Aurelia Butler

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Foreign manufacturers in China are paying duties of 125 per cent to import components and then 145 per cent to export to the US as Donald Trump’s trade war hammers their operations.International companies and joint ventures account for nearly one-third of China’s total trade, according to official data that makes clear the extent of their exposure to tariffs.Large US companies such as Apple and Tesla and many smaller producers rely on China as a manufacturing base. These companies often import raw materials or components from the US for assembly into products that are then exported.This leaves them exposed to the possibility of paying both US and Chinese tariffs on the same goods, economists said, after Trump sharply escalated levies on all Chinese exports to 145 per cent, leading Beijing to retaliate.“Foreign firms are really being squeezed in the Chinese market,” said Heiwai Tang, director of the Asia Global Institute at the University of Hong Kong. “If they import, they pay the Chinese tariffs. When they export back to the US, they pay the US tariffs.”“They are hit twice.”Some content could not load. Check your internet connection or browser settings.Wholly or partly foreign-owned companies in the country accounted for $980bn of China’s exports last year, or more than one-quarter, and $820bn of imports, or more than a third, data from China’s General Administration of Customs and calculations by the Financial Times showed. China registered a record trade surplus of nearly $1tn last year.China’s export machine was built on the back of wholly and partly foreign-owned companies, including those from Hong Kong and Macau, which sought to take advantage of the country’s huge and low-cost labour market to manufacture goods. Foreign-invested companies, as they are called in China, accounted for 55 per cent of the country’s total trade in 2008.This share has fallen over the years as China has developed a more aggressive policy of industrial self-reliance. But foreign-invested enterprises still represented 29.6 per cent of trade by dollar value last year, according to the government figures.They accounted for just 16 per cent of China’s trade surplus last year, however, as foreign companies’ quantity of exports was offset by their larger share of total imports. “There’s a number of foreign companies operating in China who are not American but who rely on American inputs and so they are also being affected,” said American Chamber of Commerce president Michael Hart. China’s ministry of commerce is considering exemptions on tariffs for some sectors, Hart said. China does grant some exemptions from its customs duties for companies importing components and raw materials for goods that will be re-exported, which is known as the “processing trade”.Some larger US manufacturers, including smartphone makers and some electronics producers, have also won temporary exemptions from Trump.Some content could not load. Check your internet connection or browser settings.But with the trade war, many foreign companies may still find it prohibitive to export from China, particularly smaller producers. Jacob Rothman, chief executive of China-based Velong Enterprises, which makes kitchenware and home products in China sold by US retailers including Walmart, said it imports Tritan, a form of plastic, from US-based company Eastman.“We get hit with double tariffs on products with this material,” said Rothman. “Once when importing the material, and again when exporting the finished goods.”He said China had granted a tariff exemption if the final product was exported back to the US within a certain time period. But China did not grant the exemption if the product was exported to countries other than the US. Economists warned the trade war could cause further declines in China’s foreign direct investment inflows, which dropped 27.1 per cent in 2024 on a year earlier in renminbi terms, according to commerce ministry figures. “For those entering China to serve the Chinese market, they may still come. But if your aim is to serve other markets, especially the US, you will be hurt a lot,” said Qiu Dongxiao, economics department head at Lingnan University in Hong Kong “So you need to reconsider your global strategy.” More

The Swiss franc has soared to a decade high against the dollar as investors rush for shelter from the global trade turmoil, sparking bets that the country’s central bank will have to lower interest rates to zero or below to curb the currency’s rise.The currency, historically a financial market haven because of the Alpine country’s political and economic stability, reached near-record strength against the dollar this week, with the greenback sinking close to SFr0.80 for the first time since the franc’s shock appreciation in 2015. That has put policymakers in a bind, as they seek to restrain the currency to support the export-heavy economy without provoking a backlash from the US, which has already threatened Switzerland with high tariffs.Those “cross-currents” put the central bank in a “staggeringly difficult” position, said Kit Juckes, chief FX strategist at Société Générale. “The Swiss government doesn’t want major disinflationary pressures coming at it again, and so they’re frustrated,” he added. Yields on short-term government debt have dipped into negative territory in recent days as traders bet that the Swiss National Bank will respond with interest rate cuts. Two-year Swiss yields, which reflect expectations for interest rates, traded marginally below zero on Friday.The rapid appreciation in the franc risks a deflationary shock for Switzerland, say analysts, exacerbated by the growth impact of US President Donald Trump’s trade war. At 31 per cent, the “reciprocal” tariffs placed on Swiss goods earlier this month — before being suspended for 90 days — exceed the levies on the EU. Switzerland relies on US consumers for more than 10 per cent of exports. The situation has propelled the government into a diplomatic offensive. Swiss President Karin Keller-Sutter, who is also the finance minister, held a phone call with Trump hours before he announced the tariff pause. This week she travelled to Washington with the economy minister for a meeting with US Treasury Secretary Scott Bessent, at which she said they discussed “opportunities for enhanced collaboration between our two countries”. Switzerland, which has historically sought to restrain the strength of its currency, is no stranger to sharp moves. In January 2015, the SNB suddenly scrapped its policy of capping the franc’s value against the euro, sending the currency soaring.Analysts say Bern fears being branded a currency manipulator by the US again if it were to intervene heavily in markets to rein in the franc. Switzerland was added to a US list of “currency manipulators” in the final weeks of the first Trump presidency, in part due to its intervention to cushion the financial turmoil from the coronavirus pandemic. It was removed from the list under the Biden administration.The franc has also risen against the euro, leaving the export-reliant country in a difficult position with its biggest trading partner. The SNB has already moved faster than its peers in cutting its key interest rate to 0.25 per cent, and further cuts are viewed as a diplomatically safer option to arrest the franc’s rise. The SNB held rates well below zero for eight years — in part to stop the franc rising too far — before raising them into positive territory in 2022 to combat the burst in inflation that followed the pandemic.“If the SNB is unhappy with the strong franc and constrained on FX interventions, lower rates are the only option,” said Francesco Pesole, FX strategist at ING. Stefan Gerlach, chief economist at EFG Bank said negative interest rates “may well happen”, adding that currency intervention could also be necessary.Gerlach played down the chances of Switzerland being labelled a currency manipulator again. There is a sense among “adults in the room” at the US Treasury department that this is not a problem, he said.“It may be an issue if you push down the exchange rate to gain competitive advantage. But it is not an issue if your currency surges and you try to moderate its rise.” Markets are pricing in an around 80 per cent chance of the rate falling to zero at the next meeting in June, with a small chance it could move into negative territory later in the year, according to levels implied by swaps markets.Annual inflation is sitting at around 0.3 per cent, already at the low end of the central bank’s target range of zero to 2 per cent. The Swiss central bank is “definitely worried,” said Gregor Kapferer, head of Swiss bonds at Vontobel, arguing greater intervention would be a “last resort”. “During the last Trump administration they were called a currency manipulator but there were not really any consequences. Now Trump is following through so I think SNB will be a lot more cautious here.”But Athanasios Vamvakidis, Bank of America’s global head of G10 FX strategy, suggested that the SNB “lean against the wind” with some interventions. “It’s hard to imagine that the US administration will be complaining about some intervention” given the rapid appreciation in the currency, he said, adding that this approach seemed more likely than negative interest rates.Leaving aside the 2015 shock, the dollar is closing on its 2011 all-time low against the franc.“Maybe [the franc] just needs a calmer world than this,” said Société Générale’s Juckes. “The danger is, history says, over time, it gets stronger.” More

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The return of Donald Trump to the White House has brought with it market chaos, trade wars and economic anxiety. International diplomacy has been turned upside down as the US rethinks decades of alliances, while the global trading system has been jolted by unprecedented tariffs. To mark the first 100 days of Trump’s second term on Wednesday we asked readers to share their questions, to be answered by our experts. The questions below may have been lightly edited for sense and some of the names withheld at the request of the correspondent. We start with three trade questions.Tariffs on US imports are ten times what they were last year, according to rating agency Fitch More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.UK entrepreneurs have sounded the alarm that Washington’s trade tariffs pose a direct threat to profits, prompting some to signal that they plan to halt operating in the US altogether, a new survey reveals.The research, conducted by entrepreneur network Helm, showed that 64 per cent of its members believe the recent tariffs imposed by President Donald Trump will affect their bottom lines, with one in five considering reducing or ceasing their operations in the US. According to the survey, 13 per cent said they were “extremely likely” to withdraw from the US market, signalling a potentially significant shift in how small businesses operate there.Entrepreneurs cited supply chain costs, the impact on direct product exports and distribution partnerships as key concerns in the changing trade landscape.“These tariffs are creating ripples that could become waves across the Atlantic trade relationship,” said Andreas Adamides, chief executive of Helm. “We’re seeing UK entrepreneurs at a crossroads — some standing firm, others charting new courses away from American shores.”He added: “While many are adapting their strategies — adjusting price points, exploring new territories, or developing different products — the terrain of UK-US trade is shifting beneath our feet.”The findings come days after a survey by the global bank HSBC, which polled 2,000 UK companies ranging from small businesses to large corporates. It found that 66 per cent of businesses would face some impact in response to the tariffs. Tina McKenzie, policy chair of the Federation of Small Businesses, said confidence among small businesses is “already fragile, so tariff hikes on UK-US trade will hit small firms hard”. The US is the leading market for 59 per cent of small exporters, she added, so adding costs to that threatens a vital source of income for thousands of businesses.“Exporting is one of the few ways small firms can strengthen their position during uncertain times, which is why negotiations to promote free trade with the US, EU and other countries must continue,” said McKenzie.The disruption to international shipping between China and the US caused by the tariffs is already affecting Hunter Luxury, said the chief executive of the packaging manufacturing company. Mike Banister said production jobs in Chinese factories had stalled and shipments were sitting in warehouses indefinitely. Goods that were being shipped, meanwhile, faced delays as congestion built at US ports. “In the medium to long term,” he said, “plans are having to be completely reassessed.” Banister added that the uncertainty around possible further tariff announcements “is, if anything, even worse”.The ongoing market volatility has caused 28 per cent of Helm members to begin exploring alternative markets, with just under 10 per cent of the 400 respondents already securing new partnerships outside of the US, the survey found.“We have been actively exploring other supply routes from countries that we believe won’t be so impacted, such as India, Malaysia, Cambodia and Turkey,” said Mark McCormack, co-chief executive of Talking Tables, a party supplies business, on finding options other than China.While some look elsewhere, nearly a quarter of respondents remain committed to their place in the US market, implementing mitigation strategies to ride out the tariff-led uncertainty.A third said they planned to continue to do business there in much the same way as before the tariff announcement, adopting a “wait-and-see approach”.On Wednesday, the US president said he planned to exempt carmakers from some tariffs; last week, his administration said it would exempt consumer electronics from the “reciprocal” tariffs placed on Chinese imports. Businesses of all sizes will be closely watching any outcome from Friday’s meeting in Washington DC between UK chancellor Rachel Reeves and her US counterpart Scott Bessent to discuss a potential UK-US trade deal. More

For the past seven years, Zhoushan airport near Shanghai has been the delivery point and completion centre for new Boeing jets in China. But on Monday, against the darkening skies of a trade war, one 737 aircraft was heading back to where it came from.Beijing has suspended orders for new jets after tariffs spiralled and Boeing chief executive Kelly Ortberg this week confirmed the company had taken back two planes that were in China due for delivery and is in the process of bringing back a third. The returned planes illustrate how Donald Trump’s escalating trade war has disrupted US business in one of the world’s biggest markets. For many well-known American companies, the prospect of a sharper break between the US and China threatens a vast corporate infrastructure that ranges from the factory floor to the end consumer, which has been central to the growth prospects that they have sold to their investors. Even though Washington has for years encouraged US companies to “de-risk” their presence, many still have a deep reliance on Chinese supply chains or, like Boeing, sell products into the mainland. Others have ambitions to tap into China’s fast-evolving consumer market even as growth slows and political tensions mount.A woman walks past a McDonald’s in Shanghai. The fast-food group aims to have more than 10,000 outlets in China by 2028 More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Japanese trade negotiators trying to spare their country from Donald Trump’s tariffs are preparing to do battle over an issue where neither side can easily back down: a car safety test that does not exist.Trump has perplexed officials in Tokyo with a reference to a Japanese “bowling-ball” test — dropping a bowling ball on to a car and failing any vehicle if its bonnet dents under the impact. The US president first referred to the test in 2018. “They take a bowling ball from 20 feet up in the air and they drop it on the hood of the car. And if the hood dents, then the car doesn’t qualify,” he said. “It’s horrible, the way we’re treated.”On Sunday he again cited the test on his Truth Social platform as an example of “protective technical standards”.Japan does not carry out such tests on its cars, although one carried out in the country and elsewhere does entail hitting a car with a rounded object at a speed of 35kph, to simulate an impact with a pedestrian. In the test, a dent in the bonnet typically indicates good shock absorption and a potentially less deadly impact.It is part of a UN-formulated safety regime that closely resembles Europe’s and puts new car models through tests on 43 items. The US has its own proprietary car safety testing regime that diverges from UN standards.Japan has lots at stake in the trade negotiations with the US, which Tokyo’s chief negotiator, Ryosei Akazawa, will resume in Washington next week. Trump has threatened its export-oriented economy with 24 per cent “reciprocal tariffs” on top of levies on cars and metals, and has previously suggested that cars will be high on the agenda.“94 per cent of the cars in Japan are made in Japan. Toyota sells one million foreign made automobiles into the United States and General Motors sells almost none,” said Trump on the day that reciprocal tariffs were announced in early April.US complaints about imbalances with Japan in car exports are not new. “There are many Japanese cars in America. I want to see more American cars in Japan, as well,” Barack Obama said on a visit to Japan as president in 2015.Some US brands such as Jeep and Tesla have made inroads in Japan but 2024 fiscal year sales of up to 17,207 units for US brands were a small fraction of the 4.57mn passenger cars sold in Japan, according to official data.Some US carmakers admit that has little to do with non-tariff barriers.“There are little quirks but they are remnants of a bureaucracy of a system that has been changing slowly. Are they non tariff barriers? Yes, they are as it takes more time and money to comply,” said Pontus Häggström, who led Fiat Chrysler in Japan for more than a decade and is now regional director of Alpine, Renault’s sports car brand. “Is this the reason why US cars are not selling in Japan? The answer is completely not.”One senior advertising executive in Tokyo, who worked on marketing US car brands in Tokyo during the 1990s and early 2000s, said selling American cars to Japan was a challenge because they are “too big, consume too much gas, and lack the little design details that the customer here looks for”.While Japan remains in search of compromises that might appeal to Trump, any compromise on safety standards might not be accepted by prime minister Shigeru Ishiba, who is trying to shore up his popularity and has repeatedly referred to Trump’s tariffs as having precipitated a “national crisis”. “Be it cars or agricultural products, we will not do anything that will affect safety,” he told a parliamentary session this week.Some content could not load. Check your internet connection or browser settings.But Japan might have ground to cede on other non-tariff barriers for imported vehicles, including subsidies that favour local producers such as Toyota and Japan’s unique fast-charging standards for electric vehicles, according to auto executives.“If Japan wants to offer something, then they can do it on the EV front as there are some barriers there,” said Ludwig Kanzler, chief executive of Hanegi Solutions, a consulting firm that has advised South Korea’s Hyundai on market entry to Japan. More

Unlock the White House Watch newsletter for freeYour guide to what Trump’s second term means for Washington, business and the worldUK chancellor Rachel Reeves on Friday held her first formal talks with US Treasury secretary Scott Bessent, with both finance ministers agreeing that there was a “landing zone” for a bilateral trade deal, according to British officials.Reeves has opened the door to Britain cutting its tariffs on imports of US-made cars, along with agricultural and seafood products, as she tries to persuade the Trump administration to cut its levies on UK exports.Bessent is seen inside the Starmer government as a relatively dovish figure on tariffs, but there is an acknowledgment that trade decisions are ultimately taken in the Oval Office. The US has imposed a 10 per cent baseline tariff on UK exports and a 25 per cent levy on cars and steel.UK officials said Reeves — who had not met Bessent before her trip to Washington this week — had held a “good discussion” with her US counterpart.One person briefed on the talks said: “Both feel there is a landing zone for a trade deal but we’re not there yet. The discussion has become more intense, so that’s positive. Discussion will continue.”In a readout released on Friday evening, the Treasury said Bessent “noted the need for progress on fair and reciprocal trade” between the US and the UK.Reeves, in Washington for the spring meetings of the World Bank and IMF, has been lauded by some of the world’s financial elite for her commitment to free trade and supply side reforms. Kristalina Georgieva, IMF managing director, said: “She is tackling very tough issues, getting reprioritisation of spending, getting the regulatory environment to be more rational and then taking on the battle to get it done. And it’s really impressive.”But Reeves is far less popular at home, with opinion polls showing her dire approval rating has fallen further in recent weeks.YouGov reported this month that only 14 per cent of those surveyed said they had a positive view of the chancellor, with 62 per cent holding a negative view. The score of -48 represents Reeves’ lowest rating yet.Reeves has this week sought to build relations with the Trump administration by signalling that some of its concerns about the global trading system were well founded. Speaking at an event at the British embassy in Washington on Thursday evening, Reeves argued the US was right to be concerned about excessive trade imbalances — highlighting “challenges” associated with the rise of China’s economy as well as benefits.“The challenges that Donald Trump’s administration has spoken about, about the global trade imbalances, are very real, and we should address them,” she said at an event hosted by Britain’s ambassador to the US, Lord Peter Mandelson.Reeves added those trade imbalances were not always associated with “transparent policies”. But she stressed in her meetings in Washington that the UK continued to believe in multilateral dialogue and institutions, and not in tariffs, emphasising the undesirability of trade wars.  More