Aurelia Butler

The writer is chair of the European Risk Management CouncilIf someone set out to design a rigorous stress test for the financial system, it would be hard to come up with a better one than the scenario emerging from the actions and policies of the current US administration.When President-elect Donald Trump last year promised a “golden era”, pledging to deregulate businesses and cut taxes, executives at US financial institutions responded with considerable optimism. However, that optimism began to fade as it became increasingly clear that the new administration’s approach was beginning to undermine key pillars of the US financial system.The stability of the system is a complex and multi-faceted concept. It rests on several pillars, including robust regulation, sound monetary and fiscal policies, efficient markets, a predictable political, economic, and legal environment, and investor confidence. It also relies on effective international co-operation both on a regulatory and a political level.Each of these pillars is necessary but not sufficient on its own to guarantee financial stability. While undermining one pillar may create stress within the system, the weakening of several simultaneously can result in a “perfect storm”.‘Liberation day’ woundsThe tariff war initiated by Trump exposed critical shortcomings in his administration’s competence and governance and has placed considerable strain on US financial stability.Impulsive executive orders — imposing, increasing, pausing, and cancelling tariffs — have repeatedly created confusion and thrown financial markets into turmoil. If this chaos were part of a master plan (which seems unlikely), the plan was fundamentally flawed, scoring an “own goal” by damaging US financial stability without delivering any clear benefits. However, if this disorder reflects a modus operandi (which appears more probable), the threat to financial stability is even greater. Prolonged uncertainty corrodes investor confidence and is damaging for the entire financial system.The US administration’s failure to co-operate with international bodies, recognise multilateral processes, honour previous agreements, and treat partners and allies with respect has cast serious doubt on its ability to work effectively with global financial institutions and regulators — another crucial pillar of financial stability.When the US president posts on social media encouraging investors to buy stocks just before announcing a major tariff move, it severely undermines trust in market integrity. Investors are understandably wary of markets that appear susceptible to manipulation and insider trading.What the “liberation day” rollercoaster also revealed is a new form of governance. Crucial decision-making within the US administration now appears to be driven entirely by one individual, reflecting his personal worldview, fantasies, and ego. This style of leadership is not commensurate with how the world’s largest economic power should be governed. Rather, it resembles the governance models more commonly seen in certain authoritarian emerging economies and the behaviour of the US market has started to reflect this.This helps explain why, when clouds of a global recession began to gather on the horizon, the US dollar fell to a three-year low against other major currencies, and US government long-term bond yields began to rise. These developments signal that the global investor community is losing confidence in American assets and no longer sees them as safe havens.The US federal executive branch has revealed a level of political culture, competence, governance, and accountability that falls well short of the standards expected from the world’s largest economic and financial power. The damage done to the country’s reputation as a reliable and responsible international trade partner will be difficult to reverse. Within just 100 days, the administration managed to erode confidence in the overall financial soundness of the US.Regulation Some pillars of US financial stability have been less affected so far, but perceptions about the administration’s ability to safeguard these pillars have shifted and the outlook is not bright.The financial regulatory and supervisory framework is likely the next target for reform. Periodic review of existing financial regulation is of course a positive practice. As the world evolves, certain regulations that were once relevant and effective may become obsolete, unnecessary, or even counter-productive. However, the process of regulatory review and potential deregulation is a delicate endeavour that demands time, expertise, and rigorous analysis.Given the unprofessional and chaotic manner in which the US administration has handled other reforms, such as government spending and the implementation of “reciprocal” tariffs, it is reasonable to expect that financial deregulation may follow a similar path, marked by equally troubling levels of competence and foresight. The recent arrival of staff from Elon Musk’s Department of Government Efficiency at the Federal Deposit Insurance Corporation only heightens concerns that we are more likely to witness a sweeping and indiscriminate dismantling of existing financial regulations, rather than a carefully assessed and balanced approach. Impairing the ability of regulators to effectively carry out their oversight functions would be detrimental to the financial system. In the worst-case scenario, critical regulatory guardrails and risk mitigants — currently in place to prevent financial institutions from becoming overexposed to risky assets, engaging in high-risk transactions, or assuming excessive liabilities — could be removed from regulatory requirements. The consequences for financial stability in such a case could be catastrophic. Monetary and fiscal policyOne of the most important pillars of financial stability — monetary and fiscal policy — has already been problematic for many years. The US national debt, which now exceeds $36tn, is a major red flag for the long-term stability of the financial system. Despite this, Trump has already announced plans to implement “the largest tax cut in American history”, with the intention of offsetting the revenue loss through increased tariffs.If this questionable approach to budget rebalancing fails, the federal deficit will grow even further. At this point, any additional increase in government borrowing or debt servicing costs could become the final trigger that pushes the US financial system towards a meltdown.Markets thrive on stability, predictability, and responsible governance. The speed at which the US administration is currently undermining all of those elements is unprecedented for a developed economy. Trump must recognise that a stable financial system is a public good that must be carefully safeguarded. Without that understanding, financial stability will continue to erode. More

Earlier this year, a headline caught the eye of the senior officials at China’s foreign exchange regulator who manage the country’s multitrillion-dollar reserves: the Trump administration had overhauled the boards of Fannie Mae and Freddie Mac.The officials responded swiftly, instructing a team at the State Administration of Foreign Exchange to kick off an evaluation of the potential investment implications of the shake-up. The review included a deep dive into both government-backed mortgage consolidators, which bundle home loans made by commercial banks into securities that are sold to investors. They were nationalised by the US government during the financial crisis, but Donald Trump is reportedly considering returning them to private ownership.What intrigued the officials at Safe, according to people familiar with the matter, is that they saw mortgage-backed securities — which come with an implicit US government guarantee — or even equity stakes in Fannie and Freddie themselves, as possible alternatives to Treasuries.US government bonds have long formed the bedrock of China’s $3.2tn in foreign reserves. So far, there has been no public indication of a change in that strategy, despite the imposition of tariffs and other gyrations in US policy. Zou Lan, vice-governor of the People’s Bank of China, told a briefing this week that the investment portfolio was already effectively diversified and that “the impact of fluctuations in any single market or single asset on China’s foreign exchange reserves is generally limited”.Some content could not load. Check your internet connection or browser settings.But many advisers, scholars and academics are voicing concern. “The safety of US Treasuries is no longer a given,” said Yang Panpan and Xu Qiyuan, two senior fellows at the Chinese Academy of Social Sciences, in an article in April. “That era is behind us, and we should be concerned about that change from the safeguarding perspective of our Treasury holdings.” As Trump unravels the global trade system and publicly criticises the Federal Reserve, investors more widely are starting to question the haven status of the dollar and Treasuries.The April sell-off in US Treasuries following Trump’s announcement of sweeping tariffs on America’s trading partners fuelled a long-standing fear in Washington and elsewhere: that China could attack the US by revenge-selling its Treasuries. Doing so could trigger alarming volatility in an asset coveted by central banks, asset managers and pension funds around the world for its stability.But officials with knowledge of Safe’s workings say the agency does not regard massive dumping as a sensible option, preferring a gradual transition from Treasuries to other short-term assets and gold over a period of years. That process is described by one person close to Safe as “tengnuo”, a Chinese phrase that translates as “agile manoeuvring on a tightrope”. It aims to strike a balance between asset liquidity, safety, and stable if unspectacular returns. Yet the volatility and unpredictability of policymaking in Washington presents a problem for a slow-moving Safe, with some arguing that tengnuo now looks increasingly unsustainable. Some content could not load. Check your internet connection or browser settings.“I am deeply worried that the ongoing US-China trade dispute could spill over to China’s foreign assets,” said Yu Yongding, a former member of the Monetary Policy Committee at the People’s Bank of China and a senior adviser to the government, at a conference in early April. He cited media speculation about a “Mar-a-Lago accord” along the lines of the 1985 Plaza Accord. Based on an essay by Stephen Miran, now chair of Trump’s Council of Economic Advisers, the aim of such a plan would be to weaken the dollar and persuade other governments to swap their Treasury holdings for 100-year zero-coupon bonds in return for more lenient trade tariffs.Few in financial markets believe this plan will ever be implemented. But for Yu, it is still a concern. Such a swap would constitute a default, he argued. “That poses a huge threat to China, and we may end up paying a steep price,” he added.Beijing’s heavy exposure to dollar assets is a legacy of its export-driven economic boom and decades-long trade surplus with the west. As overseas consumers spent trillions on the manufactured goods pouring out of China’s factories, the dollars that flowed the other way were often recycled into Treasuries — helping Washington to finance its budget deficit. Window washers clean the Fannie Mae building in Washington. From 2018-20, China’s holdings of US agency bonds issued by government-sponsored entities rose 60 per cent More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The writer is president and chief investment strategist at Yardeni ResearchWhen the US stock market was hitting new record highs last year, led by the Magnificent Seven group of technology companies, the financial media and many investors extolled “American exceptionalism”. Now, not so much.Instead, the widespread worry is that the US is in decline as the world’s pre-eminent economic and military power. In this scenario, the exceptionalism has been fuelled with excessively high federal government deficits that have resulted in a debt-to-GDP ratio exceeding 120 per cent, a fourfold increase since 1980. The net interest outlay on all this debt is tracking at an annual rate of $1tn.America depends more than ever on foreign investors and central banks to finance the government’s deficit and to refinance its maturing debt. However, in the first 100 days of his second term in the White House, President Donald Trump has abruptly turned the US towards policies widely viewed as protectionist and isolationist. As a result, foreign investors are reconsidering their commitment to its capital markets. In addition, they are questioning whether the Treasury bond market and the dollar are losing their status as havens in a volatile world.So the decline of the dollar this year has been viewed as confirmation that Trump’s “new world disorder” will harm America’s pre-eminence. It may also be a harbinger of a US debt crisis if foreigners lose their confidence in the country. Some content could not load. Check your internet connection or browser settings.This is all a very depressing narrative. It may also be an absurdly alarmist view that’s simply an overreaction to the recent correction in the S&P 500. The sell-off was certainly attributable to Trump’s tariff turmoil. But, now with the benefit of hindsight, everyone agrees that stock valuations were stretched at the start of this year, especially for the Magnificent Seven. In other words, the stock market was cruising for a bruising. Lots of the recent pain experienced by the tech giants came as investors questioned their high spending on artificial intelligence infrastructure.The angst mounted quickly when the US 10-year Treasury bond yield spiked from 4.00 to 4.50 per cent in a couple of days in early April after Trump introduced his tariff regime on “liberation day”, as he dubbed it. The rise in bond yields spooked the Trump administration, leading the president to postpone the tariff increases.At the same time that stock and bond prices were falling, the widely followed Dollar Index (DXY) fell rapidly by almost 10 per cent. America was no longer exceptional, according to the doomsayers. Then again, financial markets can be volatile without confirming that the end is near for American exceptionalism. Recent events can be explained quite simply and without implying any dire consequences. Consider the following:Some content could not load. Check your internet connection or browser settings.• Since early last year, DXY has been highly correlated with the price of the Roundhill Magnificent Seven ETF. US Treasury data shows that foreign investors piled into US stocks at a record pace last year. When open-source DeepSeek R1 was launched on January 20 this year, investors lost their confidence in companies that had been spending a lot on AI infrastructure, including the Mag-7. DXY fell as global investors sold them and allocated more of their portfolios to Chinese and European stocks. • DXY is an odd duck. It isn’t a trade-weighted dollar index, as widely assumed. It is based on a basket of six major foreign currencies — but their weights don’t change. It is mostly driven by the euro, which has a 57.6 per cent weight. • On a weekly basis, the Federal Reserve board releases daily measures of a “broad” trade-weighted dollar index. DXY is usually highly correlated with the Fed’s dollar index relative to advanced foreign economies. But on a year-to-date basis, DXY is down 8.3 per cent, while the Fed’s broad index is down 4.8 per cent. This all suggests this is at least in part a dollar-euro story, as US stocks are sold to buy European ones.It’s true that the US government has issued a record amount of debt. That makes the US Treasury market the largest, most liquid, and (still) the safest capital market in the world. The dollar should remain the pre-eminent reserve currency. Global investors might soon start buying the Magnificent Seven again now that Alphabet, Meta and Microsoft reported great earnings for the first quarter of 2025. If so, that should boost DXY. More

From cars to iPhones to semiconductors, bringing manufacturing jobs back to the US is a cornerstone of Donald Trump’s economic agenda.As the country’s factories struggle to find workers, with half a million jobs remaining unfilled in March, the Trump administration and some executives have envisaged robots taking up the slack. Industry experts, however, are sceptical. Manufacturers are facing an uncertain economic climate, but the significant time, cost and the shortages of technically skilled workers are barriers to a rapid acceleration in automation. “Companies can’t pivot on a dime,” said Ken Goldberg, a robotics professor at the University of California, Berkeley and chief scientist at US-based Ambi Robotics.Some content could not load. Check your internet connection or browser settings.Cost is the biggest obstacle. While the price of industrial robots is rapidly declining, driven by Chinese manufacturers, a lower-priced type known as a “cobot” still retails for between $25,000 and $50,000. The robot is also just a fraction of the expense of integrating automation into a factory. A robot that stacks goods on to pallets can cost up to $150,000 to install when sensors, safety fencing, conveyors and other infrastructure are taken into account, according to Jorg Hendrikx, chief executives of robotics marketplace Qviro.Such costs put robotics out of the reach of many US manufacturers. Just 20 per cent of factories with between 50 and 150 employees have a robot, half the rate of those with more than 1,000 staff, according to the US Census Bureau. Manufacturers are also constrained by the types of goods they produce, with robots often less economical in sectors where products change frequently, because of the required reprogramming or reconfiguration. Two in five industrial robots in the US are in the automotive sector, where lines often churn out the same high-value model year after year.Some content could not load. Check your internet connection or browser settings.Large upfront capital expenditures, including in new facilities, will probably become less popular as the US’s economic outlook becomes more uncertain after Trump’s sweeping tariffs.“A lot of businesses are going to put investments on hold, because you don’t know what the situation down the road will look like,” said Carl Benedikt Frey, a professor of AI and work at the Oxford Internet Institute. “If you want to spend [on] automation, you need to be sure that this is a strategy that goes over many, many years,” said Susanne Bieller, general secretary of the International Federation of Robotics, which represents the industry. Increased tariffs would be a “huge burden” for US companies seeking to purchase robots, she added. America relies on imports for finished robots and key components as all of the leading manufacturers, such as Switzerland’s ABB, Sino-German KUKA and Fanuc in Japan, are located outside of the US. Some content could not load. Check your internet connection or browser settings.Experts are also critical of the “all-stick-and-no-carrot” approach the administration has taken to reshoring. “Tariffs are punitive,” said Melonee Wise, chief product officer at humanoid robot maker Agility Robotics. “I don’t think that we’ll start seeing any kind of shift [to automation] without large or definitive incentivisation.” Both China and South Korea have seen robot adoption surge well past the US as a result of huge government backing such as tax credits, subsidies and nationwide initiatives, such as Made in China 2025.The US government has invested about $6bn in robotics R&D between 2018 and 2022, according to Public Spend Forum, a government research platform. However, it lacks a national robotics strategy and federal scientific research budgets are being slashed by the Trump administration. Some content could not load. Check your internet connection or browser settings.Despite the hype around humanoid robots and those which will “self-learn” through integrated AI, these technologies were off the sophistication and price point where they could be widely deployed, said Bieller.Increased automation will accelerate the need for workers with the skills to install and work with robotics, such as programming, systems design, engineering and maintenance, which are in global shortage.“Manufacturers are struggling to hire qualified workers,” said Catherine Ross, a workforce development expert at the Association for Manufacturing Technology. “The education pipeline isn’t producing enough talent to meet industry needs.”It was common for factories to have a “robot graveyard” where equipment had been mothballed because of a lack of expertise to upkeep it, said Saman Farid, chief executive and founder of “robotics-as-a-service” provider Formic.Another complication for employers is the widespread labour union pushback against automation.Some content could not load. Check your internet connection or browser settings.Unions representing workers as varied as delivery drivers, hotel staff and grocery store cashiers have increasingly fought to get provisions limiting the use of robots in their workplaces or requiring payouts to displaced workers. Dockworkers represented by the International Longshoremen’s Association went on strike at three dozen US ports over automation last year, costing the US economy billions. While proponents of automation says the trend is inevitable due to the lack of labour, they still warn that it is a long way off. “I think it’s really important to set expectations . . . [robots are] not going to be able to do a lot of tasks in the near future,” Goldberg said. “It’s a very hard problem.” Additional reporting by Taylor Nicole Rogers More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Eight years ago, Steven Borrelli, a West Coast American entrepreneur, raised $50,000 from family and friends to start an e-commerce clothing group called Cuts. He has since grown it into a successful venture using just internal funds. Now, however, he needs a financial lifeline. The reason? Like many others, Borrelli imports goods from countries including China and Vietnam. He now faces the expiration today of the crucial “de-minimis” regime that has previously spared lower-priced Chinese imports from tariffs, in addition to the fallout from wider tariff increases.And even if he can partly offload that on to suppliers and customers, Borrelli somehow has to find money to pay the tariff bill, let alone make the investments needed to move his supply chain. Even banks seem to be shying away because of the economic uncertainty and stigma around China; or so he tells me. “I support Trump’s vision,” he stresses, noting he has repeatedly voted for him. “But we need time to adjust [or] you will see hundreds of thousands of companies going bust.”Investors — and Trump himself — should pay attention. Following this week’s news that the economy contracted by 0.3 per cent in the first quarter, there has been an explosion of angst about the disruptive impact of tariffs on the physical movement and price of goods. And as retailers are already starting to prepare for Christmas, Trump is beginning to look like the Grinch. Indeed, he seemed to acknowledge that himself this week, airily telling Americans that they should realise that “maybe the children will have two dolls instead of 30 dolls [this Christmas] and maybe the two dolls will cost a couple of bucks more.”But what has not got much attention — yet — is another aspect of the drama: finance. Most notably, if tariffs stay in place, there will be a corporate rush to find the cash needed to pay these bills and prepare for other potential shocks (including looming supplier and customer defaults.) Can these funds be found, whether by tapping credit lines or anything else? In theory, the answer should be yes. Overall, financial conditions have recently tightened but remain relatively benign by historical standards. Moreover, banks are fairly well capitalised and the private credit industry has exploded. And while banks are raising provisions for corporate defaults — and the Bank of England is warning that tariffs could increase bad loans — overall bank lending has actually risen this year.But, as Stephen Blitz, an analyst at TS Lombard, notes, this lending data is backward-looking and may be out of date. Indeed, he thinks that if tariffs remain in place, this will squeeze credit, fuelling recession risks. “The flow of credit, not goods, is where the risk to growth sits,” he says. “Firms typically borrow to carry inventory and unless 100 per cent of the tariffs are passed through, margins adversely impact the ability to pay.”In theory, the White House could tackle this by dusting off the playbook it successfully used during the Covid-19 supply chain shock, ie offering loans or grants to affected companies. It could also provide cheap loans to companies wanting to move production to America.Some smaller businesses are begging for another possible response: waiving tariff fees for companies that pledge to invest in domestic plants. Sean Frank, founder of Ridge, a Los Angeles-based e-commerce group, wrote on X about the industrial support China provides. He notes that some start-ups now have a $200,000 looming tariff bill which could be better invested in US infrastructure. “[We] would love to bring manufacturing back to the US — please don’t let a million, small, rural businesses die.”But the White House has not responded — yet. That might be because Trump’s team is determined to show that it is cutting rather than expanding the public sector footprint. It almost certainly also reflects a dire lack of holistic thinking, which is sowing growing alarm even among some of his strongest tariff-loving advisers. “I believe in tariffs, but the execution really worries me,” one tells me. And a cynic might cite another possible explanation for the lack of action: some of Trump’s advisers suspect that the tariffs will be softened under pressure from business. That, after all, is what figures such as David Solomon, head of Goldman Sachs, seem to expect — and what smaller groups are praying for. “These tariffs could potentially sink my company and many others,” Matthew Hassett, founder of Loftie, a group which imports lighting from China, wrote on LinkedIn. “I hope that reason prevails.”Maybe it will. But if Trump does not buckle, the anxiety will swell — along with the half-hidden scramble for cash. “I hope all the people [like me] who voted for [Trump] don’t get destroyed in the cross hairs,” Borrelli tells me. All eyes on the White House — and the irony of unintended consequences. [email protected] More

Seated before a pile of rough diamonds laid out on a faded velvet tray, Kalpesh Mangukiya said his cutting and polishing business in the Indian city of Surat was struggling even before Donald Trump’s trade war deepened his woes.The owner of Kushal Gems had already been forced to lay off a quarter of his staff as revenue more than halved due in part to western sanctions on Russian diamonds. Ebbing demand from the US and China, the world’s biggest diamond markets, amid competition from cheaper lab-grown gems has been a further complication.Now Trump’s blanket 10 per cent tariff on imports, and a potential for an additional levy on India, which processes 90 per cent of the world’s diamonds, threaten greater turmoil — unless a deal can be struck between New Delhi and Washington.“The tariffs will affect us . . . demand will come down,” Mangukiya said in his office, as TV monitors streamed footage from the cramped workshops next door, where about 100 employees hunched over abrasive polishing wheels in the sweltering pre-monsoon heat. “I don’t think things will improve much in the coming months,” he added. “It’s not fun doing business.”Many artisans have lost their jobs in the past 12 months and more than 60 have died by suicide as they struggled with mounting debts More

Unlock the White House Watch newsletter for freeYour guide to what Trump’s second term means for Washington, business and the worldDonald Trump has announced secondary sanctions on Iranian oil as Washington intensifies a “maximum pressure” campaign against the Islamic Republic amid faltering talks over its nuclear programme. The US president said on Thursday that anyone buying Iranian oil or products would be frozen out of doing business with the US, stepping up a crackdown on a vital revenue source for Tehran and further squeezing China, its biggest importer.“All purchases of Iranian Oil, or Petrochemical products, must stop, NOW!” Trump wrote on his Truth Social Platform. “Any Country or person who buys ANY AMOUNT of OIL or PETROCHEMICALS from Iran will be subject to, immediately, Secondary Sanctions. They will not be allowed to do business with the United States of America in any way, shape, or form.”Trump has taken a tough line on Iran, escalating sanctions targeting its energy sector after announcing in February a “maximum pressure” strategy “aimed at driving Iran’s oil exports to zero”.It was unclear how and when the latest measures would be implemented. A Treasury spokesperson said: “We’ve been very clear and consistent in our actions up until this point: anyone that seeks to engage in or facilitate any stage of Iran’s oil supply chain — including refineries, purchasers, brokers and shippers, among others — is placing itself at significant sanctions risk.”The National Security Council did not immediately respond to a request for further details. Trump’s announcement came after a fourth round of talks between the US and Iran, due to be held this weekend in Rome, was postponed earlier on Thursday. The foreign minister of Oman, which is acting as a mediator, said on X that the delay was made “for logistical reasons”. Oil jumped following the announcement, with international benchmark Brent crude settling up 1.8 per cent at $62.13 a barrel. US marker West Texas Intermediate made similar gains to settle at $59.24/barrel.US envoy Steve Witkoff and Abbas Araghchi, Iran’s top diplomat, have held three rounds of talks in Muscat and Rome as the Trump administration presses Tehran to agree a deal to reverse its nuclear advances.  China — with which the US is embroiled in a bitter trade war — is the country most exposed to Trump’s sweeping secondary sanctions. Beijing accounts for the vast majority of the roughly 1.5mn barrels a day of crude shipped by Iran.“If taken literally, it means that China . . . would have to choose between commercial relations with Iran or the United States,” said Bob McNally, a former adviser to President George W Bush and now head of Rapidan Energy Group. “If China opted to stop importing Iranian oil, Tehran would struggle to redirect those barrels to other countries.”“Unless China defies the United States, Iran is facing a catastrophic loss of crude exports and revenue. This step should move coercive diplomacy quicker towards either a diplomatic agreement or military conflict,” he added.Oil prices have dropped sharply this year amid fears of a global recession stemming from Trump’s trade war. Opec+ production is also rising, giving Washington greater leeway to slap sanctions on crude-producing countries without hurting American consumers. In March, Trump said the US would impose a 25 per cent tariff on all imports from any country that buys oil from Venezuela as part of a pressure campaign against President Nicolás Maduro’s government. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Apple chief executive Tim Cook has warned that President Donald Trump’s tariffs will increase costs by $900mn in the quarter to the end of June, marking the latest sign of how the levies are cascading across corporate America.Cook said in a call with analysts on Thursday evening that “assuming the current global tariff rates . . . do not change for the balance of the quarter, and no new tariffs are added, we estimate the impact to add $900mn to our costs”.But he said the uncertain tariff environment had made it “very difficult to predict beyond June” how the levies would affect Apple’s costs. Apple’s shares fell almost 4 per cent in after-hours trading on Thursday.Cook’s remarks are the latest sign of how Trump’s levies on trading partners are already affecting the US’s largest companies. Fellow tech behemoth Amazon on Thursday added “tariff and trade policies” to the list of factors that posed a risk to its earnings, while McDonald’s said economic jitters were weighing on its customers. Trump on April 2 announced steep “reciprocal” tariffs on a number of countries. While the US has temporarily exempted smartphones from its 125 per cent “reciprocal” tariffs on China, Apple is still affected by an existing 20 per cent tariff on Chinese imports. Cook noted that in the quarter to the end of June, “we do expect the majority of iPhones sold in the US will have India as their country of origin”. Vietnam would meanwhile supply Mac, Watch and AirPods products for the US, while China would remain responsible for the “vast majority” of product sales outside of the US, he said.“What we learned some time ago was that having everything in one location had too much risk with it, and so we have over time, with certain parts of the supply chain, not the whole thing . . . opened up new sources of supply,” Cook said. “You could see that kind of thing continuing in the future.” The Financial Times reported last week that Apple plans to shift the assembly of all US-sold iPhones to India as soon as next year. Any decoupling of Apple’s supply chain from China, however, runs the risk of potential political backlash in the country, which remains its third-biggest market after the US and Europe.Gene Munster at Deepwater Asset Management said Apple’s inability to forecast the effect of tariffs beyond the first half of this year was a concern for investors.“The nagging question comes back: what does that mean for the back half of the year?” he said, adding, “every company is going to have to deal with it . . . but Apple has got the hardest problem of anybody”.Despite the warning, Apple said on Thursday that demand for iPhones had remained robust early in 2025.The company reported revenue of $95.4bn for the quarter ending March 29, up 5 per cent year on year and slightly above consensus estimates of $94.6bn. Net income was $24.8bn, also slightly beating estimates of $24.5bn and up 5 per cent on the same period for the previous year.Revenue for the iPhone, Apple’s flagship product, was $46.8bn, up 2 per cent year on year.China revenue fell slightly to $16bn, down 2.4 per cent, reflecting the competitive challenge Apple has faced from local smartphone makers in recent quarters. Its services business, which includes the App Store, iCloud and Apple Pay, continued to show strong growth, rising 12 per cent to $26.6bn.Apple chief financial officer Kevan Parekh told the Financial Times there had been no sign of a short-term uptick in consumer demand to get ahead of the April tariffs. “For the March quarter, we don’t believe we saw any strong evidence of pull-ahead demand that impacted our results,” Parekh said.Apple’s board approved a 4 per cent increase in its dividend and up to $100bn in share buybacks, slightly lower than the $110bn of the previous year. More