Aurelia Butler

The election of Donald Trump in 2016 was a watershed moment for Bao Phung.His family’s business A&M Flooring, a Vietnamese producer of premium wooden flooring, had initially struggled to compete against Chinese businesses when it was founded the year before.But after Trump came to power and unleashed a trade war on China, Bao saw A&M’s business flourish as American buyers rushed to source products from elsewhere. Profits rose even as local competition increased. Bao says dozens of Chinese companies have moved to Vietnam to avoid US tariffs, estimating there are now 20 times more competitors than a decade ago. As trade tensions between the US and China lingered during the Biden administration, business remained good. The US accounted for 95 per cent of the company’s total sales — until April 2. On Trump’s so-called “liberation day”, he announced Vietnam would face a 46 per cent tariff rate, one of the highest in the world. For A&M and its 120 employees, new orders from American clients slowed to a trickle. Like thousands of companies across Vietnam, it is now frantically trying to figure out its future. “Some of us [in the industry] are trying as best as we can to diversify,” says Bao, A&M’s assistant director. The company is seeking new customers in Japan and Europe. “But other than that, right now, we are on our hands and knees to pray that the negotiation between the US and Vietnam goes well.”Vietnam was one of the biggest winners from Trump’s first term as manufacturers moved production in droves to the country as part of their “China plus one” diversification strategy. Some content could not load. Check your internet connection or browser settings.The country’s recent economic success — with GDP growth at 7 per cent last year — has been driven primarily by exports to the US and surging investments from companies fleeing China. Foreign direct investment in Vietnam surged from $15.8bn in 2016 to $38.2bn in 2024, and it has become a critical link to global supply chains, hosting manufacturing heavyweights such as Apple, Intel, Samsung and Nike. As a result, the south-east Asian country is one of the most trade-dependent countries in the world, with the US accounting for nearly a third of its total exports. Now, its “China plus one” success has backfired as the US president takes issue with trading partners who have large surpluses with the US. Vietnam has the third largest, after China and Mexico.Vietnam’s ruling Communist party is acting with urgency to address the tariff threat. Party chief To Lam was one of the first world leaders to call Trump after the “reciprocal tariff” announcements, promising to remove all Vietnamese tariffs on American goods. But Trump’s actions have also served as a wake-up call — for local factories relying on the US, for American companies sourcing from Vietnam, and for the Communist party — about the vulnerability of the Vietnamese economy to external shocks.Many now fear its export-led growth model will soon run its course, throwing a wrench in Vietnam’s plans to become a developed country by 2045. In late April, the World Bank revised Vietnam’s growth forecast for this year down from 6.8 per cent to 5.8 per cent. Vietnam has become a critical link to global supply chains, hosting manufacturing heavyweights such as Nike 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 and welcome to FirstFT Asia. In today’s newsletter:Deadly plane crash near Ahmedabad airport in India US senator detained during press conferenceStablecoins go mainstreamWe start in India, where the country is grappling with the aftermath of the worst aviation disaster in more than a decade. More than 240 people died when an Air India flight to London crashed in Ahmedabad shortly after take-off on Thursday. The latest: Air India said 169 Indian nationals, as well as 53 British citizens, seven Portuguese and one Canadian were on board. At least one passenger survived and was taken to a hospital for treatment. The US transportation chief has said his department is working with the NTSB to assist India with its investigation of the crash.Some content could not load. Check your internet connection or browser settings.Boeing: The crash has brought more scrutiny to one of Boeing’s best-selling aircraft. The 787 Dreamliner has a “good in-service safety record,” according to an aviation consultant, but has suffered from production setbacks and attention from whistleblowers. Last year, the company rejected allegations about the aircraft’s structural integrity from a longtime in-house engineer.Read more on how Boeing CEO Kelly Ortberg and world leaders are reacting to the tragic crash.Here’s what else I’m keeping tabs on today and through the weekend:Economic data: The EU releases industrial production figures from April and first-quarter labour market data.G7 Leaders’ Summit: The annual meeting of international leaders begins on Sunday and will be hosted in Canada by PM Mark Carney. What is Europe’s game plan for handling Trump?Five more top storiesHow well did you keep up with the news this week? Take our quiz.1. A US Senator was forcibly removed by federal agents at a press conference held by homeland security secretary Kristi Noem. Democrat Alex Padilla was wrestled to the ground and handcuffed, but not arrested, the California politician later said. The altercation marks a new escalation after days of tensions in Los Angeles following protests over the White House’s efforts to deport millions of undocumented immigrants.Division among Democrats: The party has struggled to form a coherent message on immigration. Now, they are caught between whether to criticise the US president’s actions or condemn protesters.2. Donald Trump has warned an Israeli strike on Iran could “very well happen”. The comments on Thursday come as US and Iranian officials are due to hold a new round of talks over the Islamic republic’s expanding nuclear programme. Western diplomats say Tehran is keen to avoid military conflict, but it refuses to accept a US demand that the country stop enriching uranium domestically.3. Western companies say Beijing’s commerce ministry is demanding sensitive business information to secure rare earths and magnets. These include production details, images of products and facilities, and confidential customer lists. China has not said it would abandon its export controls and it was unclear if the country’s latest trade truce with the US would affect the approval process for shipments of the critical materials. Here’s more from businesses on how the controls have affected them.4. More than £185mn worth in properties linked to Bangladesh’s former land minister have been frozen by Britain’s National Crime Agency. The NCA’s freezing orders of more than 300 properties is one of the highest-profile developments yet in Bangladesh leader Muhammad Yunus’s effort to track down foreign assets.5. The dollar reached a three-year low after Trump told reporters he would outline new tariff rates to trading partners in the next couple of weeks. While trade tensions have continued to weigh on the dollar, stocks have since rebounded from their April plunge.Today’s big readStablecoins were created to boost trading in cryptocurrency markets, enabling buying and selling without the use of a bank. Until recently, ease of use and anonymity made them a de facto currency reserve for crypto traders and a conduit for crime including drug trafficking and money laundering. With Trump’s return to the White House, stablecoins are becoming increasingly mainstream — a development that could have profound implications for the global financial system.We’re also reading . . . Chart of the day South Korea’s main stock index has hit a more than three-year high, as investors bet on the country’s new left-wing government. During his campaign, president Lee Jae-myung promised the country’s retail investors that Kospi would reach 5,000 points during his term. The index has climbed more than 7 per cent since last week. Will it continue to rise?Take a break from the newsHigh above the Swiss alps, “Chrigel the Eagle” is on a historic unbeaten streak. Paraglider Christian Maurer has won every edition of the Red Bull X-Alps since 2009 and doesn’t plan on stopping. He shares with HTSI what it takes to be king of the mountains. © Sebastian Marko/Red Bull Content Pool More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Argentina’s monthly inflation rate has fallen below 2 per cent for the first time in five years, a boost for libertarian President Javier Milei in his war against the country’s chronic price pressures.Consumer prices rose 1.5 per cent in May from the previous month, the country’s statistics agency said on Thursday. This compares with 2.8 per cent in April and a 25.5 per cent high in December 2023, when Milei took office. However, annual inflation is still 43.5 per cent, one of the highest in the world.“We have the best president in the world,” economy minister Luis Caputo said on X as he shared the figure.The result bolsters Milei’s chances at October’s midterm elections, when price stability is his main message for voters who have suffered years of extreme volatility. It is a surprise victory for the president after he lifted a controversial currency control that had underpinned his fight against inflation.In April, as part of a $20bn loan deal with the IMF, Milei scrapped a fixed exchange rate that had dramatically strengthened the peso in real terms, acting as an anchor on local price rises but preventing the central bank from building up its scarce hard currency reserves. He floated the currency on April 14, raising expectations that inflation would jump as a result.“The government managed to keep the devaluation and pass-through to inflation to a minimum,” said Ramiro Blazquez Giomi, Latin America and Caribbean strategist at financial services group StoneX. Authorities have taken steps to attract more dollars to the exchange market, including a temporary tax break for agricultural exporters. That has bolstered the peso, though analysts warn it may weaken further as the often-volatile midterm election season gets under way.Milei’s sweeping austerity and deregulation measures have rapidly stabilised Argentina’s economy, which the IMF predicts will grow 5.5 per cent in 2025 as it rebounds from last year’s recession. However, economists warn growth has plateaued in recent months as productivity and investment remain weak. Investors also remain nervous about the government’s currency and reserve policy.Milei has been slow to build up the central bank’s reserves, which Argentina needs to make billions of dollars in foreign debt repayments this year. The IMF has postponed an initial target for the country to add about $4.5bn to its reserves by June 13, to July.Milei has refused to buy dollars in the way previous Argentine governments did — by issuing pesos to buy greenbacks in the official market — because he wants to avoid expanding the monetary base and weakening the peso, which could fuel inflation. He has also continued using reserves to intervene in peso futures markets, despite the IMF deal saying such intervention should only happen in exceptional circumstances.On Monday, the government announced measures to increase reserves, including a $2bn repurchase agreement with international banks, and a plan to buy dollars using pesos from Argentina’s fiscal surplus. Last month, the government also raised $1bn in a bond auction for international investors.Blazquez Giomi said the measures to increase reserves had “calmed doubts somewhat” but investors’ focus was now turning to flagging economic activity.“The stronger peso is [affecting the competitiveness] of exporting sectors . . . and consumer spending in some areas is still at recession levels,” he said. “It is possible that weaker activity starts weighing on certain groups of voters, instead of inflation.” More

Unlock the White House Watch newsletter for freeYour guide to what Trump’s second term means for Washington, business and the worldDonald Trump has called Federal Reserve chair Jay Powell a “numbskull” for not cutting interest rates, saying the White House may “have to force something” if the US central bank does not reduce borrowing costs. The president on Thursday repeated his calls for the Fed to cut borrowing costs by a full percentage point — a measure Trump said would save the US hundreds of billions of dollars a year on its debt. “We are going to spend $600bn a year because of one numbskull that sits there, [saying] ‘I don’t see enough reason to cut the rates’,” Trump told reporters, referring to Powell, who he has nicknamed “too late”. The president added: “I may have to force something.”Trump did not specify what he meant by force — and said he would not fire the Fed chair ahead of the end of his term in May 2026. The president’s comments came less than a week before the central bank’s June meeting, in which policymakers are expected to hold rates steady. The Fed has this year halted a rate-cutting cycle that began in 2024 over concerns that Trump’s trade tariffs could fuel a fresh bout of inflation. At 4.25 per cent to 4.5 per cent, the Fed’s benchmark target range is more than double the main European Central Bank interest rate, following several moves by Eurozone rate-setters this year.Powell has repeatedly said the Fed will set rates based on data, rather than Trump’s wishes for lower borrowing costs, including at a meeting late last month that was held at the president’s request.Trump’s repeated attacks on Powell over his reluctance to cut rates this year have sparked speculation that he could speed up the nomination process for Powell’s successor.Remarks last Friday from Trump that he could make a decision on a potential successor “very soon” have led to speculation among some economists that he could nominate a “shadow Fed chair” in a bid to massage expectations of future rate cuts once his preferred candidate takes charge of the central bank. Treasury secretary Scott Bessent, who is seen as one of the leading candidates to replace Powell, proposed the idea of creating a shadow Fed chief in an interview in October. Stanford academic and former Fed governor Kevin Warsh, National Economic Council head Kevin Hassett and current Fed governor Christopher Waller are also considered potential candidates for the job. The “shadow” role could, in theory, move expectations of where interest rates will be years from now, which would — if credible — lead to immediate movements in US borrowing costs.However, Fed-watchers are sceptical on whether a shadow Fed chair could influence expectations of future rate cuts in an environment of heightened economic uncertainty.“Markets are not going to defer to an individual that is not yet confirmed as a member of the Fed board, much less the chair,” said Doug Rediker, managing partner at International Capital Strategies. “If you want to make sure you are upending investor confidence in an already tense Treasury market, then make sure you have competing voices on what the Fed is going to do.” He added: “The earlier Trump names someone, the more opportunity he or she has to say or do something that puts a bullseye on their head and for people to find reasons to oppose them.” More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The UK has agreed that Spain will check goods entering Gibraltar as part of a deal to remove border controls for people moving between the two territories, according to British and European officials.The Rock’s airport will be almost entirely closed to cargo, and trucks and ships will need to stop at Spanish customs near the border, said a European Commission official. A Spanish foreign ministry official said most checks would be done at the port of Algeciras.The British territory will also lift its sales tax from 3 per cent to at least 15 per cent within three years of the deal’s ratification to avoid unfair competition with Spain where VAT is higher, the European official added.The Spanish official said the tax deal meant “Gibraltar will implement for the first time an indirect tax on goods aligned with European VAT”.The Gibraltarian authorities have backed the deal since almost all goods already enter by land, the European official said, and the changes will allow its citizens to travel unhindered to Spain and to work in bordering areas.A UK official confirmed that Gibraltar had accepted the terms on sales tax and that goods imported to the territory will be checked and cleared by EU customs officers in Spain. A Gibraltar official did not immediately comment.There will be exemptions from checks for particular products, such as cars that are imported, refitted and exported again — a key segment of the Gibraltarian economy. Gibraltar’s port, which occupies a strategic position at the gateway to the Mediterranean, is a key asset for reasons other than cargo imports. It hosts British naval vessels, cruise liners and luxury yachts, and is a key fuel bunkering hub for vessels leaving and entering the Mediterranean.The territory was handed to the UK by the Spanish crown in 1713. While Spain claims sovereignty, the vast majority of its 34,000 people want to remain British.UK Prime Minister Sir Keir Starmer praised the deal unveiled on Wednesday, which solves one of the last big post-Brexit conflicts. Gibraltar’s first minister Fabian Picardo has also strongly supported the deal.Kemi Badenoch, leader of the opposition Conservative party, said on Thursday that while she had not yet seen the full details of the deal she was reassured by the fact Picardo has supported it.“I do actually trust his judgment,” said Badenoch, who was trade minister in the previous government. “My concern is that whenever Keir Starmer signs a deal it’s never a good deal. We always lose out.”Spanish border guards will check passports at the airport and port and can refuse UK citizens entry in some circumstances, since the abolition of the border in effect puts the territory in the EU’s borderless Schengen zone.The agreement, which must be approved by EU member states and the European parliament, was necessary if Spain was to allow a wider reset of relations with London, the European official said.“It would have been very difficult for . . . a number of states like Spain to conclude new agreements with the UK without finding a solution for Gibraltar,” they said.Madrid has been blocking British entry into some EU defence co-operation agreements because of its military presence on the Rock, where it has a naval and air base.At a summit last month the EU and UK agreed to negotiate a veterinary deal to smooth trade in food and animals and a security pact that could allow the UK defence industry to access EU money.” More

Unlock the White House Watch newsletter for freeYour guide to what Trump’s second term means for Washington, business and the worldDonald Trump’s latest trade threats pushed the dollar to its lowest level in three years on Thursday as rising worries over trade and geopolitics piled fresh pressure on the currency.The dollar was dragged lower after the US president told reporters he would send letters to trading partners outlining new tariff rates in the next couple of weeks, as the end of the 90-day pause on so-called “reciprocal” levies approaches next month. The greenback fell 0.9 per cent against a basket of its trading partners, including the pound and the euro. The move means the currency has fallen past the low it hit in the wake of Trump’s “liberation day” tariff blitz in early April and to its weakest level since March 2022.“[Trump’s] comment certainly points to renewed escalation in trade tensions ahead of the official deadline date,” said Derek Halpenny, an analyst at MUFG.Investors were also digesting a trade truce between US and China announced on Wednesday, and rising tensions between the US, Israel and Iran, with the Trump administration authorising dependants of military personnel to leave the Middle East.“We’ll see what happens,” Trump told reporters on Wednesday. “They [Iran] can’t have a nuclear weapon, very simple.”While trade tensions have continued to weigh on the dollar, stocks have since rebounded from their April plunge, with the S&P 500 index closing in on a fresh all-time high in recent days. Futures markets indicated a 0.3 per cent slide for the Wall Street benchmark on Thursday. Stocks also fell in Europe, with the broad Stoxx Europe 600 down 0.5 per cent.Analysts from Deutsche Bank suggested that some of Thursday’s dollar move could be attributed to news, revealed by the FT, that the US Pentagon was reviewing its 2021 submarine deal with the UK and Australia. “Reporting that the US is re-evaluating its participation in the Aukus defence pact is highly relevant for the dollar, in our view,” wrote head of FX research George Saravelos. “A weaker geopolitical alignment between the US and its allies undermines US inflows,” he said, adding that Australian investors had already raised the issue in meetings on Thursday morning. Lower-than-expected US inflation data on Wednesday and Thursday have also weighed on the dollar by opening the door to faster interest-rate cuts by the Federal Reserve. Futures markets are fully pricing in two quarter-point cuts from the Fed this year.By contrast, signals from the European Central Bank last week that it may be close to the end of its rate cutting cycle have pushed the euro higher. It climbed 1.2 per cent to $1.162 against the dollar, its strongest level since November 2021.The moves compounded a slide in the dollar that has taken it down about 10 per cent this year as economic worries over the trade war mix with concerns over a rising budget deficit and signs that some investors are reducing their exposure to US assets. A budgetary provision that would allow the government to raise taxes on foreign investments has added to the unease.“Foreigners are selling every rally in the dollar on policy chaos, ballooning debt and other threats to their investments,” said Trevor Greetham, head of multi-asset at Royal London Asset Management.Weakness in the greenback “has much more room to run”, said Vasileios Gkionakis, senior economist at Aviva Investors. “The shift away from US exceptionalism is driving the US risk premium higher and is weighing on the value of the dollar.” More

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