Aurelia Butler

Giorgia Meloni is under pressure from Italy’s EU partners to “choose a side” in the transatlantic trade war as she wields an effective veto over a push by some big member states for Brussels to hit back hard against US tariffs.The Italian premier — who has friendly ties with US President Donald Trump — is opposing a Franco-German push to escalate the EU’s response to the 20 per cent so-called “reciprocal tariff” to be imposed on its exports.Paris and Berlin are among member states urging the European Commission to hit US services exports such as technology in response to Trump’s measures affecting more than €360bn of its trade.At a meeting of ambassadors on Thursday, France, Germany, Spain and Belgium said the EU should be prepared to use its “trade bazooka”, the anti-coercion instrument, for the first time ever to achieve this, said two EU diplomats. But a move using the instrument could be blocked by a weighted minority of member states. Given Italy’s size, it would be the decisive member of the No camp, which also includes Romania, Greece and Hungary, the diplomats said.Giorgia Meloni has criticised Donald Trump’s tariffs on the EU this week as ‘a wrong decision’. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.In an early interview as US Treasury secretary back in February, Scott Bessent made it clear that bond yields, rather than stock prices, were the financial market metrics that he and President Donald Trump cared most about.While he didn’t elaborate why, it’s not hard to guess. US bond yields set the price for new mortgages. They determine the price and availability of finance for most US company borrowing. And, perhaps most importantly to Trump, bond markets hold the purse strings to government.Since the interview, US stocks have bombed — down 13 per cent by mid-morning on Friday in New York. Equity markets hate uncertainty and there has been no shortage of that since Donald Trump’s return to the White House. Tariff flip-flopping, public sector job cuts amid upheaval over government policy and a broader assault on multilateralism have cast a dark shadow over the economic outlook. But bond prices have risen, meaning that yields have dropped.In the context of weaker global bond markets, this is impressive. British, French and German ten-year government bond yields have risen over the same period. American exceptionalism lives on in their bond market, if no longer across their newly-sagging equity indices.Furthermore, this exceptionalism has occurred despite higher inflation expectations and an increasingly worrying debt trajectory — the traditional bogeymen of bond markets. Since Bessent’s interview, both private sector economists and markets alike have revised higher their forecasts for US inflation. And the nonpartisan Congressional Budget Office not only expects ever rising levels of federal debt, but has also increased its projected path of federal deficits.Moreover, there has been much market chatter over a so-called Mar-a-Lago Accord involving what would effectively be a coercive exchange of Treasury bonds upon America’s allies. The idea was discussed in a report written by Stephen Miran before he became chair of Trump’s Council of Economic Advisors. When asked about the idea last week, Miran would only say that Trump’s focus was on tariffs. We don’t know how much of the $3.8tn of US Treasury holdings marked as foreign official holdings are owned by its allies, but talk of a debt exchange is unlikely to encourage them to add more.And yet, despite rising inflation expectations, the government debt burden and the talk of a debt exchange, the US market has had no Liz Truss moment.Some content could not load. Check your internet connection or browser settings.What explains the strength of US government bonds? Well, yield declines have been accompanied by the sort of news that administrations tend to fear and bond markets tend to relish: leading economic indicators have fallen off a cliff. This is because bad economic news tends to be a prelude to cuts in short-term interest rates, making existing bonds with higher yields more valuable. And they’re betting that a weak economy will overwhelm rising consumer prices in the Federal Reserve’s rate-setting calculus.The collapse in leading indicators looks largely self-inflicted. So-called “soft data” series — such as surveys of consumer confidence and manufacturing purchasing managers — reflect heightened uncertainty about the economic outlook. Both central bankers and bond markets are watching closely for signs that harder economic data will begin to follow the softer data south.In a note entitled “There will be blood” on Friday, JPMorgan raised its estimate of the risk of recession in the global economy this year to 60 per cent from 40 per cent if the tariff increases are maintained. Since Bessent’s February interview, the bond market has priced in almost three additional rate cuts by the Fed.Given the dominant role of the dollar in global commerce, Treasury bonds also have a special place not only in global financial plumbing, but also on the balance sheets of the world’s governments and firms. This guarantees that, should the US economy slow sharply, the Fed can cut rates and the government can cover revenue shortfalls with additional bond issuance. And substantial demand for Treasuries will be forthcoming for as long as the US retains monetary hegemony.Bond traders cannot imagine that the administration would be so reckless as to threaten the dollar’s reserve currency status by enacting the coercive exchange idea. Or at least they are unwilling to price it. Loss of this so-called exorbitant privilege would be devastating. Moreover, these losses would probably stretch far beyond American shores given the interconnectedness of the global financial system. So — perhaps ironically — investors seeking shelter from the damage being done by US tariffs continue to find it in its government’s bonds. At least for now.“Wall Street, where you and I came from, has had it great”, Bessent told his interviewer. “Under this administration, it’s Main Street’s turn”. The bond markets are betting that the Trump administration is engaging in an act of economic self-harm. If it’s right, Main Street will have to wait. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Europe is tallying the potential cost of President Donald Trump’s tariffs. The trade war will fray ties between the world’s two most closely bound continents, unstitching some of the trillions of dollars of sales by European companies’ foreign affiliates in the US. The UK, of course, has been somewhat cushioned by a lower tariff rate. That’s important because — fittingly given its special relationship with the US — it tops the charts of countries with the biggest sales across the Atlantic. The FTSE 100 derives a quarter of its sales from the US; the FTSE 250 a tenth.  Decades of integration have borne fruit. European companies’ income in the US rose by almost a fifth year-on-year to $205bn last year, reckons AmCham EU. ​​The business body estimates that European affiliates in the US reaped sales there of $3.3tn in 2023, more than treble the value of comparable exports.Multinationals have long banked on broad geographic reach to smooth earnings. Heavy industry is not far behind, including defence. BAE Systems, Europe’s biggest defence company, derives 44 per cent of its sales from the US, more than it garners from its home UK market and the rest of Europe combined.Or look at tech, another sector caught in the geopolitical riptides. ASML, which produces machines to make chips and is Europe’s biggest tech stock, almost doubled the portion of sales from the US over two years to 16 per cent last year. Its boss has warned that geopolitics threatens to stifle collaboration and thus innovation.True, European affiliates’ sales in the US are usually backed by at least some production in the country, reducing the tariff threat. Some 20 FTSE 100 companies already have more than a fifth of their facilities in the US, says AJ Bell, led by industrial equipment rental company Ashtead.European companies will no doubt seek to shift production to the US where possible. In some sectors, there is existing spare capacity. Bernstein estimates that carmaker Volkswagen’s North American production will be only 67 per cent of its capacity this year. But re-localisation opportunities are limited and building new plants and factories will take time.There are other ways of mitigating tariff impacts — including passing on costs to consumers, sharing them with the supply chain, or diverting shipments to other countries. But the likeliest affect of taxing goods is to reduce demand for them. Expect ports and shipping lanes to be a lot emptier.louise.lucas@ft.com More

Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldSir Keir Starmer will discuss the “shifting” global economic landscape precipitated by Donald Trump’s trade war with fellow world leaders over the coming days, and press the need to strengthen partnerships in response.The UK prime minister will hold a flurry of bilateral calls with British allies across multiple regions, according to officials. On Friday, Downing Street rebuffed the US president’s suggestion that Starmer was “very happy” that Washington has slapped a 10 per cent levy on British exports, reiterating London’s “disappointment” over the move. “We accept that the tariffs imposed on the UK put us in a relatively more favourable position than other countries, but of course, the impact on the UK will be real,” Number 10 said. Trump’s tariff schedule is ushering in a “new era” for world trade, which will have “an economic impact . . . both here and globally”. Starmer’s spokesperson added: “The global economic landscape is shifting. It means we have a responsibility to work even more closely with other countries to maintain stability and strengthen our partnerships abroad.”The flurry of diplomatic activity this weekend is expected to involve Starmer, who will be at Chequers, calling leaders from Europe and other regions.The US hit the UK with the lowest baseline tariff, along with many other countries, half the 20 per cent rate applied to the EU.Trump told reporters on Air Force One he thought the UK prime minister was “very happy about how we treated them with tariffs”. British Treasury minister James Murray said on Friday the UK’s priority now was to negotiate a trade deal with Trump “at pace”. He told the BBC: “We want to see the additional tariffs removed.”However, British officials admit that it will be tough to persuade the Trump administration to cut the baseline tariff below 10 per cent, although talks on a deal are continuing.A key aim for British ministers is to cut the 25 per cent global tariff applied by the US to car exports — the automotive sector is one of the most directly exposed parts of the UK economy to the Trump tariffs.“That is a particular concern to me,” business and trade secretary Jonathan Reynolds told MPs on Thursday. The IPPR think-tank estimated that 25,000 direct jobs in the car industry could be at risk, with employees at Jaguar Land Rover and Mini seen as most vulnerable.While the UK’s car industry mainly exports to Europe, the US accounts for one in six models shipped abroad and is the largest market for high-end manufacturers such as JLR, Bentley and McLaren.Reynolds has started a four week consultation with British business on possible retaliatory measures against the Trump tariffs, including targeted measures against selected products. However, Reynolds has made it clear that business does not want an escalation of a trade war.British negotiators, including Britain’s US ambassador Lord Peter Mandelson, are looking at scrapping or scaling back Britain’s digital services tax, which mainly affects US tech firms, along with other concessions, such as cutting tariffs on certain meat and seafood products.The UK is also trying to secure a tech partnership with the US as part of a broader economic deal, including regulatory changes to facilitate transatlantic co-operation.Reynolds has dismissed suggestions that American criticisms of free speech in Britain are part of trade negotiations and rejected the idea that the UK would water down its online safety laws to appease US tech firms.“The talks I have had with my US counterparts are to do with goods, services, the regulation of professional bodies and all the things we would associate with normal trade talks,” Reynolds told MPs on Thursday.“The United States is not seeking to make our children unsafe or more vulnerable. That is not the right approach to take to our key and core ally.” More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Brewers have warned that a 25 per cent tariff on beer imports to the US could lead to 100,000 job losses and brewery closures in Europe as they called on the European Commission to defend them from the levy. The introduction of the levy this week as part of US President Donald Trump’s “liberation day” tariffs has blindsided brewers and will inflict a financial hit on American importers of European and Mexican beers such as Heineken and Corona. Brewers said they were confused about whether the new tariff applied to all beer or only to products imported in cans. “We are calling on the commission to use all diplomatic channels and whether through negotiation or retaliation, find a way to de-escalate this tariff in which we have become a collateral victim,” said Julia Leferman, secretary-general of Brewers of Europe, a trade group whose members include AB InBev, Heineken and Molson Coors. Brewers of Europe, which also represents Carlsberg, Asahi and trade groups from 28 countries, said the EU’s directorate general for trade had contacted US officials but had failed to get clarity on the scope of the tariffs, which come into effect on Friday. The 25 per cent rate is higher than the 20 per cent tariff that will apply to all EU goods imported into the US. European brewers exported €870mn worth of beer to the US in 2024, according to the trade group. It estimates that 100,000 out of 2mn brewing jobs in the bloc could be lost as a result of the move. Analysts estimate that US imports of Mexican beers make up about 85 per cent of sales by Constellation Brands, which produces Corona and Modelo. Heineken’s exposure is much lower, with imports to the US making up 3 per cent of group sales. Constellation did not immediately respond to a request for comment. Heineken declined to comment.Aluminium imports to the US were already subject to tariffs before Trump’s sweeping announcements this week, which widened his global trade war.Brewers were dragged into the president’s net on Thursday when the US commerce department added imports of “beer” and “empty aluminium cans” to the list of products subject to a 25 per cent tariff. “We struggle to understand why beer has been downgraded to be a derivative product of aluminium,” Leferman said. “It can’t be that we are listed alongside cables and wires.”The wording of the commerce department’s amendment to its “aluminium presidential proclamation” left many unanswered questions, the industry has said. An executive at one international brewer said it was not clear whether only beer in cans was included in the scope of the tariff, or all beer. Another brewing giant said the wording of the amendment was “causing confusion”, adding that they had concluded for now that it meant beer and beer cans. Analysts at Citi said the change meant that US beverage producers were “likely to source more cans domestically” but that the broader impact on the aluminium market would be “marginal”. The aluminium in the cans came mostly from Mexico, Canada and China, they estimated.William Bain, head of trade policy at the British Chambers of Commerce, said beer had been included within the tariffs after representations by US industry, making it harder for foreign competition to access the American market.  Additional reporting by Peter Foster in London More

Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldChina has announced tariffs of 34 per cent on all US imports in retaliation for duties unveiled by President Donald Trump this week, moving the world closer to a full-blown trade war.Global stock markets extended their losses on Friday after the announcement, with futures tracking the S&P 500 down 3 per cent and the Europe-wide Stoxx 600 4.3 per cent lower.China’s Ministry of Commerce said on Friday that the tariff, which matches Trump’s latest increase in duties on Beijing, would be imposed on all imported goods from the US from April 10, a day after America’s “reciprocal” levies come into effect.Trump’s announcement this week of the 34 per cent tariff on Chinese imports to the US will take Washington’s total levies on Chinese goods to more than the 60 per cent he threatened during last year’s election campaign.Beijing, which had previously considered such a level of tariffs as a worst-case scenario, denounced the new US duties as “a typical unilateral bullying move”.It added that this week’s round of US tariffs “does not comply with the rules of international trade and seriously damages the legitimate rights and interest of China”.Some content could not load. Check your internet connection or browser settings.Beijing’s latest measures are likely to have the most impact on US agricultural exports, including soyabeans, wheat and corn. China is also a significant importer of pharmaceuticals, crude oil, petroleum gas and liquefied natural gas from the US.The trade war comes at a sensitive moment for Chinese President Xi Jinping, who has leaned on exports to steer the world’s second-largest economy through a property sector slump and deflation.Trump’s move to impose steep tariffs on US trading partners around the world has convulsed markets. On Thursday, about $2.5tn in market value was erased from Wall Street stocks and all of the dollar’s post-election gains were wiped out.As the falls continued on Friday, the FTSE 100 slumped 3.8 per cent and Germany’s Dax lost 3.7 per cent.Some content could not load. Check your internet connection or browser settings.Investors swept into US Treasuries, pushing the 10-year yield down 0.16 percentage points on the day to 3.9 per cent, their lowest since early October.Beijing is among the biggest targets of the “reciprocal” tariffs unveiled by Trump, who had already imposed a separate duty of 20 per cent on Chinese goods earlier this year.Andrew Gilholm, head of China analysis at consultancy Control Risks, said Beijing could suffer “major self-inflicted damage” from fully matching US tariffs, given China’s trade surplus with the US and the tariffs it already has in place.China announced export bans on seven types of rare earths on Friday, while US tech companies, including drone makers Skydio and Brinc Drones, were added to its “unreliable entity” list, which bans Chinese suppliers from selling components to them. 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 following a day of carnage on global markets. We’ll bring you the latest on the latest on the impact of the Trump tariffs. And here’s what else we’re covering: South Korea’s president removed What ‘geoeconomics’ can teach us US troops prepare for Arctic warfareAnd the Orient Express’s first makeover in four decadesA global stock market sell-off, triggered by Donald Trump’s “liberation day” tariffs, deepened today, with falls in Asia and Europe presaging further falls in the US when Wall Street opens. Here’s what you need to know:The fallout so far. The tariffs wiped out about $2.5tn of market value on Wall Street yesterday, with technology stocks, banks and consumer goods companies suffering the biggest falls on the worst day for US shares in nearly five years. Brent crude slumped amid fears of a global economic slowdown and on the back of an unexpected announcement from the Opec+ countries that they would increase production from next month. Havens such as government bonds and gold benefited from the “flight to safety”. Shorter-dated bonds, which move with interest rate expectations, were particular beneficiaries. We saw the largest moves in two- and three-year yields, which move in the opposite direction to prices, since August 2024. Longer-term inflation expectations have been more stable.“There has been a massive flight to quality into Treasuries,” said Matthew Scott, head of core fixed-income and multi-asset trading at AllianceBernstein.What does the Federal Reserve do next? The bond price moves suggest investors are expecting a burst of inflation. Fed chair Jay Powell, who is speaking at an event later today on the economic outlook for the US, is facing a fiendishly difficult trade-off between rising prices and weakening growth. Scarred by the inflation surge that followed the end of the Covid-19 lockdowns, the central bank is anxious to prove it takes its inflation-fighting mandate seriously.The next few days will see many countries rushing to placate Washington with concessions. The universal 10 per cent import duty kicks in tomorrow and higher “reciprocal” tariffs from Wednesday. Here’s more analysis on the fallout:For more on the impact of Trump’s trade war, sign up for our Trade Secrets newsletter if you’re a premium subscriber, or upgrade your subscription here. Here’s what else we’re keeping tabs on today:Economic data: The government’s monthly employment data report is expected to confirm hiring slowed last month. Brazil’s statistics agency the IGP-DI price inflation index which is expected to confirm price rises slowed in Latin America’s biggest economy last month.Federal Reserve: Board governor Michael Barr will appear at an AI and banking conference hosted by the Federal Reserve Bank of San Francisco while Christopher Waller will participate in a discussion in New York on payments. TikTok: A deadline forcing the sale of the hugely popular social media app to non-Chinese owners comes into force tomorrow. Trump suggested yesterday he could cut tariffs if China allows ByteDance to divest the app.How well did you keep up with the news this week? Take our quiz.Five more top stories1. The director of the US National Security Agency was fired yesterday, according to Democratic lawmakers, as President Donald Trump extended his purge of America’s security establishment. The dismissal of Timothy Haugh came just hours after Trump sacked a number of national security officials following claims by a far-right activist of disloyalty to the president’s “Make America Great Again” agenda. Here’s more on the sackings. 2. South Korea’s president Yoon Suk Yeol has been removed from office four months after his shortlived attempt to impose martial law sparked a prolonged political crisis. The country’s Constitutional Court upheld Yoon’s impeachment, ending his presidency less than three years into his five-year term.3. BP chair Helge Lund has announced plans to step down “most likely during 2026” after a bruising tenure in which the oil major tried to pivot away from fossil fuels only to reverse course this year. Tom Wilson looks back at the highs and lows of Lund’s tenure. 3. PwC China plans to spin off its Dark Lab cyber security arm in a private buyout deal as the Big Four firm seeks to improve liquidity and navigate the financial fallout from its audit of failed Chinese property developer Evergrande. Here’s how much the deal could generate.4. Meta and the US Federal Trade Commission are set to face off in federal court later this month in the first big test of whether the new Trump-appointed antitrust regulator will continue to crack down on Big Tech. Mark Zuckerberg has met the president in recent days in an apparent last-minute lobbying attempt to avoid a court showdown.From the MagazineA group of US Marines are debriefed after training in the Arctic More

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