last Friday to go to bed, leaving his deputy to decide whether to close the UK’s biggest airport after a fire broke out at a nearby power substation. The decision to step away received some criticism — but do CEOs always need to be on duty to do a good job? Read Emma Jacobs on the power of sleep in a crisis.Fatigue has been linked to a number of disasters, including the accident at the Chernobyl nuclear power plant and the Exxon Valdez oil spill More

Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldThe EU is considering hitting US services exports, including Big Tech’s operations, to retaliate against Donald Trump imposing 25 per cent tariffs on the car industry and promising a further round of measures next week.Brussels has already unveiled extra duties on up to €26bn of US goods after Washington imposed steel and aluminium tariffs. But European officials and diplomats said the scale of action by the Trump administration required it to consider using more powerful trade tools. The bloc has wide powers to suspend intellectual property rights and exclude companies from public procurement contracts under its Enforcement Regulation, which was strengthened in 2021 after a trade conflict with the first Trump administration.“The Americans think that they are the ones with escalation dominance [in the trade war], but we also have the ability to do that,” said one EU diplomat, adding that the aim was ultimately to de-escalate with a comprehensive trade deal.A fightback could include restrictions on the intellectual property of Big Tech companies. Another example would be banning Elon Musk’s Starlink satellite network from winning government contracts. Italy is already reconsidering whether to acquire the system.“Services is where the US is vulnerable,” a second diplomat said. Washington ran a €109bn trade surplus with the EU in services in 2023, compared with a €157bn deficit in goods.EU officials believe that the Trump administration will only be willing to negotiate after the US has erected a tariff wall that would demonstrate it is serious about securing better terms from trading partners that allegedly took advantage of its open market.The European officials are hopeful of making fast progress on an eventual agreement but acknowledge even this would not remove all additional tariffs imposed by Trump. “The view is that we have to respond. It is the only way to get a deal,” said a third EU diplomat. “We tried to talk.” Since the EU’s exports far outweigh its imports, the bloc would struggle to match US tariffs on goods. Brussels also does not want to halt gas supplies from the US to the continent.“There are only so many goods imports from the US that the EU can target before that damages the economy too much,” said David Henig, of the European Centre for International Political Economy think-tank. “If you don’t want to target energy, there’s a limit to what can be done on goods. Whereas on services there is greater room for retaliation without so much harm to the economy.”Some experts say that to inflict even more economic pain on the US, the European Commission would need to use its anti-coercion instrument (ACI), dubbed the “trade bazooka”. This tool could restrict the activities of US banks, revoke patents or prevent companies receiving revenues from software updates or streaming. “I would advise the European Commission to use the ACI,” said Ignacio García Bercero, a former senior commission official who led negotiations on a US-EU trade deal, the Transatlantic Trade and Investment Partnership, that were concluded without a deal.Any retaliatory measures taken by the EU would be drawn up by the commission but must be approved by a weighted majority of member states. EU countries are still negotiating the goods retaliation list drawn up in response to Trump’s steel and aluminium tariffs; France has pressed for bourbon whiskey to be removed to avoid fallout for its own drinks industry. The commission has postponed the measures, which also cover jeans, motorcycles and possibly soyabeans, until April 12. They will be discussed with national leaders before a final agreement.Diplomats and officials said there was scope for more goods tariffs in response to any US “reciprocal” tariffs that will be adopted by the White House next week and are expected by Brussels to be around 20 per cent. Aircraft, chemicals and pharmaceutical products could be hit. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Asian, European and North American countries have put Donald Trump on notice of possible retaliation against his 25 per cent car tariffs, threatening to ignite a full-blown global trade war. Japan’s Prime Minister Shigeru Ishiba said “every option” was under consideration and South Korea promised an emergency response after the US president announced the tariffs would go into effect on April 2, when Washington is also expected to apply a range of reciprocal tariffs against America’s trading partners. The car tariffs are Trump’s most aggressive trade policy move to date and hit shares in carmakers from Toyota to Stellantis to Porsche. Carmaker shares dropped around the globe. General Motors closed down 7.36 per cent in New York on Thursday, while Ford fell 3.88 per cent. In Europe, shares in Stellantis, the owner of the Fiat, Peugeot and Chrysler brands, dropped 4.23 per cent, Porsche dipped 2.4 per cent and Volkswagen fell 1.5 per cent.“We need to think about the best option for Japan’s national interest,” Ishiba told the country’s parliament on Thursday. “We are considering every option in order to reach the most appropriate response.”Industry executives warned Asian and European carmakers would be among the hardest hit. Luxury brands, such as Jaguar Land Rover and Aston Martin, are also exposed, because they do not make cars in the US.With $40bn of car sales to the US in 2024, Japan is the second-largest exporter of finished vehicles to the country after Mexico, where Japanese companies are the dominant manufacturers.As countries across the world prepared for a deadline less than a week away, Ursula von der Leyen, president of the European Commission, said the bloc planned on “safeguarding its economic interests” while seeking a negotiated solution to the dispute.Some content could not load. Check your internet connection or browser settings.French finance minister Eric Lombard attacked the US for “completely shifting its economic policy in a very aggressive manner”, harming both regions’ economies.“The only solution for the EU will be to raise its own tariffs on American products,” he added, telling France Inter radio that Brussels was working on a list of targeted products.By contrast, President Claudia Sheinbaum of Mexico, the biggest car exporter to the US, said her country was seeking to retain preferential treatment in talks with the Trump administration. “We are the only country that has this level of communication with the US government,” she said, adding that Mexico would give a more complete response when the fuller range of Trump’s tariffs — including reciprocal duties — is unveiled next week.Sheinbaum’s government says that, under new rules set out by the White House, tariffs on imported Mexican cars may be discounted because of their high US content.In the UK, chancellor Rachel Reeves signalled the British government had no plans to retaliate, saying it was not in a “position where we want to do anything to escalate these trade wars”.Canada’s Prime Minister Mark Carney had earlier denounced what he described as “a direct attack” on auto sector workers. But Trump gave no sign of backing down.“If the European Union works with Canada in order to do economic harm to the USA, large scale Tariffs, far larger than currently planned, will be placed on them both,” he posted on his Truth Social network early on Thursday.“FOR YEARS WE HAVE BEEN RIPPED OFF BY VIRTUALLY EVERY COUNTRY IN THE WORLD, BOTH FRIEND AND FOE. BUT THOSE DAYS ARE OVER — AMERICA FIRST!!!”European car-part manufacturers were also hit, with France’s Valeo down 7.7 per cent. The White House’s decision to impose duties on imported car parts as well as completed vehicles would inflict further damage, analysts said. Almost half of vehicles sold in the US are imported, and cars assembled in the US contain nearly 60 per cent foreign-sourced parts, according to research from Bernstein.Trump has said the steep tariffs will convince foreign companies to make more of their cars in the US, boosting the country’s manufacturing industry.Sigrid de Vries, director-general of European car industry body Acea, urged Trump to “consider the negative impact of tariffs not only on global automakers but on US domestic manufacturing as well”. European manufacturers export up to 60 per cent of the vehicles they make in the US, according to Acea. Additional reporting by Kana Inagaki and Mari Novak in London, Christine Murray in Mexico City and Anne-Sylvaine Chassany in Berlin; data visualisation by Alan Smith More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.These are tricky times to be a big automaker — though less so if you’re Chinese. President Donald Trump’s planned 25 per cent tariffs on imported cars and key auto parts are meant to force manufacturers to relocate production to the US and create jobs. European and Asian carmakers’ shares have dropped, but so have those of US carmakers, whose costs will rise. Shares of China’s BYD, however, now the world’s biggest maker of electric vehicles, rose on Thursday. The US tariffs may put western carmakers further behind BYD and its compatriots — by pushing their prices up just when Chinese firms are coming out with ever more affordable offerings and whizzy EV technology.The tariffs come soon after what some analysts have called a “DeepSeek moment” — referring to China’s recent AI breakthrough — for the global auto industry. BYD last week announced a superfast EV charging system that it says can add about 470km of range in five minutes. By enabling drivers to charge up an electric car about as easily as filling up a petrol one this could remove a key deterrent to consumers going electric. Weeks earlier, BYD unveiled another techno-leap: a free, advanced self-driving system called God’s Eye that it plans to install across its range.Grid capacity might yet restrain BYD’s plans for 4,000 fast-charging stations across China, and political and practical barriers could thwart ambitions to build such networks in other big markets. Foreign rivals may, in time, replicate its charging achievements. Yet BYD’s prowess shows the focal point of EV innovation is now China. Beijing’s state-led industrial policy has built a formidable manufacturing base and catalysed a striking shift in purchasing patterns. Pure battery and plug-in hybrid cars are expected to outsell internal combustion engine (ICE) cars in China in 2025, years ahead of western rivals.All this is happening while the EU is proposing to relax emissions rules — a perhaps predictable response to European automakers’ failure to keep up with targets, but one that will slow EV momentum. US policy, meanwhile, has in effect been going into reverse on EVs. Trump wants to cut consumer tax incentives to go electric, and roll back clean technology subsidies in favour of his “drill, baby, drill” approach to oil.US carmakers such as General Motors were still promising to invest revenues from higher ICE car sales into reducing EV prices. If tariffs go ahead as billed — though little is certain with Trump — they would in theory have an opportunity to use some of their excess capacity to boost domestic sales to replace imports. In practice, applying import levies to auto parts as well as whole vehicles will disrupt their supply chains, raise costs and force prices up — which may put US consumers off buying.While most other big global carmakers rely on the US for a portion of their sales, the likes of BYD are already largely shut out of importing into the US, as well as Canada and the EU, by existing tariffs on Chinese EVs. But Chinese groups are being welcomed into emerging markets such as South Africa, Brazil, India and Turkey, helping China to overtake Japan in 2023 as the world’s largest car exporter. Many of those exports are ICE cars, but as demand develops, China has highly competitive EV models ready to go.BYD’s arch-rival Tesla, whose cars are largely US-made, is among the best-positioned automakers to weather the tariffs. But even Tesla faces threats from BYD’s advances. And for western carmakers as a whole, US tariffs threaten to be a further brake on their transition to the clean technology that is the future of the industry — just when they should be applying the accelerator. More

Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldThe US’s federal debt burden is set to surpass the peak it reached in the wake of the second world war in coming years, Congress’s fiscal watchdog has warned, underscoring growing concerns over America’s public finances. The Congressional Budget Office said on Thursday that the US’s debt-to-GDP ratio would reach 107 per cent during the 2029 fiscal year — exceeding the 1940s era peak — and continue rising to 156 per cent by 2055. The debt-to-GDP ratio is forecast be 100 per cent for the 2025 fiscal year.The projections come just days after Moody’s delivered a warning about the sustainability of the US’s fiscal position, with the rating agency saying that President Donald Trump’s trade tariffs could compromise attempts to bring its large federal deficit under control by raising interest rates. “Mounting debt would slow economic growth, push up interest payments to foreign holders of US debt, and pose significant risks to the fiscal and economic outlook; it could also cause lawmakers to feel constrained in their policy choices,” the CBO said on Thursday. Despite the scale of the rise in the debt burden, the rate of expansion is forecast to be less drastic now than anticipated a year ago due to the CBO’s assumptions of lower interest rates, less spending on Medicare and higher revenues. Some content could not load. Check your internet connection or browser settings.The Trump administration has pledged to find the fiscal headroom to deliver on its campaign pledge of substantial tax cuts for businesses and households. Trump has tasked tech billionaire Elon Musk with finding $2tn in federal spending cuts by the middle of next year as the president looks to renew tax cuts put in place in 2017, during his first administration. The president has also raised the possibility of lowering corporation tax on domestic activity from 21 per cent to 15 per cent. The CBO calculations do not take into account the impact of Trump’s tax cuts becoming permanent — a move which the fiscal watchdog said last week would add 47 percentage points to the US’s debt-to-GDP ratio by 2054. The Trump administration believes revenues from sweeping tariffs could plug the gap left by lower revenues from income and corporate taxes. However, economists at the Peterson Institute, a Washington think-tank, have disputed the claim that the levies on trade will be enough to compensate for the potential loss of trillions of dollars in income tax revenues. Some content could not load. Check your internet connection or browser settings.The US federal government has been running substantial budget deficits each year since the pandemic, with outlays exceeding revenues by 6.4 per cent of GDP last year. The CBO said that deficits would likely remain high, rising to 7.3 per cent by 2055 — slightly lower than anticipated in March 2024. The calculations assume long-term US growth will be slightly lower than anticipated a year ago. The CBO believes that lower growth is largely down to less immigration, with the US population set to start shrinking in 2033.Video: Why governments are ‘addicted’ to debt | FT Film More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Argentina said on Thursday it had agreed a $20bn loan deal with the IMF to replenish the country’s central bank reserves, in a key step forward for libertarian President Javier Milei’s economic plan.Economy minister Luis Caputo said the deal still needed approval from the fund’s board, which could take several weeks, but that he had asked IMF director Kristalina Georgieva’s permission to announce the figure after uncertainty over the agreement prompted a sell-off of Argentine pesos over the past week.“What we are aiming for with this agreement is that people can rest assured that pesos are backed by the central bank. That will give us a healthier currency,” Caputo said.Milei is betting that a fresh loan from the IMF, to whom Argentina is already the world’s largest debtor with more than $40bn owed for a previous programme, will keep his revival of the troubled South American economy on track. While he has slashed inflation and stabilised the economy, Milei has been unable to rebuild the scarce foreign exchange reserves he inherited, which he needs to prop up the peso, repay debts, weather external shocks and lift Argentina’s strict currency controls. IMF cash gives him firepower to do so.Luis Caputo said the central bank’s gross reserves would rise from $26bn to $50bn after deals with multilateral lenders More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Like a handful of nails tossed into a busy road, here come President Trump’s punitive car tariffs. A 25 per cent levy on vehicles imported into the US from everywhere else in the world — with partial exceptions for Mexico and Canada — will force companies such as General Motors, Ford, Stellantis, Volkswagen and BMW to bunny hop, swerve and reverse. While a flat tariff is a simple thing to announce, auto supply chains are complex. Almost half of US vehicles are imported, reckon Bernstein analysts. Even those assembled domestically get more than 50 per cent of their components from outside the US, and those parts will be subject to tariffs under current plans.The outcome: $440bn of taxable value, and a potential tariff take of $110bn, a veritable crater for a sector with operating margins of 5-10 per cent. Nonetheless, some carmakers are better placed than others to navigate the disruption. Three types of company could prove relative winners. First, those that actually produce their vehicles in the US. Elon Musk’s Tesla laps rivals here. As well as being American-assembled, its cars also — largely — rely on domestically-produced parts. That’s not an easy lever for others to pull. While European and Asian carmakers will no doubt seek to move as much of their production as possible to the US, there is limited slack in the system. Building new capacity takes time and money. Then there are carmakers that sell few or no cars in the US, and will therefore be mostly unharmed. That includes Chinese manufacturers and Europe’s Renault. Finally, those whose cars are madly expensive already. Ferrari, for example, has already said that it will raise prices by up to 10 per cent and does not expect much of a profit dent this year. After all, when customers already fork out hundreds of thousands of dollars on a car — and are proud to do so — a mark-up is unlikely to curb their enthusiasm. Ferrari might even prove to be a Veblen good: one that gets more coveted as it gets more expensive.At the other end of the spectrum, of course, carmakers that sell imported bargain basement basic motors are likely to find they have to eat up more of the cost. Otherwise, customers who simply want something that gets them from A to B might forgo new purchases altogether. Seen from space, the purpose of these tariffs is threefold: raise some revenue, encourage more domestic manufacturing and advantage local carmakers over foreign ones. That is unlikely to work as planned. US carmakers may make more of their cars locally than Europeans do, but are also more exposed to the chaos. Trump has reordered the car trade’s winners and losers — albeit maybe not how he intended.camilla.palladino@ft.com More