Aurelia Butler

This article is an on-site version of our Trade Secrets newsletter. Premium subscribers can sign up here to get the newsletter delivered every Monday. Standard subscribers can upgrade to Premium here, or explore all FT newslettersWelcome to Trade Secrets. Wednesday next week is apparently “Liberation Day”, when Donald Trump’s piecemeal approach of a steel and aluminium (aluminum, whatever) tariff here and a fentanyl duty there gives way to a glorious unified policy of “reciprocity”. (Disappointingly, they’ve gone for the second of the month rather than April Fools’ Day itself.) There was some chatter and media stories about this from various administration types last week, which solidified my default view that the “reciprocal” description is totally bogus and they’ll do whatever they feel like doing. Accordingly, I’ve relegated the issue to the second piece in today’s newsletter, the first one being what eager-beaver subsidy-busters in Brussels are going to do to a carefully constructed policy towards Chinese electric vehicles. The Charted Waters section, which looks at the data behind world trade, is on the Canadian dollar.Get in touch. Email me at [email protected] come, EV goMy ace Brussels colleagues bring the news that the European Commission is conducting a review under the EU’s newish foreign subsidies regulation (FSR). The target is the Chinese car company BYD’s electric vehicle plant in Hungary, and the suspicion is that it receives distorting handouts from the Chinese state. The FSR gives investigators a lot of powers to seize information (including, it seems, examine the email inboxes of company employees held on servers outside the EU) and punish wrongdoers by forcing them to divest or repay subsidies. You could see this dust-up over Chinese subsidies and EVs coming from a mile away (specifically from May 9 last year, for Trade Secrets readers) and it’s juicy stuff. Here’s why.The EU’s dealings with China over EVs (and green tech more generally) are a tricky balancing act. On the one hand are EU governments such as France, who want antisubsidy duties to protect carmakers from cheap Chinese imports. On the other are those German carmakers who don’t want to lose access to China’s market, whatever that’s worth for them these days. On the third hand are consumers and environmentalists who would actually quite like affordable electric cars if that’s not too much trouble. The fourth hand belongs to member state governments, who are less concerned about who builds car factories in their economies than that they get built.The compromise involves carefully calibrated, company-by-company antisubsidy duties to slow but not stop imports of Chinese EVs. The duties also give an incentive to Chinese manufacturers to set up in the EU (via joint ventures or otherwise) and hopefully bring transferable technology (oh, the historical irony) and value-added production, rather than just final-assembly plants.Now enters the fifth hand, in the form of the FSR investigation. Finding that BYD has benefited from government subsidies could upset that delicate balance, deterring Chinese carmakers from setting up in the EU by requiring them to repay subsidies or divest. One of the first targets for the FSR last year was the Chinese security-scanner company Nuctech. As with EVs, the EU initially imposed antidumping duties on Nuctech’s exports to Europe, which caused the company to “tariff-jump” and set up production inside the bloc. There’s always a tendency to think events like these are part of some cunning geopolitical game, particularly since the BYD plant is in Hungary, whose prime minister Viktor Orbán is a lot matier with Beijing (and Moscow and now also Washington) than most other EU states would like. But at its heart the FSR starts off as a technocratic process, in this case conducted by the fiercely independent competition directorate (COMP to its friends and its many enemies). COMP has had no problem in the past with very seriously annoying even the EU’s biggest member states in other areas such as state aid. See, for example, the Siemens-Alstom merger.That said, the FSR investigation could be made to pull in the same direction as the trade instruments rather than against it. If the probe proceeds to a later stage, the commission will have to apply a “balancing test” to assess whether the benefits to the internal market outweigh the distortions from the subsidy. Those benefits can include environmental protection and promoting R&D. Now, let’s say they decide that BYD bringing a lot of value-added production and technical knowhow to the EU makes Europe green and productive. Ta-da! That could get it off the subsidy penalties. The circle is squared. Is this how it’s going to work? Dunno. It’s what I’d do, though. Trump draws up his trade bucket listWriting about so-called reciprocal tariffs I do pause wearily to consider the words of the former Arizona congressman Mo Udall, who observed during a tedious debate in the House of Representatives that everything that could possibly be said had already been said, but that not everyone had yet had a chance to say it. Anyway, there are a few crumbs worth sweeping up and consuming from last week as Liberation Day draws nearer. So let’s dig in. Readers may remember my view that to do reciprocity properly — product by product and tariff line by tariff line — would be hugely complex and expose certain sensitive US sectors (cane sugar, dairy) to competition from cheap imports — and so was unlikely to happen.It’s not happening. Instead the extent of debate within the administration, to judge by last week’s stories, is whether every trading partner gets its own special bespoke tariff — “each country will receive a number”, as Treasury secretary Scott Bessent put it in an uninspiring appearance on Fox Business — or whether they would be put in one of several “buckets”, where they would have to share a number with others. Oh, and as of yesterday, the Wall Street Journal was reporting that cars and microchips, among other products, might be excluded entirely for the moment.The country that put a man on the moon is wondering whether it’s got the computational ability to create a number for each of its couple of hundred trading partners, or whether they have to share one among fifty.Little of this makes sense. What happens if you reduce your own tariffs just enough to escape the bucket you’re in? Do you automatically go into the next bucket down, even though there might be countries in that bucket with much lower tariffs than you? Why doesn’t each country in any given bucket immediately raise their tariffs to the level of the country in that bucket with the highest tariffs? Are you told the actual formula used to compute your number, in which case you can game it like crazy? Or do they go Kafka-style and just tell you what it is without explanation? If so, how are you supposed to bring it down except with trial and error?When they are calculating, say, the Chinese tariff number, do they compare it with their own existing tariffs on imports from China? Because those are a lot higher than the standard most-favoured-nation tariff. And if they’re complaining about the value added tax in other countries, which they bafflingly regard as a discriminatory trade measure, do they take into account US state-level sales taxes?Surely at the least the administration has decided whether these tariffs are on top of other tariffs, such as the existing steel and aluminium duties? Apparently not. Bessent last week looked startled at the question (11 mins 30 secs here) and punted it to the commerce department and US trade representative.The original so-called reciprocal trade act, wrong-headed and destructive though it was, at least had some coherent meaning and structure. Like all US trade policy these days, it’s being put through the administration blender and coming out as a kind of pulpy sludge that can be fashioned into any shape Trump likes. And it will probably fall apart before too long.Charted watersIf Trump is heading for a Mar-a-Lago Accord that will strengthen the Canadian dollar against the US dollar, the markets don’t believe it. The exchange rate has gone the other way over the past year and has been basically unchanged since his inauguration.Trade linksA paper from the European Council on Foreign Relations looks at the EU’s capacity to retaliate against tariffs and other aggression from the US.As happened during Trump’s first term, his administration is looking at the possibility of a bailout for American farmers caught in his trade war.The controversy over Elon Musk has put negotiations about a secure communications system between Italy and Starlink on hold, that country’s defence minister said. (I wrote last week about Europe trying to build alternatives to Starlink.)Bloomberg reports that China’s imports of commodities and cars from the US are collapsing.New Zealand and India are relaunching trade talks, with the Kiwis hopeful they can get a deal that opens up India’s dairy markets. Bless. Meanwhile, the EU’s recent surge of enthusiasm for its own bilateral deal with India didn’t last long.Trade Secrets is edited by Harvey NriapiaRecommended newsletters for youChris Giles on Central Banks — Vital news and views on what central banks are thinking, inflation, interest rates and money. Sign up hereFT Swamp Notes — Expert insight on the intersection of money and power in US politics. Sign up here More

Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldMexico will learn its fate just after April Fool’s Day. Donald Trump has called April 2 “liberation day”. For Mexicans, it will be the moment they discover the extent of the economic damage that Trump plans to inflict on their country.Much of the global economy will probably be hit by the tariffs America is set to announce on April 2. But the stakes are especially high for Mexico, which sends 80 per cent of its exports to the US. Trump has already imposed 25 per cent tariffs on both Canada and Mexico. About half of these new duties were swiftly put on hold. But they could all be reimposed next week.Mexico’s fate is worth watching for two main reasons. First, the economy’s unusual dependence on exports to the US means that Mexico’s social and political stability are at stake. Mexican economists believe that, in the worst-case scenario, Trump’s tariffs would cause a depression in their country.The second reason is that Mexico offers a test case for how to deal with Trump. While Canada has hit back at the US with tough talk and reciprocal tariffs, Mexico’s President Claudia Sheinbaum has played nice. She has emphasised her respect for Trump and has for now refrained from imposing retaliatory tariffs. Sheinbaum has also agreed to send 10,000 more troops to guard the US-Mexican border and deported 29 high-profile drug cartel leaders to America.Sheinbaum has been rewarded with praise from Trump, who has called her a “wonderful woman”. She is also enjoying sky-high opinion poll ratings at home. Internationally, she has been held up as an example of how to deal shrewdly with Trump’s America, with the New York Times praising her pragmatism and The Economist saluting her “diplomatic nous”. Reality is more complicated. As Luis de la Calle, a leading trade economist, pointed out to me in Mexico City last week, Canada and Mexico have so far been treated pretty well identically by the Trump administration. Sheinbaum’s critics also say that she is damaging the Mexican economy and future investment by pressing ahead with a plan to fire all the country’s judges and replace them with elected officials. With the local economy already struggling, Sheinbaum badly needs Trump to cut her a break. But, unfortunately for Mexico, Trump’s grievances go well beyond trade. Last month, the White House asserted: “The Mexican drug trafficking organisations have an intolerable alliance with the government of Mexico.” Joshua Treviño of the pro-Trump America First Policy Institute commented approvingly that this statement was a “seismic pronouncement that heralds a new era of confrontation between the two nations”.There is a serious debate in Republican circles about whether the US should use military force to strike the drugs cartels inside Mexico. This month, Defense Priorities, another think-tank that is influential in Trump world, warned: “‘Bomb Mexico’ is increasingly mainstream as a policy option for border security. It would be a grave mistake.” Some influential Mexicans will say quietly that it might not be such a bad thing if the Trump administration pushes their own government to take more aggressive measures against the drugs gangs — perhaps with significant American assistance.The damage that the cartels are doing to Mexican society is highlighted by the horrifying discovery of an “extermination camp” in the countryside where kidnapped recruits to an organised crime gang seem to have been murdered. More than 100,000 people are registered missing in Mexico, many thought to be victims of the cartels. But unilateral American military strikes against the cartels — while they might draw cheers from Trump’s base — would put the Mexican government in an impossible position. They would also risk drawing the US into another open-ended conflict without attacking the root causes of the problem, which include the flow of guns from the US to Mexico and America’s own demand for drugs. By suggesting that tariffs are the right tool to deal with narcotics, illegal immigration and trade simultaneously, Trump has made it harder for Mexico to craft a reasoned response. So Sheinbaum is left trying to humour and flatter the US president, while hoping that he gets distracted or that his advisers make him see reason. The reality is that tariffs would undermine the most advanced parts of Mexico’s economy and make the country poorer. That downward spiral would be likely to fuel nationalism and anti-democratic populism, while increasing the power of organised crime and driving more Mexicans to try to cross into the US.Mexico’s greatest hope is that the US itself would recoil from the shared pain caused by a tariff war. Americans rely on cheap, reliable supplies from Mexico for everything from fruit and vegetables to car parts and medical equipment. Higher inflation would be felt quickly in the US, while the promised re-industrialisation of America would be a long time coming, if it ever happened at all. Impoverishing and destabilising America’s southern neighbour and largest trading partner is obviously a bad idea — for the US and for Mexico itself. But, unfortunately, that is no guarantee that it won’t [email protected] More

Stay informed with free updatesSimply sign up to the More

This article is an on-site version of our FirstFT newsletter. Subscribers can sign up to our Asia, Europe/Africa or Americas edition to get the newsletter delivered every weekday morning. Explore all of our newsletters hereGood morning and welcome back to FirstFT Americas. We start today with a request for help. April 29 marks the first 100 days of Donald Trump’s second term in office and to mark this milestone we plan to publish a reader Q&A. Email your questions to [email protected] and our experts will answer them. Now, on with today’s edition:Hopes for a “Trump bump” fade on Wall StreetCarmakers brace themselves for Trump’s tariffs The new nuclear arms raceAnd how Covid lockdowns changed the workplace Stock market falls and policy uncertainty are forcing dealmakers in the US to reassess expectations for a surge in activity this year.As the end of the first quarter approaches, the volume of takeovers globally has risen more slowly than many advisers expected at the end of last year when investment banking stocks hit record highs in anticipation of a “Trump bump”. The number of deals announced since the start of January is the lowest in more than a decade, according to data from Dealogic. There have been about 6,600 global transactions announced so far this quarter, down almost 30 per cent on a year earlier and 44 per cent below the peak in 2021.Wall Street has been trying to talk a dealmaking recovery into existence for two years after interest rate rises in 2022 killed off a pandemic-era boom. What started in 2023 as “green shoots” became “early innings” in 2024 and then “animal spirits” following Donald Trump’s victory in the US presidential elections in November. Yet, US stock markets have been gripped by fears in recent weeks about the health of the domestic economy, with the blue-chip S&P 500 index down nearly 4 per cent so far this year. Read more on the outlook for dealmaking this year. More market news: Large and persistent falls on Wall Street and for the US dollar are unusual, says Goldman Sachs in a new report. And here’s what we’re keeping tabs on today:War in Ukraine: The US and Russia have resumed talks in Saudi Arabia a day after American and Ukrainian negotiators met.Economic data: Mexico’s national statistics agency will publish data on consumer price changes in the first half of the month.Federal Reserve: Board governor Michael Barr speaks on “Small Business Lending” at an event in Washington hosted by the Aspen Institute.Canada: Campaigning begins in the country’s general election, following Prime Minister Mark Carney’s decision to set April 28 for the poll.Five more top stories1. Exclusive: Japan has not yet beaten deflation despite years of persistently rising consumer prices and the largest round of annual wage increases in three decades, the country’s finance minister has warned. Katsunobu Kato’s blunt assessment comes 15 months into the Bank of Japan’s efforts to “normalise” the economy. Read the full FT interview.2. Software giant SAP has overtaken Novo Nordisk to become Europe’s most valuable company, in the latest milestone for Germany’s surging stock market. Shares of SAP have risen more than 40 per cent in the past year as investors welcomed the shift of its business customers to the cloud. This is a developing story. 3. International carmakers are rushing to ship vehicles and core components to the US to get ahead of the next round of President Donald Trump’s tariffs. Trump has said that “reciprocal” tariffs on the US’s trading partners will come into effect on April 2 — the same day that a 30-day reprieve ends on the president’s pledge to impose 25 per cent tariffs on imports from Mexico and Canada. Here’s more on how the car industry is preparing.4. A Turkish court yesterday formally arrested the main challenger to the country’s longtime leader Recep Tayyip Erdoğan, threatening to escalate a crisis that has ignited mass protests and financial turmoil. The court ruled that Istanbul mayor Ekrem İmamoğlu should remain behind bars ahead of a trial on corruption allegations. The move against İmamoğlu has set off the largest opposition protests in more than a decade in Turkey.5. The head of law firm Paul Weiss yesterday defended his decision to strike a deal to end a dispute with US President Donald Trump. Brad Karp, the chair of Paul Weiss, wrote in a note to colleagues that Trump’s executive order “could easily have destroyed our firm”. Read more on the memo.Today’s Big Read © Adam James/FT; AFP/Getty Images/DreamstimeDonald Trump’s pivot to Moscow and scathing disregard for Nato has prompted old allies — from Berlin and Warsaw to Seoul and Tokyo — to confront what was seemingly unthinkable: how to prepare for a potential withdrawal of their US nuclear shield. We’re also reading . . . US exceptionalism: The long overdue rebalancing of global markets has only just begun, writes Ruchir Sharma, and is likely to be playing out for a long time. Why ships are the new chips: At the centre of the Trump administration’s world view is a desire to make America’s maritime capacity great again.Weight-loss drugs: Ozempic and Wegovy may mean vast gains for drugmakers but they could upend the insurance sector, writes Patrick Jenkins.Seven AI roles managers must master: Technology is handing leaders new challenges as some jobs are wound down, writes Andrew Hill.Chart of the daySome content could not load. Check your internet connection or browser settings.Argentina’s imports are rising rapidly as libertarian President Javier Milei bets on a strong peso and cheap foreign goods to help fight inflation. Italian pasta, Brazilian bread and Uruguayan butter have become increasingly visible on supermarket shelves in recent months while farmers quadrupled overseas tractor purchases in the first two months of 2025. But the peso’s strength has become politically fraught for Milei.Take a break from the news . . . The upheaval of Covid lockdowns prompted a rethink not just of where we work but when and why. FT writers and contributors assess what is different five years on. Recommended newsletters for youOne Must-Read — Remarkable journalism you won’t want to miss. Sign up hereNewswrap — Our business and economics round-up. Sign up here More

Stay informed with free updatesSimply sign up to the More

This article is an on-site version of our Europe Express newsletter. Premium subscribers can sign up here to get the newsletter delivered every weekday and Saturday morning. Standard subscribers can upgrade to Premium here, or explore all FT newslettersGood morning. Donald Trump’s yearning for Greenland is back in the news: Mike Waltz, the US national security adviser, and energy secretary Chris Wright will travel to the Danish Arctic island later this week and tour Pituffik Space Base, in what officials are billing as “a private visit”.Yesterday in Saudi Arabia, US and Ukrainian negotiators resumed talks over a potential peace deal. Below, I explain why subsequent US-Russia talks today over the Black Sea are making European capitals nervous, and Laura lays out why the mass protests sweeping Turkey are problematic for Brussels.Tomorrow, I’ll interview European Commission technology chief Henna Virkkunen on stage at the Financial Times’ event on Enabling Europe’s AI Ambitions in Brussels, alongside top FT colleagues and senior officials and experts. Register here to attend for free, or watch online.Murky watersEurope’s Black Sea states are watching on nervously as US-Russia peace negotiations over Ukraine continue today in Saudi Arabia, fearful of a possible deal that would restore some of Moscow’s clout over the contested waters.Context: US President Donald Trump has demanded a rapid end to the war in Ukraine and opened bilateral negotiations with both Moscow and Kyiv in a bid to find a framework for a peace deal. European countries are not directly involved in the discussions.Negotiators from Moscow and Washington will discuss Black Sea safety and a potential resumption of export lanes in Riyadh today, with the intention of tying a naval deal to a wider peace agreement.Mike Waltz, Trump’s national security adviser, said yesterday the talks would focus on “a Black Sea maritime ceasefire so that both sides can move grain, fuel and start conducting trade again in the Black Sea”.EU littoral states Romania and Bulgaria are wary of any significant changes to the status quo in the Black Sea as part of any broader potential agreement between Russia and the US, officials from the region told the Financial Times, given that it would expand the Russian navy’s operational area.Ukraine has successfully driven Russia’s navy out of the western part of the sea, in one of Kyiv’s most striking military achievements of the more than three-year-long war. Any agreement negotiated is thus expected to be beneficial to Moscow, the officials said, and could affect their countries’ security without giving them a say.“This is our neighbourhood and we don’t trust the Russians if they are allowed more freedom to operate,” said one of the officials.US and Russian officials have described today’s talks as “technical”, involving mid-level officials rather than senior politicians. Still, Trump’s top Russia envoy Steve Witkoff yesterday seemed pretty bullish.“I think that you’re going to see in Saudi Arabia on Monday some real progress, particularly as it affects a Black Sea ceasefire on ships between both countries,” he told Fox News.Chart du jour: TakeoverSome content could not load. Check your internet connection or browser settings.Elon Musk’s ties to Donald Trump are becoming a hindrance to the global rollout of Starlink — as showcased by his recent unsuccessful efforts to salvage a $1.5bn deal with Italy.Danger signsThe EU has warned Turkey not to stray from democratic standards after the arrest of President Recep Tayyip Erdoğan’s main challenger and hundreds of protesters, writes Laura Dubois.Context: Last week, Istanbul mayor Ekrem İmamoğlu was detained by police on corruption and terrorism charges, triggering mass protests. It is the first time such a senior member of the main opposition Republican People’s party (CHP) has been detained under Erdoğan’s longtime rule.Yesterday, a court ruled that İmamoğlu should remain in jail awaiting trial, a decision which he called a “black stain on democracy”. The government has also banned demonstrations in some cities and detained more than 600 protesters around the country since Friday.These moves put the EU in an awkward position, at a time when Brussels is seeking closer ties with Ankara in the face of threats from Russia and an indifferent US.Next month, the EU and Turkey are slated to hold a high-level economic dialogue for the first time since 2019, when relations soured over Ankara’s unauthorised drilling operations in the eastern Mediterranean.But the arrest of İmamoğlu, who denies wrongdoing and previously announced he wants to challenge Erdoğan to the presidency, has forced Brussels to react.EU foreign affairs spokesperson Anitta Hipper said yesterday that the arrests of İmamoğlu and the protesters “give rise to questions regarding Türkiye’s adherence to its long-established democratic tradition”.Hipper said that as an EU accession candidate, “Türkiye must uphold democratic values”.“The rights of elected officials, as well as the right for peaceful demonstrations need to be respected,” she warned.What to watch today EU chief diplomat Kaja Kallas visits Israel and Palestine.Meeting of EU agriculture and fishery ministers in BrusselsInformal meeting of EU health ministers in Warsaw.Lithuania’s Prime Minister Gintautas Paluckas meets his Estonian counterpart Kristen Michal in Tallinn.Now read theseFinancial crisis redux: Top EU financial watchdogs have told the FT that watering down regulations risks another economic meltdown.Nuclear option: Trump’s pivot to Moscow and disregard for Nato threatens the consensus on non-proliferation of nuclear weapons. Keep it flowing: Kyiv has called on the EU to renew a trade deal lifting duties and quotas on Ukrainian exports, or risk “really damaging” consequences.Recommended newsletters for you Free Lunch — Your guide to the global economic policy debate. Sign up hereThe State of Britain — Peter Foster’s guide to the UK’s economy, trade and investment in a changing world. Sign up hereAre you enjoying Europe Express? Sign up here to have it delivered straight to your inbox every workday at 7am CET and on Saturdays at noon CET. Do tell us what you think, we love to hear from you: [email protected]. Keep up with the latest European stories @FT Europe More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The writer is group chief economist at Société GénéraleLong bond yields in the Eurozone have risen sharply on the back of the “whatever it takes” fiscal measures presented by Germany’s chancellor-in-waiting, Friedrich Merz, on March 4. The benchmark 10-year Bund yield has jumped by about 0.25 percentage points since then.The sell-off is warranted by fundamentals, given expectations for significantly stronger economic growth and government bond issuance. This is not true elsewhere in the region, where similar scaled debt-financed spending measures are not in the pipeline.The welcome German measures won final approval last Friday, with relatively low import content from other euro area member states. As such, positive spillover from stronger German growth to the rest of the region is likely to be modest and is potentially even in danger of being more than offset by the sharp rise in bond yields. Soaring bond yields also add to governments’ debt servicing costs, adding to the challenges for member states in need of fiscal consolidation.It is further worth noting that euro area bond yields are now around the levels that prevailed last June, just before the European Central Bank embarked upon its current monetary policy-easing cycle, which has now led to 1.50 percentage points of cuts to its key deposit rate. There is thus an argument to be made that euro area member states, outside Germany, are experiencing an “unwarranted” increase in bond yields. Zooming in on the major 10-year benchmark bond yields in the France, Italy and Spain, these have increased by about 0.25 percentage points since the announcement of the German measures. The ECB’s toolkit has since the euro area debt crisis been expanded to deal primarily with unwarranted widening of euro sovereign bond yields relative to the German benchmarks, with notably the Outright Monetary Transactions and the Transmission Protection Instruments schemes. Neither tool has been used, but there is little doubt about their effectiveness.OMT is the 2012 scheme to buy government bonds in potentially unlimited amounts if needed. It was the delivery on Mario Draghi’s July 2012 promise to do “whatever it takes” to preserve the euro as the then-ECB president. TPI, introduced in July 2022 in what Christine Lagarde, his successor, called a “historic moment”, marked a further addition to counter disorderly market dynamics. It allows the ECB to buy the bonds of a Eurozone country if is suffering from an increase in its borrowing costs beyond the level justified by economic fundamentals.Some content could not load. Check your internet connection or browser settings.In theory, the TPI could be activated to counter the recent rise in bond yields in member states outside Germany, but this seems both unlikely and suboptimal. The TPI is widely understood to be a tool to counter disorderly spread movements in jurisdictions under market pressure and comes with the conditionality of respecting European fiscal rules. Using the tool outside this context may lead to market confusion.And further rate cuts could prove a blunt instrument, if such moves were to merely to steepen the German bond yield curve, widening the gap between shorter and longer interest rates. Likewise if rate cuts steepened the yield curve farther by raising growth and inflation expectations in Germany.There is thus a case to be made for a tool to deal with an unwarranted rise in long euro area bond yields that is driven by the de facto anchor for this market, Bunds.Pausing so-called quantitative tightening — the unwinding of the long-running programme of bond buying to lower the costs of borrowing in order to stimulate the economy — could mark a first step. That could ease upside pressures on the premiums placed on longer-term bonds across the euro area over short-term debt.A speech by ECB executive board member Piero Cipollone last month discussed the right balance for the ECB’s balance sheet and its implications for monetary policy. He cited survey data suggesting the potential for a greater impact from QT on Spain and Italy, compared with France and Germany, in lifting bond yields. If accurate, this asymmetry offers a case to pause QT. A further avenue for the ECB involves its Pandemic Emergency Purchase Programme, a temporary asset purchase programme of private and public sector securities buying to offset the shock of the outbreak of Covid-19 in 2020. The ECB is letting those purchases “run off”, not reinvesting proceeds from maturing bonds. The central bank has said this process will be managed “to avoid interference with the appropriate monetary stance”. It may be time to consider that, at least pausing PEPP run-off outside Germany.  More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The risk of a global trade war is “a very big concern” that would damage the world’s ability to tackle rising temperatures by limiting access to crucial technology, the chief executive of this year’s UN COP30 climate summit has warned.Brazil is due to host the world’s most important environmental talks in November, but the country’s climate secretary Ana Toni admitted they would take place in “very difficult circumstances”.Since taking office in January, President Donald Trump has launched a sweeping attack on climate policies in the US, including pulling the country out of the landmark Paris agreement for the second time, while his threatened tariffs have sparked fears of a global trade war.“The trade war is a really big concern because some countries have technology for decarbonisation that other countries need,” Toni said in an interview with the Financial Times. “We cannot slow down the process because of trade wars in terms of exchanging technologies, products and so on.”A London School of Economics paper last year found that Trump’s promised tariffs would “significantly impact the affordability of electric vehicles” in the US alone. “Having fluid and free trade for specifically low carbon products is really important,” Toni said. “So trade wars don’t help us. They really make our lives harder for the process that we need to face, which is global decarbonisation.”Academic research suggests duplicate supply chains caused by tariffs can increase emissions, but bolstering domestic manufacturing can also cut demand for heavily-polluting long-haul shipping.Toni argued there was still widespread support from countries outside the US for addressing climate change, adding that the UK, Europe and China all supported a “multilateral approach”.“We have to have a successful COP” despite the geopolitical turmoil, Toni said. “Climate change is not going to wait for the geopolitical scenery to change.”She said this year’s COP needed to shift away from a focus on negotiations — arguing the “rule book” for the Paris accord was now largely agreed — and instead focus on how to “accelerate action”.She noted that the summit, which will take place in the Amazonian port city of Belém, will be the first held “since we’ve gone over 1.5C” above pre-industrial levels over a calendar year.This is not a breach of the Paris agreement’s goal to limit the temperature rise to 1.5C above the pre-industrial period, which is measured over decades rather than one year, but scientists warn last year’s record-breaking temperatures signalled that climate change was accelerating faster than expected.Brazil’s leadership of the COP conference has come under scrutiny in recent months, with criticism of its decision to explore for more oil, join the OPEC+ oil group and allow the construction of a road through forest in Belém.Despite being a big oil producer, Brazil is “going to do this transition” away from fossil fuels, Toni said, arguing their membership of OPEC+ could help drive dialogue about reducing nations’ dependence on oil and gas.She also played down concerns about deforestation caused by the construction of the road in Belém. The road was not being built specifically for the summit, she said, insisting it was instead infrastructure required for the city.“No one is proud to deforest even one tree but sometimes it is needed.”Climate CapitalWhere climate change meets business, markets and politics. Explore the FT’s coverage here.Are you curious about the FT’s environmental sustainability commitments? Find out more about our science-based targets here More