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Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldDonald Trump is considering imposing tariffs of about 25 per cent on imports of cars, drugs and chips into the US as he teased the next steps of a rapidly escalating trade war.The US president said on Tuesday that he was weighing tariffs “in the neighbourhood” of 25 per cent on automotive imports and at least that level on pharmaceutical products and semiconductors.“It’ll be 25 per cent and higher and it’ll go very substantially higher over the course of the year,” Trump said, referring to chips and drugs. The possibility of additional increases later in the year is designed to give companies “a little bit of a chance” to relocate operations to the US.Show video infoThe president added that he would “probably” provide final details on the automotive tariffs on April 2, a date he had previously indicated they would take effect.The comments marked the latest salvo fired by Trump as he looks to reshape America’s trading relationship with the world. They came as an EU delegation arrived in Washington in a bid to avert a further escalation. Trump has already unveiled 25 per cent tariffs on steel and aluminium imports due to take effect next month and hit China with an additional 10 per cent levy. He pushed back plans for new 25 per cent tariffs on Canada and Mexico after reaching eleventh-hour deals with the US’s North American neighbours this month. The president also took aim at the EU on Tuesday. As trade commissioner Maroš Šefčovič landed in the US capital for three days of talks, Trump repeated complaints about the scale of the trade deficit and reiterated plans to slap reciprocal tariffs on the bloc.“The EU has been very unfair to us,” Trump said. “They don’t take our cars, they don’t take our farmed products, they don’t take almost anything, they take very little. And we’re going to have to straighten that out.”Trump suggested the EU had already agreed to cut tariffs on US car imports, proving that the reciprocity threat was working.European officials had previously indicated the bloc was willing to cut its 10 per cent import tax to a level near the 2.5 per cent charged by the US. But Brussels said on Tuesday that no deal had yet been reached.“No specific offer on reducing tariffs has been made by either side. Any tariff reductions must be mutually beneficial and negotiated within a fair and rules-based framework,” the European Commission said. The commission added: “The EU remains committed to deepening transatlantic trade relations and addressing tariff concerns through constructive dialogue.” More
Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The writer is senior economist for emerging Asia at Natixis Corporate & Investment BankingAs promised and feared, US President Donald Trump started his second term by deploying tariffs to tackle a wide range of issues from immigration to national security to overreliance on imports for production. The US is the largest importer of goods and services, buying $4.1tn worth in 2024, surpassing Chinese imports of $2.6tn by a wide margin. As such, higher barriers to its trade disrupt global supply chains and investment.The spectre of tariffs has helped spark a sell-off in bonds on inflation fears, pushing the dollar higher and currencies of Asian emerging markets lower. It has also weighed on some equity markets such as India and Malaysia.But Trump’s trade barriers are much more targeted than he promised on the campaign trail. The 25 per cent tariffs on aluminium and steel are steep but they are not the biggest items on the list of American goods imports. The pushback of plans for what the US describes as reciprocal tariffs until April also signals less extensive action than had been feared. Moreover, the 10 per cent tariff on China is likewise much less than the 60 per cent threatened. This points to worsening US-China relations on trade and investment, though not yet a complete breakdown.Instead of fretting over tariffs, investors should look for opportunities in those countries that stand to gain from probable shifts. Emerging market economies in Asia outside China should be on the list.While China is likely to compete more aggressively for the trade pie outside the US, those countries that want to benefit from disrupted global supply chains should see growth as they did after trade frictions started in Trump’s first turbulent term. Vietnam is the big example. From 2017 to 2023, the country increased its export share to the US in all product categories, making it a winner among Asia’s emerging economies. This growth is not merely a result of China rerouting its exports under the guise of Vietnamese goods but stems from Vietnam’s hard-earned progress.Some content could not load. Check your internet connection or browser settings.Vietnam’s trade linkages have expanded significantly across the globe, spanning China, the US, north Asia, the EU and the Asean group of 10 Asian countries. This performance mirrors the rapid increase of foreign direct investment over the past two decades. Vietnam has outperformed the rest of the region in attracting FDI, drawing inflows from countries such as South Korea, Singapore, Japan, Hong Kong, Taiwan, China and the US.Malaysia and Singapore have benefited from an investment diversification push, too. Malaysia has targeted high-tech sectors such as semiconductor and data centres while Singapore has expanded in financial services and attracted corporate headquarters. The two have also teamed up to create a Johor-Singapore Special Economic Zone this year to boost investment and jobs in strategic sectors. Asean — which includes Vietnam, Malaysia and Singapore — is now the largest recipient of FDI in Asia.India has also gained in export market share to the US since 2017, but to a much smaller extent. A “Make in India” drive by the Modi government, tax cuts and production incentive schemes have helped, especially in the information technology sector. Still, manufacturing has not kept up with the country’s rapid growth, and its share of GDP declined to 14 per cent in 2024 from 16.5 per cent in 2014. Prime Minister Narendra Modi is trying to change that with pre-emptive lowering of tariffs on US goods while boosting bilateral India-US trade, investment and security ties. He is targeting further investment in sectors such as toys, footwear and IT.Modi has done a good job at beefing up India’s infrastructure, from energy to expressways. What is next is reducing red tape, especially burdensome land and labour laws that hold back investment and scaling-up of companies. India’s $110bn trade deficit in goods in 2023 with China, not just in high-tech but in labour-intensive manufactured goods, shows that opportunities lie in both grabbing more of the US trade pie and serving strong domestic demand at home.For some economies, this shock to global trade is a chance to bolster resilience, liberalise trade access and improve competitiveness. Amid higher trade friction and volatility, capital is seeking an eager host. Some economies in Asia — such as Malaysia, Singapore, Vietnam and increasingly India — are positioning themselves to be winners in the trade war. More
Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.A notorious Russian ship under sanctions for transporting arms from North Korea is set to enter the Mediterranean via the Suez Canal, the first time that a vessel involved in arms-running for Pyongyang would have entered European waters.The Maia-1, a Russian-flagged and crewed ship that has been placed under sanctions directly by the US and EU, is currently anchored outside the south entrance to the key waterway that links Asia and Europe, according to Open Source Centre, a research group that identified the vessel. The vessel’s stated destination is a port on the Baltic coast of Russia where Moscow is building a liquefied natural gas facility.The ship is one of more than 20 vessels owned by MG-Flot, a company that has also been put under sanctions by the UK, EU and US among others. The EU, in its sanctions listing, said the carrier was part of “a military transportation network of Russian cargo vessels”. It made at least nine trips to North Korea in the five months to February 2024, according to the OSC.“The Maia-1 is a vessel which has been named by the UN Panel of Experts on North Korea, and sanctioned by several governments for its involvement in shipping North Korean munitions to Russia,” said Joe Byrne, a senior OSC analyst.The arrival of this ship in European territory — and its later possible transit through the waters of Nato members including Denmark — would pose a fresh challenge to the continent just as its leaders consider how far they are willing to go to keep supporting Ukraine and disrupt the Russian economy. The voyage presents “a challenge on the western sanctions system, testing their resolve to take action”, Byrne added. Some content could not load. Check your internet connection or browser settings.The Maia-1 began its journey in Vladivostok in Russia’s far-east last month before picking up cargo at a port near Shanghai. Since leaving China it has largely sailed with its AIS transponder turned on.The OSC said large items appeared to have been loaded on to the ship when it was at the Zhangjiagang Equipment Port between January 11 and 16. The facility has been linked to efforts to evade sanctions on the supply of equipment to Russia’s liquefied natural gas projects.Satellite imagery gathered by the OSC showed the vessel being loaded with objects that were then covered in tarpaulins for the journey.The Maia-1 filed documents during a stop in Vietnam giving its final destination as Ust-Luga, a Baltic Sea port where the LNG terminal is being built despite the effect of sanctions. Russia’s access to turbines and other gas liquefaction equipment has been badly hit by US sanctions imposed by the White House under previous president Joe Biden. The US Treasury has also hit heavy-lift cargo ships caught supplying these schemes.The Maia-1 last February returning to the Russian port of Vostochny after loading containers in North Korea More
This article is an on-site version of our Chris Giles on Central Banks newsletter. Premium subscribers can sign up here to get the newsletter delivered every Tuesday. Standard subscribers can upgrade to Premium here, or explore all FT newslettersFederal Reserve chair Jay Powell appeared to have two objectives when giving evidence to Congress last week. Steer clear of politics and do not upset the president. He largely succeeded. On the day of a poor set of US consumer price inflation data for January, Powell said the Fed had made “great progress” in getting inflation down but had not quite met its goals. He was quite right about the former, with US CPI inflation down from 9 per cent in June 2022 to 2.4 per cent in September 2024, but the latest data was bad. US headline CPI inflation rose in January on a 12-month, six-month, three-month and one-month basis and almost all measures of core inflation were higher in January than in December over every time period. My favourite measure in the chart below is FT core inflation, which combines all the others in a statistically optimal way — this rose across all time periods on an annualised basis. It is generally hovering at an annualised rate of a little below 3 per cent. Some content could not load. Check your internet connection or browser settings.One question raised by many analysts after the data release was whether the Bureau of Labor Statistics was struggling to seasonally adjust the data because companies raised prices more in January than they traditionally do in the first month of the year. The chart below shows the month-by-month change in US prices, with the most recent data shown in red. Over a long period, they rise fastest in the first three months of the year, are pretty stable in spring and summer and go up again in the autumn ahead of price cuts in December. Seasonal adjustment smooths out this pattern over a long period of data.The chart shows, however, that January 2025’s monthly price rises were hot on any historical basis and remained high after the BLS’s latest seasonal adjustment.Some content could not load. Check your internet connection or browser settings.With inflation having been elevated in recent years, this pattern might simply show the overall level of price rises recently. You can eradicate some of that noise by subtracting the average monthly inflation rate of the previous 12 months to remove general price trends. January 2025 was still a big month for US price rises.Some content could not load. Check your internet connection or browser settings.There does therefore appear to be some residual seasonality in the data, with companies more likely to raise prices in January than previously. The evidence is stronger for headline inflation (you will need to click on the chart) than the traditional core measure, excluding food and energy, suggesting that it is exactly some food and energy prices that are now reset higher in January.Is this pattern also repeated in the Eurozone?Not really. On the same basis as in the previous chart, the monthly seasonally adjusted Eurozone core measure of inflation was inside a normal range in January 2025. Although the headline measure was high, there is less of a trend in Europe for big seasonally adjusted price rises at the start of the year. Some content could not load. Check your internet connection or browser settings.What does residual seasonality mean? Most analysts last week largely refrained from excusing the poor CPI data on the basis of seasonal adjustment failures and noted there was something real behind the numbers. In any case, residual seasonality would only mean that the January data was overstated while inflation in other months would be too low. As Powell noted in his press conference after the January Fed decision: “At the end of the day, it comes down to 12-month inflation because that takes out the seasonality issues that may exist.”And if companies are finding it easier to raise prices in January than previously, there are three main potential culprits. Corporate market power enabling companies to push prices higher without a consumer backlash. If true, this would be a version of the “high inflation” trap that the Bank for International Settlements warned about in 2022 with companies and households expecting and accepting annual price increases. It would require aggressive monetary policy to prevent companies continuing the practice every year. Tariff forestalling with companies raising prices in January in anticipation of tariffs being applied later in the year when their actions would attract more scrutiny.“Menu costs” reflecting more lumpy and occasional price rises to minimise the administrative costs of increasing charges frequently.It is hard in advance to distinguish between these possibilities. But I am sceptical about the scale of “menu costs”, especially in a digital world, where prices change rapidly and printing costs are low. As an anecdote, I have been photographing a local restaurant in Camden Market, London, which has long offered an all-you-can-eat buffet. In the UK’s low inflation years before 2021, it displayed the price in expensive illuminated signage and charged £8.80 in September 2021. The pictures below show the evolution of prices and the difficulty the restaurant had in updating its frontage. Last Friday, the price for the same buffet was £14.90 — a 69 per cent increase. In the UK, the Office for National Statistics measures the national increase in restaurant prices over the same period at only 24 per cent.For this restaurant, the costs of changing signage would have been high, but that did not stop it applying rapid and frequent price rises since 2021. Even when expensive, changing menu costs has not been a deterrent in Camden Market, London More
