Aurelia Butler

Unlock the White House Watch newsletter for freeYour guide to what Trump’s second term means for Washington, business and the worldUS tariffs of 50 per cent on steel and aluminium will take effect from June 4 after Donald Trump signed an executive order on Tuesday escalating his global trade war a week after a court ruled the bulk of his levies illegal.The new tariffs double existing levies on the sector of 25 per cent that the president introduced earlier this year. Duties on UK steel and aluminium will remain at 25 per cent — a carve-out for London after it signed a trade deal with Washington last month.Trump said on Tuesday that the tariffs were necessary to prevent dumping by foreign producers that would “threaten to impair the national security”.“The increased tariffs will more effectively counter foreign countries that continue to offload low-priced, excess steel and aluminium in the US market and thereby undercut the competitiveness of the United States steel and aluminium industries,” Trump wrote in the order. The additional duties intensify the president’s bid to reshape international commerce even as much of his trade agenda remains in legal limbo. A court ruled last week that he lacked the authority cited when he imposed his most sweeping “liberation day” tariffs on April 2.The ruling — which has since been paused by an appeals court — did not affect sector-specific levies, such as those on steel and aluminium, which Trump introduced using a different authority.The additional steel and aluminium duties, which take effect from 12:01am eastern time on Wednesday, will not immediately apply to the UK, which last month became the first country to strike a trade pact with the administration.But Trump indicated he could hit yet London with the higher rate if his commerce secretary Howard Lutnick “determines that the United Kingdom has not complied with relevant aspects” of the agreement after a July 9 deadline.The president announced his plan to double the tariffs during a rally at a Pennsylvania steel mill last week, promising to erect a “fence” around the domestic metals industry that would in effect lock out foreign producers. “That means that nobody’s going to be able to steal your industry,” he told a jubilant crowd of steel workers on Friday. “At 25 per cent, they can sort of get over that fence. At 50 per cent they can no longer get over the fence.”The policy drew swift condemnation from Canada, the largest supplier of steel and aluminium to the US, where the industry warned in recent days of “mass disruption” and “catastrophic” job losses. More

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This is an on-site version of the White House Watch newsletter. You can read the previous edition here. Sign up for free here to get it on Tuesdays and Thursdays. Email us at [email protected] and welcome to White House Watch! Today let’s dig into:A downgrade for US growth Trade tensions with ChinaTrump vs the Federalist SocietyThe OECD said this morning that it was slashing its growth forecast for the US, as it warned that President Donald Trump’s trade war will sap momentum from most major economies. The global economy as a whole is heading into its weakest period of growth since the Covid-19 pandemic, but the slowdown will hit the US particularly hard, according to the OECD. The organisation predicted that US growth would slow to just 1.6 per cent this year, down from 2.8 per cent in 2024.It also forecast that stubborn inflation would prevent the Federal Reserve from cutting interest rates until at least 2026.The Paris-based body also trimmed its growth forecasts for China, France, India, Japan, South Africa and the UK. “This has massive repercussions for everyone,” said Álvaro Pereira, the OECD’s chief economist. He added that countries around the globe urgently needed to strike trade deals to lower tariff barriers and avoid a “quite significant” hit to growth.The latest assessment represents a further downgrade to the OECD’s already downbeat March interim forecasts, which came before Trump’s “liberation day” tariffs announcement. Some content could not load. Check your internet connection or browser settings.The OECD’s gloomy assessment comes after the dollar slid towards a three-year low yesterday and US government bonds came under pressure, as weak manufacturing data and growing warnings over the sustainability of the country’s debt pile unnerved investors. Futures trading is pointing to a lower open on Wall Street this morning. An ISM survey of purchasing managers in the manufacturing sector came in weaker than expected at 48.5 for May, indicating a contraction. Economists said the reading, the fourth consecutive fall in the index, was the latest sign that Trump’s unpredictable trade war was weighing on the world’s largest economy.“The confusion of trade policies is making it near-impossible for supply managers to source goods efficiently,” said Joe Brusuelas, chief economist at tax and consulting firm RSM US. “That tells me that we may run into bottlenecks in terms of production, leading to shortages.”The latest headlinesWhat we’re hearingTrump’s judicial appointees are struggling to balance fealty to the White House with commitment to the US Constitution, as the president continues to push the boundaries of his power. [Free to read]In his first term, Trump joined forces with Leonard Leo, co-chair of the powerful Federalist Society, to stock the federal judiciary with 226 conservatives, including three members of the US Supreme Court.But after two Republican appointees to the Court of International Trade joined with a Democrat to block his signature tariffs last Thursday, Trump said Leo was “a bad person, who in his own way, probably hates America”. “I am so disappointed in The Federalist Society because of the bad advice they gave me on numerous Judicial Nominations,” he wrote on Truth Social.Trump’s tirade is the latest public expression of a growing rift within the conservative legal movement. Maga loyalists are demanding that judges toe the line, while traditional conservatives are pushing back against presidential measures that they find unconstitutional.When judges rule against him, Trump “sees both those judges and the Constitution as obstacles to his political success”, said Paul Butler, professor at Georgetown Law. “Leo and the Federalist Society support the Constitution in a way that Trump does not.”If Trump’s fury towards dissenting judges deepens the split with Leo, the conservative activist may have to choose between staying true to his judicial philosophy and retaining his influence in the White House.“To Trump, loyalty über alles [above all],” said Barbara Perry, professor of presidential studies at the University of Virginia’s Miller Center. “This may be a rift that’s not mendable in Trump’s mind.”ViewpointsRecommended newsletters for youFT Exclusive — Be the first to see exclusive FT scoops, features, analysis and investigations. Sign up hereBreaking News — Be alerted to the latest stories as soon as they’re published. Sign up here More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Switzerland’s inflation rate has dipped into negative territory for the first time in four years, fuelling bets that the country will return to sub-zero interest rates in a bid to stave off a deflationary slump and restrain a soaring currency.Annual inflation was minus 0.1 per cent in May, with prices for air transport and accommodation among those dragging on the consumer price index, data published on Tuesday showed. Prices rose 0.1 per cent month on month.Traders have increased their bets in recent months that the Swiss National Bank will reduce interest rates to zero or below to deal with lagging inflation and a surge in the value of the Swiss franc, a haven currency that investors have bought up as a refuge from US President Donald Trump’s trade war.The franc is one of the best-performing major currencies this year, up nearly 11 per cent against the dollar and outpacing peers such as the euro and the pound. That has taken the greenback close to SFr0.80 in recent weeks for the first time since a shock appreciation in the franc in 2015.A stronger franc drags down Swiss inflation by reducing the cost of imports.Mike Riddell, a fund manager at Fidelity, said signs of deflation were “going to make the SNB allergic to Swiss franc appreciation” that could exacerbate price falls.He predicted that “any further upwards currency pressure” was likely to trigger FX market intervention by the central bank to weaken the currency. The SNB targets an inflation rate between zero and 2 per cent. That would risk provoking the ire of the White House, which added Switzerland to a list of “currency manipulators” during the final weeks of Trump’s first presidency. It was later removed from the list under Joe Biden’s administration.“That’s a delicate situation they are in,” said Daniel Kalt, chief investment officer for Switzerland at UBS Global Wealth Management. “You don’t want to be perceived as a currency manipulator while you have these trade talks with the US.” The path of the franc will be crucial, Kalt said, adding “we’ve not even seen the whole pass-through” from the recent strength into consumer prices.Switzerland has historically sought to restrain its currency, viewed as a financial market haven due to the country’s relative political and economic stability. The SNB held interest rates below zero for eight years before returning to positive territory in 2022 and built up a vast portfolio of international assets through its currency interventions.The market is now pricing in two quarter-point rate cuts by the December SNB meeting, which would take the policy rate to minus 0.25 per cent. One of those is expected to come at the meeting later this month.The two-year Swiss government bond yield fell as far as minus 0.24 per cent on Tuesday, its lowest in three years. Yields up to six years in maturity traded below zero on Tuesday. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Eurozone inflation fell below the European Central Bank’s 2 per cent target in May for the first time in seven months, in figures economists said made further interest rate cuts this year more likely.May’s annual inflation reading of 1.9 per cent was down from April’s 2.2 per cent figure and below analysts’ expectations of 2 per cent in a Reuters poll.It was the first time inflation has been below the 2 per cent goal since September, when it briefly dropped to 1.7 per cent after exceeding the target for more than three years.The euro slipped after the data publication on Tuesday, down 0.5 per cent in early afternoon trading at $1.139.In a reference to the impact of US President Donald Trump’s tariffs, Diego Iscaro, an economist at S&P Global Market Intelligence, said the decline in inflation would “offset some of the headwinds on consumption stemming from a highly uncertain economic environment”.He predicted that price pressures would ease further over the coming months due to the stronger euro, cheaper commodities and a softer labour market, adding that he expected the ECB to lower its benchmark deposit rate from its current 2.25 per cent to 1.5 per cent in the third quarter.The central bank will make its next interest rate decision and update its inflation forecasts on Thursday. It predicted in March that inflation in the currency area would hover above target this year, before falling to 1.9 per cent in 2026.In trading after the Tuesday’s data release, swaps markets continued to expect another quarter-point cut in the ECB’s benchmark interest rate on Thursday. That would take the rate to 2 per cent — the lowest level in more than two years and half that of June 2024, when the central bank started to reduce borrowing costs. Two quarter-point cuts are priced in by this time next year.Commerzbank economist Vincent Stamer said current consumer price trends implied the ECB would on Thursday be “in the comfortable position of being able to lower its [full-year inflation] projections”, adding that this should open the door for one more quarter-point rate cut after the one expected this week.Riccardo Marcelli Fabiani, an analyst at Oxford Economics, said a quarter-point cut this week was “an easy bet” and that “more easing should follow later in the year” as inflation was likely to slow further.Tuesday’s figures showed that core inflation, excluding volatile food and energy prices, fell to 2.3 per cent in May compared with 2.7 per cent in April.The closely watched figure for services inflation — a gauge for domestic price pressures — dropped to 3.2 per cent, the lowest level since March 2022. It had reached 4 per cent in April. More

This article is an on-site version of our Chris Giles on Central Banks newsletter. Premium subscribers can sign up here to get the newsletter delivered every Tuesday. Standard subscribers can upgrade to Premium here, or explore all FT newslettersIt’s been a week of novel communications from Federal Reserve officials who appear to be enjoying their new “can’t be fired” protection from the US Supreme Court. In contrast, Donald Trump does not seem to like the new environment so much. The president summoned the Fed chair for a meeting on Thursday, in which he told Jay Powell that the Fed was “making a mistake by not lowering interest rates, which is putting [the US] at an economic disadvantage to China and other countries”. We know this not because Trump claimed victory on social media later, but because he left it to his press secretary Karoline Leavitt to comment. She did not dispute the Fed’s account, posted on its website, which demonstrated Jay Powell was hearing Trump but not acquiescing. For the full brutality, it is worth noting down the Fed statement in full. At the president’s invitation, chair Powell met with the president today at the White House to discuss economic developments including for growth, employment and inflation.Chair Powell did not discuss his expectations for monetary policy, except to stress that the path of policy will depend entirely on incoming economic information and what that means for the outlook.Finally, chair Powell said that he and his colleagues on the FOMC will set monetary policy, as required by law, to support maximum employment and stable prices and will make those decisions based solely on careful, objective and non-political analysis.The Trump administration’s belly fatAnother Fed official who offered a far from flattering opinion on Trump’s policies was Austan Goolsbee, Chicago Fed president and a voting member of the Federal Open Market Committee. Interviewed at the Mackinac Policy Conference, he also stuck to the strict Fed script that the dual mandate dominates everything he considers. “If it affects prices or affects employment, we have to think about it,” he said. Trump’s willingness to insist on lower interest rates fails this test, Goolsbee added. His social media posts “feel a little more like an expression of desire on rates”, he said. The Chicago Fed president loves a folksy anecdote. One of his favourites is to use a Midwest weather metaphor to explain why Fed officials should never complain about the conditions they face. “There is no bad weather, only bad clothing,” he said. “You tell me what the conditions are and I’ll tell you what clothes to wear.” To the uncharitable, what came next felt quite like a complaint about the conditions, however. He said he had recently hired a personal trainer with the aim of rediscovering his six pack. She told him everyone has a six pack underneath, you’ve just got to get all the fat off first before you can see it. “I feel a bit like that on the economy. If we could get this [fat] off of there, there’s a six pack underneath.” There was no doubt in the context of the chat that the fat he was talking about was Trump’s tariffs.And if they come off? That was even clearer. He said that without tariffs the US economy had low, stable unemployment and inflation heading back to the 2 per cent target. “If you have stable full employment and inflation going to target, rates can come down to where they would eventually settle,” and that is “well below where they are today”.As the table below shows, there is little doubt that ahead of the main tariff effects, the inflation measured by the personal consumption expenditure deflator in April was benign.Some content could not load. Check your internet connection or browser settings.Still all to play for in the autumnThe one significant dissenter to tariff complaints on the FOMC of late has been Christopher Waller, a Fed governor who is a possible replacement for Powell as Fed chair. Speaking at the start of this week in Korea, he again said he expected any inflation from tariffs to be “transitory”, and held out the prospect of lower rates for “good news” reasons. He was rather more positive than Goolsbee, who linked lower rates to tariffs coming off. That said, his key sentence was gloriously conditional. I am sure he hopes Trump will hear “rates coming down”, while others hear, “we can cut rates when things get back to normal”. The specific words were:Assuming that the effective tariff rate settles close to my lower-tariff scenario, that underlying inflation continues to make progress to our 2 per cent goal, and that the labour market remains solid, I would be supporting “good news” rate cuts later this year.Take the summer offThere is no sign that the Fed will decide anything soon. In fact, Dallas Fed president Lorie Logan gave us all an excuse to take a long summer holiday. With unemployment low, inflation falling and risks running both ways, she echoed Powell in saying the stance of US monetary policy was in a good place. “It could take quite some time to know whether the balance of risks is shifting in one direction or another,” she said. While we are at the Dallas Fed, its economists last week noted how the Fed’s Beige Book had been rather shoddy recently. Instead of giving an accurate anecdotal picture of US economic trends as it used to, their take was that since 2022 it has been overly pessimistic. Their analysis showed that the report tends to measure cyclical parts of the US economy — manufacturing, construction, retail and real estate — which have not been the drivers of US growth recently and so are unrepresentative of the wider economy. This is something to remember when the latest Beige Book is published on Wednesday. Some content could not load. Check your internet connection or browser settings.What I’ve been reading and watchingFormer European Central Bank supervisory board member Ignazio Angeloni worries about money in the Eurozone in light of the growth of US dollar stablecoins. Given the momentum behind the digital euro, he worries too much.The world of work, it turns out, is much better than we feared at the time of the millennium. We’re healthier and working longer on average, raising the prospect of better retirements.Stan Fisher, perhaps the most influential policymaker of recent times, who served at the Fed, Bank of Israel, IMF and World Bank, has died.Slovakia’s government is hardly excelling itself, by keeping in post a central bank governor convicted of bribery.A chart that mattersChristine Lagarde has a simple technique of communication and it is one journalists know well — repetition. I won’t have the formulation of words quite right, but I know that the ECB takes a meeting-by-meeting, data-dependent view and will decide monetary policy on the basis of the inflation outlook, the dynamics of underlying inflation and the transmission of monetary policy to households and companies. Shout if I’ve got that wrong.The central bank’s blog produced some projections of the borrowing costs likely to be paid by households with mortgages for the rest of the decade. Even though official interest rates have fallen from 4 per cent to 2.25 per cent, mortgage rates are still rising as many people come to the end of their fixed-rate periods and now have to settle for a higher rate. Poorer households have already felt the pinch more than richer ones, because fewer fix for long periods and the rates also differ between countries. Even though the ECB’s blog is run by staff and the views “do not necessarily represent the views of the European Central Bank and the Eurosystem”, the message is clear that the transmission of monetary policy is still getting more restrictive — at least for mortgages.Some content could not load. Check your internet connection or browser settings.Central Banks is edited by Harvey NriapiaRecommended newsletters for you Free Lunch — Your guide to the global economic policy debate. Sign up hereThe Lex Newsletter — Lex, our investment column, breaks down the week’s key themes, with analysis by award-winning writers. 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Unlock the White House Watch newsletter for freeYour guide to what Trump’s second term means for Washington, business and the worldSmart money says that Donald Trump’s upside is that you know where he stands. That may be true on his love of grift and loathing of immigrants and trade deficits. When it comes to Trump and China, however, economists should drop their caveat about “all things being equal”. Nothing to do with Trump’s China policy is predictable, let alone equal. Does he care about Taiwan? Let’s toss a coin. Does he want the US to decouple from China? Spin the roulette wheel. Trump’s supposed coming phone call with China’s President Xi Jinping is unlikely to lift our confusion. China is the ultimate Trump riddle. You can hardly blame the Chinese for being wary of talking to him. In late April, Trump told Time that Xi had called him — “and I don’t think that’s a sign of weakness on his behalf”. No call had taken place. Any reading by Trump of Xi’s psychology should thus be put down to an AI-style hallucination. China’s foreign ministry accused Trump of “misleading the public”, which by today’s standards was polite. But we should not mistake Xi’s avoidance of “wolf warrior” invective for submission to Trump in the tariffs war. China is not the UK. The Chinese are as confused about Trump’s endgame as everyone else. If Xi does finally agree to a call with Trump — the first since he was inaugurated — the duelling Washington-Beijing readouts would make for interesting reading. It is almost impossible to imagine Xi agreeing to sit down for one of Trump’s reality TV Oval Office specials. That crapshoot has had big downside impacts on Ukraine’s Volodymyr Zelenskyy and South Africa’s Cyril Ramaphosa, and proved helpful to Canada’s Mark Carney and arguably to Britain’s Keir Starmer. Xi will never agree to run that gauntlet. Nor should he. The China-US component of Trump’s on-again off-again trade war is in a category of its own. The rest are based on exaggerated or imaginary complaints. The EU is no likelier to concede that its value added tax is a trade barrier than Canada will admit to exporting fentanyl to the US. Both are fictions. By contrast, China’s dual-use technological ambitions pose a big geopolitical conundrum to America. How Trump addresses those — whether he scraps Joe Biden’s “small yard, high fence” restrictions on semiconductor trade with China — matters to everyone. Yet we have little clue how much they concern Trump. The leverage goes both ways. The US could continue to restrict China’s access to AI technology and chips. But Trump has already relaxed some of this. Nvidia’s chief executive Jensen Huang is an influential advocate with Trump of further relaxation. On the other side, China has a stranglehold on the world’s rare earth supply that is critical to a wide range of US production. Trump claims China has reneged on last month’s deal to resume its exports of rare earths to the US. In that pause, Trump reduced his 145 per cent tariff on China to 30 per cent. Will he ratchet tariffs up again if China does not lift its embargo? There is no way of knowing. Once upon a time Trump thought that the China-owned TikTok was a threat to US national security. Now he is keeping the social media app alive — with a possible view of a forced sale to a Trump business partner — against the wishes of Congress and the Supreme Court. As goes TikTok, so might go Trump’s China policy. The same confusion reigns over Taiwan. Many voices in Trump’s administration urge a hardline defence of Taiwan. Pete Hegseth, the US defence secretary, said last week: “The threat China poses [to Taiwan] is real. And it could be imminent.” But few in the US or around the world take Hegseth seriously. Trump hired him to play Pentagon chief on TV. China is widely believed to be getting ready to launch an invasion of Taiwan by 2027. Hegseth could well have been speaking the truth. But you cannot assume he is credible. Trump has thus created a real national security risk by having a secretary of defence of cry wolf. Trump’s China uncertainty is also a tax on the global economy. France’s Emmanuel Macron spoke for many last week when he said: “We don’t want to be instructed on a daily basis what is allowed, what is not allowed, and how our life will change because of the decision of a single person.” That was one way of putting it. Here is another from JPMorgan’s Jamie Dimon: “China is a potential adversary . . . But what I really worry about is us.” Dimon was tactful not to name the US president. On the conundrum posed by Trump’s erraticism, China and the rest of the world are as one. [email protected] 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 back to FirstFT Americas. Here’s what we’re covering today: Auditors launch AI assurance services OECD warns of threat to global growthCarney promises ‘grand bargain’ with Canada’s oil industryBig Read on the future of the private equity industryThe Big Four accountancy firms are racing to create a new type of audit that verifies the effectiveness of artificial intelligence tools as the companies seek to profit from clients’ demand for proof that their AI systems work and are safe.Auditing AI: Deloitte, EY and PwC told the Financial Times that they were preparing to launch AI assurance services as they hope to use reputations gained in financial audits to win work assessing whether AI systems, such as those in self-driving cars and cancer-detecting programmes, perform as intended.The context: The audits would open another revenue stream for auditors, similar to when the firms cashed in on the trend for companies to buy assurance for their environmental, social and governance metrics. The move comes as some insurers have begun offering cover for losses caused by malfunctioning AI tools such as customer service chatbots. Ellesheva Kissin has the exclusive story.Warning from AI “godfather”: Yoshua Bengio says the latest models are displaying dangerous characteristics such as lying to users.xAI seeks $113bn valuation: Elon Musk returns to business with a new share sale for his AI start up. Here’s what else we’re keeping tabs on today:Economic data: The US publishes April job openings and factory orders data while Brazil’s statistics agency publishes industrial output data for the same month. Results: Dollar General and Hewlett Packard Enterprise report earnings. Harvey Weinstein trial: Lawyers are set to make their closing arguments in the movie mogul’s retrial on rape and sexual assault charges.South Korea: Voters go to the polls in a pivotal election after the former president was removed over his attempt to impose military rule.Five more top stories1. The global economy is heading into its weakest growth spell since the Covid-19 slump as President Donald Trump’s trade war saps momentum in leading economies including the US, OECD forecasts showed. The organisation slashed its outlook for global output and the majority of the G20 leading economies. Read more on the OECD’s new growth projections.2. Far-right leader Geert Wilders has quit the Dutch government, plunging the country into political uncertainty. Wilders, whose Freedom party was the biggest in a four-party coalition, said he could no longer support its failure to crack down on asylum applications. 3. Israeli soldiers have killed more than two dozen Palestinians near an aid centre in Gaza, the local health ministry said, the latest in a string of deadly incidents since a controversial US-backed aid scheme was introduced in the enclave last week. Follow this developing story.4. Private credit is now so intertwined with big banks and insurers that it could become a “locus of contagion” in the next financial crisis, a group of economists, bankers and US officials has warned. The report is one of the most comprehensive analyses to date on how private credit would affect the broader financial system during a period of market upheaval.5. Mark Carney has vowed to work with Canada’s oil industry on a “grand bargain” to boost production and reduce emissions after a meeting with senior oil industry executives in recent days. The overture to the oil sector, a key driver of Canada’s economy, marks a shift for Carney.The Big Read© FT montage/GettyThe difference among private equity’s Big Three is becoming stark in terms of their business models. Blackstone is sticking to a traditional fee-based approach, while rivals Apollo and KKR embrace an insurance-powered model that provides long-term funding but comes with bank-like risks. Which version will prevail?We’re also reading . . . Larry Fink: The first draft of globalisation created enormous wealth that was unevenly distributed, argues the chief executive of BlackRock. It’s time for the second draft.‘Taco trade’: Trump always chickens out on foreign policy too, writes Gideon Rachman. Vibe coding: Creating apps using large language models may go the same way as DIY, with some people enjoying success while others rue their very costly mistakes, writes Sarah O’Connor.Poland: The country’s ruling coalition is bracing itself for a confidence vote after Donald Tusk’s party suffered a bruising defeat in the presidential race.Chart of the daySome content could not load. Check your internet connection or browser settings.Walmart is the US’s biggest private sector employer and while sales and profits are rising the number of employees is not. In the past five years Walmart’s workforce shrunk by 70,000 even as revenues expanded by $150bn. Walmart’s payroll trend stands in contrast to its peers. Here’s why. Take a break from the newsAs the industry faces falling demand, Oyster Yachts has found a novel way to build orders. The UK maker of luxury “blue water” sailing boats offers its 1,200 owners a mid-life challenge and a collective thrill by helping them to sail around the world together, writes John Gapper. More