Aurelia Butler

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The writer is a fellow at Stanford University’s Institute for Human-Centered Artificial Intelligence and the Cyber Policy Center. She is the author of ‘The Tech Coup’Europeans keen to escape the dark clouds of concern over the continent’s security may benefit from a trip to India, where optimism prevails. While some schadenfreude at the waning influence of former colonial powers is understandable (India’s foreign minister, S Jaishankar, recently told this newspaper that the virtues of the old world order were “exaggerated”) the prevailing sense of opportunity comes from within. Indians are optimistic not just because of the emergence of a multipolar world but also because of the country’s economic growth and technological advances.In technology policy circles, the EU is often positioned as the “third way” — an alternative to the laissez-faire approach in America, where market forces steer tech development, and China’s state-controlled model, where technology is instrumentalised for political control. The EU’s rights-based regulatory approach offers a democracy-driven alternative. But India is keen to claim its own role offering an alternative to Chinese and American tech governance. After a decade of Digital India policies, this is well under way. Since its launch by Prime Minister Narendra Modi’s government in 2015, the Digital India initiative has delivered spectacular results. The uptake of digital identities, payment systems and internet access has steadily climbed, although a significant gender gap remains. Nearly 6mn Indians work in the technology sector, and the country is now exporting its digital public infrastructure model to emerging economies. From Aadhaar, the world’s largest biometric ID system, to Unified Payments Interface, the payments network, Indian tech is gaining traction across the global south.But there is a flip side. India also holds the dubious distinction of being the global leader in internet shutdowns — with more than 800 reported in the past decade. Critics argue that these shutdowns are human rights violations, as are restrictions to press freedom, digital rights and data privacy. Significant numbers of content moderation requests are made by the government itself. Elon Musk’s X is suing over what it considers illegal requests to censor content on the platform.Against this backdrop, it was striking to see Joel Kaplan, Meta’s chief global affairs officer, take the stage at the Raisina Dialogue conference in New Delhi this month. Kaplan celebrated the virtues of US government support against perceived unfair treatment, particularly from the EU. He had less to say about India, despite Meta’s Facebook, Instagram and WhatsApp apps appearing at the top of user charts in India. Meta’s plan to relax content moderation and embrace far-reaching “free expression” is likely to have raised eyebrows from India’s ruling BJP. Content moderation has been a topic of confrontation between Meta and the Indian government but civil society has also criticised Meta for its concessions.Whether the new US administration will help or complicate India’s role on the world stage remains undecided. While there are similarities between Modi and US President Donald Trump’s nationalist politics, the two may still end up clashing. India First and America First do not mix well. India also receives $33bn annually in remittances from Indians working in the US, many of whom could be directly affected by Trump’s immigration policies. This may have an impact on economic ties between the two nations.Another potential pain point is Washington’s escalation of trade restrictions, such as the proposed 100 per cent tariffs on Brics nations. Hastily planned negotiations that aim to strike a trade deal ahead of the April 2 deadline leave little time for comprehensive talks. By way of comparison, the EU and India have been in on-off talks since 2007 without concluding a trade deal. Understanding how the shifting tectonic plates of global politics look from New Delhi’s point of view is necessary and important for anyone trying to anticipate the future of geopolitics. And it is easy to conclude that there is nothing but momentum for India: warm ties between Trump and Modi, as well as the chance for India to rise as other nations decline. But the jury remains out on whether the age of nationalist politics will benefit the Indian people. The narrative of India as a rising global power is compelling but it must ensure that its rule of law grows with the same ambition as its digital economy. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Rachel Reeves’ “tiny” room for manoeuvre on public finances was thrown into stark relief on Thursday after Donald Trump announced 25 per cent tariffs on foreign-made cars, with warnings it made the prospect of tax rises later in the year more likely.Within hours of the UK chancellor announcing her Spring Statement, the prospect of an escalating trade war posed a new threat to the £9.9bn of headroom she had given herself against the many risks facing the economy.Richard Hughes, head of the independent Office for Budget Responsibility, warned that a full-blown global trade war could eliminate that headroom, while some economists said the chancellor could be forced to raise taxes in her autumn Budget.“This represents the crystallisation of one of the risks that we highlighted around our central forecast,” Hughes said on Thursday.Reeves said she hoped the US president could be persuaded to exempt Britain from the tariffs before they were introduced on April 2, saying: “We are in intense negotiations with our US counterparts on cars, steel and every other type of tariff.”Sir Keir Starmer, prime minister, indicated that Britain would not immediately retaliate. “I’m very clear in my mind that the sector, the industry, does not want a trade war,” he said.Business secretary Jonathan Reynolds told an international trade conference at the Chatham House think-tank that the UK had not “wanted any tariffs applied” during negotiations with the US.But Reynolds also gave clear hints that the UK could water down its digital services tax (DST), which raises £800mn a year largely from US tech giants, to secure a tariffs deal with Washington.“It’s not as though DST was put in place as if it can never change or we would never have a conversation about it,” he said.The OBR’s Hughes said that, in a worst-case scenario where the US levied additional 20 percentage point tariffs across the world and the UK retaliated, “we would lose about 1 per cent of GDP at its peak”.He said that would weigh heavily on growth next year — which the OBR has forecast will hit 1.9 per cent — and would lower growth in the medium term by 0.75 per cent.“That kind of shock would be enough to wipe out the £10bn of headroom Rachel Reeves has set aside.”Hughes warned that the chancellor’s headroom was “a tiny fraction of the array of risks and shocks that could hit the UK economy in the next five years”. He said that on top of tariffs there were risks to the UK’s domestic productivity outlook, a warning to Reeves that the OBR might re-evaluate its consistently optimistic assessment of Britain’s growth potential.“There’s a lot of uncertainty about recent figures and what they mean for UK growth and output for workers,” he said. “If growth were just 0.1 per cent less per year over the next five years, that would be enough to wipe out that headroom.”Many economists think Reeves could be forced to raise taxes this year to put the public finances on a more stable footing — even after Wednesday’s welfare and other spending cuts.Paul Johnson, head of the Institute for Fiscal Studies, said Reeves’ headroom was “tiny”, adding: “There is a good chance that economic and fiscal forecasts will deteriorate significantly between now and the autumn Budget.“If so, she will need to come back for more, which will probably mean raising taxes even further.”Some content could not load. Check your internet connection or browser settings.The US is the second-largest export destination for UK-made cars, accounting for 17 per cent of the industry’s exports after the EU, which accounts for 54 per cent, according to the Society of Motor Manufacturers and Traders. Car exports were worth £6.4bn, according to the Office for National Statistics. While the UK exported £60.4bn of goods to the US in 2023, it sold services of £126.3bn in the same year, according to the most recent figures available from the ONS. UK luxury car brands such as Jaguar Land Rover, Aston Martin and Bentley would be hit hard by the tariffs since they do not produce any cars in the US. Ian Henry, an automotive production expert who runs the AutoAnalysis consultancy, said some luxury brands such as Rolls-Royce and Bentley might have more flexibility to absorb the higher tariffs by cutting margins at dealers or by trying to reduce the cost when vehicles arrive in the US.“For UK car exporters, this is a very challenging development,” said Tomasz Wieladek, economist at T Rowe Price. “Some of the very high-end producers might be able to pass the cost of tariffs on to consumers, because their customers are price-insensitive. For all other UK automakers, this policy will severely restrict market access.”Downing Street played down the prospect of the UK’s retaliating by targeting Elon Musk’s Tesla, the US electric vehicle maker. “We’re not singling out individual companies,” a spokesman for Starmer said. More

The global car industry has been thrown into turmoil by Donald Trump’s new “draconian” tariff regime that automotive executives expect will raise the prices of American vehicles, cut production of US cars and cost carmakers up to $110bn. The US president’s announcement on Wednesday evening that he would impose a 25 per cent tariff on imports of foreign-made cars sparked a scramble to understand the details of the policy and to identify potential exemptions that could alleviate the hit to the industry. Within hours, it was becoming clear that every carmaker, including Tesla and the US Big Three of General Motors, Ford and Stellantis, would be affected. “We are all on the same boat,” said one senior executive at a European carmaker. The tariffs are intended to boost US industry but shares in Ford and GM fell as much as 4.4 per cent and 8.2 per cent respectively on Thursday morning in New York. Ford manufactures fewer vehicles in Mexico and Canada than its fellow Michigan rival.The pair could suffer a 30 per cent slump in earnings before interest and taxes this year as a result of the policy, even if they raised prices and rejigged their supply chains to use more parts made in the US, according to estimates by Bernstein analysts. Some content could not load. Check your internet connection or browser settings.Almost half of vehicles sold in the US are imported, while those assembled in the US on average source nearly 60 per cent of their parts from overseas. Bernstein said the tariffs could introduce up to $110bn in annual costs for the carmakers. The policy, which analysts and investors have described as “a worst-case scenario”, “heavy-handed” and “devastating”, is unparalleled in its scale and determination, dashing industry hopes that Trump would row back from an escalating trade war.The 25 per cent levy will come on top of tariffs that Trump has already announced against imports from Mexico, Canada and China. They will take effect from April 2, alongside reciprocal levies against US trade partners that are expected to be unveiled on the same day. “It’s certainly possible we could see tariffs on some vehicles imported from outside North America reaching 40 per cent or 50 per cent in aggregate,” said Barclays analyst Dan Levy. The tariff also applied to core car components such as engines and transmissions while processes were in place to expand the levy to other parts if necessary, the White House said. Bank of America estimated that prices on some vehicles could rise as much as $10,000 and US auto sales could fall by as much as 3mn, or almost a fifth of last year’s 15.9mn. “The concern is on affordability of our products that are made in America and the implications on demand,” said Stellantis chair John Elkann. If the tariffs are implemented next week, market research company Cox Automotive predicted that the confusion in the supply chain would lead to vehicle production in North America being disrupted by mid-April, resulting in US plants making 20,000 fewer vehicles per day, or about 30 per cent less than now. If the costs are passed on to customers and vehicle prices in the US become too expensive, car manufacturers may choose to sell more cars in other markets. Even before Trump’s announcement, one “mid-range” carmaker, which manufactures vehicles in Mexico, was considering cutting sales to the US and selling more in Central America, according to a person with knowledge of the plans. The carmaker is thinking “there is no way these cars will sell in the US” if it increases the price by 25 per cent, the person added. Elon Musk’s Tesla would be the best positioned among US carmakers, with its strong manufacturing base in America, although its electric vehicles also use many foreign components. One major source of confusion over the policy has related to cars and parts that are compliant with the 2020 trade agreement between the US, Mexico and Canada. Trump earlier granted a 30-day reprieve from the duties for vehicles and components that met the rules of USMCA. Those will remain tariff-free but only until a process is established to apply the levies to non-US content, according to a US government official. “It’s not clear what tariff applies to what part. Not everything is in the executive order,” said an official at a European parts maker, noting also the ambiguity over the USMCA compliant parts. Parts makers warned that they could not absorb the tariffs and were planning to pass on the costs of additional tariffs to consumers accordingly, the person added. Staff check electric Porsche Taycan cars at the company’s factory in Stuttgart, Germany More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Poorer families in Britain will endure “recession level” falls in income over the next five years fuelled by the Labour government’s cuts to health-related benefits, according to analysis from the Resolution Foundation.The think-tank said on Thursday that the cuts confirmed by Rachel Reeves’ Spring Statement on Wednesday amounted to £8.3bn a year taken from some of the most vulnerable people in the country, although this was offset by other welfare measures that brought the net saving to £4.8bn.The chancellor had chosen to “concentrate the pain” of her fiscal consolidation on sick and disabled benefit claimants, while making relatively modest cuts to spending on public services, the Resolution Foundation said. James Smith, the think-tank’s research director, said the policy decisions would contribute to “recession level” falls in living standards for households in the bottom half of the income distribution.Their disposable income after housing costs would fall by an average of 3 per cent, or £500, over five years, the think-tank estimated. This marked “a really tough, recession-like outlook for living standards . . . similar to the 2000s or 1990s”, Smith said, calling it “a really bleak outlook”. The overall outlook for living standards would also be affected by low real wage growth, higher rents, council tax and water bills, and an ongoing squeeze on other areas of welfare.Labour MPs are highly anxious about the political fallout from the welfare cuts. On Thursday several expressed concern in the House of Commons about the reforms and the way ministers had communicated them. Some said their constituents were afraid.Dame Meg Hillier, Labour chair of the Commons Treasury select committee, pointedly added that “every minister should be very careful about clumsy and inappropriate language”.That was an apparent reference to Treasury chief secretary Darren Jones using an analogy to explain the welfare reforms by referring to his children taking a Saturday job on top of their pocket money. Jones later apologised.The Resolution Foundation said the current parliament would be among the worst on record for living standards, with growth of 0.6 per cent in households’ real disposable incomes over the course of the parliament.The 2020s as a whole — the first 4.5 years of which had a Conservative government — would be the weakest decade for living standards in 70 years of records, the think-tank said.The decade has so far included the Covid-19 pandemic, a period of high inflation, and elevated energy costs.“The 2020s are looking like a disaster of a decade, even relative to the two preceding it, in terms of living standards,” said Smith. “It is worse if you zero in on the bottom half.”Reeves on Wednesday said she would save £4.8bn from the welfare budget by 2029-30 by cutting health-related benefits while increasing unemployment benefits, a figure scored by the Office for Budget Responsibility.She said this was offset by another £1.4bn spent on schemes to get people back into work, meaning a net saving of £3.4bn.But the Resolution Foundation said the cuts that some of the poorest families in the UK would experience were much larger than the net figure presented by the fiscal watchdog suggested. Gross cuts to spending on disability and incapacity benefits total £8.3bn. The OBR has set against this a £1.9bn increase in spending on basic jobless benefits.It has also scored a £1.6bn increase to welfare spending from Labour cancelling cuts to incapacity benefits planned by the Tories and included in previous fiscal forecasts but never implemented — totalling to £4.8bn in cuts.This was the correct approach “in strict scorecard terms” but “as it represents the cancellation of a never-implemented cut, it will never be felt as a positive impact by households”, the Resolution Foundation said.Reeves said on Wednesday that household income was set to grow in 2025 at twice the rate expected at the Autumn Budget, with people set to be “£500 a year better off under this government”.She has also argued that estimates of the impact of the welfare cuts have not taken into account the benefits of the government’s back-to-work programmes.Gauging the impact of the welfare changes could be difficult, however, given concerns raised on Thursday by the Institute for Fiscal Studies about the accuracy of official data used to measure poverty.New figures showed real median household income after housing costs fell 2 per cent in 2023-24, with the largest decline of 18 per cent for the poorest tenth, and record numbers of children in poverty.But the figures are based on an Office for National Statistics survey that — like many of the agency’s surveys — has suffered a sharp drop in its response rate to just 31 per cent.Sam Ray-Chaudhuri, a research economist at IFS, said other data sources such as tax records did not corroborate the “concerning” trends outlined in the latest survey-based data published on Thursday.“Policymakers are once again left in the dark as they try to navigate an increasingly unreliable statistical landscape, and this can only hinder effective policymaking,” he added. More

This is an on-site version of the White House Watch newsletter. You can read the previous edition here. Sign up for free here to get it on Tuesdays and Thursdays. Email us at [email protected] back to White House Watch. On today’s agenda: Economists are worried about the Trump administration’s deep cuts to the federal government — and not just because they’re worried about their own jobs.Slashing the federal workforce and research funding threatens the quality and credibility of “gold standard” US statistics, economists have warned. The impact could be felt across Wall Street’s $105tn stock and bond markets. The data — from the jobs report to inflation indices — can swing markets in milliseconds. These flagship reports also underpin policies that influence the trajectory of the world’s biggest economy. Ricardo Reis, a London School of Economics professor, who is a consultant at the Federal Reserve Bank of Richmond told the FT: “All of the cuts in federal funding and some of the ones you’ve seen come out of Doge . . . they’re often a death blow to already very stretched survey operations.” Already, commerce secretary Howard Lutnick has closed the Federal Economic Statistics Advisory Committee, sparking concern among economists polled by the University of Chicago’s Booth School of Business and the FT earlier this month.More than 90 per cent of the respondents to the FT-Chicago Booth poll said they were either “a little” or “very” worried about a decline in the quality of US economic data, in part due to the closure of the FESAC. Lutnick has also suggested that his department produce a measure of GDP that strips out government spending — which goes against international norms. The proposal has triggered apprehension over whether political officials will try to influence economic reporting.“The US has always been the gold standard on data, especially on things like GDP, the labour force, prices,” said Stephen Cecchetti of Brandeis University and former head of the economic and monetary department at the Bank for International Settlements. “It’s been the gold standard because the society and the government supported and believed in measuring things as accurately as possible,” he added. The latest headlinesSome content could not load. Check your internet connection or browser settings.What we’re hearingWhen Bethany of Bogalusa, Louisiana, welcomes into the world her third child — due next week — she plans to rely on Medicaid for the cost of delivery. The government health insurance for people on low incomes has become essential to her family. So she’s been surprised about talk around potential cuts to the programme, which serves one in five Americans. “It never came up in the [presidential] campaign . . . I don’t think people saw it coming,” said Bethany, who voted for Trump in November. What was a prominent issue on the president’s campaign, however, were tax cuts. To pay for those reductions, Republicans in Congress passed a budget that includes huge cuts to spending.And in ruby red Louisiana, a relatively poor state with one of the highest proportions of people on Medicaid, there’s a very real fear that people will suffer as a result. Some content could not load. Check your internet connection or browser settings.“Any cuts would be very impactful,” said Maria Christina Buenaflor, an obstetric gynaecologist at Our Lady of the Angels hospital in Bogalusa. “Upwards of 60 per cent of the women who deliver here are on Medicaid.” EJ Kuiper, chief executive of the Franciscan Missionaries of Our Lady Health System, which runs the Bogalusa hospital, told the FT’s Guy Chazan that more than 40 hospitals in Louisiana are at risk of closing if Medicaid funding is reduced.“If anything close to what is being contemplated now would actually pass, these Congressmen and women would go back to districts where hospitals are going to get shuttered,” he says. “So they’d better plan for a future beyond politics.”Over the next few months, Trump will have to find a way to balance the interests of both the fiscal hawks and his billionaire allies who want to radically downsize the federal government, and his working-class Maga base, which has become heavily reliant on government support.ViewpointsRecommended newsletters for youFT Exclusive — Be the first to see exclusive FT scoops, features, analysis and investigations. Sign up hereBreaking News — Be alerted to the latest stories as soon as they’re published. Sign up here More

Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldThe best supposition I’ve heard for how The Atlantic editor-in-chief Jeffrey Goldberg was added to the Houthi-bombing Signal messaging group was his initials getting him mistaken for Jamieson Greer, the US trade representative. It would be somewhat ironic if Goldberg’s presence resulted from an attempt to loop in the US official responsible for the attack’s supposed goal of easing the world trade system. It’s not in the top five or even 10 bad things about Signalgate, but it’s highly ambitious to label as a trade-facilitating measure some scattered assaults on a militant group whose blocks on Red Sea container shipping since late 2023 have manifestly failed to stop global freight. Likewise, trying to stick a vaguely defined “Europe” with the bill.In the meantime, even before the extraordinarily destructive auto tariffs Trump announced on Wednesday, the US is posing an actual new threat to the world trading system in the form of fees on Chinese ships calling at US ports. It’s an initiative originating with Joe Biden’s administration, whose role in blazing a wrong-headed trail for Donald Trump to follow should be more widely recognised. The fees are designed to revive US shipbuilding but are more likely simply to raise the price of imports to the US and weaken yet more the country’s economy.The Houthi attacks on shipping were, of course, genuinely worrying, the first time for decades that a major sea route has been severely constricted by the action of militants rather than uncoordinated acts of piracy. Global freight rates more than doubled inside a few weeks. Contrary to vice-president JD Vance’s assertion that the closure of Suez affected almost entirely European trade, world container shipping is sufficiently connected that a capacity shortage on one route increases costs everywhere.But, as with many shocks, the global trading system adjusted. Freight rates partially fell back. Container vessels have been redirected round the southern tip of Africa, increasing travel times and costs but not seriously affecting world goods commerce, which has held up well. Shipping companies and their clients have assessed the risks of using the Suez route and adjusted accordingly. No one really thinks the Houthis are going to be cleared out by a few air strikes. The Biden administration failed to stop their control of the Red Sea despite multiple attacks with support from European allies, especially the UK. Saudi Arabia has intermittently pounded them with bombardments since 2015 but has not dislodged them from Yemen.The Houthis have set up a system of extorting payments from ships for passage. The amount of money raised is disputed, but it’s a nice example of the distinction in economic theory between “stationary bandits”, who exact calibrated bribes to maximise income rather than deterring trade altogether, and “roving bandits” who simply loot everything they can. A fixed and predictable bribe paid to a stationary bandit simply becomes a tax, and companies are used to factoring those into their business calculations.Joe Kramek, head of the World Shipping Council, told me: “Our members are assessing the Red Sea situation according to their individual circumstances on a daily basis, but most are still choosing to go around the continent of Africa, because, as we can see, the security situation isn’t stable.” The French shipping group CMA CGM recently announced a limited service through the Suez Canal, but the situation is very far from normal.Global freight rates shot up again last spring and summer, but shipping industry experts say that appears to have been related to companies globally building inventories to insure against future shocks rather than any fresh news out of the Red Sea. They have since fallen back again, and as Kramek points out, around 80 per cent of global shipping takes place under long-term freight contracts, so dramatic shortlived spikes in container rates have a muted impact on costs. World shipping and ports also managed to cope with a surge of trade earlier this year to get deliveries done before any Trump tariffs were imposed.Kramek’s more immediate concern, as he testified at a hearing this week, is the administration’s plan for a fee of up to $1mn on calls at US ports for Chinese shipping lines and shipping companies that have commissioned vessels from Chinese shipyards and up to $1.5mn for ships built in China. For a visit to the US with six port calls, the WSC reckons this could add $6,350 to the cost of a container, more than twice the combined current spot rates for the Rotterdam-New York route. However, the time lag involved in constructing vessels and the possibility of shuffling Chinese vessels on to different routes surely mean the likelihood that port fees will make a material difference to the relative returns of shipbuilding in the US and China is minimal.It will take time and money to revive US shipbuilding, and burdening shipping with extra costs, even if the WSC’s calculations are discounted as coming from a vested interest, will increase upward pressure on US input and consumer prices without contributing much to the cause. It’s a counter-productive quick fix from an administration that reaches for protectionist tools without any thought to their wider consequences. The auto industry is bracing for a much faster and more catastrophic imposition of barriers, and no one needs accidentally to be added to a “trade & tariffs” Signal messaging group to work that [email protected] More

American companies are racing to negotiate price cuts from Chinese suppliers, shift production and increase prices for US consumers as executives grapple with President Donald Trump’s additional 20 per cent tariffs on Chinese goods and prepare themselves for more.Trump campaigned on a promise of 60 per cent duties on Chinese goods, and the White House may impose additional levies on imports from China on April 2, when it unveils “reciprocal tariffs” on countries around the world.It is unclear how high tariffs could go, but US and Chinese companies are looking for workarounds and rethinking their supply chains to lessen reliance on China.“Obtaining cost concessions from our vendors” was top of the list, Jeff Howie, chief financial officer at home furnishings retailer Williams-Sonoma, told investors this month.Howie said the company would continue to shift sourcing out of China, having already reduced Chinese-made goods from 50 per cent of inventory in 2018 to 23 per cent. He said it would also expand production in the US and was “passing on targeted price increases to our customers”.The Pottery Barn owner is one of several US retailers taking action. Costco and Walmart have already demanded price cuts from suppliers, with the latter hauled in by Chinese authorities to explain their thinking.Demands for price cuts, along with moves to shift production elsewhere, underscore how large companies have built greater resilience and flexibility into their supply chains following Trump’s first trade war and the Covid-19 pandemic.US and Chinese companies said the latest tariffs had accelerated a production diversification drive that began during Trump’s first term.“The 2017 round of tariffs certainly created action, and we’re in a different position than we were back then,” Richard McPhail, chief financial officer of home improvement giant Home Depot, told the Financial Times.Home Depot chief Ted Decker added that many of its suppliers had shifted some manufacturing out of China over the past seven years. About a third went to south-east Asia, a third to Mexico and a third to the US, he said.Elegant Home-Tech, a Chinese manufacturer that ships vinyl flooring to the US, including to Home Depot warehouses, began building a factory in Mexico in 2023 after Trump’s first bout of tariffs.The $60mn factory will start shipping flooring to the US this summer, said a manager at the company, asking not to be named. The group hopes it will not be caught in the crossfire of US-Mexico trade tensions.“Everything is uncertain,” said the manager. “This is difficult for manufacturers, for importers and for retailers.”Elegant Home-Tech is in negotiations with its customers over how to share the added tariff burden, which now stands at 50 per cent. This includes 25 per cent from Trump’s first term and the normal 5 per cent rate.“Our profit is very tiny,” said the manager. “It’s impossible for us to afford all the tariff costs. We will likely split the costs. We think the [in-store] price will increase, too.”Chinese pet-food maker Petpal Pet Nutrition Technology told investors its factories in Vietnam and Cambodia “could now fully take over orders from American customers” and were “not affected by tariffs”.Similarly, Chinese battery-powered tools manufacturer Globe said its “Vietnam factory has basically achieved full coverage of exports to the United States”.The problem for companies shifting their production elsewhere is they are not sure who will be hit by tariffs next. Trump has said the only sure-fire way to avoid tariffs is to move production to the US. “Nobody knows what tariffs are going to be put on, where, when or what,” said Jay Schottenstein, chief executive of clothing brand American Eagle. “We don’t know what’s going to be on Vietnam, we don’t know China, we don’t know India. We don’t know Bangladesh.”“We’re not going to be jumping all over the place until we know exactly what the story is,” he told analysts.Still, American Eagle executives said they had already spent months preparing and planned to reduce China sourcing from the current “high teens” percentage to “single digits” by the second half of the year.For retailers, particularly those heavily reliant on Chinese manufacturing, the effects will be more damaging.Discount retailer Five Below, which sources about 60 per cent of its products from China, expects a percentage-point hit to its gross margin for the year despite its best efforts to mitigate the impact.Kristy Chipman, Five Below’s finance chief, told analysts the group was looking to renegotiate prices with suppliers, shift production and raise some in-store prices.“The breadth and magnitude of the recently announced tariffs are significant,” she said. Additional reporting by Nian Liu and Wenjie Ding in Beijing and Thomas Hale in Shanghai More

Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldThe US has put dozens of Chinese entities on an export blacklist in the Trump administration’s first big effort to slow China’s ability to develop advanced artificial intelligence chips, hypersonic weapons and military-related technology.The US commerce department on Tuesday added more than 70 Chinese groups to the “entity list”, which requires any American company selling technology to them to have a licence. In most cases, the licence request is denied.Among the listed groups are six Chinese subsidiaries of Inspur, a big cloud computing group that has worked with US chipmaker Intel, including one based in Taiwan. The Biden administration put Inspur on the entity list in 2023 but came under criticism for not adding its subsidiaries. Inspur did not immediately respond to a request for comment.The US said the subsidiaries were targeted for helping develop supercomputers for military use and obtaining American-made technology to support projects for China and the People’s Liberation Army. It added that the subsidiaries had developed large AI models and advanced chips for military use.“We will not allow adversaries to exploit American technology to bolster their own militaries and threaten American lives,” said Howard Lutnick, the US commerce secretary. “We are committed to using every tool at the department’s disposal to ensure our most advanced technologies stay out of the hands of those who seek to harm Americans.”The US has not provided any public evidence to support the blacklisting of Beijing Academy of Artificial Intelligence for supporting China’s military modernisation. BAAI is a leading non-profit AI research institute set up in 2018 to bring together industry and academia. It regularly releases open source AI models and other tools and holds an annual conference to convene global experts in the field.The blacklisting of BAAI comes after Washington targeted Zhipu in January. The start-up is a frontrunner among Chinese AI groups developing large language models. BAAI did not immediately respond to a request for comment.In most cases, the restrictions will apply to non-US companies that export products containing American technology to the Chinese groups under an extraterritorial tool known as the “foreign direct product rule”.The US also targeted four groups — Henan Dingxin Information Industry, Nettrix Information Industry, Suma Technology and Suma-USI Electronics — that are involved in developing exascale superconductors for military purposes, such as nuclear weapons modelling. Washington said the groups provided “significant manufacturing capabilities” to Sugon, an advanced computer server-maker put on the entity list in 2019 for building supercomputers for military use.The Chinese embassy in Washington said the US had “time and again overstretched the concept of national security and abused state power to go after Chinese companies”.“We firmly oppose these acts taken by the US and demand that it immediately stop using military-related issues as pretexts to politicise, instrumentalise and weaponise trade and tech issues, and stop abusing export control tools such as entity lists to keep Chinese companies down,” said Liu Pengyu, the embassy spokesperson.The Biden administration imposed export controls on China targeting quantum computing and AI chips under its “small yard, high fence” policy. But critics accused it of failing to close loopholes that let some Chinese companies avoid restrictions.Meghan Harris, a semiconductor policy expert at Beacon Global Strategies, said it was telling that the first significant action on export controls “corrects what was viewed as a major gap in the Biden administration’s listing of Inspur, which left major subsidiaries unrestricted”.“While a solid first action by the Trump team that will be seen as strengthening controls and fixing errors, it’ll take a bit more time to work up the weightier policy decisions,” she added.Jeffrey Kessler, under-secretary of commerce for industry and security, said his bureau was “sending a clear, resounding message” that the administration would prevent US technology “from being misused for high performance computing, hypersonic missiles, military aircraft training and [Unmanned Aerial Vehicles] that threaten our national security”.The US also added 10 entities based in China, South Africa and the UAE to the list over links to the Test Flying Academy of South Africa, a flight school that Washington put on the entity list in 2023 after discovering it was hiring western fighter jet pilots, including from the UK, to train Chinese pilots.Additional reporting by Ryan McMorrow in Beijing More