Aurelia Butler

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: The latest South China Sea stand-off Trump’s trade war hits US ports and air freightInside Interpol’s Singapore innovation labWe start today with China’s move to proclaim sovereignty over a disputed reef in the South China Sea, which has triggered a new stand-off with the Philippines. Here’s what you need to know about the row over Sandy Cay.What’s happening: The Philippines sent navy, coastguard and maritime police officers to Sandy Cay and two neighbouring sandbanks in the Spratly Islands yesterday to “uphold the country’s sovereignty, sovereign rights and jurisdiction” and displayed the national flag there, according to a statement published on X. The move came a day after China said it had “implemented maritime control and exercised sovereign jurisdiction” over the reef by showing its own flag there — the first such official declaration of sovereignty on or near a land feature in the disputed waters in at least a decade.Why Sandy Cay matters: Although just a sand bank measuring little more than 200 sq m, Sandy Cay has strategic value because its categorisation as a rock could allow the nation controlling it to claim a territorial sea around it. That 12-nautical-mile radius would overlap with Thitu Island, the Philippines’ most important military foothold in the area. Sandy Cay is one of four reefs where Manila has suspected China of planning land reclamation works followed by further militarisation.US-Philippine military drills: The row over Sandy Cay comes as Philippine and American troops are due to begin coastal defence and island seizure drills on the Philippine territory closest to the Spratlys today. The White House said on Saturday that the reports of China seizing Sandy Cay were “deeply concerning if true”.Here’s what else we’re keeping tabs on today:Economic data: Singapore publishes first-quarter labour market figures and Malaysia reports March PPI inflation data.Canada’s election: Prime Minister Mark Carney will face off in a national election against Pierre Poilievre, a career politician whose leadership bid has been tainted by association with US President Donald Trump. The vote takes place after eleven people were killed when a car was driven into a large crowd in Vancouver on Saturday night.Results: Daiwa Securities, Tokyo Gas, Kikkoman, Komatsu and China Petroleum & Chemical Corp are among the companies reporting today.Five more top stories1. Donald Trump’s trade war with Beijing is starting to affect the wider US economy as container port operators and air freight managers report sharp declines in goods transported from China. Logistics groups said container bookings to the US have fallen sharply since the introduction of 145 per cent tariffs on Chinese imports to the US.Double tariffs: Foreign manufacturers in China are paying duties of 125 per cent to import components and then 145 per cent to export to the US.More US-China news: The liquefied natural gas industry has warned the Trump administration it cannot comply with new rules aimed at forcing them to use US transport vessels by imposing levies on Chinese-built ships docking at US ports.2. Vanguard, the world’s second-largest asset manager, has ruled out re-entering China’s fund industry even as the group seeks to accelerate its global expansion beyond its biggest market in the US. Chris McIsaac, head of Vanguard’s international business, told the FT why it doesn’t make sense for the group to operate in China.3. Russian businessman Albert Avdolyan has been hit with EU sanctions over Moscow’s war in Ukraine, but can partially circumvent the bloc’s travel ban thanks to a Maltese passport he bought under a “golden” visa scheme that faces a European court ruling on its future this week. The paid-for citizenship was given to politically exposed individuals, or people who later appeared on sanctions lists or were convicted of crimes.4. Saudi Arabia and Qatar have said they will settle Syria’s outstanding debt to the World Bank, in a step that will help the conflict-ravaged country access funding for postwar reconstruction and public-sector salaries. The funding of about $15mn will be the first financial assistance to Syria from Saudi Arabia since the fall last year of Bashar al-Assad’s regime, a government that the kingdom had staunchly opposed.5. Far-right politician Jordan Bardella has said he will run to become France’s president in 2027 if Marine Le Pen is blocked from running by a court judgment. “Marine Le Pen is my candidate and, if she were to be prevented [from running] tomorrow, I think I can tell you that I will be her candidate,” the 29-year-old Bardella told Le Parisien newspaper. FT MagazineInterpol’s Singapore innovation centre in 2015 More

Donald Trump’s trade war with Beijing is starting to affect the wider US economy as container port operators and air freight managers report sharp declines in goods transported from China.Logistics groups said container bookings to the US have fallen sharply since the introduction of 145 per cent tariffs on Chinese imports to the US.The Port of Los Angeles, the main route of entry for goods from China, expects scheduled arrivals in the week starting May 4 to be a third lower than a year before, while airfreight handlers have also reported sharp falls in bookings.Bookings for standard 20-foot shipping containers from China to the US were 45 per cent lower than a year earlier by mid-April, according to the latest available data from container tracking service Vizion. John Denton, secretary-general of the International Chamber of Commerce, said the upheaval in China-US trade flows reflected traders “kicking decisions down the road” as they waited to see how quickly Washington and Beijing could reach a deal to lower tariffs.A survey of ICC members conducted in more than 60 countries after Trump’s April 2 “liberation day” tariff announcement showed expectations that trade would be permanently impacted, whatever the result of coming negotiations. Some content could not load. Check your internet connection or browser settings.The cost of access to the US market would be the highest since the 1930s, Denton said. Referring to the baseline tariff for all countries, he said there was “almost an acceptance that 10 per cent will be the minimum charge to access US market, whatever other uncertainties there may be”.Washington and Beijing showed signs of starting to feel the effects — with both sides announcing some tariff exemptions this week on important products for their respective economies and Trump predicting the 145 per cent tariff would “come down substantially”. However, China said on Friday it was not in talks with the US.As the first container shipments from China to face tariffs are due to land in the US in the coming week, freight operators said supply chains were shifting.Nathan Strang, ocean freight director at US logistics group Flexport, said companies were waiting to ship goods in anticipation of Washington and Beijing agreeing a deal to mitigate the levies.US importers are looking to use up stockpiled inventories before importing fresh stock from China, said logistics executives. They are also holding stock in bonded warehouses where inventory can be stored duty-free with taxes paid on withdrawal, or diverting it to other nearby countries such as Canada. “They’re sitting on goods at origin, sitting on goods at destination,” Strang said, warning that if a deal was done to cut tariffs, shipping rates would then jump sharply. Hapag-Lloyd, one of the world’s largest container shipping lines, said Chinese customers had cancelled roughly 30 per cent of its bookings out of China. Hong Kong-listed Taiwanese container shipping company TS Lines has suspended one of its Asia to US west coast services in recent weeks. “Demand is not there,” one person at the group said. The declines in order volumes have fed through to landings in Los Angeles, according to shipping data analysts Sea-Intelligence, which reported a surge in ‘blank sailings’, where scheduled vessels from China were being cancelled.Almost 400,000 fewer containers are booked on Asia to North America routes during the four weeks from May 5 than planned — a 25 per cent drop from the amount scheduled for the same period at the start of March, before tariffs were imposed.The Port of Los Angeles alone expects 20 blank sailings in May, representing more than 250,000 containers — up from six in April.That is a sharp fall from this week, when arrivals were up by 56 per cent year-on-year — a sign that importers have been frontloading deliveries from other south-east Asian manufacturing hubs such as Cambodia and Vietnam that are enjoying a 90-day “pause” in tariffs.Container prices reflected the supply chain shift, according to data from logistics hub Freightos, with a 15 per cent increase in the price of a 40-foot container from Vietnam compared with a 27 per cent fall on major China-US routes.Some content could not load. Check your internet connection or browser settings.“Rates from other Asian countries to the US may continue to climb ahead of the July tariff deadline,” Judah Levine, head of research at Freightos, said.Airfreight volumes have also fallen sharply, according to US industry association the Airforwarders Association, with its members’ bookings from China falling roughly 30 per cent.“A lot of members have just stopped receiving orders from China,” said executive director Brandon Fried. “It’s also creating a whipsaw effect on prices and booking rates as traders reacted to each piece of news from the White House.”The industry is expected to be further hit by a US decision to close its ‘de minimis’ scheme that allowed goods valued at under $800 to be imported tariff-free, an important route for e-commerce retailers such as Shein and Temu. Chinese goods are set to lose the exemption from May 2.Lavinia Lau, chief commercial officer at Hong Kong’s Cathay Pacific, whose air cargo business contributes about a quarter of its revenue, said it expected a “softening” of demand between China and the US because of the tariffs and de minimis rule changes.Hong Kong freight forwarder Easyway Air Freight said business from China to the US dropped roughly 50 per cent following the tariff increases. E-commerce executives noted waning freight demand. Wang Xin, head of the Shenzhen Cross-Border E-Commerce Association, said: “We are seeing noticeably fewer price quotation requests in relation to air cargo shipments.” Even though stockpiling and supply-chain reorientation have helped buffer consumers from the sharp falls in freight volumes, hauliers and retailers are starting to feel the effects of the slowdown in imports.Arizona-based Knight-Swift Transportation, one of the largest US trucking companies, warned of lower anticipated volumes, citing uncertainty caused by the tariffs threat.Chief executive Adam Miller said some of the group’s largest customers were “expressing concern” that the cost of tariffs would feed into lower volumes in May.“There are some that have told us that, yes, they’ve cancelled orders or they’ve stopped ordering, particularly from China, and we’ll figure out how to adjust their supply chain to avoid the cost,” he said.Retail consultants said purchasing patterns were reflecting the three successive months of softening consumer confidence indices.John Shea, the chief executive of Momentum Commerce, which helps consumer companies sell about $7bn annually on Amazon, warned of a potential “double whammy” of rising prices and falling consumer spending.“We’re seeing evidence that consumers are starting to trade down . . . while at the same prices are creeping up,” he said.Data visualisation by Clara Murray More

This article is an on-site version of our The Week Ahead newsletter. Subscribers can sign up here to get the newsletter delivered every Sunday. Explore all of our newsletters hereHello and welcome to the working week.My colleagues in Washington are sharpening their pens to assess the first 100 days of Donald Trump’s second term in office. But the US president’s impact can also be assessed by a series of national and local elections scattered across continents over the next seven days.Let’s start with Canada, whose citizens will be first to the polls on Monday. Up until the return of Trump, and more particularly his tariffs, the incumbent Liberal party was on the ropes. Now they are riding high and it is the rightwing opposition leader Pierre Poilievre who is struggling. Mark Carney, the man defending his recent elevation to the office of prime minister, is winning votes by portraying himself as a wartime leader akin to Winston Churchill and an antidote to the US president — the question, asked in this FT analysis, is whether he has what it takes do this.It is a similar story in Australia, which holds federal elections on Saturday. When Labor Prime Minister Anthony Albanese called the ballot in March, many predicted a hung parliament with Labor forming a government, given the lack of other viable options. But opposition Liberal party leader Peter Dutton’s strongman image — linking him with Trump in many voters’ eyes — has backfired spectacularly such that an outright Labor win looks more likely with each successive poll.The picture is more complicated in the UK, where seats in 24 English local authorities and six regional mayoralties will be contested on Thursday. It is also the day of the Runcorn and Helsby by-election, after the former MP was convicted for punching a constituent — not the first Labour politician to use his fists, but seldom a good look politically. Labour Prime Minister Sir Keir Starmer is likely to be facing an embarrassing loss in Runcorn and at least two of the mayoral seats. But this will be balanced by the probable heavy defeat in local council seats awaiting his parliamentary rival Kemi Badenoch’s Conservatives. Nigel Farage’s Reform UK party — which as my colleague Robert Shrimsley notes in his latest UK politics column has morphed from being pure far right into a surprisingly leftwing political group when it comes to economics — is set to vacuum up votes in all the electoral contests. If you want to track when the various vote counts will be announced, read Stephen Bush’s Inside Politics newsletter.There is a clear exception to the rule of Trump helping the left in elections this week and it’s Romania. Ultranationalist candidates, trading on Maga-style techniques, are riding high ahead of the central European state’s presidential election on Sunday. This state of affairs, explained entertainingly by the FT’s man on the ground Marton Dunai, is somewhat ironic given that the election was postponed previously because of concerns about Russian influence.For Singaporeans, who go to the polls on Saturday, the key electoral issue is the impact from rising tensions between the US and China, both big trading partners for the Asian city-state. This election will almost certainly be won by the incumbent Prime Minister Lawrence Wong and his People’s Action party, which has taken the previous 14 contests. But trade wars and the impact on Singapore’s high living costs — made worse by the economic chaos caused by Trump’s tariff threats — have been big issues in campaigning, as my colleague on the ground Owen Walker explains.Saturday is also the day that the Trump administration’s 25 per cent tariff on imported car parts comes into force. The exception to this levy is any import that is duty-free under the US-Mexico-Canada Agreement. Of course, Trump has already introduced 25 per cent tariffs on imported cars. Moreover, given past form, he might postpone the lot. For the latest on the White House levies, click on the FT’s Trump Tracker.Has it really been just 100 days?After a quiet start, the economic data run will peak later in the week, with preliminary first-quarter GDP estimates and monthly employment reports from the US and the EU, plus an interest rate announcement from the Bank of Japan. If monetary policy is your thing, try the FT’s inflation and interest rate tracker. We are in the thick of earnings season with a plethora of results announcements and trading updates: from the last of the retail banks (HSBC and Lloyds Banking Group, I’m looking at you) and Big Tech (Amazon.com, Meta, Microsoft and Spotify), plus oil (a chance to compare and contrast BP with Shell, Chevron and ExxonMobil), retailers (Associated British Foods) and pharmaceutical groups AstraZeneca and GSK. The big question at the analyst calls is how Trump’s tariff wars are affecting the outlook for these companies. My colleague Rob Armstrong, in his consistently excellent Unhedged (Premium subscriber) newsletter, has called it a crucial earnings season. More details below.One more thing . . . Being a fan of the Star Wars film franchise has never been cool. I know because I am one. This will be proved via myriad weirdo posts in my social media feeds next Sunday on International Star Wars Day, an unofficial fan celebration based on a pun on the line “may the force (fourth) be with you”.For those of us who queued round the block of our local cinema to see the first film in 1977, there is genuine joy at the British Film Institute reshowing that original British cut of the movie for the first time in decades in London next month. For those of us who love a Shrimsley satire, read this.What are your priorities for the next seven, or indeed 100, days? Email me at [email protected] or, if you are reading this from your inbox, hit reply.Key economic and company reportsHere is a more complete list of what to expect in terms of company reports and economic data this week.MondayAmazon is due to launch the first 27 satellites for its Project Kuiper fast internet network, an already delayed start to the company’s plan to create a massive constellation to rival Elon Musk’s Starlink systemResults: Brambles Q3 trading update, Cadence Design Systems Q1, Daiwa Securities Q4, Deutsche Börse Q1, Domino’s Pizza Q1, Hitachi FY, Kikkoman FY, MGM Resorts Q1 business update, NEC Q4, Nucor Q1, Porsche Q1, Plus500 Q1 trading update, Roper Technologies Q1, SBA Communications Q1TuesdayReserve Bank of Australia assistant governor (financial markets) Christopher Kent gives keynote speech at Australia’s External Position and the Evolution of the FX Markets, hosted by Bloomberg in SydneyDave Ramsden, Bank of England deputy governor, markets and banking, delivers a keynote speech at the Innovate Finance Global SummitEU: European Central Bank monthly consumer expectations surveyJapan: Showa Day. Financial markets closedUK: Zoopla House Price Index. Also, Kantar grocery market share figures and shop price inflation reportUS: March Job Openings and Labor Turnover Survey (Jolts) dataResults: Adidas Q1, Alfa-Laval Q1, AO Smith Q1, Associated British Foods HY, AstraZeneca Q1, Banco Bilbao Vizcaya Argentaria Q1, Beazley Q1 trading update, Booking Q1, BP Q1, Brown & Brown Q1, Caesars Entertainment Q1, Carlsberg Q1 trading statement, Clariant Q1, Coca-Cola Q1, Corning Q1, Deutsche Bank Q1, Deutsche Lufthansa Q1, Entain Q1 trading update, General Motors Q1, HelloFresh Q1, Hilton Q1, Honeywell Q1, Howden Joinery trading update, HSBC Q1, Hydro Q1, Kraft Heinz Q1, Leggett & Platt Q1, Mondelez Q1, Novartis Q1, PayPal Q1, Pfizer Q1, Royal Caribbean Q1, RWS HY, Seagate Q3, Sherwin-Williams Q1, Snap Q1, Spotify Q1, Starbucks Q2, Teradyne Q1, Travis Perkins Q1 trading update, United Parcel Service Q1, Universal Music Group Q1, Visa Q2, Waste Management Q1WednesdayGareth Truran, Bank of England executive director, insurance supervision, speaks at the 22nd Conference on bulk annuities “Overseeing BPA growth safely”DN Solutions, a South Korean industrial tools manufacturer, is set to name the final price for the sale of 17.5mn shares, potentially making it the biggest IPO the country has seen for three yearsAustralia: March consumer price index (CPI) inflation rate dataAustralia, China: S&P Global/Caixin manufacturing purchasing managers’ index (PMI) dataAnglo American holds a general meeting for shareholders to vote on the proposed demerger of Anglo American Platinum. If approved, the demerger is expected to become effective on May 31EU: preliminary Q1 GDP estimateGermany: March labour market statistics, plus provisional April CPI and harmonised index of consumer prices (HICP) inflation rate data and preliminary Q1 GDP estimateUK: Nationwide April House Price IndexUS: preliminary Q1 GDP estimateResults: Aberdeen assets under management and administration (AUMA) and flows trading update, Adyen Q1 business update, Airbus Q1, Air France-KLM Q1, Albemarle Q1, ArcelorMittal Q1, Aston Martin Lagonda Q1, Banco Santander Q1, Barclays Q1, Caterpillar Q1, Crédit Agricole Q1, Crown Castle Q1, East Japan Railway FY, eBay Q1, Equinor Q1, Etsy Q1, Glencore Q1 production report, GSK Q1, Haleon Q1 trading statement, Hess Corp Q1, Iberdrola Q1, International Paper Q1, Kingspan trading update, Mercedes-Benz Q1, Meta Platforms Q1, MetLife Q1, Microsoft Q3, OMV Q1, Prudential Q1 business performance update, Qualcomm Q2, Repsol Q1, Samsung Electronics Q1, Schindler Q1, Segro Q1 trading update, Smith & Nephew Q1, Société Générale Q1, Stanley Black & Decker Q1, Stellantis Q1, Taylor Wimpey AGM trading update, THG FY and Q1 trading statement, UBS Q1, Videndum FY, Volkswagen Q1, Western Digital Q3, Yum Brands Q1ThursdayAustria, Belgium, Brazil, China, France, Germany, Hong Kong, India, Italy, Netherlands, Norway, Philippines, Russia, Singapore, South Africa, South Korea, Spain and others: financial markets closed for Labour DayCanada, Japan, UK, US: S&P Global manufacturing PMI dataJapan: interest rate announcement and economic outlook reportResults: Airbnb Q1, Allstate Q1, Amazon.com Q1, American International Group Q1, Amgen Q1, Apple Q2, Baxter International Q1, Bombardier Q1, Canadian National Railway Q1, Cardinal Health Q3, Computacenter Q1 trading update, CVS Health Q1, Drax AGM and trading update, Eli Lilly Q1, Estée Lauder Q3, Hershey Q1, Hiscox Q1 trading statement, Iron Mountain Q1, Juniper Networks Q1, Kerry Group Q1 interim management statement, KKR Q1, Linde Q1, Live Nation Entertainment Q1, Lloyds Banking Group Q1, London Stock Exchange Group Q1 trading statement (revenues only), Mastercard Q1, McDonald’s Q1, Mitsui FY, Moderna Q1, Morgan Sindall AGM and trading update, Persimmon AGM and trading update, Prudential Financial Q1, Schroders Q1 update, Stryker Q1, Sumitomo FY, Thomson Reuters Q1, Whitbread FYFridayAustralia: March producer price index (PPI) inflation rate dataChina, Russia: Labour Day holiday continues. Financial markets closedEU: March employment figuresEurozone, France, Germany, India, Italy, Spain: HCOB/HSBC manufacturing PMI dataUS: April employment reportResults: Bank of Ireland interim management statement, Chevron Q1, Cigna Q1, Danske Bank Q1, ExxonMobil Q1, Ingersoll Rand Q1, ING Groep Q1, Itochu FY, Mitsubishi FY, NatWest Q1, Pearson Q1 trading update, Shell Q1, Standard Chartered Q1World eventsFinally, here is a rundown of other events and milestones this week.MondayBelgium: Nato hosts a ceremony at its Brussels headquarters to mark the 70th anniversary of German accession to the military bloc, including a wreath-laying ceremony by Nato secretary-general Mark Rutte and Germany’s president Frank-Walter SteinmeierCanada: general electionTrinidad and Tobago: parliamentary electionsTuesdayPhilippines: Japanese Prime Minister Shigeru Ishiba begins a visit to the country, where he will meet his Philippine counterpart Ferdinand Marcos JrPoland: 13 EU member states, border the Baltic, Adriatic and Black seas, begin a two-day summit in Warsaw for the Three Seas Initiative, a politically inspired, commercially driven club to improve connectivity between these countriesWednesdayCayman Islands: parliamentary electionsUS: Trump administration’s 100th day in officeVietnam: 50th anniversary of the end of the Vietnam war, finishing 20 years of fighting. Commemorations will take place across the countryThursdayFridaySaturdayTrump administration’s 25 per cent tariff on imported car parts to the US due to come into forceAustralia: federal electionSingapore: general electionUS: Warren Buffett’s Berkshire Hathaway holds its annual shareholder meeting, during which it will release its first-quarter earningsSundayItaly: Asian Development Bank annual meeting begins a four-day session in MilanRomania: presidential electionUS: Investors, dealmakers and government officials gather for the annual four-day Milken Institute Global Conference in Beverly HillsRecommended newsletters for youWhite House Watch — What Trump’s second term means for Washington, business and the world. Sign up hereFT Opinion — Insights and judgments from top commentators. Sign up here More

This article is an on-site version of Free Lunch newsletter. Premium subscribers can sign up here to get the newsletter delivered every Thursday and Sunday. Standard subscribers can upgrade to Premium here, or explore all FT newslettersWelcome back. Every twist and turn from the White House brings a new rally or sell-off in the S&P 500. But is the market missing the bigger picture?Despite signs of a slowing US economy, Donald Trump’s tariff plans and stultifying uncertainty, Wall Street analysts still expect the main US stock index to end 2025 just below 6,000 on average. That means the market projects the S&P 500 will rise by at least 5 per cent between now and December 31.So this week, I’ll outline the case for why the market is wrong, and why the S&P 500 is more likely to end this year significantly below its current level of 5,525. End-year stock market forecasts are ultimately underpinned by investors’ annual economic outlook and their assessment of structural drivers, such as artificial intelligence and US exceptionalism. For 2025, analysts essentially expect the S&P 500 level to be broadly unchanged on last year. That is a notable markdown from the past two years of consecutive annual growth above 20 per cent. But is it still too optimistic? Some content could not load. Check your internet connection or browser settings.Let’s begin with the economic fundamentals. Last month, I argued that America was heading for a recession. (This was based on economic weakness coming into Trump’s second term, the uncertainty of his policies, and the possibility of some import duties being implemented.) I appreciate that this isn’t Wall Street’s view, yet.Analysts are more focused on actual tariff announcements. Indeed, since “liberation day”, consensus growth forecasts for 2025 have fallen and probabilities for a recession in the next 12 months have risen to 45 per cent. Most expect the US effective tariff rate (pre-substitution effects) to settle around 10 to 20 per cent this year. It is currently estimated at around 28 per cent, having started 2025 close to 2.5 per cent.These forecasts seem reasonable: notably higher tariffs than last year and slower growth, even if there is no recession. However, the market is still pricing more optimistically than that.“The information derived from risk assets doesn’t even suggest markets reckon a mild slowdown will take shape this year,” said Daniel Von Ahlen, a senior macro strategist at TS Lombard, utilising a simple regression model to estimate US growth forecasts from asset prices. Some content could not load. Check your internet connection or browser settings.Expectations for corporate earnings this year remain too high. It is easier for Wall Street to make buy and sell decisions based on perceived risk-on or risk-off news items. Judging their impact on companies’ bottom lines can take longer. “Typically earnings estimates decline during even mild recessions,” said Peter Berezin, chief global strategist at BCA Research. “But the market currently assumes nearer 10 per cent earnings growth over the next 12 months. That’s off last year’s peak profit margins no less.”Analysts may be too optimistic about the ability of companies to pass through any tariff costs to consumers. The sectors that import the most — industrials, materials and consumer discretionary — also have limited pricing power, notes BCA Research’s US equity strategy team. Assuming companies won’t be able to raise prices significantly, it shows Trump’s tariffs reducing S&P 500 net income margins by 2.2 percentage points. That would translate to a 19.2 per cent decline in S&P 500 earnings per share, all else equal (based on tariff rates at 10 per cent for all countries, Chinese import duties returning to their pre-retaliation rate of 54 per cent, and steel, aluminium and car-specific levies at 25 per cent.)For measure, Goldman Sachs estimates that each 5 percentage point rise in the US tariff rate leads S&P 500 EPS to fall roughly between 1 to 2 per cent.Some content could not load. Check your internet connection or browser settings.Whatever one’s tariff outlook, consensus forecasts for EPS to grow notably in 2025 appear at odds with the current economic environment: high uncertainty, weak consumer and investor confidence, and elevated import duties. (Scheduled vessels into the Port of Los Angeles are expected to drop significantly year on year in two weeks’ time.)Earnings revisions are coming in rapidly now. The number of earnings downgrades by analysts for 2025 is ironically at recessionary levels, though the actual magnitudes of the downgrades remain relatively less significant. As earnings projections come down, prices will follow, as analysts calibrate valuations.For measure, the forward price-to-earnings ratio (how much investors are willing to pay for each dollar of future earnings) is currently around 19. In the five years prior to the pandemic, it was closer to 17. And in all recessions since 1980, it has averaged around 10.Using Goldman Sachs’ S&P 500 sensitivity matrix, a still modest forecast for EPS to grow by 3 per cent this year and forward P/E ratios to return to just above their pre-pandemic average would put the index nearer to 4,550.Some content could not load. Check your internet connection or browser settings.Of course, it is possible for the S&P 500 to dodge such a hefty fall if structural factors provide buying impetus.But first, the AI narrative is hitting roadblocks. DeepSeek’s low-cost model release in China put the spotlight on the billions being spent by US tech firms on AI capital. Trump’s trade announcements — including planned duties on Asian tech manufacturing hubs and chip export restrictions — have added further pressure.“We’re still waiting for a ‘killer app’ that justifies the heavy capex taking place. The low barriers to building large language models also raise further questions over the revenue [the Magnificent Seven] can generate”, explains Hugh Grieves, a fund manager at Premier Miton Investors. “[They] are also only slowly assessing how tariffs impact their earnings”.The stock prices of the Magnificent Seven tech businesses have dropped substantively since Trump’s inauguration. But analysts are unclear on what is being priced in. The companies account for one-third of the S&P 500’s market capitalisation. (They also skew net profit margin estimates for the whole stock market upward.) So selling them is an easy way to cut risk exposure as the news whipsaws. Still, their forward P/E multiples remain above pre-pandemic levels (individually and collectively). Prices could drop further as their profitability is re-evaluated, both in terms of tariffs and AI hype.Some content could not load. Check your internet connection or browser settings.Second, US exceptionalism. For years America has attracted capital by virtue of its deep liquidity, stability and the safe-haven status of its assets. This enabled the S&P 500 to grow beyond economic fundamentals.But the narrative is weakening. In March, respondents to Bank of America’s Fund Manager survey slashed their US equity holdings by the most on record. Tariffs weigh disproportionately on America. Its companies are the greatest beneficiaries of the “Made in Asia” model, notes Matt King, founder of Satori Insights. (Retaliatory measures will hurt US firms too.)Policy upheaval, radical uncertainty, rising financial stability risks and attacks on independent economic institutions (such as the US Federal Reserve most recently) make the US a less reliable place to park capital.“The US has gone from the ‘cleanest dirty shirt’ to being one of the ugliest and yet still most expensive item cluttering the investment wardrobe,” says King. “Even after this year’s correction, US equities retain a significant exceptionalism premium trading on forward P/Es 50 per cent higher than non-US equities.”This exposes America to further capital flight, depending on the attractiveness of opportunities abroad and Trump’s actions. Paradoxically, if the president’s term continues as it has started, the US will be more reliant on improved economic fundamentals to build buying momentum. Some content could not load. Check your internet connection or browser settings.The S&P 500 has oscillated down around 10 per cent from its February peak. But the newsflow makes it difficult to know what has and hasn’t been priced in.The constant churn of policy announcements, exemptions, postponements and denials mean investors re-price each day where they consider risk to be relative to the day before. This then shifts the goalposts for judging growth and profitability forecasts. For all the noise, however, the market still seems positioned for a hopeful outcome. Stocks are not even priced right now for a mild downturn. “For the S&P 500 to rise to where the consensus is now, Trump would need to immediately roll back tariffs”, reckons Berezin. Sure, recent climbdowns suggest the president can be turned somewhat. But by how much? And when? If most investors reasonably expect tariff rates to eventually settle at least several multiples higher under Trump than where they started 2025, they are yet to fully price that in, along with the lingering impact of economic uncertainty.Wall Street’s earnings and growth projections have further to fall. As they do, markets may also further scrutinise the AI and US exceptionalism narratives. That’s why I fear the S&P 500 will end the year not with a 5 handle, let alone a 6 — but with a 4.Send your rebuttals, reflections and end-year S&P 500 forecasts to [email protected] or on X @tejparikh90.Food for thoughtPlanning a social media detox? A new study of Facebook and Instagram deactivations before the 2020 US election found improvements in measures of users’ happiness, depression and anxiety.Recommended newsletters for youTrade Secrets — A must-read on the changing face of international trade and globalisation. 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Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.President Donald Trump’s global trade war is expected to weigh heavily on April’s US jobs report, with hiring forecast to be sharply lower for the month.Friday’s data is expected to show that hiring slowed significantly this month, according to a survey of economists by Bloomberg. The US is forecast to have added just 125,000 jobs in April, a significant drop from the 228,000 added in the previous month.April’s data will capture cuts to the public labour force exacted by Elon Musk’s so-called Department of Government Efficiency, which has been intent on slashing government spending. The figures will also reflect any slowdown in hiring that has happened as companies plan for hits to profits from Trump’s wide-ranging tariffs.But the damage to the labour market is still expected to be limited, and may remain that way given the president’s climbdown on tariffs, with a 90-day pause for most countries and his apparent willingness to negotiate far lower rates on China. For that reason, analysts expect the unemployment rate to remain at 4.2 per cent, and for this to be a factor in preventing the Federal Reserve from cutting interest rates next month.“We do not think that the April jobs report nor the Q1 GDP data will be conclusive enough for the Fed to act. We expect hiring to moderate amid the uncertainty but be sufficient to keep the unemployment rate steady at 4.2 per cent,” wrote analysts at BNP Paribas. Kate DuguidHow hard will US tariff uncertainty hit EU growth?On the face of it, policymakers at the European Central Bank next week are likely to have reason to celebrate that they are on track to meet their medium-term inflation target of 2 per cent for the first time in half a year.Economists polled by Reuters on average predict that annual inflation in April, to be reported by Eurostat on Friday, will have fallen to 2 per cent, down from 2.2 per cent in March. Such a result would be the latest sign that upwards pressures to consumer prices have finally been tamed.But ECB president Christine Lagarde is unlikely to go on a victory lap, as the 10 per cent universal tariffs Trump imposed on most imports — combined with concerns over even higher rates should the US and its trading partners fail to strike a deal — could dent economic sentiment as well as growth prospects.A sharp drop in the oil price in recent weeks and the stronger euro could drag down inflation even further over the coming months.“Downside risks to inflation are mounting in the near term,” Pantheon Macroeconomics wrote in a note to clients on Friday, adding that it had slashed its full-year inflation forecast by 0.2 percentage points to 2.2 per cent.In the run-up to Trump’s so-called liberation day announcements on April 2, the euro area’s economy started to pick up speed again, with seasonally adjusted real GDP expected to have risen by 0.2 per cent compared with the final three months of 2024, according to a Reuters poll.But the ECB, which cut interest rates by a quarter point in April, its seventh reduction since June 2024, warned that the “economic outlook is clouded by exceptional uncertainty”. Olaf StorbeckWill the Bank of Japan signal higher rates this year? The big question for analysts and investors ahead of the Bank of Japan’s monetary policy meeting next week is not whether there is likely to be a rise in interest rates, but whether — or how far — the fallout from Donald Trump’s trade tariffs has blown Japan off its course of monetary policy normalisation.No economists polled by Reuters are expecting the meeting, which takes place on Wednesday and Thursday, to produce a shift from the current level of 0.5 per cent. That is despite the reading for the Tokyo core consumer price index showing April prices in the capital rose 3.4 per cent compared with a year earlier. That rate is a two-year high and a faster clip than most analysts had expected. However, the mood of caution is clear. The BoJ governor, Kazuo Ueda, noted on Thursday that the bank would be scrutinising how various information, including the fallout from US tariffs, could affect Japan’s economy sustainably meeting the BoJ’s price goal.Investors will be focused on the precise language the BoJ uses to define the current state of inflation, how fearful is the tone it strikes in the economic outlook statement accompanying the decision, and how clearly it sets up the possibility of a further rate rise later in the year.On the outlook report, economists at HSBC and elsewhere are in little doubt that downward revisions to growth forecasts will be the headline. “Meanwhile, more varied nuances are at play with respect to inflation, and so the focus will be on how officials see price trends developing in 2026 and 2027,” wrote HSBC’s economics team in a note to clients.But Naohiko Baba, chief Japan economist at Barclays, said that the BoJ could nevertheless repeat the message that it believes real policy rates are too low, and that it will increase rates appropriately if growth and inflation are on track.“Wages and inflation are actually ‘on track’ or even slightly stronger than expected by the BoJ, so in terms of fundamentals, the stage appears set for a rate hike at any time. In our view, it is now a matter of tariff negotiations with the Trump administration and related impacts,” said Baba. Leo Lewis More

Unlock the White House Watch newsletter for freeYour guide to what Trump’s second term means for Washington, business and the worldThe liquefied natural gas industry has warned the Trump administration it cannot comply with new rules aimed at forcing them to use US transport vessels by imposing levies on Chinese-built ships docking at US ports.It warns the rules published by US trade representative Jamieson Greer on April 17 could damage a $34bn a year export industry that is central to the president’s “energy dominance” agenda, according to lobbying letters sent by the American Petroleum Institute to the administration this week. The new rules are part of US efforts to increase the pressure on China over what Washington argues are unfair trade practices, while boosting the domestic manufacturing of ships. However, they have caused alarm among US exporters, who worry they will dramatically increase the cost of contracting vessels.The LNG industry has already benefited from a three-year delay in the implementation of the rules to the sector, which is heavily reliant on Chinese and foreign-built vessels. The USTR is also allowing LNG producers to gradually phase-in the use of US-built and flagged vessels over a 22-year period. US authorities could still order the suspension of LNG export licences if the terms of the new rules are not met.But the API warns in letters to the US secretaries of energy and the interior that it is impossible for LNG producers to comply with the rules. There are currently no US-built vessels capable of shipping LNG and no surplus capacity at US shipyards to build LNG carriers by the deadline of 2029, according to people briefed on the contents of the letters. API warns the rules would compromise US producers’ ability to dominate the global LNG industry and cement America’s position as the global energy superpower. This action against the industry could cause future US administrations to become creative and use similar trade instruments as a way to suspend export licences, the group argues.  Industry has also requested the administration exempt shipments of crude oil and refined products such as gasoline and liquefied petroleum gas from the maritime tariffs, noting such fees would disrupt a carefully balanced supply chain and hit industry competitiveness.When asked about the letter, API told the Financial Times that it understood the need to curb discriminatory trade practices from China and increase US shipbuilding but had concerns about the rules.“We will continue working with USTR and the Department of Energy in support of feasible and durable policies that benefit consumers and advance American energy dominance,” said Aaron Padilla, API vice-president of corporate policy, in a statement.Charlie Riedl, executive director at the Center for LNG, an industry group, said the measures risk destabilising long-term contracts, raising costs for global buyers, and threatening America’s position as the leading LNG exporter.  “That’s why we have urged USTR to exempt LNG shipping and LNG carriers from this action entirely,” he said.The US overtook Australia in 2023 to become the world’s biggest exporter, and last year shipped 11.9bn cubic feet a day of LNG — enough to satisfy the combined gas needs of Germany and France. The industry has ambitious plans to double exports by the end of the decade. The new rules on Chinese-built, owned and operated vessels have sparked a wave of lobbying by US industry, including farmers and other exporters, who have warned it will push up freight costs.Under the rules, the US will begin charging fees to vessel owners and operators from China of $50 per net ton beginning in 180 days, increasing by $30 per net ton over the following three years. Companies from elsewhere in the world operating Chinese-built ships would be charged a lower amount.The oil and gas industry, which was a big donor to Trump’s election campaign, has so far enjoyed considerable success in winning concessions from the administration, including have oil and gas imports into the US excluded from tariffs. More

The havoc unleashed by Donald Trump’s trade war has divided Europe’s far-right parties that have courted his Maga movement.Alice Weidel, one of the leaders of Alternative for Germany (AfD), described the US president’s moves as “far too aggressive and self-defeating”. The former Goldman Sachs analyst said that the so-called reciprocal tariffs — which Trump put on pause for 90 days after a stock market crash and fears of a global recession — were “fundamentally bad for free trade”.But Weidel’s co-chair Tino Chrupalla, a former painter and decorator from the east German state of Saxony, described Trump’s approach as “understandable”. “Sometimes you have to restrict free trade to protect your economy,” Chrupalla said. “President Trump wants to force other countries to negotiate. He wants to improve the US trade balance and stimulate industry.”Analysts said that the divergence spoke to a fundamental tension at the heart of the AfD that could also be observed in Europe’s other populist movements: how to explain to their voters a protectionist US policy that would hurt their country. Giorgia Meloni is one of the few European leaders in Donald Trump’s good books More

More than half a century after the summer of 1973 when he bought his first British retro sports car at the age of 20, Michael Hattem had been ready to buy a new model of the Morgan Plus Four.However the 73-year-old classic car enthusiast in Los Angeles is now facing a dilemma. The hand-built wood-framed luxury car, which has a price tag of $85,000, may soon become 10 per cent more costly if US President Donald Trump keeps his tariffs on imports of all foreign-made vehicles and automotive parts.“I just have to save a few pennies more,” Hattem, the president of the Morgan Plus Four Club in Southern California, said jokingly, but added that he was also afraid of buying now in case Trump changed his mind and removed the levies. “Let’s give it another 30 days. We will see what happens with the tariffs.”Morgan Motor Company, the 116-year-old British specialist carmaker, has unexpectedly been caught in Trump’s tariff crosshairs just as the key model in the marque’s offering returned to the US market for the first time in two decades. Long before the trade war started, the company’s engineers had been working for years to clear US regulatory hurdles to bring a four-wheeled Morgan to American fans following changes in a local rule that allows companies to replicate models that are more than 25-years-old.Large parts of the Plus Four cars are still wooden, including the frames that are made with ash timber carved by carpenters More