Aurelia Butler

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Poland’s lurch to the right has imperilled the EU’s trade ambitions and cast into doubt billions of euros in funds earmarked for Warsaw, officials said, while boosting a growing Eurosceptic trend in central Europe.The victory of rightwing nationalist Karol Nawrocki in Poland’s presidential election has shocked Brussels, which fears that it will fatally wound the country’s pro-EU government under premier Donald Tusk, stymie reforms required to access EU funds and prompt Warsaw to help block a landmark trade deal with the South American Mercosur countries.Nawrocki, a former football hooligan with no political experience, campaigned under a slogan of “Poland First”, and criticised EU policies on climate change, Ukraine and social issues. “Let’s help others, but let’s take care of our own citizens first,” Nawrocki, who was backed by US President Donald Trump, said on the campaign trail.Orsolya Raczova, central and eastern Europe analyst at Eurasia Group, said Tusk’s reform agenda would now “be paralysed . . . Nawrocki will prevent him from implementing an overhaul of the judiciary in line with EU demands”.“Nawrocki will join other sovereigntists leaders led by Hungarian Prime Minister Viktor Orbán in resisting Brussels,” Raczova added.Tusk’s election as prime minister in October 2023 was seen by Brussels as a welcome return to a pro-EU government in Poland, the bloc’s sixth-largest economy and most important eastern flank member, after eight years of Eurosceptic rule. Demonstrators in Warsaw protesting against EU policies More

This article is an on-site version of our Trade Secrets newsletter. Premium subscribers can sign up here to get the newsletter delivered every Monday. Standard subscribers can upgrade to Premium here, or explore all FT newslettersDonald Trump’s tariff announcements are giving him less and less Taco time to put them into reverse. Following an ill-evidenced accusation last Friday that China was breaking its promises on an unspecified deal, he subsequently threatened to double steel and aluminium (aluminum, whatever) tariffs to 50 per cent by this coming Wednesday. Trump said there would be no deals with trading partners to avoid them, but he always says that. Speaking of special deals, it’s seriously bad news for the UK, which supposedly negotiated the last lot of steel tariffs away but with no date decided for lifting them. Today I look at what last week’s explosive court ruling against Trump’s tariffs means for his broader protectionist campaign. Charted Waters, where we look at the data behind world trade, is on imports to the US. Today’s reader question: will the 50 per cent steel tariffs go ahead? A simple yes or no, and only answers sent by 12 noon US eastern time count.Get in touch. Email me at [email protected] wouldn’t like Trump when he’s angryLast week, there was a bit of variety from the endless Trump announcements and retreats: a big tariff shock that didn’t emanate from the president directly. In this case it was the Court of International Trade declaring Trump’s use of the International Emergency Economic Powers Act (IEEPA) to be unreasonably broad.Older readers may recall I said a while back that the courts were unlikely to rule against Trump and it probably wouldn’t stop him if they did. Well, it’s certainly true that last week’s ruling was a surprise, though not an inconceivable one. There were some exceedingly eminent scholars (the most obvious being Trade Secrets favourite Jennifer Hillman, former US trade representative general counsel) who cogently argued a couple of months ago that Trump’s use of the tariffs was an abuse of power. But at the time Hillman told me that hers was a minority view and there was no guarantee a court would agree.I’m absolutely not going to start cosplaying a US trade or constitutional lawyer and try to predict where this goes on appeal, let alone if it eventually ends up in the Supreme Court. You can read here a long interview with Ilya Somin, the academic who deserves a lot of credit for helping bring the case to court, and a somewhat contrasting view here from the law professor Jack Goldsmith, who argues that the ruling rested on weak grounds that might not hold up in subsequent hearings.Instead, here are my thoughts on where the political economy takes Trump from here. When he is thwarted in any way — remember the “Trump as toddler” trope from his first term? — his reaction is to lash out wildly and without logic. His outburst against the Federalist Society’s former leader for recommending to him the wrong kind of judge was particularly weird. The member of the court’s judicial panel he seems to be referring to, Tim Reif, is a Democrat who was USTR general counsel under Barack Obama and continued to work there during Trump’s first term. None of my conversations with Reif in the past convinced me he was some hardline conservative ideologue.Where does an angry Trump go?Trump’s habitual response to a constraint, after venting, is to ignore it or find a way round. It’s notable that his reaction to the court’s decision was to threaten to double steel tariffs, which, being “Section 232” national security duties, were not covered by the ruling. He loves tariffs, but I’ve long suspected that if that weapon turns out to be ineffectual or gets blocked, he will quite quickly turn to other tools of international economic warfare. In fact, he already has. The nasties in his budget bill that will allow reprisals against foreign companies invested in the US were, of course, there before last week’s ruling. But they’re a warning of what happens when Trump widens the field of fire.Despite the briefing that he’s winding up for some big, beautiful, bro-mantic deal with President Xi Jinping, Trump is already ratcheting up export controls on technology by prohibiting the sale to China of software used to design semiconductors. Export controls are a much more Joe Biden-style, technical and targeted policy (“small yard, high fence”) than broad tariffs. But even Biden, with a massively more competent and reality-based administration, couldn’t make them very effective. Trump isn’t going to make them work any better.My fear is that Trump then moves on to something that both won’t work and will do massive economic damage if he tries. The obvious one is the dollar payments system, which he already tried to use during his first term to increase pressure on Iran and go after Huawei. This is a fairly terrifying prospect. If the Trump administration can’t competently manage to execute the task of taxing physical goods as they go through American ports — something governments have been doing literally for millennia — the thought of his administration trying to precision-target payments sanctions to reorder the world economy is chilling. This is a good time to re-read Abraham Newman and Henry Farrell’s magisterial Underground Empire, a book on how the US weaponised various aspects of the networks connecting the global economy, including finance, data, semiconductors and data centres. (I interviewed Newman on the FT’s Economics Show podcast earlier this year.) As the authors are at pains to point out, their work is supposed to be a cautionary tale. Instead, it seems it’s being used as an operations manual.Charted watersNot exactly unexpected but still scary to see: US goods imports dived in April following the bogus “reciprocal tariffs” of April 2, even though some were suspended a week later.Trade linksCanada’s steel producers and steelworkers are understandably furious at Trump’s latest tariff threats.Investors are beginning to treat the US more like an emerging market than an advanced economy, with bond prices and the dollar falling simultaneously. Inventor of the Taco trope Rob Armstrong looks at the impact of tariff revenues on Trump’s tax plans in the FT’s Unhedged newsletter.Shahin Vallée at the German Council on Foreign Relations, a former adviser to Emmanuel Macron, argues that the EU should have chosen a much more aggressive response to Trump’s tariffs. The FT’s India Business Briefing looks at the effect of Trump’s proposed tax on remittances sent out of the US to India. Trump’s trade policy is so absurd it’s quite hard to parody it, but this excellent tariff tracker run by the German satirical website Der Postillon has a good shot.Trade Secrets is edited by Harvey NriapiaRecommended newsletters for youChris Giles on Central Banks — Vital news and views on what central banks are thinking, inflation, interest rates and money. Sign up hereFT Swamp Notes — Expert insight on the intersection of money and power in US politics. Sign up here More

Unlock the White House Watch newsletter for freeYour guide to what Trump’s second term means for Washington, business and the worldThanks to Donald Trump and my FT colleague, Robert Armstrong, many of the world’s investors are now talking about the “Taco trade”.It was Robert who coined the phrase “Trump always chickens out” (Taco). The pattern is that the US president will promise to impose massive tariffs on a chosen target. But he will then later cut or delay the tariffs, often in response to an adverse reaction from the markets. So far this has happened with Canada and Mexico, then with the “reciprocal tariffs” imposed on most of humanity (and some penguins), then with the 145 per cent rate on China. A threat to raise tariffs on the EU to 50 per cent lasted all of a weekend. Hence — Taco.The Taco phrase was drawn to Trump’s attention in a press conference last week. He was not amused and called it a “nasty question”.All the nastier, perhaps, for being accurate. In fact, “Taco” is not just a useful heuristic for investors. It also turns out to be a key to analysing Trump’s foreign policy. As Jeremy Shapiro of the European Council on Foreign Relations points out in a recent paper, Trump enjoys issuing blood-curdling threats of the use of force. But he very rarely follows through.In his first term in office, Trump famously threatened North Korea with “fire and fury” and also mused about the possibility of wiping Afghanistan “off the face of the earth” within 10 days. And what happened? He entered into negotiations with North Korea about its nuclear programme. When the talks ultimately failed, they were followed not with fire and fury, but with amnesia. North Korea has accelerated its nuclear weapons programme over the past five years. Trump seems to have forgotten about the problem.When it came to Afghanistan, Trump ultimately agreed to pull US troops out of the country without securing any real concessions from the Taliban — setting the stage for the fall of Kabul during the Biden administration. The most striking use of force in Trump’s first term was the killing of Qassem Soleimani, the head of Iran’s Quds force, in January 2020. But Trump authorised that drone strike only after receiving reassurances that the risk of Iranian retaliation was low. Looking at Trump’s two periods in office, Shapiro finds 22 occasions so far in which he has threatened the use of force — but only two in which he has actually followed through. There have been 25 actual uses of force — mainly limited strikes against terrorist groups such as Isis or al-Qaeda. But only on two occasions were they preceded by a presidential threat.Surveying the record, Shapiro comes to a clear conclusion: “Trump uses threats and force much like a playground bully: while large and outwardly powerful, he actually fears the use of force in any situation even vaguely resembling a fair fight . . . Actual violence only occurs against much weaker foes that have no hope of striking back.”Applying the Taco principle to today’s foreign policy crises is instructive. Trump has threatened to authorise attacks on Iran, if the current talks to limit its nuclear programme end in failure. But the record suggests that he is likely to remain very reluctant to strike Iran whatever happens in the negotiations.When it comes to Ukraine, Trump is likely to be even more wary than the Biden administration of anything that risks escalation with Russia. Despite last week’s warning from Pete Hegseth, the US defence secretary, that a Chinese attack on Taiwan could be “imminent” — it also seems unlikely that Trump would risk a war over Taiwan, whatever China does. There has been talk in Trump circles about using the US military to go after Mexican drug cartels. But he may even be wary of tangling with them if there is a risk that the cartels could strike back on US territory.The places that need to worry are those that look vulnerable or unlikely to fight back. Greenland may fall into that category — which suggests that Denmark and the EU need to find ways of letting Trump know that there will be a price to pay if he makes a move on the island.Trump, of course, is not unique in his reluctance to use force. Both Joe Biden and Barack Obama were also notably wary of committing US troops to battle. Like Trump, their outlook as presidents was shaped by the bitter experiences of the Iraq and Afghan wars.What sets Trump apart is not his reluctance to go to war — but the striking contrast between his tough-guy rhetoric and his real-world caution. The current president seems to have inverted Teddy Roosevelt’s famous maxim about speaking softly and carrying a big stick. Trump prefers to shout loudly, while brandishing a pencil.There is, however, one obvious problem with making too much of the Taco principle. Now that it has been pointed out to him, Trump may be goaded into trying to demonstrate that he genuinely is a tough guy. A day after the nasty “Taco” question, Trump increased America’s tariff on foreign steel to 50 per cent.It is rarely a good idea to mock a bully. Countries that suspect Trump’s ferocious threats won’t amount to much, would probably do best to keep that thought to [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 to the first working day of June. On today’s agenda we have: Donald Trump’s trade war has slammed the brakes on a global dealmaking recovery for the private equity industry. A new forecast from consultancy Bain & Company found that a long-awaited rise in dealmaking had reversed since the US president’s “liberation day” tariffs announcement in April.The key findings: The value of deals for buyout funds to purchase companies in the second quarter is on course to fall 16 per cent from the first three months of 2025, according to the report. The figure for April was down 24 per cent on the monthly average for the first quarter. The value of assets fully or partially sold by buyout funds is on track to drop 9 per cent in the April-June quarter.The context: The data highlights the mounting difficulties for the private equity industry, after several years in which a lack of exits from portfolio companies has left traditional backers such as pension funds and endowments with less money to commit to new funds. For the first time in a decade, no buyout fund closed in the first quarter had raised more than $5bn of capital, Bain said.We have more on the mounting difficulties facing the private equity industry here and on global trade tensions below.Here’s what else I’m keeping tabs on today:Mexico judiciary elections: Counting has begun in Mexico’s first-ever judicial elections. The electoral authority announced late last night that 13 per cent of the country’s 100mn voters cast ballots at the polls. Results will be announced in the coming days.US monetary policy: Federal Reserve Bank of Dallas president Lorie Logan participates in moderated conversation at an event in Dallas and Federal Reserve Bank of Chicago president Austan Goolsbee will speak in Davenport, Iowa.Russia-Ukraine talks: Officials from the two countries meet in Istanbul for a second round of talks a day after Ukraine’s most audacious attack of the war.Companies: Campbell’s is expected to report a rise in third-quarter revenue, helped by demand for its soups and frozen meals.Five more top stories1. Treasury secretary Scott Bessent yesterday insisted the US would never default on its debt as he sought to assuage Wall Street’s concerns over the state of the country’s public finances. Investor jitters over the size of the US federal debt have mounted after Trump’s “big beautiful” budget bill was approved by the House of Representatives. It begins its passage through the Senate this week.Federal Reserve: The US central bank faces a tough summer ahead with a hostile White House, writes Mohamed El-Erian.Go deeper: The close relationship between US government bond yields and the dollar has broken down as investors cool on American assets.2. US authorities are investigating a possible terrorist incident in Boulder, Colorado, after a man allegedly attacked a demonstration in support of Israeli hostages in Gaza. Six people were injured in the assault. The FBI said the attacker was armed with a “makeshift flame-thrower” and was heard to shout “Free Palestine” during the incident.3. Nationalist Karol Nawrocki has narrowly won Poland’s presidential election, beating pro-EU rival and Warsaw mayor Rafał Trzaskowski. Nawrocki’s win is a rare overseas victory for Donald Trump’s Maga movement. US homeland security secretary Kristi Noem described Trzaskowski as “an absolute train wreck” on a visit to Poland last week. Here’s more on what Nawrocki’s victory could mean for Poland, the EU and the war in Ukraine. 4. France’s Sanofi is to buy Massachusetts-based Blueprint Medicines, the maker of the world’s only approved treatment for a debilitating rare blood disorder, for up to $9.5bn. Systemic mastocytosis is estimated to affect about 32,000 people in the US. Read more on one of the biggest biotech acquisitions of 2025.5. The Canadian Steel Producers Association has warned of “catastrophic” job losses, factory slowdowns and supply chain disruption after US President Donald Trump doubled tariffs on imports to 50 per cent. The steel industry in Canada employs 23,000 and supports an additional 100,000 indirect jobs, according to the CSPA.The Monday InterviewJony Ive and Laurene Powell Jobs More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The world’s advanced economies risk a significant GDP loss if they move too quickly to localise supply chains as a result of the deteriorating geopolitical environment, the OECD has warned.Modelling by the international organisation found that aggressive reshoring of supply chains could decrease global trade by 18 per cent, with some countries losing up to 12 per cent GDP compared with persevering with a globalised trading regime.The Paris-based OECD, which represents most of the advanced economies, issued its warning as rising trade tensions between the US and China have intensified questions in boardrooms about the risk posed by integrated supply chains.Marion Jansen, head of the OECD’s trade and agriculture directorate, said the report provided a cautionary counter-narrative to advanced economies that were in danger of swinging too far in the direction of autarky.“In the past, we perhaps underestimated the risk of over-dependency on a single trade partner, but swinging too far towards localising and avoiding international trade would be another mistake, leaving us exposed to domestic shocks and huge inefficiencies,” she added.The OECD used econometric modelling to assess the impact of re-localisation, which it defined as imposing higher import tariffs, using subsidies to encourage domestic production and imposing restrictions on sourcing inputs from certain countries. Some content could not load. Check your internet connection or browser settings.The Supply Chain Resilience Review found that China’s rise as a manufacturing powerhouse over the past 25 years had shifted the balance of trade. Since 2009 export restrictions on critical industrial raw materials have increased fivefold, with China becoming a dominant trading partner for a growing number of countries. Dependency on China had “increased considerably” for several OECD member countries and regions since the mid-1990s, the analysis found, particularly in advanced manufacturing sectors such as cars, pharmaceuticals, lifts and machine parts. Canada, France, Germany and the UK were the most exposed to supply chain shocks, while countries that relied more on domestic production, including the US, Brazil and China, were relatively less exposed.As a result of its dominance of many advanced manufacturing sectors, China is the single most important country for creating “trade dependencies” for OECD members.By the early 2020s, the study found, China was the main trading partner in 30 per cent of cases where countries had “significantly concentrated imports”, compared with 5 per cent in the late 1990s. For OECD members, however, these dependencies were frequently “mutual”, playing out in both directions, while for other large non-OECD economies, such as Brazil, India, Indonesia and South Africa, the growth of import dependency with China “appears more one-sided”.Still, the modelling indicated that supply chain localisation made countries no more resilient to external shocks, with more than half the economies becoming more vulnerable to booms and busts than if they had continued with the interconnected global regime. “This runs counter to some of the claims in the general debate on the risks of GVCs [global value chains],” the report said, adding that “openness and geographical diversification” offered greater options for adjusting to disruptions.Data visualisation by Will Crofton More

Unlock the White House Watch newsletter for freeYour guide to what Trump’s second term means for Washington, business and the worldChina has accused the US of “seriously violating” a trade truce between the two powers and vowed to take strong measures to defend its interests as tensions reignited over the supply of critical minerals.China and the US agreed during talks in Geneva in early May to a deal that would temporarily reduce their tit-for-tat tariffs, which had soared as high as 145 per cent, and that Washington believed would restart the flow of critical rare earths and related magnets to the US. President Donald Trump on Friday claimed that Beijing had “totally violated” the agreement, as US officials grew increasingly frustrated with the slow pace of rare earth exports from China since the May 12 agreement. But on Monday, China’s commerce ministry said it had upheld the deal and accused Washington of introducing “a series of discriminatory and restrictive measures” in recent weeks that undermined the Geneva consensus and harmed “China’s legitimate rights and interests”.“If the US insists on going its own way and continues to harm China’s interests, China will continue to take strong and resolute measures to safeguard its legitimate rights,” the ministry said. Among the US actions cited in the statement were warnings against the use of Huawei chips globally, a halt to sales of chip design software to Chinese companies, and the cancellation of visas for Chinese students.US officials, for their part, believed the May 12 deal would unwind the export restrictions on rare earths Beijing unveiled in early April, and grew increasingly frustrated by the slow pace of approvals. People briefed on the matter said the US had privately raised the issue several times with Chinese officials since the Geneva deal and warned Beijing that it was an issue of highest concern in Washington, with Trump following it closely.This spurred China to hasten the issuance of licences for some US-bound rare earth shipments, according to one person familiar with the Chinese government’s thinking, citing bureaucratic reasons for the delays. The person said they believed this issuance had averted a full breakdown in the trade truce.While China had approved nearly a dozen rare earth shipments to the US, dozens more applications were in limbo, according to a person close to the US.“The fact that they are withholding some of the products that they agreed to release during our agreement, maybe it’s a glitch in the Chinese system, maybe it’s intentional, we’ll see after the president speaks with the party chairman,” said Treasury secretary Scott Bessent in an interview on CBS on Sunday. “What China is doing is they are holding back products that are essential for the industrial supply chains of India, of Europe, and that is not what a reliable partner does,” he said. Still, Bessent said he was confident Trump and Xi would be able to iron out differences over rare earths in an upcoming phone call, which some White House officials suggested could take place this week.China’s foreign ministry did not immediately respond to questions regarding a call. US officials have floated a Trump-Xi call several times without it coming to fruition. Michael Hart, AmCham China president, noted that, while rare earth export applications for US companies were moving slowly, Chinese suppliers had last week received approval to ship rare earths to several American automakers. “It’s a new process China is working through,” he said. “We have heard there are only a handful of officials reviewing thousands of applications.” The rise in US-China tensions sent Asian markets lower. Hong Kong’s Hang Seng index fell 0.8 per cent while Japan’s Nikkei 225 fell 1.3 per cent. The offshore renminbi weakened 0.1 per cent to 7.21 a dollar. Stock markets in mainland China were closed for a public holiday.Additional reporting by Arjun Neil Alim More

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