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Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Alphabet shares rose after it reported double-digit increases in first-quarter revenue and profit, driven by another good performance in its search business and the boom in artificial intelligence-related demand for cloud computing.Revenue rose 12 per cent to $90.2bn, while net income jumped 46 per cent to $34.5bn, from the same period a year earlier, the parent company of Google reported on Thursday. Both beat expectations and helped calm fears about its ability to weather a trade war and US recession.Google’s core search and advertising business grew almost 10 per cent to $50.7bn in the quarter, surpassing estimates for between 8 per cent and 9 per cent. The figures gave comfort to investors who have been watching closely for any softness in search — which accounts for 56 per cent of group revenues — because of the popularity of AI chatbots such as OpenAI’s ChatGPT, Anthropic’s Claude and Elon Musk’s Grok. They have also been on alert for evidence that answers from Google’s own Gemini chatbot and AI summaries are cannibalising that core business by reducing the number of user clicks on ads.“Search saw continued strong growth, boosted by the engagement we’re seeing with features like AI Overviews,” said chief executive Sundar Pichai, referring to AI-generated answers it now shows at the top of many results pages. “We’re leaning in heavily here, continuing to roll the feature out in new countries, to more users and to more queries.”Chief business officer Philipp Schindler said “we see monetisation at approximately the same rate” for AI Overviews versus traditional search links, while declining to specify exact user click-through rates.Jefferies analyst Brent Thill said the results were “better than feared, with healthy ads and cloud”. He had previously cautioned that “macroeconomics and tariffs [would] cast a haze over the second and third quarter” and advertising “faces headwinds” as Chinese sellers reduce spending.Alphabet shares rose more than 4 per cent in after-market trading. The company said it would buy back $70bn of shares, the same amount as last year. A one-off $8bn gain related to shares in a private company it did not name boosted the increase in net income.Google is the second Big Tech company to report earnings in the wake of US President Donald Trump’s global trade war. Alphabet shares have fallen about 17 per cent this year. Like most of its rivals, the company has been affected by concerns about tariffs disrupting supply chains and softening consumer spending, promoting fears of a US recession.“We’re obviously not immune to the macro environment,” Schindler said. This month the White House raised duties on small packages, which were previously exempt if valued at less than $800. That caused Chinese ecommerce groups Temu and Shein to slash their spending on digital ad platforms such as Google and Meta.Schindler said the policy change “will cause a slight headwind to our ads business in 2025, primarily from Asian-based retailers”.Earlier this week, Tesla warned tariffs would have an “outsized” impact on its battery business that relies on components from China. Chief executive Elon Musk pledged to continue to lobby Trump in favour of free-trade principles.But Alphabet’s overall revenues beat Wall Street consensus expectations, of $89.2bn, according to Capital IQ.Its cloud computing division reported a 28 per cent surge in revenue to $12.3bn, showing continued appetite for its data centre and network services from the boom in AI. However, this slowed from 30.1 per cent in the prior quarter, which Alphabet blamed on demand outstripping supply as it races to bring new data centres online.Alphabet’s record spending on chips, networking equipment and other AI infrastructure continued to increase, shrugging off investor concerns about Big Tech’s $300bn spending plans this year. First-quarter capital expenditure jumped to $17.2bn, up from $12bn last year and slightly more than the $17.1bn estimate. It has forecast spending will reach $75bn this year, up from $53bn in 2024. The company still faces challenges having lost a succession of antitrust cases brought by US regulators against its search, digital advertising and play app store businesses. It could be forced to sell its Chrome browser, end an exclusive search engine partnership with Apple and share more data with rivals. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.UK consumer confidence plunged in April to the lowest level in well over a year as concerns over Donald Trump’s global trade war and rising living costs hit household sentiment. The GfK consumer confidence index — a measure of how people view their personal finances and broader economic prospects — fell four points to minus 23 in April, the research group said on Friday.The drop from March wiped out gains so far this year and took the reading to its lowest point since November 2023, when households were contending with surging mortgage and rental costs. Neil Bellamy, consumer insights director at GfK, said households had been hit by “multiple April cost increases” in energy, water and telecoms bills, as well as rises in stamp duty, council tax and road charges. “They are also hearing dire warnings of renewed high inflation on the back of the Trump tariffs,” he added. Bank of England policymakers and economists have warned that the tariffs — which are being levied at 10 per cent on UK products and unleashed turmoil across financial markets — will hit economic growth. Their effect on inflation remains unclear, however, given uncertainty over how other countries might respond.High uncertainty has also hit business sentiment, with private sector activity contracting at the fastest pace in more than two years in April, according to the S&P Global flash UK PMI composite output index. The worsening consumer sentiment — a shift that could weigh on growth via lower household spending — was confirmed by other measures of confidence this week, with indices provided by the British Retail Consortium and S&P Global both falling in April. Maryam Baluch, economist at S&P Global Market Intelligence, said consumers’ concerns over disruption to global trade and their personal finances meant “we are likely to see a more prudent approach to purchasing and savings in the coming months”. Compared with March, consumers were more pessimistic about all measures tracked in the GfK survey, which was conducted in the first half of this month. Falling household and corporate confidence risks derailing the green shoots shown in official data this year.In February, the economy beat expectations to grow 0.5 per cent, leaving it on track to beat the BoE’s forecast of a 0.25 per cent increase in the first three months of 2025.Output in consumer services, such as bars and restaurants, rose 0.6 per cent in the three months to February, the fastest pace in a year, signalling improvements after consumer spending disappointed for most of 2024. Inflation also fell more than forecast in March to 2.6 per cent, and wage growth remained strong in the three months to February, supporting household incomes, according to official figures published last week.Consumers have built up sizeable savings since Covid-19, with wages outpacing inflation for nearly two years while spending has remained subdued. The trend had spurred expectations of a rebound in household consumption: only a few months ago, economists forecast growth of 1.3 per cent this year, more than double the 0.6 per cent registered in 2024. But those hopes have dimmed: the latest figures from Consensus Economics, which collates projections from leading forecasters, show expectations at just 0.9 per cent.Friday’s GfK data added to the darker outlook, with the index tracking expectations for the economy in the year ahead dropping by 8 points to minus 37, the lowest level since March 2023. The future indicator on consumers’ view of their personal finances also “slipped badly”, dropping four points to minus 3, according to the survey. More

Unlock the White House Watch newsletter for freeYour guide to what Trump’s second term means for Washington, business and the worldIntel plans to slash its capital expenditures and eliminate managers as the US chipmaker plots a turnaround under its new chief executive and contends with President Donald Trump’s trade war with China. The company, which cut 15,000 jobs in the second half of 2024, on Thursday said its plan included “streamlining the organisation, eliminating management layers and enabling faster decision-making”.But Intel gave a more downbeat guide on the current quarter — sending its shares lower in after-hours trading — as the Trump administration’s sweeping tariff plans send shockwaves through the semiconductor industry. The California-based chipmaker and designer said it expected adjusted revenue of $11.2bn to $12.4bn for the three months to the end of June, lower than analysts’ expectations of $12.9bn, according to Bloomberg estimates.The shares were down more than 5 per cent in after-hours trading following the release.Intel’s earnings report was the first since Lip-Bu Tan took over as chief executive in March, after the board ousted Pat Gelsinger in December.The latest cuts follow months of financial woes for the chipmaker, which has fallen behind Taiwan’s TSMC in the race to manufacture leading-edge semiconductors and struggled to open a business building chips for competitors — a process started under Gelsinger. Competitors have also threatened its position in the PC chip space while it has failed to capture a meaningful share of the AI data centre chip market, where Nvidia has dominated.Investors have broadly welcomed Tan’s appointment as a sign of a new strategic direction for the company. Last month he promised “cultural change” at Intel. He has held off on discussing any potential sale of the company’s lossmaking manufacturing business, which some investors have called for.After the results were announced, Tan revealed the company had reversed course on spinning off its venture capital arm, which was announced in January before his appointment. “We have made the decision not to spin off Intel Capital but to work with the team to monetise our existing portfolio,” he said, adding they would be “more selective on new investments”.In an email to Intel employees on Thursday, the new chief said “unnecessary bureaucracy” was slowing down critical engineering efforts. “There is no way around the fact that these critical changes will reduce the size of our workforce,” he wrote.He said the cuts would begin during the current quarter and move “as quickly as possible” over the coming months.Tan also said the company would be enforcing a return-to-work policy, requiring four days a week on site by September 1. Intel said it was not including restructuring charges in its guidance.For 2025, Intel said it was revising down its previous operational expenses targets from $17.5bn to $17bn, and cutting $2bn from its earlier capex target of $20bn.For the first three months of 2025, Intel reported adjusted revenue of $12.7bn, flat from a year ago but above Wall Street’s consensus estimates of $12.3bn. Its net loss widened to $821mn from a loss of $381mn a year ago but was better than analysts expected.Trump has spared semiconductors and related products from the brunt of his tariff regime on China. But they are subject to a national security review that could lead to further tariffs and more disruption to the highly complex, global semiconductor supply chain.Washington has cracked down US companies’ exports of artificial intelligence chips to China, as it seeks to exert pressure on Beijing and protect American technology.Trump’s hostility towards the billions of dollars in subsidies for chipmakers including Intel, TSMC and Samsung, agreed under Joe Biden’s administration and aimed at bringing chipmaking back to the US, has also created uncertainty around the programme.At the time of its January earnings report, Intel had received some $2.2bn of the $7.9bn in federal grants allocated to it under the 2022 Chips Act.Chief financial officer David Zinsner on Thursday said Intel’s net capex for 2025 would be between $8bn and $11bn, with the broad range stemming from the “uncertainty regarding timing of the US government fulfilling their obligations in our chips agreement”. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.UK chancellor Rachel Reeves has rejected key planks of Donald Trump’s economic agenda ahead of talks with Scott Bessent, her US counterpart, saying she is “proud that the UK has its global, open reputation”.Reeves, who will discuss a possible UK-US trade deal with Treasury secretary Bessent on Friday, said at the IMF’s spring meeting that she wanted to “strengthen” Britain’s position as an open economy.In a speech on Thursday, Reeves said the world had to adapt to a “new era of global trade” and accepted the US president’s determination to address what she called “excessive global trade imbalances”.But she said global stability depended on lower trade barriers and respect for global institutions, neither of which have been hallmarks of Trump’s presidency to date.“We are in a new era of global trade,” Reeves said. “In that new era we need a system that provides security for working people, stability for businesses and prosperity for national economies.”“To deliver this, we need to do three things: tackle excessive global trade imbalances, reduce barriers to trade and promote strong multilateral institutions.”Her comments came ahead of her planned meeting with Bessent, where she will press the case for an early UK-US trade deal to cut Trump’s high tariffs on British exports — including 25 per cent levies on cars and steel.Reeves on Wednesday while in Washington said Britain would look to reduce tariffs on imports from the US as part of a deal, and did not reject a suggestion that the country might cut its 10 per cent levy on American-made cars to 2.5 per cent.Greg Hands, former Conservative trade minister, said he deliberately retained the 10 per cent levy on US cars after Brexit as a bargaining chip in any future trade negotiation in Washington.Reeves’ comments put a new focus on the tariffs Britain imposed on US goods, many of them carried over from the pre-Brexit era when the UK was part of the EU customs union.While the UK reduced some tariffs after it left the EU, many remain high on industries where the US has a vital exporting interest, including agricultural produce — such as meat, dairy and seafood — as well as textiles, chemicals and the active ingredients in pharmaceutical products.For example, British levies on high-quality frozen beef from the US are set at 12 per cent, and contrast with how Irish meat exporters can send products to Britain tariff-free under the EU-UK trade deal.In its latest annual report into foreign trade barriers, the US Trade Representative singled out some “high tariffs” on American exports to the UK, including 25 per cent for some fish and seafood products, 10 per cent for cars and trucks, and up to 6.5 per cent for certain mineral or chemical fertilisers.Former UK trade department official Allie Renison, now at consultancy SEC Newgate, said removing or reducing some of these tariffs would have a “notable impact” for some US exporters, partly depending on availability of quotas and how quickly any levy changes came into effect.However, she added many UK non-tariff and regulatory arrangements — from food safety standards that outlaw hormone-treated beef to so-called geographical indications that protect against foreign rivals to domestic products such as cheddar cheese or Scotch whisky — would make it difficult for US industries to take full advantage of the British market.Renison added UK plans to fully align with EU food standards as part of a veterinary agreement envisaged in a post-Brexit reset of relations between the two sides would also limit access for some US exporters, although Britain could still admit American products under reduced tariffs that met those requirements.The UK has said it will not lower food and agricultural standards to accommodate demands made by the US, which has long argued Britain should move away from EU standards that it has claimed are “unscientific” and protectionist.In the annual report, the US Trade Representative said American agricultural exporters “are increasingly concerned” the UK will retain the EU’s approach to regulating agricultural chemicals and pesticides, which it said created restrictions that “do not appear to be science-based”. More

Unlock the White House Watch newsletter for freeYour guide to what Trump’s second term means for Washington, business and the worldChina has told the US to “completely cancel all unilateral tariff measures” if Washington wants trade talks, in some of Beijing’s strongest comments on the deepening trade war between the world’s two economic superpowers.Beijing also said there were “no economic and trade negotiations between China and the United States”, despite repeated comments from President Donald Trump that the two sides were talking.US Treasury secretary Scott Bessent has said in recent days that the trade war is “not sustainable” and that “there would have to be a de-escalation by both sides”.He Yadong, a Chinese commerce ministry spokesperson, said on Thursday: “The unilateral tariff measures were initiated by the US.”“If the US truly wants to solve the problem, it should . . . completely cancel all unilateral tariff measures against China and find a way to resolve differences through equal dialogue.”Trump has wanted to negotiate a deal with President Xi Jinping, but China has insisted it will not capitulate to what it views as economic bullying. Beijing has also stressed to the White House that the US must make the first move to de-escalate the crisis, which is threatening to spark a hard decoupling between the two countries’ economies. China has consistently said that its “door is open” to talks, but an insistence that the US first unilaterally remove its tariffs as a precondition for negotiations would represent a hardening of its stance. Asked on Wednesday, how soon he could reduce tariffs on China, Trump said: “That depends on them.” The White House also stressed the president would not unilaterally roll back his levies on Chinese goods. Washington and Beijing have been engaged in a tit-for-tat escalation since Trump started raising tariffs on imports from China in February. US levies on Chinese goods have reached 145 per cent while Beijing has imposed a 125 per cent retaliatory duty. Bessent on Tuesday said the high level of tariffs from both sides amounted to a trade “embargo”. Trump has softened some of his overall tariffs, granting exemptions for smartphones, semiconductors and electronics.On Tuesday, the president said tariffs would come down “substantially” and a deal would be done “pretty quickly”. But Beijing on Thursday said any reports that China and the US were nearing a deal were “fake news”.“There have been no consultations or negotiations between China and the United States regarding tariffs, let alone reaching an agreement,” said foreign ministry spokesperson Guo Jiakun.Speaking to reporters on Thursday, Trump said US and Chinese officials had met on Thursday, but declined to provide any details. The White House and Treasury department did not immediately respond to a request for more information about the meeting.Chinese finance minister Lan Fo’an and central bank governor Pan Gongsheng are in Washington on Thursday for the IMF’s spring meetings. Asked about China describing his remarks about trade talks as “fake news”, Trump said: “They had a meeting this morning . . . It doesn’t matter who they is, we may reveal it later, but they had meetings this morning, and we’ve been meeting with China.”He Yadong said “he who tied the bell [on the tiger] should be the one to untie it”, a reference to a Chinese proverb that means the person who creates a problem should be the one to solve it.He said Beijing had maintained “an open attitude towards consultations and dialogue”, but “pressuring, threatening and extorting are not the correct ways to engage with China”. “The trade war is one that the US has unilaterally instigated . . . if they want to negotiate, they must show sincerity and return to the correct path of equal dialogue and consultations,” He Yadong said.Bessent said on Tuesday that any de-escalation of the trade war would have to be mutual, denying reports that Trump might unilaterally cut levies on Chinese goods.Chinese analysts argue that the US imposition of high tariffs makes it difficult for Beijing to find a way to defuse the crisis.They say that Xi would find it difficult to engage personally with Trump on the trade war unless this was preceded by extensive negotiations to hammer out a deal. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The world’s largest consumer goods groups have warned that US President Trump’s trade war is denting already fragile consumer sentiment and threatens to leave consumers dealing with a fresh round of price rises. Food and personal care giants PepsiCo and Procter & Gamble (P&G) cut their financial outlooks for the year on Thursday as a result of tariff-related uncertainty. Meanwhile, Unilever and Nestlé said weary shoppers would have to swallow higher prices.Pepsi, the maker of soft drinks and Doritos chips, said profits were likely to stagnate in 2025, scrapping a forecast for single-digit growth. The company blamed tariffs and economic uncertainty for a 1.8 per cent drop in sales during the first three months of the year. “We probably aren’t feeling as good about the consumer now as we were a few months ago,” chief financial officer Jamie Caulfield told analysts. P&G, whose brands include Tide laundry detergent and Gillette razors, lowered its sales and profit guidance for the year even as it modestly raised prices in the latest quarter. “The main driver . . . is a more nervous consumer reducing consumption in the short term,” Andre Schulten, chief financial officer, told reporters. He said consumers were taking a “wait and see” attitude because of uncertainty over the stock market, the jobs market, mortgage rates and politics. P&G now expects organic sales to grow by 2 per cent this year, down from a previous expectation for growth of between 3 per cent and 5 per cent. The group’s results revealed “just how heavy the external pressures are on the industry”, said Blake Droesch, senior analyst at Emarketer, adding that declining demand in essential categories, such as laundry detergent and toothpaste, underscored the fragility of consumer spending. P&G’s share price dropped by 5 per cent following the trading update, while Pepsi’s fell 4 per cent. The warnings from the US consumer goods giants added to widespread corporate concern over the toll Trump’s tariffs will take on the US economy. While the European consumer groups, Unilever and Nestlé, maintained their financial guidance, they also warned on Thursday of growing consumer unease. “We entered 2025 with a consumer who was not optimistic, to say the least,” said Nestlé chief executive Laurent Freixe, during an investor call on Thursday.Fernando Fernandez, newly appointed chief executive of London-listed Unilever, said the direct impact of tariffs on the group’s profitability would be limited, but warned the knock on effects to consumer sentiment still posed risks. Fernandez also cited higher commodity prices and currency volatility as causes for concern.During a period of high inflation following the Covid-19 pandemic, manufacturers of household brands largely passed on their substantially higher costs on to consumers. However, with Trump’s tariffs threatening to push up inflation once more, there are increasing concerns that many consumers will not stomach further price rises.Jefferies analyst David Hayes said companies were struggling with how to cover rising costs without losing customers. “Nestlé and to some extent Unilever were both flagging that the reaction to price rises is still not yet clear,” he said, adding that P&G had indicated they will not be able to fully pass higher costs through to consumers.Nestlé, the Swiss group behind Nespresso and KitKat, said it had cut prices in the US by 1 per cent in an attempt to win back market share after shoppers traded down to cheaper products — demonstrating the limits of its pricing power. Fernandez said Unilever was seeing the return of some commodity price inflation, particularly in its personal care and ice cream divisions, but remained “cautious” about raising prices. The maker of Magnum ice cream and Dove soap increased prices by 1.7 per cent in the first quarter, but the volume of goods it sold rose by only 1.3 per cent. Overall, its underlying sales increased by 3 per cent in the first three months of the year.P&G’s Schulten said the group would consider raising prices further to compensate for any impact from Trump’s tariffs. The company also plans to look at switching sources of supply, changing how it formulates products and boosting productivity. More

Unlock the White House Watch newsletter for freeYour guide to what Trump’s second term means for Washington, business and the worldSay what you like about Scott Bessent, but the Treasury secretary’s insistence on claiming logic in every tergiversation of Donald Trump’s haphazard tariff policy is providing much amusement abroad. Bessent and other administration officials are now beetling around the world desperately trying to sign dozens of trade deals while fractious financial markets metaphorically hold a gun to their heads, and we’re asked to believe it is all a cunning plan.Obviously, Trump’s strategy is terrible: it’s not even clear what he wants. But a less inept administration would also be struggling. Over the decades, the US’s leverage to remake the global trading system — capital flows, advanced technology and access to its vast consumer market — has weakened relative to China. Barack Obama used to call the US the “indispensable nation”. In trade and tech terms that is increasingly untrue.During the post-second world war Marshall Plan, the US created a largely Atlanticist political economy in western Europe. It offered not just financial Marshall Aid but also advanced technology, and access to its growing consumer market.Those advantages have dissipated. US aid budgets have massively shrunk relative to China’s, and the so-called Department of Government Efficiency has more or less closed down their last vestiges in the US Agency for International Development.The US, particularly under Joe Biden, worked hard to deprive China of advanced technology, especially semiconductors. But the failure to match Chinese official and corporate investment, while sending the wrong signals to US industry, mean it’s well behind in much of green tech. If a country wants to adopt solar or wind power or replace internal combustion engines with electric vehicles, including batteries, it will generally get the heavily subsidised kit from China.The Rhodium Group consultancy estimates that China’s share of global exports in solar cells and modules was 53.5 per cent in 2023, up from 35.5 per cent 10 years previously, and had risen above 50 per cent for lithium-ion batteries and semi-finished EVs.The US, using subsidies and protective tariffs on imports, has attempted to build up its own battery, EV and solar production for the domestic market. This week, a Biden initiative came to fruition in the announcement of mesospheric tariffs of up to 3,521 per cent on solar cells from south-east Asian countries. This may be politically necessary to keep solar power alive in the US, but it will never make it a competitive exporter.Similarly, on EVs the EU is trying to integrate cutting-edge Chinese production into its domestic market. But the US, its indigenous car industry skewed by trade protection towards giant gas-guzzling pick-up trucks that no other country wants, is creating a low-tech, high-priced EV sector that cannot compete overseas.If it can’t offer technology to secure trade deals, surely the US still has its domestic market as an incentive? Here it retains an advantage over China, which continues to follow an export-oriented growth model. The OECD told me that in 2019, the latest pre-Covid year for which they can calculate this data, the US share of total global goods imports was 15.4 per cent, but its share of final demand (which takes account of the value added at each stage of production) was 17.5 per cent, well above China’s 9.7 per cent and even the EU’s 11.3 per cent. The US has long used market access as bait for trading partners to cut tariffs, adopt US rules on intellectual property rights and so forth. Probably the last hurrah for this tactic was the painstakingly created Trans-Pacific Partnership, signed by 12 Asia-Pacific countries in 2016 and designed to encircle China with US-oriented economies.But Congress held the agreement up before Trump pulled the US out altogether in 2017. The spurned countries went ahead and turned the TPP into the “comprehensive and progressive” CPTPP without the US, excising IP provisions that had been included at Washington’s insistence.Since then the prospects for using the US market for leverage have shrunk, not just because of the secular decline in America’s share of the global economy but because of the toxicity of trade agreements in Washington. The Biden administration attempted to restore US influence in the Asia-Pacific with the “Indo-Pacific Economic Framework for Prosperity”. But that merely created bemusement in the region by attempting to coax partner countries to adopt US labour standards and other rules without offering export markets in return.Trump’s idea is to threaten to take market access away with high tariffs and then restore it in return for trade concessions. It’s all stick and no carrot. The credibility of his threat to impose permanently high import duties is subject to the whim of the financial markets, and his trustworthiness in keeping those taxes low following a deal exceedingly suspect.In the global game of trade poker, Trump inherited a weakening hand and is playing it extremely badly. Bessent and his other officials are in a precarious position. The US does not have the aid, the technology or the market access to exert control over global trade the way it once did, and Trump’s erratic behaviour is rapidly increasing the probability that it never [email protected] More