Aurelia Butler

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Brussels wants EU governments to exclude foreign bidders in public procurement tenders and “buy European”, as the bloc attempts to reassert itself despite the impact of US President Donald Trump’s trade war.Trump’s tariffs and threats to remove US protection from European countries unless they spend more on their militaries has spurred Europe to try and increase its self-sufficiency, from technology to defence and economic security.Stéphane Séjourné, the EU’s executive vice-president for industry and the internal market, on Wednesday presented a plan harmonising rules across the EU and cutting down barriers in the bloc’s internal market. The plan addresses challenges from transferring workers between EU countries, to inconsistent standards for e-commerce and financial services.One key element is introducing European preferences in upcoming changes to the EU’s public procurement rules, which Séjourné told the Financial Times was a “Buy European Act”. “There is a will to remain a continent that is exporting internationally and at the same time to be lucid and less naive about strategic sectors,” Séjourné said.EU governments could be allowed to bar foreign companies from bidding for government contracts for goods and services, if proposed changes to the public procurement rules are agreed next year. Current EU and World Trade Organization regulations prohibit favouring local suppliers. The move represents a major shift in the EU’s attitude to open procurement and adhering to international rules. While it would protect strategic sectors from cheaper competitors from China and elsewhere, it could open it up to potential challenges from other countries at the WTO. Séjourné, a former French foreign minister and close ally of President Emmanuel Macron, has consistently pushed for Europe to be more autonomous. He sees favouring European bidders in public procurement as a “first step”.“Then we’ll look into the private sector with arguments around safety and economic security and see which sectors we can add.”As well as the trade tensions with the US, concerns over privacy and data access have prompted calls for Europe’s tech sector to be more self-sufficient. The EU is also considering “buy European” elements in upcoming legislation on the cloud market, which is currently dominated by US companies such as Amazon, Microsoft and Google.Séjourné declined to discuss specific sectors, but said that action was needed in areas where Europe was totally dependent on one country.“In tech, we’re very, very dependent on the Americans. In raw materials, we’re 100 per cent dependent on the Chinese. These are sectors, in the current geopolitical context, [for which] we don’t want future generations blaming us for not having acted.” Still, Séjourné was hopeful that the geopolitical challenges provided an opportunity for Europe, which has been fighting to boost its stuttering economy since the Covid-19 pandemic and the energy crisis that followed Russia’s full-scale invasion of Ukraine.European companies have complained that they are strangled by the EU’s ambitious climate agenda, undercut by cheaper Chinese rivals and now are suffering the impact of Trump’s aggressive trade policy. But Séjourné argued that Europe was in an “almost ideal” position, “in the sense of the trade-off that you can do one with the other, since the Americans remain our partners and the Chinese want to strengthen the partnership”.It was possible to “make progress on many big difficulties with the Chinese in many sectors,” he said. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.It looked like an easy win for Xi Jinping in the superpower battle for global influence.The Chinese leader played host to three Latin American presidents and a gaggle of foreign ministers at a regional summit in Beijing last week. Trade between China and Latin America exceeded $500bn last year, Xi noted in his speech, a 40-fold increase in 25 years.Then he took a swipe at US President Donald Trump: “There are no winners in tariff wars or trade wars. Bullying or hegemonism only leads to self-isolation.” Brazilian President Luiz Inácio Lula da Silva, Xi’s star guest, was on message regarding his appreciation and “affection” for China. In tow were a clutch of cabinet ministers who joined the state visit on top of the Latin America-China meeting. About 20 different Sino-Brazilian co-operation agreements were signed, along with about R$27bn ($4.8bn) of planned investments. Across the ocean, Brazil’s private sector elite and a group of powerful state governors were courting another superpower. In New York for an annual set of business and bank conferences dubbed “Brazil Week”, executives and politicians played down suggestions that the Trump presidency had fundamentally changed the strong business relationship between the two giants of the Americas.“Brazilian industry is here because it understands perfectly the importance of partnership with the US,” said the president of Brazil’s industry confederation, Ricardo Alban. “We go back more than 200 years together and we will never belittle that history.”Although Brazil’s chief executives and bankers dislike Trump’s tariffs on steel and aluminium (both Brazilian exports), they are less bothered by his politics. Many of them voted for Jair Bolsonaro, the former Brazilian president known as the “Tropical Trump”. They are more worried about the profligacy of Lula’s government, which is running an overall deficit of nearly 8 per cent of GDP, forcing up interest rates, weakening the real and deterring often short-term US investors.“Brazil is more culturally aligned with the US and closer to US values. But Brazilian business people increasingly realise that if they want long-term investment they have more possible partners in China, the Middle East or Singapore than in the US,” said Marcos Troyjo, a former president of the New Development Bank.But US money still matters. While many executives from Brazil’s booming agribusiness sector were glad-handing Chinese officials with Lula, the chief executive and the billionaire owners of the world’s biggest meat producer, Brazil’s JBS, chose to go to New York, perhaps with an eye on the company’s impending US stock market listing.Dario Durigan, Brazil’s deputy finance minister, was also in New York and keen to underline that his country was not picking sides. “In a world with a lot of volatility and where people are very unsure [about the future], Brazil is positioning itself as a safe harbour,” he argued. The relationship between two of the Brics’ founder members is less unequal than some might suppose. Brazil is one of the few nations to run a large trade surplus with China and its dominance of global commodity exports gives it some strong cards.Brazil supplies nearly 60 per cent of the world’s soyabean exports, while China, the world’s top soyabean importer, has few options for diversifying supplies. (The US is the second-biggest exporter and number three, Paraguay, recognises Taiwan instead of Beijing.) The story is similar with meat, where Brazil also leads exports and China is the top importer.Despite the warm words in Beijing, Brazil has not signed up to China’s Belt and Road infrastructure initiative and no big new construction projects were announced during Lula’s visit.Marcos Caramuru, a former ambassador to China, said Lula’s visit was successful in consolidating political dialogue and a personal friendship with Xi, despite the lack of new joint infrastructure projects.“Brazil was pointing in both directions last week and seems to be operating well,” he said of the delegations to Beijing and New York. “In China you need the government to make things happen, while in the US you work with the private sector and you don’t need the government.” Tellingly, Lula’s speech to the China-Latin America forum ended not with a paean to Xi, but a plea for Latin America to unite and forge its own future. If that happens, Brazil, rather than China, may be the winner of last week’s [email protected] More

This article is an on-site version of our Europe Express newsletter. Premium subscribers can sign up here to get the newsletter delivered every weekday and fortnightly on Saturday morning. Standard subscribers can upgrade to Premium here, or explore all FT newslettersGood morning. Today, the man who proposed a plan to fix the EU’s single market tells our colleagues that Brussels is not being ambitious enough in its remedies. And Laura reveals a cross-party European parliament proposal to cut off all EU funding to Hungary.To the LettaPolicymakers in the EU should focus on fixing the bloc’s internal market rather than spending their energy on tariffs and defence projects, Enrico Letta tells Alice Hancock and Barbara Moens.Context: The former Italian premier last year penned a report on the state of the bloc’s 30-year-old internal market, which diagnosed the gaps and highlighted the areas the EU should focus on to deepen integration. The European Commission will today announce a new strategy for the single market guided by Letta’s ideas. It will list actions such as simplifying compliance for small companies, harmonising waste disposal, and possible joint rules for sending people to work in other EU countries, according to a draft seen by the FT.But Letta said that while this was “positive”, the “top priority” should be for the commission to present more binding rules to member states. This means tabling regulations, which member states have to copy and paste into their rule books, rather than directives, which they can implement as they choose.“We are entering a moment in our history when directives are like the cavalry horses against the tanks,” Letta said.Letta warned that policymakers should focus on strengthening the EU’s internal market rather than putting all their energy into tariff retaliation lists in the trade war with the US, or new defence initiatives. Progress “will not come by inertia”, he said.The “crazy Trump nightmare” of tariffs was a “lose-lose” situation for the EU, not only because of the economic impact, but also because it sucked up all the attention in Brussels, Letta said. Brussels needed the courage for “strong negotiations with the member states”, particularly larger ones, Letta said. He feared big countries “were not ready to accept a big movement of consolidation” and were too preoccupied with protecting their own companies and interests.Chart du jour: Fat trapDanish drugmaker Novo Nordisk has seen its share price fall 60 per cent from its peak, and last week ousted its chief executive. The market stance towards its star drug Ozempic highlights the pitfalls of being a one-trick pony. Turning off the tapEuropean lawmakers across party groups are calling on the European Commission to freeze all funding to Hungary as Budapest continues to chip away at the rule of law, writes Laura Dubois.Context: The EU currently withholds some €18bn in funds dedicated to Budapest over concerns about corruption, discrimination against LGBT+ people and breaches of the rule of law. The European parliament last year sued the commission over the unfreezing of about €10bn in a deal to get Budapest to back aid for Ukraine.Parliamentarians are now stepping up the pressure.“We urge the European Commission to increase pressure on Viktor Orbán’s government to cease violating EU values and EU laws by immediately suspending all EU funding for Hungary,” a group of 26 lawmakers wrote in a letter to the commission, seen by the FT.The letter, initiated by Green MEP Daniel Freund, lists a number of measures which it says constitute an “alarming regression” on the rule of law, including some undermining the independence of the judiciary.They highlight a draft law “enabling the state to blacklist NGOs deemed a threat to sovereignty”. The law, which was discussed in parliament yesterday, would allow a “Sovereignty Office” to investigate NGOs or media organisations receiving foreign funds, and impose potentially heavy fines. Critics view it as a measure by Prime Minister Viktor Orbán to quell dissent.The lawmakers also criticise Hungarian legislation allowing the suspension of citizenship for dual nationals perceived as threats, and a ban on the Budapest Pride march.“Given these troubling developments, we firmly believe the EU must adjust its response,” write the MEPs. “We therefore consider a freezing of all funds proportionate to the risk posed to the union’s financial interests.”The lawmakers also warned against allowing Hungary to claw back some funds using loopholes.In the past three years, Hungary has spent about €6bn from the EU budget per year, according to commission figures.What to watch today Annual EU budget conferenceEU and African Union foreign ministers meet in Brussels.European parliament president Roberta Metsola meets the president of Italy, Sergio Mattarella, and opens the chamber’s plenary session in Brussels.Now read theseRecommended newsletters for you Free Lunch — Your guide to the global economic policy debate. Sign up hereThe State of Britain — Peter Foster’s guide to the UK’s economy, trade and investment in a changing world. Sign up hereAre you enjoying Europe Express? Sign up here to have it delivered straight to your inbox every workday at 7am CET and on Saturdays at noon CET. Do tell us what you think, we love to hear from you: [email protected]. Keep up with the latest European stories @FT Europe More

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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 worldA top IMF official has called on the US to reduce its fiscal deficit and tackle its “ever-increasing” debt burden at a time of rising concerns about President Donald Trump’s plans for sweeping tax cuts. “The US fiscal deficits are too large and they need to be brought down,” Gita Gopinath, the IMF’s first deputy managing director, told the Financial Times this week.She also warned that the world’s biggest economy was still affected by “very elevated” trade policy uncertainty despite “positive developments”, such as the Trump administration dialling back tariffs on China. Gopinath’s comments came after Moody’s stripped the US of its last remaining pristine triple A credit rating owing to concerns over the country’s growing debt. Trump’s proposal to prolong his 2017 tax cuts beyond this year has added to those worries and prompted unease among investors. The administration says the cuts — combined with deregulation — will pay for themselves with higher growth, but neither Moody’s nor financial markets are convinced. The rating agency said last week that the proposed legislation, which Trump calls “the big, beautiful bill”, would raise US deficits from 6.4 per cent last year to just under 9 per cent by 2035. Treasury secretary Scott Bessent told NBC on Sunday that the Moody’s downgrade was “a lagging indicator”, blaming the fiscal situation on the Biden administration. He added that the administration was “determined to bring the spending down and grow the economy”. He previously said he would cut the deficit to 3 per cent by the end of Trump’s term. But Gopinath noted that US debt to GDP was “ever-increasing”, adding: “It should be that we have fiscal policy in the US that is consistent with bringing debt to GDP down over time.” The federal government debt held by the public amounted to 98 per cent of GDP in fiscal 2024, compared with 73 per cent a decade earlier, according to the Congressional Budget Office. Although the IMF said last month that it expected the US fiscal deficit to fall this year as long as tariff revenues grew, those projections did not account for Trump’s tax bill, which is winding its way through Congress. Gopinath added that Bessent had been right to make a “clear call” to bring down fiscal deficits. Trump is pressuring Republicans in the House of Representatives, where he has a slim majority, to support the legislation, arguing that doing otherwise would increase voters’ tax bills. Deficit worries and Moody’s downgrade have driven the dollar lower and pushed prices down and yields up in the Treasury market. The 30-year Treasury bond yield on Monday rose to 5.04 per cent, its highest level since 2023. A bigger deficit means the government will have to sell more bonds at a time when foreign and domestic investors have begun to question the stability of the US market. The IMF in April cut its US growth forecast by nearly a percentage point to 1.8 per cent in 2025, while dropping its global growth projection to 2.8 per cent, as it incorporated the impact of Trump’s tariffs. Since then, Trump has announced sharp cuts to American levies, as China and the US agreed to slash respective tariffs by 115 percentage points for 90 days. “The tariff pause with China is a positive development,” said Gopinath, who also welcomed the US-UK agreement. But she stressed that the US effective tariff rate remained far higher than it was last year and that high levies on China had only been paused. First-quarter GDP figures had been roughly in line with IMF expectations, she said, adding that data remained difficult to read because businesses rushed to buy supplies ahead of the introduction of Trump’s tariffs. “It is going to take a little while before the effects of all these developments work through the data,” she said. “It is absolutely a positive to have lower average tariff rates than the ones we assumed in [April] . . . but there is a very high level of uncertainty, and we have to see what the new rates will be.” Additional reporting by Kate Duguid in New York More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The writer is the author of A Random Walk Down Wall Street A shaky, temporary truce may have been declared in the trade war between the US and China but it is clear the world has regrettably entered a new era of increased friction in the flow of goods and services. That will carry a big cost for growth in the global economy.There could be legitimate arguments for limited and targeted tariffs designed to enhance national security or to help negotiate a lowering of trade barriers imposed by other nations. But a policy of imposing higher permanent general tariffs allegedly to increase US wealth is completely misguided. It will not achieve the goal of restoring American manufacturing. Most economists would agree with the determination of David Ricardo, who wrote in the early 1800s that free international trade can increase the overall welfare of nations. What Ricardo argued was that the availability of goods and services of both of two trading nations could be increased if each country specialised in the products on which they had a relative advantage.If each country did this and imported goods in areas where they were relatively inefficient, the total amount of output available for both countries would be larger than if each country produced everything themselves. International trade was not a zero-sum game. Trade can make both countries richer.A simple illustration will show the benefits of trade. Think of two countries, Britain and France, each of which has only 100 hours of labour available. Suppose if Britain devoted half its labour — 50 hours — to cloth, it could produce 50 units of that. The remaining 50 hours if devoted to wine could produce 10 barrels. France, however, could produce 50 barrels of wine by devoting 50 hours to wine production but only 20 units of cloth with the remaining 50 hours of labour. Total production in both countries would be 70 cloth and 60 wine.Now suppose instead that each country specialises with its 100 hours of labour. Britain produces 100 units of cloth. France concentrates exclusively on wine, making 100 barrels. Total combined production is far greater. By engaging in specialisation and trade both countries are better off. If Britain trades 40 units of its cloth for 40 units of wine, it can consume 60 units of cloth and 40 barrels of wine. France can have 60 wine and 40 cloth. This was Ricardo’s universally accepted contribution over 200 years ago.Consider now an actual example of aluminium and wheat production in the US and Canada. Canada has a comparative (and absolute) advantage over the US in the production of aluminium because it is able to rely exclusively on inexpensive, clean, reliable and renewable hydropower. Clearly efficiency is maximised by having Canada produce aluminium and trade with the US by importing wheat. Indeed, this is precisely what has happened when markets have been allowed to function without restraint. But now misguided policy seeks to eliminate the positive benefits of trade by imposing punitive tariffs on Canada, our previously friendly trading partner.Would it even be possible to substitute US production of primary aluminium for Canadian sources? In a recent interview, William Oplinger, the chief executive of Alcoa, was asked that question. He did indicate that it might be possible but that it would take seven to 10 years to build the production facilities required. Moreover, investment of billions of dollars would be required, and it is far from certain that such funds could be raised. Oplinger also warned in February the tariffs could cost about 20,000 US aluminium industry jobs and a further 80,000 jobs in sectors that support it.But it is very unlikely that a new crop of production plants could be run. Aluminum production requires availability of enormous power, and the US power grid would be unable to handle the smelting demand. There are already concerns that power supplies will not be able to meet the increased use of artificial intelligence. Reshoring of aluminium smelting may not even be possible.To be sure, we do need to be concerned for the losers created by unfettered trade. But the solution lies in using our educational system to provide training for the good jobs that will be required in areas such as energy generation, telecommunications, skilled repair and healthcare, and in facilitating the geographic mobility needed to take advantage of the new economic opportunities. Cutting ourselves off from the benefits of free trade will not make us richer in the long run. Permanent general tariffs will only make the US and foreign nations considerably poorer.  More

Japan’s largest companies have said tariffs planned by the Trump administration could erode annual profits by tens of billions of dollars, with the probability of a bigger impact in the event of a US recession. Groups including Toyota, Sony and Mizuho could suffer a total hit as high as ¥4tn ($27.6bn), according to Financial Times calculations based on company guidance during the current full-year earnings season.The total could rise, with many companies refusing to provide estimates, citing “extreme uncertainty”, and some still to report.With executives at leading industrial groups reporting a massive impact from tariffs, pressure is increasing on the country’s negotiators to secure a deal to lower levies, analysts said. Chief negotiator Ryosei Akazawa plans a third round of talks with US Treasury secretary Scott Bessent by the end of the month.Japanese car companies, as well as steel and aluminium producers, are subject to tariffs of 25 per cent on US imports, while other sectors have 24 per cent levies on their goods as part of President Donald Trump’s “reciprocal” tariffs. The automotive industry, Japan’s biggest export sector, is the most exposed. In 2023, Japan shipped 1.5mn vehicles to the US, worth more than $40bn, and car manufacturers ship many vehicles and parts into the US from Mexico and Canada, which have also been stung by tariffs.“The impact of tariff policies is huge,” said Toshihiro Mibe, chief executive of Honda, which predicted ¥650bn ($4.5bn) of extra costs and has slashed its investment plans to 2030 by ¥3tn ($20bn) to ¥7tn.Toyota is the hardest hit, estimating an impact of $1.2bn in April and May.Some content could not load. Check your internet connection or browser settings.The $27.6bn total was calculated by adding up tariff impact figures provided by the country’s top 100 largest groups by market capitalisation, car companies and others that cited a large impact, in their earnings presentations or calls. Most of the estimates given by Japanese groups assume no measures to offset the charges such as a product price rise. When a range was given, the middle estimate was taken, and when the impact was said to be “several billions of yen”, it was assumed to be ¥3bn.For Toyota and Mazda, the annual impact was extrapolated from the monthly figure for the remainder of their financial year, which resulted in a total that was lower than estimates made by SBI Securities.The earnings also revealed large vulnerabilities across the rest of Japan, despite efforts over decades to localise production in the US, and many companies not putting a figure on the potential pain.Tadashi Imai, president at Nippon Steel, which is still attempting to buy US Steel for $15bn and declined to estimate the tariff blow, said the levies were “expected to have a tremendous impact on the domestic and overseas steel industries, including indirect effects”.Many companies said they could take countermeasures to soften the impact by raising prices or shifting more production to the US.“In the medium to long term, we would like to change the source of product supply and become more efficient to reduce the impact of tariffs,” said Takuya Imayoshi, president of Komatsu, which has been a target of Trump’s ire for many years over its competitively priced excavators. A lengthy period of tariffs would probably mean a much larger financial hit, with leaders of many companies saying no reliable estimate could be provided, given the volatility and uncertainty over their implementation.“There is no point in just reporting numbers when we have no idea what the underlying assumptions are,” said Ryo Hirooka, chief financial officer of Hoya, a glasses and contact lens manufacturer, 15 per cent of whose sales are generated in the US.Others have put in provisional “buffers” to account for extra tariff-related costs, such as the ¥40bn given by the trading house Sumitomo Corporation. President Shingo Ueno said: “This is the first time ever that we have announced our results with a buffer factored in [to the forecast] from the very beginning. I think that alone shows how extremely uncertain the situation is.”There is also a risk that Japan’s economy could be steered further off course. Figures released on Friday showed Japanese GDP turned negative in the January-to-March period from the previous quarter, even before the US tariffs had begun to show in the export numbers. While broadly in line with market expectations, the 0.7 per cent annualised quarter-on-quarter contraction highlighted fragility, said analysts.Japan’s trade negotiations with the US appear to have lost some of their early momentum and corporate leaders are urging the government to accelerate efforts to strike a deal.“I would expect that they move faster, to be very honest,” said Nissan chief executive Ivan Espinosa. “We do need to get clarity as soon as possible.” More