Aurelia Butler

Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldUS inflation fell more than expected to 2.8 per cent in February, bolstering the case for the Federal Reserve to cut interest rates amid signs of slowing growth in the world’s largest economy.Wednesday’s annual consumer price index figure was below January’s 3 per cent and the 2.9 per cent expected by economists, according to a Reuters poll.US stocks have slipped in recent weeks but rose on Wednesday, with the blue-chip S&P 500 closing 0.5 per cent higher and the tech-heavy Nasdaq Composite adding 1.2 per cent.Futures markets are pricing in two rate cuts this year with a roughly 85 per cent chance of a third — up marginally from before the data release.The US central bank faces a difficult balancing act as it tries to bring down inflation without triggering a recession, amid intensifying fears that President Donald Trump’s aggressive economic agenda is hampering growth.Businesses and financial markets have been rattled by the chaotic rollout of the president’s tariffs on the US’s biggest trading partners, which has been marked by sudden escalations and U-turns.Wednesday’s figures showed core inflation rose 3.1 per cent, falling short of expectations of a 3.2 per cent increase.“Underlying inflation is slowing before we get to those upside risks of tariffs, which will come later in the spring, so that’s positive for the Fed,” said Veronica Clark, an economist at Citigroup. “That will make them less worried about planning cuts later in the year.”Some content could not load. Check your internet connection or browser settings.Last week, Fed chair Jay Powell played down concerns over the health of the US economy after the S&P 500 index’s post-election gains were wiped out following the release of disappointing employment figures for February.Powell suggested he expected the central bank to hold rates at their current range of between 4.25 per cent and 4.5 per cent at its meeting next week, saying the Fed was in no “hurry” to cut and was “focused on separating the signal from the noise as the outlook evolves”.The Bank of Canada on Wednesday cut interest rates by a quarter point to 2.75 per cent, citing the expected slowdown from “heightened trade tensions and tariffs imposed by the United States”.Although it said Canada’s economy had begun the year in good shape, the BoC also noted slowing economic activity in the US and warned its own outlook was harder to fathom as a result of “more than usual uncertainty because of the rapidly evolving policy landscape”.Some economists and investors fear Trump’s tariffs will stoke US inflation, with the price of several metals, including aluminium, rising after the administration imposed steep tariffs on imports from Wednesday.The White House’s decision to impose 25 per cent levies on all steel and aluminium imports triggered swift retaliation from the EU, which is targeting up to €26bn of US goods with tariffs. Tom Porcelli, chief US economist at PGIM Fixed Income, said February’s drop was welcome but said investors’ relief could prove shortlived given the possible impact of tariffs.In February, sectors registering the biggest price increases included medical care and used cars, while airfares and new cars were among those where costs declined.Egg prices, a significant contributor to January’s strong reading, were higher again in February, rising a further 10 per cent on the month for an annual increase of 59 per cent.“It’s good news, for sure, but I do think we don’t want to overstate this,” said Ryan Sweet, chief US economist at Oxford Economics. “Only the tariffs on China had gone into effect in February and it may be a bit too soon to be captured in this round of data.” More

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Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.China’s Ministry of Commerce has summoned executives at Walmart over reports the US retailer asked its suppliers to cut prices in response to tariffs imposed by President Donald Trump, according to state media.The discussions, reported on Wednesday by a social media account affiliated with state-run China Central Television, highlight mounting geopolitical risks for big US companies in China.“Chinese companies shall not bear the blame for US tariffs,” the Yuyuantantian account, a frequent source of official commentary on trade, said in a post on the social media site Weibo.Walmart has expanded its presence in China in recent years despite a wider slowdown in domestic consumer demand, and its US stores rely heavily on goods imported from the world’s second-largest economy.US companies have been struggling to avoid the fallout from tariffs announced since Trump’s inauguration as president in January. The new administration initially introduced an additional tariff rate of 10 per cent on imports from China, then doubled it to 20 per cent last week.Escalating trade tensions with Washington have prompted a host of countermeasures by Beijing. As well as implementing retaliatory tariffs on US exports of energy and agricultural goods this week, China has also increasingly targeted American companies in the country.Chinese authorities added clothing maker PVH, the owner of Calvin Klein and Tommy Hilfiger, to an “unreliable entity list” in February alongside California-based biotech group Illumina, and launched an antitrust investigation into Google.The move represented the first time US companies with substantial interests on the ground in China had been blacklisted on national security grounds, and prompted a wave of concern through international business communities in Beijing and Shanghai. Earlier this month, China added 10 US companies to the list. All had sold arms to Taiwan or been involved with military technology co-operation with the island, state media said then, citing the commerce ministry.Walmart said its “purpose is to help people save money and live better. Our conversations with suppliers are all aimed at making our purpose a reality for millions of customers, and we will continue to work closely with them to find the best way forward during these uncertain times”. The commerce ministry did not immediately respond to requests for comment on the Yuyuantantian report. Bloomberg reported last week that Walmart had asked makers of kitchenware and clothing in China to cut prices by 10 per cent.Walmart has a presence in more than 100 cities in mainland China and is well-known in the country for its popular Sam’s Club, a chain of membership-only warehouse stores. In the quarter to January 31, its sales after returns, allowances and discounts in China were $5.1bn, up 28 per cent from the previous year.Walmart sold its stake in JD.com, one of China’s biggest ecommerce platforms, for $3.6bn last August to focus on expanding its own brands.Additional reporting by Gregory Meyer in New York More

Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldTwo of Wall Street’s most prominent executives have said there are upsides to Donald Trump’s policies, even as the US president presses ahead with protectionist measures including import tariffs that have fuelled fears of a slowdown in the world’s largest economy.Stephen Schwarzman, chief executive of Blackstone, told reporters in India on Wednesday that the tariffs would, “at the end of the day”, lead to a significant increase in manufacturing activity in the US.“Given the size of the US, that tends to be a good thing for the world,” said Schwarzman, a prominent Trump donor. “If we’re growing faster we can consume more things. So, you know, that’s one scenario . . . there are other scenarios, because it’s just way too early to play this out.”Meanwhile David Solomon, chief executive of Goldman Sachs, said the business community “understands what the president is trying to do with tariffs”, though he pleaded for more “certainty” on the Trump administration’s policy agenda.Trump’s 25 per cent tariffs on steel and aluminium imports came into effect on Wednesday, triggering countermeasures from the EU, which the bloc said would affect up to €26bn of American goods. Canada has also announced 25 per cent retaliatory tariffs on about C$30bn of US-made goods.The “business community is always going to want lower tariffs, everywhere in the world”, said Solomon. But he welcomed Trump’s wider agenda and his openness to dealing with executives, telling Fox News that he liked the way “the president is engaged with the business community”. “That’s a different experience than what we’ve had over the course of the last four years,” Solomon said.“CEOs are excited about some of the tailwinds, like the move to lower regulation,” he said, adding that red tape had been a “significant headwind to growth and investment”.Solomon said he expected the number of initial public offerings, which had been “muted” over the past couple of years, to increase in 2025.The Goldman chief was part of a group of business leaders who met Trump at an event held on Tuesday evening by the Business Roundtable, an association of 200 CEOs of large American companies. Many of the attendees have seen the market capitalisation of their companies slump in recent days amid fears of recession and a widening trade war.Trump told the gathering that tariffs would boost domestic jobs and industrial production in the US. “The biggest win is if [businesses] move into our country and produce jobs,” he said. “That’s a bigger win than the tariffs themselves.”As well as resuscitating US manufacturing, Trump’s aggressive moves on trade are designed to reduce the country’s trade deficit, and force Mexico and Canada to stem the flow of irregular migrants and fentanyl across America’s southern and northern borders.But the deepening frictions between the US and some of its closest allies are causing jitters throughout the business community.In addition to retaliatory tariffs by the EU and Canada, there is concern about the possibility that Trump will follow through on his threat to impose so-called reciprocal tariffs on all trading partners from April 2, to punish them for taxes, levies, regulations and subsidies that Washington considers unfair.Additional reporting by Antoine Gara and Oliver Barnes in New York More

Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldThe writer is associate professor of political science at Providence College and author of the forthcoming book ‘Extraction: The Frontiers of Green Capitalism’ Critical minerals have topped the agenda since Donald Trump’s return to the White House. On inauguration day, he released an executive order, “Unleashing American Energy”. With characteristic bluster, this seeks to secure “America’s mineral dominance”. He has also issued a related executive order (“Addressing the threat to national security from imports of copper”), threatened to seize Greenland and annex Canada, which have enviable mineral endowments, bullied Ukraine to accept a minerals deal (“they have great rare earth. And I want security of the rare earth”), and announced imminent additional action to “dramatically expand production of critical minerals and rare earths here in the USA”.Trump’s bellicose rhetoric and menacing behaviour has been rightly criticised but he is not acting in a vacuum. Last year, the EU signed a critical minerals deal with Rwanda. The European parliament voted to suspend the deal, however, because Rwanda is supporting a rebellion in the eastern Democratic Republic of Congo partly in order to seize and export the region’s coltan, tin, tungsten, tantalum and gold. Meanwhile, the government of the DR Congo, led by Félix Tshisekedi, has proposed a critical minerals deal to the US, modelled on the stalled Ukraine agreement. Tshisekedi pitched the idea of privileged access for US companies to abundant cobalt and copper reserves in exchange for security assistance in its fight with the M23 rebels. Vladimir Putin too saw the Ukraine deal as a model, offering Trump access to Russia’s minerals — as well as those in Ukrainian territories his military controls. These deals are part of a broader trend. Importing countries are racing to secure minerals, using a mix of onshoring (encouraging mining within their borders) and bilateral trade agreements. Producing countries are implementing export bans, establishing state-owned companies and in some cases nationalising entire mineral sectors. Whether justified on account of the energy transition, tech sectors or military preparedness, countries everywhere want their piece of the critical mineral pie.In the US, Trump’s moves mark the escalation of a bipartisan consensus that has been over a decade in the making. It was during Barack Obama’s presidency that federal officials first outlined a “critical minerals strategy”. In Trump’s first term, executive orders expanded the list of critical minerals and framed reliance on imports from foreign adversaries as a threat. Joe Biden’s administration increased domestic mining, established friendshoring alliances and imposed major tariffs on minerals from China. Some previous US policies bear an unsettling resemblance to Trump’s recent bluster too. Under Biden, for example, the state department lobbied the CEO of privately held Tanbreez to resist any offers from Chinese investors for its Greenland rare earth deposit.There is an even longer history at work here. The concept of “critical minerals” traces its origins to the lead-up to the second world war and was reinforced during the cold war race for atomic materials and the 1970s energy crisis. At each moment, labelling resources as “critical” has justified government support for extraction and access, deregulation of safeguards, and a preference for strong-arm tactics over co-operation. The consequences are deadly: mining ranks high among economic sectors for human rights violations.The idea of “critical minerals” shuts down debate. Critical for who? And extracted for whose benefit and whose expense? Instead of “mineral dominance” we need international agreements on environmental and social standards and policies that reduce mineral demand. Otherwise, the critical minerals consensus is liable to lead us to a 21st-century gold rush or resource war. More

Show video infoThe EU and Canada retaliated against US President Donald Trump’s 25 per cent tariffs on steel and aluminium within hours of them taking effect, escalating a trade war that has rattled financial markets and threatened the global economy.The European Commission said its measures would affect up to €26bn ($28bn) of American goods, matching the US tariffs on European exports, and would take effect in April, leaving some time to negotiate with Washington.Commission president Ursula von der Leyen said the EU regretted Trump’s decision and that tariffs were “bad for business, and even worse for consumers”. “These tariffs are disrupting supply chains. They bring uncertainty for the economy. Jobs are at stake. Prices will go up,” von der Leyen said.Canada also hit back swiftly as Ottawa announced tariffs on almost C$30bn ($21bn) of US goods. Dominic LeBlanc, the country’s finance minister, branded the US levies as “completely unjustified, unfair and unreasonable”. The retaliations came after the US tariffs came into force on Wednesday, as Trump pressed ahead with his protectionist trade agenda despite growing concern over the risk of a domestic recession.The move to impose the tariffs followed a turbulent day on Wall Street as the spectre of a deepening trade war and the administration’s erratic policymaking on tariffs shook investors.US and European stocks were up on Wednesday, snapping two days of declines, with the S&P 500 rising 0.8 per cent and the Stoxx Europe 600 climbing 0.8 per cent.As part of its retaliation, Brussels has reinstated measures introduced during Trump’s first term on €4.5bn of US exports from April 1. These include levies of up to 50 per cent on products such as bourbon whiskey, jeans and Harley-Davidson motorcycles.The EU has also drawn up levies on a further €18bn of US goods, which could include cosmetics, clothes, wood, soyabeans, chicken, beef and other agricultural produce. The measures, which could be expanded to include another €3.5bn of goods, require approval by EU countries and would come into force on April 13.A senior EU official said soyabeans were on the list of targets because they were grown in Louisiana, the home state of House of Representatives Speaker Mike Johnson.“We’re happy to buy our soyabeans from Brazil or Argentina,” they added.“We want to ensure there is pressure within the American system to lift their tariffs,” a second official said, referring to efforts to hit goods from Republican states. Trump’s tariffs are the latest salvo in an aggressive trade policy that the president has said will boost US manufacturing and penalise countries he claims have ripped America off.Last month the president announced that he would impose the duties on metals, tearing up agreements struck between his predecessor Joe Biden and US trading partners to allow certain quantities of steel and aluminium to enter the country duty free.US administration officials have framed the move as a response to “foreign players” that they say are responsible for “surging exports” of metals to America that are undermining domestic producers.Trump has also expanded the metals tariffs to apply to a wide range of products containing steel and aluminium, including tennis rackets, exercise bikes, furniture and air conditioning units.UK trade secretary Jonathan Reynolds said the tariffs were “disappointing” but Britain did not respond with immediate countermeasures. Despite the US being the UK steel industry’s second-biggest export market, Reynolds said the government was “focused on a pragmatic approach” as it sought to negotiate a broader economic deal with the White House.China, the world’s largest steelmaker and exporter, warned it would “take all necessary measures to safeguard its legitimate rights and interests” but did not immediately announce retaliatory tariffs.Australian Prime Minister Anthony Albanese said the tariffs were “entirely unjustified”, adding: “This is not a friendly act.” The country was exempt from similar tariffs implemented during Trump’s first term, and the country’s steel producers supply the American defence and manufacturing sectors.The full list of steel and aluminium products subject to the levies represented $151bn of imported goods in 2024, according to an analysis by Simon Evenett and Johannes Fritz of the St Gallen Endowment for Prosperity Through Trade.Ted Murphy, a partner at law firm Sidley Austin, said Trump’s sweeping new metals tariffs represented a “big change” from his approach when he introduced similar levies in 2018 and allowed exclusions for some products. “The product exclusions were vetted through a US government process to confirm the products weren’t available in the US,” said Murphy. “So taking that away will mean a lot of folks will have to pay the tariff because they can’t source these products domestically.”Additional reporting by Nic Fildes in Sydney, George Parker in London, Joe Leahy in Beijing and Ilya Gridneff in Ottawa More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Canada’s central bank has cut its benchmark interest rate to the lowest level since 2022, warning that a trade war with the US will probably slow the pace of Canadian economic growth and increase inflationary pressures.The Bank of Canada on Wednesday reduced rates by 0.25 percentage points, as expected, to bring its policy rate to 2.75 per cent. It marked the seventh consecutive cut in the BoC’s monetary policy easing cycle.The move came hours after US President Donald Trump’s tariffs on steel and aluminium imported from Canada took effect earlier on Wednesday. Trump has also imposed, then delayed, 25 per cent tariffs on Canada and Mexico, despite the US having a free-trade pact with the two countries.BoC governor Tiff Macklem told reporters that Canada’s economy ended 2024 in “good shape” but was now facing a “new crisis” due to the trade war with the US.“Depending on the extent and duration of the US tariffs the economic impact could be severe; the uncertainty alone is already causing harm,” he said. He added that a weaker Canadian dollar is adding costs to importing goods and unemployment is likely to rise over the coming months due to weaker consumer demand.Alongside its policy decision, the BoC published survey data that suggested threats of new tariffs and uncertainty about the US-Canada trade relationship were having a “big impact” on consumer and business confidence.Macklem said the survey indicated Canadian businesses, particularly those in manufacturing and sectors dependent on discretionary consumer spending, had lowered their sales outlooks.“Our surveys also suggest business intentions to raise prices have increased as they cope with higher costs related to both uncertainty and tariffs,” Macklem said. The BoC also cautioned that “monetary policy cannot offset the impacts of a trade war” and Macklem warned that the severity of the impact of new US tariffs on the Canadian economy would depend on their extent and duration.On Sunday the minority government’s Liberal party chose former Bank of England and Bank of Canada governor Mark Carney as their new leader and prime minister, replacing Justin Trudeau. Carney has pledged to “build the strongest economy in the G7”.Carney is expected to call an election that will be held probably in late April or early May. Canada must hold a national vote before October. More

Steven Kamin was previously head of international finance at the Federal Reserve and is now senior fellow at the American Enterprise Institute. Mark Sobel was previously head of international finance at the US Treasury and is now US chair, OMFIF.In recent weeks, the buzz has been mounting about a new American plan — a “Mar a Lago Accord” — to upend the global monetary system. We can only hope it remains idle chatter. In brief, based on a detailed discussion paper by CEA Chair nominee Stephen Miran, the accord would have America’s trading partners help weaken the dollar and commit to providing low-cost, long-term financing to the US government, enforced by the threat of higher tariffs or removal of security guarantees.  Intriguingly, there has been no announcement by the Trump administration or even a tweet by Trump, but Miran’s paper — along with various utterances by Treasury Secretary Scott Bessent — have led Wall Street observers to believe such an initiative is indeed in the offing. And that’s too bad, because a Mar-a-Lago Accord would be pointless, ineffectual, destabilising, and only lead to the erosion of the dollar’s pre-eminent role in the global financial system.The Mar-a-Lago Accord is premised on the view that the dollar’s global dominance is bad for America. Unnatural demand has caused gross overvaluation. This has in turn led to reduced export competitiveness, persistent trade deficits, and the erosion of US manufacturing. In response, an Accord would call for the US and its trading partners to intervene in foreign exchange markets to sell dollars for foreign currency in a bid to get the dollar down. However, since foreign sales of US Treasuries and prospects of dollar losses could push up US interest rates and jeopardise the financing of federal budget deficits, foreign governments would have to increase the duration of their remaining holdings of Treasuries, even buying 100-year zero-coupon bonds from the US government — in essence, free financing for a century! And because they could not be expected to do this voluntarily, they would be threatened with higher tariffs or the loss of American military support if they failed to comply.So, what’s wrong with all that? First, contrary to Miran’s view that the dollar’s global role is harmful for America, it is actually a net plus, facilitating our business activities abroad, lowering the cost of capital, and increasing our geopolitical reach. And even if the plan succeeded in lowering the dollar, it would do nothing to help the US economy or its workers.   Much of our trade deficits reflect a buoyant economy and large fiscal deficits, not the strong dollar. Moreover, our trade deficits aren’t really a problem per se. Despite them, US economic growth has outstripped that of our major trading partners, and the unemployment rate is only 4 per cent — very low by historical standards. In fact, there’s no logic to the notion that all countries should have balanced trade. We need trade deficits in order to provide an outlet for spending that otherwise would show up as economic overheating and inflation. Moreover, the strong dollar clearly isn’t the cause of the shrinking share of US workers in manufacturing (now less than 10 per cent of total employment). The same trend has been at work the world over, in countries with both trade surpluses and deficits, on account of the rapid productivity growth in this sector.Second, the plan would not succeed. As countless studies have shown, pushing the dollar down on a sustained basis would require the Federal Reserve to lower interest rates and foreign central banks to raise rates; but with US inflation stubbornly exceeding the Fed’s 2 per cent target and foreign economies languishing, that’s not going to happen. By the same token, if foreign governments were busy selling Treasury bonds in order to depress the dollar, it’s unlikely that increasing the duration of their remaining dollar bonds could be enough to keep US interest rates from rising. And while threats of higher tariffs and ejection from the security umbrella might coerce Japan and Europe to play ball, China — which should be America’s main concern — is going to be less willing to kowtow to Trump.Third, a Mar-a-Lago Accord risks undermining the global dominance of the dollar. That dominance is based not only on the safety and liquidity of US Treasuries, but also on the long-standing historic prudence of US economic policymaking and its support for a stable, rules-based global trading and financial system. Mistreating our allies, breaking trade agreements, and undermining support for global institutions, as is now under way, will only encourage other countries to seek alternatives to the dollar. Trump has threatened countries with tariffs if they abandon the dollar, but nothing could accelerate that process more effectively than reckless actions against our trading partners.Finally, an effort to force a Mar-a-Lago Accord on resistant trading partners could trigger a global financial crisis. The stock market is already in freefall on account of Trump’s capricious tariff policies. Consider what would happen if Trump threatened our allies with ejection from the US security umbrella, a “user fee” on Treasury repayments abroad, or a selective freezing of Treasury repayments altogether, as Miran has suggested in his magnum opus. Ditto forcing others to “reprofile” into 100-year zero coupon bonds. As the safest and most liquid asset in the world, US Treasury bonds are the bedrock of the global financial system — if they suddenly became less safe and less liquid, a financial panic akin to the Lehman Brothers and coronavirus meltdowns could ensue, taking the US and global economies down with it. The dollar might indeed fall, but not in a way that Trump would like.All told, a Mar-a-Lago Accord would represent huge downside risk for approximately zero upside gain. It is doubly amazing that Trump officials seem to be drawn to it when there is another policy that could simultaneously lower the dollar, narrow our trade deficit, reduce interest rates, and put the federal budget on a sustainable path for years to come: cut spending, responsibly raise taxes, and reduce the fiscal deficit. Instead, we get DOGE, tariffs with a half-life of 1 1/2 hours, threats to our closest allies, and the trashing of America’s credibility. It’s going to be a long four years. More