Aurelia Butler

Unlock the White House Watch newsletter for freeYour guide to what Trump’s second term means for Washington, business and the worldLower US tariffs on British steel, aluminium and car exports are unlikely to take effect for weeks, according to UK officials, as companies complain about continued uncertainty about the levies despite a bilateral trade deal.Prime Minister Sir Keir Starmer said last week the US had agreed in the trade accord to “remove tariffs” on UK steel and aluminium, as well as cut levies on British car exports to 10 per cent for an annual quota of 100,000 vehicles.US commerce secretary Howard Lutnick also signalled UK aerospace had secured a zero tariff rate, saying Washington had “agreed to let Rolls-Royce engines and those kinds of plane parts come over tariff free”. Officials in London and Washington said discussions were ongoing over how much UK steel and aluminium the US would exempt from President Donald Trump’s 25 per cent global tariff on those metals.UK officials also said Washington would need to follow due process in reducing tariffs on these three categories of British exports in the coming weeks, citing in particular the need to finalise bespoke quotas for steel and aluminium. They added it was more important to get the balance right for British industry than to push for a faster implementation of the UK-US accord, adding it was normal for trade deals to take several months to take effect.To adjust the US tariffs on UK cars, Washington would need to issue a document formally amending them and altering the level of duties collected by American customs officials. The UK’s five-page deal with the US aimed at reducing the impact of Trump’s tariffs was completed about five weeks after he unveiled steep levies against almost every major trading partner.The limited nature of the accord stands in contrast to the free trade agreements struck by the US with other nations, which typically result in documents ranging from hundreds to a few thousand pages and can take years to finalise. UK industry expressed concern at the uncertainty around the trade deal with the US, with executives at British carmakers saying they were still subject to a 27.5 per cent levy on exports to America.On Tuesday, Frank-Steffen Walliser, the boss of Bentley, the UK subsidiary of Volkswagen Group, told a Financial Times conference that uncertainty about when the US tariff would change on British car exports was leading consumers to delay purchases.UK aerospace executives said despite verbal reassurances from the British government that the sector would no longer be subject to a 10 per cent US tariff they had not received written confirmation. One executive said the industry needed “reassurance” the promised zero per cent tariffs would materialise. “We are confident it will come but it won’t come just yet,” they added. Adrian Musgrave, head of sales at Bridgnorth Aluminium, the only aluminium coil producer in the UK, said the company’s initial sense of “positivity” when the trade deal was announced had given way to one of “frustration”. “There is no timeline and no detail about this agreement,” he added. Gareth Stace, director-general of UK Steel, a trade body, said “question marks remain over the finer details”, particularly over how US supply chain requirements would work in practice.The UK was previously allowed to export up to 500,000 tonnes of steel a year to the US tariff-free under an agreement struck in 2022 with then- president Joe Biden. There is also concern in British industry over what implication, if any, a new US national security probe into imports of aircraft will have on the UK.The probe could lead to fresh tariffs on US imports of commercial jet engines and parts, and British executives said it was not clear if the trade deal meant UK industry would be exempt. David Henig, a former UK trade negotiator now at the European Centre for International Political Economy think-tank, said the uncertainty around the trade accord highlighted how rapidly the UK and US had moved to announce an agreement.“The problem with doing a quick trade ‘deal’ like this is that nobody knows when or how it is to be implemented, which leaves business winners and losers wondering what is going on and indeed whether it will happen at all,” he added.On Wednesday, Conservative leader Kemi Badenoch used Prime Minister’s Questions in parliament to pour scorn on the “tiny tariff deal” between the UK and US, which she said left Britain “in a worse position than we were”.Starmer hit back that the deal was responsible for saving thousands of British jobs, including at Jaguar Land Rover and British Steel.A UK government spokesperson said Britain “was the first to secure a deal with the US in a move that protects British business and British jobs across key sectors, from auto manufacturers to steel”.“Businesses have been at the heart of our approach throughout, and we have engaged extensively with them to understand their needs,” they added. 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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 worldThe late Pope Francis had trenchant opinions on many subjects, and the sustainability of sovereign debt burdens in emerging markets was among them.Francis’s address on New Year’s Day this year asked “leaders of nations with Christian traditions to set an example by cancelling or significantly reducing the debts of the poorest countries”. The timing is appropriate: 2025 is one of the Catholic Church’s jubilee years, which come every 25 years and during which debts are traditionally forgiven. The previous one spurred the creation of the inspired global Jubilee 2000 campaign, which successfully argued for writing down the sovereign debt of nearly 40 poor countries. South Africa, which is chairing this year’s G20 of leading nations, has also put the issue on the agenda.As it happens, though, the problems of indebted low- and middle-income countries have recently dissipated. Donald Trump’s tariffs and massive cuts in overseas aid may show contempt for the welfare of the developing world, but emerging (middle-income) and frontier (lower-income, riskier) markets have performed relatively well.The consultancy Capital Economics calculates that the percentage of countries in debt distress, although it has ticked up a little, remains well short of the shocks inflicted by the Covid-19 pandemic and Russia’s invasion of Ukraine. The firm’s measure of EM currency risk has fallen. It is tempting fate to say this, but it looks as if the EM world is emerging from a five-year period of turmoil that hammered those dependent on exports and external capital.In practice, and purely by accident, Trump’s tariff wars have created a surprisingly benign environment for emerging markets. Although no one could claim with a straight face that he is judiciously managing the exchange rate lower as part of some fantastical “Mar-a-Lago Accord”, the dollar has weakened, benefiting EMs that borrow in the US currency. The traditional perverse effect whereby risk aversion arising from eccentric US policymaking actually causes a flight to safety and strengthens the dollar has so far been absent. The net effect of a shambolic trade strategy and weakening growth has also been to reduce US Treasury yields, similarly supporting capital flows to higher-yield markets elsewhere. The spread of EM bond prices over US bonds, which typically rises at times of financial market stress and uncertainty, has remained well contained.While the tariffs create intense uncertainty for EMs such as Bangladesh, Vietnam, Pakistan and Cambodia, which rely on exports to the US, Trump’s fire has been disproportionately concentrated on China. Other emerging and frontier market exporters have thus gained in relative access to the US market.Individually, some economies remain at high risk of renewed financial turmoil. Capital notes that countries such as the hardy crisis perennial Argentina, together with Sri Lanka, Mozambique, Egypt and (for obvious reasons) Ukraine, are still vulnerable to debt or currency risk, far more so than safer countries such as Vietnam. But it also says that some of those countries — including Argentina and Egypt, and particularly Turkey — have made strenuous efforts to improve their public finances and reduce those dangers. Predicting indefinite calm in middle- and low-income countries would be spectacularly unwise. Once Trump is done with yanking tariffs around, or as well as doing so, he might embark on tax cuts large enough to drive up interest rates and the dollar. China might also be a source of instability. There is always the risk Beijing will engineer a devaluation of the renminbi to offset the loss of competitiveness from US tariffs and to head off deflation, which will obviously affect other emerging markets.If there is a return to risk aversion and debt and currency problems in EMs, the world is not exactly perfectly placed to deal with them. The attempt to create a swift and predictable international debt-restructuring mechanism ran into disputes between China and other creditor nations, which stretched out the resolution of debt distress in Zambia and Sri Lanka over several years. The IMF and World Bank remain small relative to the size of global capital flows. And although Trump has historically been a big fan of creditors writing off debt to him and his companies, voluntarily or not, he’s unlikely to extend the same treatment on behalf of the US to debtor governments.In that case, Pope Francis’s successor, Leo XIV, will no doubt be ready to take up the call for widespread debt relief. But it seems unlikely that with Trump as US president he will get the same response as Pope John Paul II did from President Bill Clinton during the last jubilee 25 years ago.Emerging markets are doing better on their own than many investors expected. Given the state of international policymaking towards embattled debtor governments, that’s just as [email protected] More

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Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The director-general of the World Trade Organization has warned that bilateral tariff deals between the US and other countries could damage a core principle of trade equality.In an interview with the Financial Times at the end of a visit to Tokyo this week, WTO chief Ngozi Okonjo-Iweala said global trade was in a “crisis” despite the recent de-escalation of a tariff war between the US and China.Japanese officials have privately expressed concern that a hastily negotiated US-UK trade agreement sealed this month could encourage countries to consider expediency-driven bilateral deals that challenge the “most favoured nation” equality principle underpinning the WTO system.Asked if a pattern of such deals would damage that principle, Okonjo-Iweala said that there was such a risk.“That is why we’ve said to WTO members who are making these negotiations bilaterally that they should aim to be as WTO-consistent as possible,” she said, adding that despite recent tensions, 74 per cent of the world’s goods trade was still conducted on MFN terms.Under the MFN concept, countries must offer the same tariff rates to all countries unless they are reduced via a bilateral trade deal that covers “substantially all trade” — which the UK-US pact does not. Okonjo-Iweala said that although tensions between the US and China appeared to have eased since Beijing and Washington agreed a tariff truce at the weekend, the preceding spectacle of the world’s two largest economies imposing tit-for-tat tariffs in excess of 100 per cent would reverberate across the global economy.“When you see this decoupling, and if countries start to align with one side or another, that’s fragmentation. And we have shown that that could lead to a 7 per cent drop in real global GDP in the longer term, which is worse than the hit on global GDP during the 2008-09 financial crisis,” she said.The WTO should accept that large disruptive forces had hit world trade and should look at the reasons, including interrogating why the US had acted as it had and what aspects of the trading system needed to change, Okonjo-Iweala said.“We must not waste this crisis,” she said.“One of the silver linings in this whole crisis is that [WTO] members have come repeatedly to say how much they now value the system . . . and had actually taken it for granted,” Okonjo-Iweala said. “You know sometimes like the air you breathe. You go to the store, you find the things you want, but now they’ve come to value the system.” More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Vietnam, Indonesia and other countries in south-east Asia are caught in the crossfire of US President Donald Trump’s trade war with Beijing, with the region coming under mounting pressure to clamp down on the rerouting of Chinese goods as it heads into tariff negotiations with the US.Chinese exports to the region jumped more than 20 per cent last month, offsetting a plunge in US-China trade and highlighting accusations from the Trump administration that countries in south-east Asia were helping Chinese manufacturers avoid punitive tariffs.Officials and trade experts said this practice, known as trans-shipment, has become a critical issue in negotiations with the US, with the Trump administration demanding countries in the region crack down to secure relief from some of the highest levies imposed on America’s trading partners.“South-east Asia is coming under more pressure than other regions in the world . . . because of origin-washing,” said Sharon Seah, co-ordinator of the Asean studies centre at Singapore’s Iseas-Yusof Ishak Institute. “The US thinks that the Chinese will use [the region] as a backdoor to continue exporting to the US markets.”Countries in the region are hoping for further talks with US Trade representative Jamieson Greer at the Asia-Pacific Economic Cooperation meeting of trade envoys in South Korea this week, after Washington and Beijing announced a temporary truce in their trade war on Monday.Some content could not load. Check your internet connection or browser settings.Many companies assemble components manufactured in China in third countries in south-east Asia, or add enough value to the products to legally change their place of origin. However, some merely relabel their products without any added value, a practice that is illegal but difficult to trace.Vietnam has come under the most scrutiny. The country, which has the third-largest trade surplus with the US after China and Mexico, has emerged as a manufacturing powerhouse in the years since Trump’s first term as production shifted away from China. It has been singled out repeatedly by US officials for allowing trans-shipment, and was hit with 46 per cent tariffs on Trump’s “liberation day” salvo in early April, before being given a 90-day reprieve. Prime Minister Pham Minh Chinh told US executives in a meeting this week that Washington had stressed trans-shipment in tariff negotiations, according to Adam Sitkoff, executive director of the American Chamber of Commerce in Hanoi.“The top priority for the US side in these trade talks seems to be the trans-shipment issue,” said Sitkoff. Vietnam was already stepping up efforts to crack down on illegal trans-shipment, he added. Since Trump’s “reciprocal” tariff announcement, Indonesia, Thailand and Malaysia have also promised to increase scrutiny of trans-shipments. Vietnam’s Prime Minister Pham Minh Chinh at the World Economic Forum in Davos. He told US executives this week that Washington had stressed trans-shipment in tariff negotiations 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 Asia. In today’s newsletter:Wall Street’s sudden recoveryUS warns companies globally not to use Huawei AI chipsFT investigates Elon Musk’s Doge The furious rally in US assets sparked by the tariff détente between Washington and Beijing has caught big investors off-guard, colliding with widespread bets against the dollar and Wall Street stocks. Wall Street rebound: The S&P 500 has rallied 4 per cent this week, erasing all of its losses this year, after the US and China agreed to cut tariffs for at least 90 days, signalling an end to the worst of the trade war. The dollar initially rose too, while US government bond prices have dropped as traders exit traditional havens. Investors caught ‘offside’: The rush of money back into stocks has stung large asset managers and other institutional investors, who were cautiously positioned on US assets on fears of an economic slowdown and broader worries over US policymaking. “I think the market got caught quite offside,” said Robert Tipp, head of global bonds at PGIM Fixed Income. “As the climbdowns and deals started to look more plausible — even though there are still a lot of tariffs by modern standards — that has forced a reassessment and a major position squaring.”Too much optimism? In a sign of the dramatic shifts in sentiment, the Nasdaq Composite has surged nearly 30 per cent from a low just weeks ago, after Trump’s April 2 “liberation day” tariff announcement shook markets. But some asset managers warn that this shift towards trade optimism has run too far. “We should remember the policy chaos damage to consumer and business confidence before getting too optimistic,” said Andrew Pease, chief investment strategist at Russell Investments. Read the full story.Here’s what else we’re keeping tabs on today:Economic data: India, Indonesia and South Korea publish April trade figures, while Australia reports employment figures for the month.Russia-Ukraine talks: The two countries are due to hold peace talks in Turkey. Results: Alibaba and Mizuho Financial Group report earnings.Join us for a subscriber-only webinar on May 28 for insights into the most consequential geopolitical rivalry of our time: the US-China showdown. Register now and put your questions to our panel.Five more top stories1. The Trump administration has taken a tougher stance on Chinese technology advances, warning companies around the world that using AI chips made by Huawei could trigger criminal penalties for violating US export controls. The commerce department issued guidance to clarify that Huawei’s Ascend processors were subject to export controls because they almost certainly contained, or were made with, US technology.Chinese manufacturing: Exporters were “shocked and elated” after China and the US agreed a thaw in their trade war.Hong Kong toymaker plans production shift: VTech plans to move all US-bound production away from China and warned that tariffs meant American consumers would “inevitably” end up paying more for toys.2. Qatar has agreed to buy up to 210 aircraft from Boeing in what Trump hailed as the largest order of jets in the history of the American company. The White House said economic deals worth more than $243bn had been agreed with Qatar as Trump toured the oil-rich Gulf in pursuit of headline-grabbing investments. Trump meets new Syrian president: The US president urged Ahmed al-Sharaa to normalise ties with Israel, one day after he announced that the US would lift sanctions on the country. 3. Western carmakers may not have a future in China as local brands take significant market share from foreign carmakers like Volkswagen and Toyota, Stellantis has warned. Asked whether western auto groups would be able to compete in China, Maxime Picat, Stellantis’s chief operating officer for Asia-Pacific, Middle East & Africa, said: “I’m quite an optimistic guy, but not on that one.” 4. Tesla’s board has formed a special committee to explore Elon Musk’s pay, which could lead to the electric-vehicle maker’s chief being offered a fresh package of stock options. People familiar with the matter said major investors had given the board their views on the billionaire’s pay and continued leadership of the company.5. Shares in retail trading platform eToro surged on the company’s Wall Street debut as investor optimism sparked by a de-escalation of trade tensions between China and the US spread to the new listings market. EToro rose as much as 42.8 per cent during intraday trading yesterday, but closed 28.8 per cent higher at $67, valuing it at about $5.5bn.The Big ReadSix months after Trump officially announced the formation of Elon Musk’s cost-cutting vehicle, the so-called Department of Government Efficiency, it has yet to find a fraction of the $2tn of savings promised at a campaign rally last year. Today’s Big Read has found evidence of inflated valuations to boost numbers and contracts that were due to lapse being claimed as new savings. We’re also reading . . . Downfall in Davos: Klaus Schwab, the ousted founder of the World Economic Forum, is fighting for his legacy after a whistleblower alleged he and his family received inappropriate financial benefits.Beijing’s aviation ambitions: State-backed manufacturer Comac doesn’t need to dominate abroad to disrupt the global order, writes June Yoon.‘Golden passports’: Christian Kälin, the man behind the rise of citizenship-by-investment schemes, says a landmark EU court ruling won’t stop the trend.Chart of the dayMoët Hennessy went from generating €1bn in cash in 2019 to burning through €1.5bn last year, according to documents seen by the FT, as a global downturn in sales of alcoholic drinks hit LVMH’s wine and spirits empire hard. But people familiar with its operations say strategic decisions made under the leadership of former CEO Philippe Schaus, who left the group at the start of this year, exacerbated its problems.Take a break from the newsJan Dalley, the FT’s former arts editor, picks her favourite pieces of art in the Sigg collection at Hong Kong’s M+ Museum. ‘Bloodline — Big Family No. 17’ (1998) by Zhang Xiaogang More

Preparations for a post-Brexit “reset” of relations between the UK and the EU were thrown into turmoil on Wednesday after EU member states demanded further concessions from London over fishing rights and youth mobility.With only five days until an EU-UK summit in London, EU diplomats rejected European Commission attempts to bridge gaps between the two sides that have led to increasingly fraught negotiations.A draft EU communiqué setting out the terms of an improved EU-UK relationship will not now be finalised until Sunday, just a day ahead of the summit, after EU member states dug in over the terms of a deal.The bloc wants long-term access to British waters for its fishermen and cheap university fees for its students as the price for lowering the trade barriers that followed the UK’s departure from the EU single market and customs union in 2020.“We are all unhappy with missing progress, especially on youth mobility . . . and how the British demand wide-ranging concessions without offering anything in return,” said one EU diplomat briefed on a meeting of the bloc’s ambassadors on Wednesday. The proposed reset of relations — outlined in the draft EU text seen by the FT — seeks to deepen links in areas including security, energy and trade in agrifood products, but would force the UK to accept some Brussels rules and a role for the European Court of Justice, as well as make some payments to the bloc.Another EU diplomat said the UK had been engaged in “intense lobbying” of the bloc’s governments in recent days to oppose an EU decision to impose a time limit on any deal to cut red tape for British food exporters if the UK did not grant long-term access to its fishing grounds.But the EU ambassadors rejected a proposed compromise to make such an agreement “time-limited and renewable” without specifying a link to fishing rights. “Even landlocked member states are vocally supportive of the commission in pushing for a hard link” between fisheries and a veterinary deal to facilitate exports, a third EU diplomat said. British supermarkets have lobbied hard for a veterinary deal to smooth the flow of food, fish and animals between the UK and EU, but industry executives warned privately that the deal would need to be permanent to deliver lasting cost reductions.The veterinary agreement would also involve “an appropriate financial contribution” by Britain.UK ministers have not denied Conservative party claims that the planned accord with the EU would reverse key elements of Brexit, including an acceptance of the principle of “dynamic alignment” — in effect taking new rules from Brussels.Tory leader Kemi Badenoch has said Starmer is preparing to “trade away our sovereignty behind closed doors” and is reversing the basic principles of Brexit.But Labour officials said Starmer was not interested in fighting the “battles of the past” and wanted to build closer relations with the EU, bringing economic benefits to Britain, cutting prices for goods and building better security ties.London and Brussels have moved closer to an agreement in principle for a “youth mobility scheme”, offering visas to 18-30-year-olds to work, study or travel in each others’ countries, raising the prospect of additional temporary migration to the UK.The proposed scheme would not allow participants a pathway to permanent residency or the right to claim social security benefits, with the final number of available visas capped at a maximum “acceptable for both sides”. EU member states are insisting their students should pay the same £9,535 tuition fees as their UK counterparts when attending British universities — a stipulation that was removed from the draft communiqué spurned by EU ambassadors. “Equal fees for EU students is the aim,” another EU diplomat said. Allies of Starmer insisted EU students will not be charged the same fees as their UK counterparts, given the importance of international fees to the finances of Britain’s university sector. “We can’t afford it,” said one.The draft text also includes a “dispute resolution mechanism with an independent arbitration panel that ensures that the ECJ is the ultimate authority for all questions of EU law”.Britain would be invited “at an early stage” to discuss forthcoming EU rules and would be part of the “decision shaping” process, but would have no vote or veto over proposed changes.A UK government spokesman said the ECJ’s role in a reset deal would be the same as in the Brexit withdrawal agreement, where it would give its opinion on the interpretation of EU law, but an arbitration body would take the ultimate decision in any dispute.The spokesman added: “These are EU internal draft texts. No final agreement has been made . . . We have been clear that we will always act in the national interest to secure the best outcomes for the UK.”The European Commission declined to comment.Additional reporting by Alice Hancock in Brussels More

When Klaus Schwab told trustees of the World Economic Forum last month that he planned to “start the process of stepping down” from the organisation he founded 55 years ago, he reeled off a list of achievements.The WEF’s annual winter meeting of political and business leaders in the Swiss ski resort of Davos had become a “global village” where common challenges could be addressed, making it “essential to avoid war”, he wrote in an email on April 1. Schwab’s own “intellectual, political, economic and social contributions to the world” had been recognised with “international and national distinctions”, while “the small non-for-profit foundation” he had created was now an international body granted special status by Switzerland because of its role in the country. “It is evident,” the 87-year-old said, “that I do not have to strive any more to create a legacy.”Just a few weeks later, Schwab is working furiously to protect his legacy after a barrage of accusations prompted the WEF’s board of trustees to order its second probe into his conduct in less than a year. Instead of an envisaged gradual handover lasting until January 2027, Schwab was forced out as chair at the end of April, and investigators are now picking over his financial relationship with the WEF after a whistleblower alleged he and his family received inappropriate financial benefits. Swiss law firm Homburger will lead the internal investigation. “The process will be carried out thoroughly, diligently, and in a timely manner,” the WEF said. “The Forum does not intend to further comment on this matter prior to the conclusion of the investigation.”But Schwab, who strongly denies all claims against him, is fighting back, arguing that the WEF underpaid him for decades, benefited from unpaid work by his wife and enjoyed the reflected glory of their personal philanthropic donations.Some current and former WEF employees view the unfolding events as an inevitable denouement for an organisation and its leader whose identities were so closely intertwined.“Basically, like many founders he thought the institution was completely inseparable from him,” said one former member of the WEF management board. “He should have left years ago, but he obviously couldn’t. I am sure he’ll fight tooth and nail.”A current senior staff member said Schwab “couldn’t let go — if these scandals hadn’t happened he would still be here”.The anonymous whistleblower allegations came on top of claims last year that Schwab had presided over a toxic workplace culture where female and Black employees suffered discrimination, and that his own remarks had made some women uncomfortable — all of which he denies.Karin Keller-Sutter, president of the Swiss Confederation, left, shakes hands with Hilde Schwab, watched by European Commission President Ursula von der Leyen and Klaus Schwab More