Aurelia Butler

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.How should outsiders want the trade war between the US and China to end? They should want both to lose.True, Donald Trump’s approach is far worse than intellectually incoherent: it is lethal for any co-operative global order. Some people think a collapse of such “globalism” is even desirable. In my view, it is foolish to imagine that a world run by predatory “great powers” would be superior to the one we have. Yet, while Trump’s protectionism has to lose, Chinese mercantilism must not win, since it, too, creates substantial global difficulties.Some content could not load. Check your internet connection or browser settings.To understand the problems the world economy faces it helps to start from the topic of “global imbalances”, which was much discussed in the run-up to the global and Eurozone financial crises of 2007-2015. In the years since, these imbalances have grown smaller but the overall picture has not changed. As the IMF’s latest World Economic Outlook notes: China and European creditor nations (notably Germany) have run persistent surpluses, while the US has run offsetting deficits. As a result, the US net international investment position was minus 24 per cent of global output in 2024. Since the US runs trade and current account deficits and has a comparative advantage in services, it also runs large deficits in manufacturing. So what, a passionate free-marketeer would ask? Indeed, even a not-quite-so-passionate free marketeer might note, with good reason, that the US has been fortunate to live beyond its means for decades. That need not be a problem: nobody, after all, will be able to force the US to pay its liabilities back. It also has ways, both elegant and not so elegant, to default. Inflation, depreciation, financial repression and mass corporate bankruptcies all come to mind.Some content could not load. Check your internet connection or browser settings.Yet, one can see at least three large holes in this rather complacent view of large and persistent global imbalances. The first is that they have become politically noxious — so noxious, indeed, that they helped get Trump elected president, twice. The second is that, on the surplus side of the ledger lie negative-sum interventions designed to shift the global balance of economic power. While international relations is not only about economic power, the latter is certainly a crucial part of it.The third is that the counterpart of external deficits tends to be unsustainable domestic borrowing. Combined with financial fragility, the latter can lead to huge financial crises, as it did between 2007 and 2015. Sectoral savings and investment balances are revealing indicators of this last challenge. Foreigners have been running a substantial savings surplus with the US for decades. US businesses have also been in balance or surplus since the early 2000s, while US households have been in surplus since 2008. Since these sectoral balances have to add to zero, the domestic counterpart of US current account deficits has been chronic fiscal deficits.Some content could not load. Check your internet connection or browser settings.If real interest rates had been high, fiscal deficits might have been driving the chronic external deficits. But the opposite has been true: real interest rates have been either low or very low. The Keynesian hypothesis looks right: the inflow of net foreign savings, shown in capital account surpluses (and current account deficits) made big fiscal deficits necessary, because domestic demand in the US would otherwise have been chronically inadequate.China is not the only player on the other side of the global ledger. But it is the most important. Michael Pettis is, in my view, correct that the world economy cannot easily accommodate a huge economy in which household consumption is 39 per cent of GDP and savings (and so investment) correspondingly huge. What is also clear is that the latter has also helped drive what the Rhodium Group judges a successful Made in China 2025 policy. Inevitably, the existing industrial powers are frightened of this Chinese-made juggernaut.Some content could not load. Check your internet connection or browser settings.This brings us back to last week’s question: who will win the trade war between the US and China? I argued that China would do so, partly because the US has made itself so untrustworthy and partly because China has the option of expanding domestic demand and so offsetting lost US demand. Matthew Klein responds, in his excellent Substack The Overshoot, that China has long had this option but has failed to use it. My answer is that China must now do so and thus will indeed choose to expand demand rather than accept a huge domestic slump. We shall see.Some content could not load. Check your internet connection or browser settings.The outcome of the US-China trade war and the possible evolution of Trump’s tariffs are the immediate questions. But the broader issues considered must not be ignored. Trade policy should not be judged in isolation. As those who founded the postwar trading system, notably Keynes himself, knew, its success also depends on global macroeconomic adjustment and so on how the international monetary system works.In the first act of the postwar period, the US ran huge current account surpluses, but recycled them into lending. In the second act, up to 1971, the US surpluses eroded. This led to the end of the dollar peg and generalised floating cum inflation targeting, at least among high-income countries. That system worked well enough before China’s rapid rise. With that, the era during which the US could act as borrower and spender of last resort, tested in the 1980s by Japan and Germany, became politically and economically unworkable.Some content could not load. Check your internet connection or browser settings.Trump’s unpredictability and focus for bilateral deals are indeed foolish. But the old US-led economic order is now unsustainable. The US will no longer serve as balancer of last resort. The world — especially China and Europe — has to think [email protected] Martin Wolf with myFT and on Twitter More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The EU has prepared sanctions against Vietnamese, Turkish and Serbian companies that it accuses of helping Russia evade embargoes, in the bloc’s 17th package of measures against Moscow since the full-scale invasion of Ukraine.The proposed sanctions also target 149 oil tankers in the Kremlin’s “shadow fleet” and about 60 individuals and companies in Russia and China, four people familiar with the initiative told the Financial Times. The measures are aimed at maintaining pressure on Moscow while Europe fears US President Donald Trump might walk away from Ukraine, after yielding little success so far in his efforts to strike a ceasefire.Some senior EU officials also see the proposal as a way to test the appetite of Hungary’s pro-Russian premier Viktor Orbán to agree to additional sanctions, ahead of a critical vote in July where Budapest could end all economic measures against Moscow.Hungary has previously threatened to veto the twice-yearly rollover of all EU sanctions against Moscow, before ultimately agreeing to their continuation. But diplomats say Trump has strengthened Orbán’s resolve to use his veto after the US president called for peace in Ukraine and for renewed economic ties with Russia.The package, which was shared with EU capitals on Tuesday and will be discussed by ambassadors on Wednesday, must be approved by all 27 EU members and could be amended.Recent EU sanctions packages have mainly sought to tighten existing economic restrictions and close avenues for evading those measures through third countries. The 17th package targets more than 20 new companies deemed to be helping Russia evade sanctions, the officials said. About a dozen are in third countries, including the United Arab Emirates, Turkey, Serbia, Vietnam and Uzbekistan. It would be the first time a Vietnamese company has been sanctioned by Brussels for aiding the Kremlin.Serbia, an EU accession country, has been strongly condemned by Brussels and many member states for refusing to align with its sanctions on Russia.The package also adds several dual-use goods that have potential military applications, such as chemicals and machine tool components, to a list of banned exports to Russia. It calls for an exemption for Russia’s Sakhalin Project, an oil and gas supplier crucial to Japan, to be extended until June 2026. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Demand for Ferrari’s supercars in the US remains “hot” despite price increases to offset Donald Trump’s tariffs, according to its chief executive, as the company maintained its guidance for profit growth this year.The Italian group is exposed to Trump’s 25 per cent tariffs on imports of foreign-made cars since it makes all of its cars in Italy, even though the US is its largest market and is where it sells about one in four cars. But the luxury-car maker also has enough brand strength to pass on the tariff costs to consumers.The company on Tuesday said it had not received cancellations in its order book — which already covers the whole of 2026 — even after it announced plans in March to raise prices for some of its models by up to 10 per cent. “Today, we don’t see any weakening of the order book,” said chief executive Benedetto Vigna. “When it comes to the tariff, specifically, I think the order book and the portfolio we have allow us to navigate with better visibility.”Ferrari reported a 23 per cent year-on-year increase in operating profit to €542mn during the first quarter while revenue increased 13 per cent to €1.79bn. Both metrics, which exceeded market expectations, reflected continuing demand for personalisation, with buyers adding expensive features to their supercars. While many other carmakers have withdrawn or sharply reduced their guidance over the past week, Ferrari broadly stuck with its previous forecast for an adjusted operating profit of at least €2bn and a profit margin of at least 29 per cent. It cautioned that the guidance faced a potential risk of a 50 basis point reduction on profitability percentage margins. “Ferrari stands out, reporting consensus-beating first-quarter results and confidently reiterating its fiscal 2025 guidance,” Bernstein analysts wrote, describing the outcome as “rock steady”. The company has managed to generate higher margins even as shipments only increased 1 per cent from a year earlier to 3,593 vehicles. The group delivered five hybrid models in the first quarter, representing 49 per cent of total shipments. Shipments to China, Hong Kong and Taiwan fell 25 per cent during the first three months of the year as luxury car brands continue to grapple with slowing demand in China. But China represents a relatively small market for Ferrari because the carmaker sets a cap of 10 per cent on deliveries to the country. Vigna said on Tuesday that the company was also on track to unveil its first electric vehicle in October, with sales due to start a year later in 2026. More

This is an on-site version of the White House Watch newsletter. You can read the previous edition here. Sign up for free here to get it on Tuesdays and Thursdays. Email us at [email protected] morning and welcome to White House Watch. Mark Carney is slated to meet Donald Trump in Washington today for their first face-to-face meeting since the Canadian prime minister swept to power on an anti-Trump platform last Monday. For now let’s jump into:Making Hollywood Great AgainTrump’s Marie Antoinette momentCorporate America’s fight against tariffsTrump is taking his trade war to Hollywood. The president said on Sunday that he would impose a 100 per cent tariff on films made abroad because “the Movie Industry in America is DYING”.In a post on Truth Social, Trump accused other countries of using “all sorts of incentives to draw our filmmakers and studios away”. He concluded: “WE WANT MOVIES MADE IN AMERICA, AGAIN!”Media executives questioned how the tariffs would work in practice, particularly in the age of streaming, given that films are not a physical good that passes a border. Nevertheless, shares in Netflix yesterday dropped about 2 per cent as investors fretted about higher costs. Analysts also warned that the threatened levies could be “beyond devastating” for production hubs in countries including the UK, Canada and Australia.The US film and TV sector generated a trade surplus of $15.3bn in 2023, with a positive balance of trade in every major market in the world. Nevertheless, it’s true that Hollywood has lost ground in the past two decades, as countries in Europe and Asia attract filmmakers with generous offers of tax incentives to offset some of their costs. Production in Greater Los Angeles fell 5.6 per cent in 2024, making it the second-least-productive year ever, according to industry body FilmLA.Executives were racing yesterday to figure out whether the threatened tariffs were even viable. “In what sense can you put a tariff on a Netflix show made in the UK and distributed worldwide over the internet?” said Peter Bazalgette, former chair of British broadcaster ITV.He said the fate of the film industry could depend on what exactly Trump categorised as “film production”, and whether he would include the high-end streaming series being made by global platforms such as Netflix and Amazon, which contribute the highest spending overseas.The White House declined to offer further details of the plan. A spokesperson told the Financial Times that the administration was “exploring all options” in order to “safeguard our country’s national and economic security while Making Hollywood Great Again”.The latest headlinesWhat we’re hearingThere was a “whirlwind” of lobbying in Washington in April as the world’s most powerful business leaders rushed to seek carve-outs and climbdowns from Trump’s tariffs, according to Republican lobbyist Brian Ballard. Executives from JPMorgan’s Jamie Dimon to Apple’s Tim Cook launched a mostly private campaign to pull the US president back from the brink of what they saw as an extremely damaging trade war. Some played on their personal connections with Trump, struck during trips to Mar-a-Lago or through hefty donations to his lavish inauguration in January. “A lot of the tariff carve-outs, like the one for electronics, didn’t come from broad industry lobbying campaigns. It seemed more like Trump was hearing directly from executives, like Tim Cook,” said one Washington corporate adviser. Cook secured exemptions from the overall 145 per cent tariff on products from China used to make Apple’s iPhones. Billionaire shale magnate Harold Hamm, who co-ordinated oil and gas donations for Trump’s election campaign, said he managed to convince the president to pull back on tariffs that would have harmed the energy sector.“I did talk to Trump about what it would do to [oil] prices, particularly in different parts of the country,” Hamm said. He said he also pointed out that imposing higher tariffs on Canadian crude imports could hamstring some refineries in the US. “And so the whole thing got complicated and the president said: ‘OK let’s not do that.’ He didn’t think it was a good idea . . . That was a success.”Business leaders are increasingly steering clear of publicly criticising Trump, and instead spending their time sending back-channel messages complaining about tariffs to Treasury secretary Scott Bessent, according to a top Wall Street executive who regularly speaks to the administration.“It’s better not to do it on television. It’s not going to get you very far,” he said. “You are better off having a more substantive conversation behind the scenes.”ViewpointsRecommended newsletters for youFT Exclusive — Be the first to see exclusive FT scoops, features, analysis and investigations. Sign up hereBreaking News — Be alerted to the latest stories as soon as they’re published. Sign up here More

This article is an on-site version of our Chris Giles on Central Banks newsletter. Premium subscribers can sign up here to get the newsletter delivered every Tuesday. Standard subscribers can upgrade to Premium here, or explore all FT newslettersIf you ask shoppers if now is a good time to buy stuff or if the economy is doing well, take cover. Surveys suggest that even though the US, Eurozone and UK are close to full employment and real incomes are rising, consumers are miserable. The University of Michigan’s consumer sentiment index was at 52.2 in April, having only been lower briefly in 2022 and in 1980. In Britain, the very long-running economic optimism index from Ipsos Mori has fallen to its lowest ever level since the survey began in 1978. Although the Eurozone consumer confidence index is not quite plumbing these depths, it also dropped sharply last month with deterioration in all four component parts of the index. The indicators are seen as a rapid insight into coming spending patterns and economic health, since household consumption is the largest component of GDP. But what if something has happened and these surveys no longer provide the information they once did? Federal Reserve chair Jay Powell thinks something fishy is going on. “There have been plenty of times where people are saying very downbeat things about the economy and then going out and buying a new car,” he said after the Fed’s March policy meeting. Sentiment has plunged further since then.What is going on in the US?The chart below shows the level of the Michigan consumer sentiment indicator and the annual growth of consumer spending since 1985. The levels are expressed in standard deviations from the mean so the two indicators can be shown on one chart with a single y-axis. This transformation of the data shows whether the indicator is above or below its long-run average and the extent of any deviation. The chart shows the relationship between consumer sentiment and real growth in private consumption has broken down. During Donald Trump’s first administration, sentiment was generally above average, but spending was nothing special. Yet since the pandemic, the opposite has been true — both during the 2021-22 inflationary period and now. Some content could not load. Check your internet connection or browser settings.It is very difficult in the US, however, to say things about the economy without mentioning a chart of consumer sentiment by political party affiliation. Since 2016, Republicans report that it is a good time to spend only when their man is in the Oval Office and vice versa. So it cannot be that surprising that the data has lost its power as an economic indicator. It seems now to measure the degree of partisanship — and Democrat-leaning consumers are really unhappy at the moment. Some content could not load. Check your internet connection or browser settings.But this is a very US-centric view of the world. To avoid making the common mistake of thinking the US is everything, what is happening in Europe?Europeans are miserable too and spendingIf you look at the equivalent chart for the UK with two different consumer confidence indicators, the same pattern as the US also emerges. Since Covid-19, even though consumption has not been that strong, both the GfK consumer confidence indicator and the Ipsos Mori economic optimism indicator have been significantly weaker. Overall, there used to be a reasonable fit between the data, which has broken down. Some content could not load. Check your internet connection or browser settings.Not to be outdone, the same pattern can be seen in Eurozone data. Sentiment across the single currency area is more volatile than consumption. Recently it has been incredibly weak, while real household spending has held up better.It seems that US political polarisation, while clearly undermining the value of sentiment indicators, is not the only thing to worry about. Some content could not load. Check your internet connection or browser settings.Some sleuthing from the Fed What we really need is to track the actual spending habits of a sample of consumers against the same sample’s sentiment scores. This is exactly what some enterprising Fed officials have done in a new research project. They combined a long-running survey of actual spending patterns, in which households scan their receipts into an app, with subjective questions about how much respondents’ incomes, spending and sentiment had changed in recent years. So long as households consistently and accurately record their receipts, the researchers can examine individual real spending growth and individual inflation rates and compare them with sentiment. The results are fascinating.First, consumers overestimate the inflation they have faced. This is not a surprise, but 24 per cent thought their inflation rate over the past five years had been over 40 per cent. In fact only 1.7 per cent of the sample had experienced such high inflation. Inflation, as I have documented before, makes people mad with rage.Second, sentiment was strongly linked to consumers’ perception of their real spending. Those that felt least confident about their finances said their incomes had grown much slower than their spending, even though they were often factually wrong. This weak economic sentiment was amplified if they felt they had to take action to cut back due to inflation.Third, although households that said they were much better off than five years earlier had higher spending growth than those who said they were much worse off, the differences in the distributions were not large, as the chart below shows.In an inflationary environment, therefore, economic sentiment is likely to be weak and could well disconnect with real spending levels. It is not just politics. Consumers around the world are likely to be angry, but might still be spending hard. Sentiment indicators may not be much use until memories of inflation fade.Some content could not load. Check your internet connection or browser settings.What I’ve been reading and watchingA chart that mattersScott Bessent spent last Thursday talking about how much the two-year yield on US Treasuries had fallen before it promptly rose 0.25 percentage points. “We are seeing that two-year rates are now below Fed funds rates, so that’s a market signal that they think the Fed should be cutting [rates],” Bessent said. He is correct in his analysis. The trouble is that financial markets have been a terrible predictor of the federal funds rate recently, as the chart below shows.Since the middle of last year they expected six quarter-point rate cuts in 2025 last September, then in January only one, and now almost four. Market participants change their minds regularly and will look for signals at Wednesday’s Fed meeting. Some content could not load. Check your internet connection or browser settings.Recommended newsletters for you Free Lunch — Your guide to the global economic policy debate. 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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 UK has limited power to retaliate against Donald Trump’s tariffs without risking a significant economic blowback, according to data that underlines the importance of signing a trade deal with Washington.Britain is the top buyer of a small number of American products — such as railway cars and wooden barrels — that represent just 0.4 per cent of total US goods exports, a Financial Times analysis of trade data found. By contrast, the EU is the primary destination for products that account for 35 per cent of American exports.The figures underline that the UK lacks the economic leverage of larger trade powers, something on the minds of British officials as they push to finalise a deal with Washington amid fears that the EU summit on May 19 could antagonise the US president.Some content could not load. Check your internet connection or browser settings.UK Prime Minister Sir Keir Starmer has said he intends to secure a deal with the US but has not ruled out retaliatory levies, telling business leaders that “nothing is off the table”. But economists advise against announcing reciprocal tariffs, even if a deal cannot be struck to reduce the 10 per cent tariff on British exports to the US — and 25 per cent on steel, aluminium and cars.“There’s no good reason on economic grounds for retaliation,” said Michael Gasiorek, director of the Centre for Inclusive Trade Policy at the University of Sussex.“America is a much bigger market [than the UK] so you’d expect the balance of reliance to be tilted in America’s favour.”British officials face political pressure to be seen as not “taking things lying down” but it was “extremely unlikely” that reciprocal UK tariffs would inflict sufficient pain to make Trump back down, he added.Some content could not load. Check your internet connection or browser settings.Retaliation “will raise prices, exacerbating the cost of living crisis, which hits those already worst off [the] hardest”, said Julian Boys, associate director at the Centre for Local Economic Strategies, a think-tank.The government recently published a list of 8,364 US products potentially at risk, which includes items such as live eels and human hair alongside traditional targets such as motorbikes and denim.William Bain, head of trade policy at the British Chambers of Commerce, said the UK would need to consider where it could shift supply chains away from the US if it decided to retaliate.Matching the hit to UK exports from the US policy, estimated at £8bn a year, would be a “difficult task”, he said, adding that retaliatory tariffs should “only ever be the last resort”. Some content could not load. Check your internet connection or browser settings.The government said the US was an “indispensable ally” and talks on an economic deal between both sides were “ongoing”.“We’ve been clear that a trade war is not in anyone’s interests and we will continue to take a calm and steady approach to talks and aim to find a resolution to help ease the pressure on UK businesses and consumers,” it added.America holds the whip hand for nearly 96 per cent of goods it exports to the UK, according to an FT analysis of 2023 trade flows, the last full year of available data.The analysis compared the relative reliance of British importers on product groups arriving from America, with US dependency on the UK as an export destination.Some content could not load. Check your internet connection or browser settings.The UK’s scope to retaliate is also limited by the strategic importance of the goods where it has more leverage, for example, some critical minerals such as roasted molybdenum ores, a crucial input in steel manufacturing.Britain could hit back by targeting US services but Gasiorek warned this was a “nuclear option” as it risked triggering countermeasures by the US — an act of self-harm since the UK exports twice the value of services to the US than vice versa.He said the UK could make an impact by co-ordinating action with the EU or by targeting American companies that could “bend the Trump administration’s ear”, but it would be difficult to find products that did not compromise British national interests. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Governments need to do more to address a gap in life expectancy between richer and poorer countries that is costing millions of lives, according to a report from the World Health Organization.The 33-year gulf between the best and worst performers — Japan and Lesotho — has narrowed by nine years since the initial report in 2008. That report called for the gap between the top third and bottom third of countries, which stood at 18.2 years in 2000, to be reduced to 8.2 years by 2040. That target is unlikely to be met at current rates of progress, according to Professor Sir Michael Marmot, who led the initial report and also advised on the latest publication. The WHO also drew attention to sharp and widening differences in longevity within countries.“It is a sad indictment on government leaders that social injustice continues to kill on such a grand scale,” Marmot said. ‘‘The targets we set to close the health gap in a generation will be missed.’’Children born in poorer countries were 13 times more likely to die before the age of five than in wealthier countries. Eliminating this wealth-related inequality “could help save the lives of 1.8mn children in low- and middle-income countries”, the report said. The initial report in 2008 sought to catalyse action to address the “social determinants” affecting longevity, such as lack of quality housing, education and job opportunities.Another key goal was to halve the gap in life expectancy between different social groups within countries by 2040. However, where there was data available, the span had often widened, the WHO found.These intra-country differences, especially in lower-income countries, increased the chance that they “will be trapped in cycles of conflict and underdevelopment”, it added.In a foreword to the report, WHO director-general Tedros Adhanom Ghebreyesus described the social determinants as “rooted in the structures of our societies, from educational access and income distribution, to living conditions and social protection”.Adhanom Ghebreyesus said its findings underscored “that achieving more equitable health outcomes requires a concerted effort to address the complex web of social, economic, environmental and political factors that impact health”. Although maternal mortality declined 40 per cent globally between 2000 and 2023, “progress stagnated between 2016 and 2023, and maternal mortality even increased in 2021” due to the impact of the Covid-19 pandemic, the WHO said.It added that there were major differences in life expectancy even between countries with very similar income levels. “[S]ome countries have managed to halve premature death over the past half-century, while in others, it has remained the same or even increased.”Addressing the structural drivers of these differences would require, among other things, tackling economic inequality, investing in public services and infrastructure, strengthening social protection, including for people with disabilities or chronic health conditions, and legislating on and regulating “commercial activities that negatively affect health and health equity”.Action had to be taken “in a way that also works to deal with the climate emergency”, the report added. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.China has planted its red flag across Latin America this century, displacing the US as the main trading partner in South America and investing more than $130bn in everything from ports to copper mines.Now the Trump administration is pursuing America First policies such as tariffs and undermining the economic logic of locating factories in nearby countries. Surely Beijing will clean up in what America used to consider its backyard? Wrong. While China may win a quick boost to its trade with Latin America, there are several reasons why the region is unlikely to draw closer to Beijing over the longer term.The first is fear of retaliation. Trump has moved aggressively against what he sees as malign Chinese interests in the region. Panama has already felt the heat over Chinese port concessions at either end of the canal; Peru may feel it next over Chancay, its Chinese-built megaport.“What Trump is looking for is an international order based on spheres of influence,” said David Lubin, a research fellow at Chatham House in London. “The Monroe doctrine defined a sphere of influence for the United States 200 years ago [in Latin America] and the geography of the region hasn’t changed that much.”Mexico, which depends on the US market for more than 80 per cent of its exports, cannot risk responding to Trump’s tariffs by boosting trade with Beijing. Playing the China card, says Arturo Sarukhán, a former Mexican ambassador to Washington, “would be the death knell of Washington seeing Mexico” as a worthwhile partner.“The strategy right now from Mexico is: ‘At all costs defend, bulletproof, Teflon-coat the relationship with the US, don’t take on Trump and ensure that the USMCA [trade pact] survives,’” he added.South American nations fret that they are already too dependent on China. The last thing they want is to increase that dependence further at a time of rising superpower tension.Data suggests the rapid growth in Chinese trade and investment in Latin America may be over. Last year Chinese imports from the region fell by 0.1 per cent, according to the Inter-American Development Bank, and Chinese foreign direct investment fell last year to the lowest level since 2012, according to a recent study. Pepe Zhang, an expert on China-Latin America relations, believes “the structural decline in Chinese economic engagement in the world won’t change” because of economic weakness at home.Brazil may increase food exports to China in the short term to fill the gap left by reduced US sales of soyabeans, corn and meat. But “the Brazilian government has always been very cautious about not depending on one big trade partner”, said Feliciano de Sá Guimarães from Brazil’s international relations think-tank Cebri.Guimarães noted that Brazil’s congress had just given the government sweeping new powers to retaliate against unfair trade practices — measures framed as a tool to hit back at Trump but which could also be used against China.Cultural issues count, too. Most members of the Latin American elite were educated in the US or Europe and feel little affinity for Beijing.Rather than picking sides, Latin American nations would prefer to diversify trade. Chile has the highest dependence on China among major regional economies; it is no coincidence that President Gabriel Boric recently travelled to India to open up new export markets.And Brazil has been pursuing trade with Gulf nations anxious to secure food supplies, while Costa Rica is now seeking membership of the Asia-dominated CPTPP trade bloc.Finally, the Trump administration is likely to realise that it stands little chance of slowing China’s rise — or sating US consumer demand — unless it enlists Latin America’s help in supplying critical minerals and providing low-cost factories.JPMorgan’s head of global macro research Luis Oganes, adds: “When prices start to go up in the US and they’re getting the message from companies in the US that what you’re asking is impossible . . . there’s going to be massive pressure to reach a deal with North America to regain some appreciation for the concept of friendshoring and nearshoring. The US will not be able to decouple from China and its North American trade partners at the same time.”[email protected] More