Aurelia Butler

Chinese manufacturers say they will speed up efforts to move production to other countries to circumvent US tariffs, after President Donald Trump announced a new trade offensive against the world’s second-largest economy.Beijing is considering how to retaliate against Trump’s decision on Saturday to impose an additional 10 per cent tariff on Chinese exporters, with options ranging from counter-tariffs to export controls and currency depreciation.The relatively muted initial response from the Chinese government, combined with Trump’s truce with Canada and Mexico on Monday and his plans for a call with China’s President Xi Jinping in the coming days, have fuelled hopes in Beijing that there may be room for negotiation.But with the tariff set to take effect on Tuesday, companies in China’s southern manufacturing heartlands said their strategies included moving some production to locations including the Middle East, passing the cost to US customers and seeking alternative markets.“A lot of Chinese exporters, especially in the consumer products market, had already lost part of their US market over the past few years after tariffs kicked in,” said Michael Lu, president of China-based gift box producer Brothersbox, referring to levies Trump imposed as part of a trade war during his first term in office.Lu said Brothersbox planned to move part of its production to the United Arab Emirates this year to target the US market. “We hope to win them back,” he said of his US customers.Some content could not load. Check your internet connection or browser settings.Trump’s threat of an additional 10 per cent tariff on Chinese goods — which he attributed to Beijing’s alleged inaction on fentanyl exports to the US — was raised during his election campaign.But Chinese companies have already been diversifying their trade in recent years. The country’s direct share of US imports fell eight percentage points between 2017 and 2023, according to a report by Rhodium Group last year.Some Chinese production has moved to third countries, from where it is exported to the US. The share of US imports from Vietnam and Mexico, for example, increased substantially during the same period.Lynn Song, greater China chief economist at ING, said the tariff would have a limited effect because “a lot of the price-sensitive exports to the US have already been redirected as a result of the first trade war”.With Trump targeting Mexico, Chinese companies would probably shift more trade towards south-east Asia and Latin America, he said.Beijing has relied on external demand to offset domestic weakness More

The largest importers of Mexican beer and tequila to the US are at risk of a double-digit hit to earnings owing to the Trump administration’s proposed tariffs, according to Wall Street analysts.Constellation Brands, which produces Modelo Especial, the US’s top-selling beer, and Corona, could take a 33 per cent earnings hit to earnings, according to analysis by Bernstein. Citi analysts estimated the earnings hit to the company, which also owns the Mi Campo and Casa Noble tequila brands, would be a slightly lower 25 per cent.Becle-owned Cuervo, one of Mexico’s oldest and largest tequila producers, which ships brands such as Jose Cuervo, 1800 and Gran Coramino to the US, faced a 30 per cent income hit, Bernstein said.The analysts cautioned that companies would struggle to raise prices while demand for alcohol in the US was so weak. More

Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldThe most dangerous thing about tariffs is how simple they sound. What could be plainer than slapping 25 per cent levies on all goods from Canada and Mexico? Yet the impact and the implementation of such trade measures are devilishly complicated. That might explain the market’s muted response.Some stocks followed a predictable script on Monday after tariffs were announced. Carmakers’ shares fell, for example. That makes sense: their vehicles comprise parts that cross borders, in some cases several times, before reaching the dealership. Stellantis is one company that ships kit between facilities on either side of the US-Canada border.Then there are companies that buy now-pricier goods from China and sell them to US consumers. That would include electronics retailer Best Buy, or budget outlet Dollar Tree. They now face the unenviable decision between how much of these increased costs to swallow and how much to pass on to consumers — at the risk of incurring the wrath of President Donald Trump.For corporate America more broadly, further discomfort awaits. Trump’s tariffs have nudged the already strong dollar even higher. That, in itself, isn’t a surprise. A study of Trump’s last presidency suggested that tariffs on China pushed up the dollar and pushed down the renminbi. Citigroup strategists reckon the latest tariffs justify a 3 per cent bump.That’s a drag for companies — from internet search providers to coffee chains — that receive a large share of their revenue and earnings in foreign currencies. It’s as if Trump had slapped a tariff on their overseas earnings.Technology, food and household goods are the most affected, Morgan Stanley strategists reckon; telecoms and utilities the least. The Wall Street bank also found that stocks with lower sensitivity to dollar earnings have outperformed their peers since September.All this augurs an adjustment rather than a crisis. The 1 per cent fall in the S&P 500 doesn’t even make it into the 20 worst trading days of the past year. Perhaps the worst has already been priced in, since Trump has made no secret of his plans. Both Canada and Mexico received a one-month reprieve on Monday after their leaders agreed to concessions, including sending 10,000 personnel to their borders with the US. Even so, BNP Paribas economists note that tariffs are already factored into baseline economic forecasts.But it may equally be that investors don’t know where to begin. Supply chains differ even between companies that are close peers. A trade war, especially when inflicted on supply chains still recovering from a pandemic, is uncharted territory. One of the enduring features of American exceptionalism is that investors flock to US assets in times of chaos, even when Uncle Sam is the cause of that disarray.Either way, the market’s reaction — basically no more than a shrug — is itself a risk. Had share prices slumped, it would have sent a message to the president that slapping on tariffs isn’t as straightforward as it sounds. As it is, investors’ relative inaction gives him little reason to show [email protected] More

Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldAnglo American chief executive Duncan Wanblad has warned US President Donald Trump’s wave of new tariffs will push up the cost of mining production for years.Wanblad’s remarks come as a worldwide trade war threatens to upend the flow of commodities on oil and gas and a range of precious and base metals on which their businesses depend.Trump’s sabre-rattling sent the stocks of some of the big mining groups lower on Monday with London listed Glencore and Anglo American down more than 2 per cent at the close.Wanblad warned Trump’s tariffs on Canada and Mexico and threat to freeze funding to South Africa over a new law that permits expropriation of land in public interest would lead to market volatility and inflation.“One thing I’m sure of is that under all circumstances, [tariffs] are going to be inflationary,” he said. “We are going to see the cost of production go up pretty much everywhere as a result of this.”It remains unclear whether Trump will stick to his plans, however, as Mexico’s President Claudia Sheinbaum said the tariffs would be suspended for one month after a discussion with the US president. Canada’s Prime Minister Justin Trudeau is also locked in talks with Trump.Wanblad said the near-term impact on mining groups depended on the region, the level of the tariff and where the product was bought. “I have no idea what to make of the [Trump] statement, other than we could have all done without it.”Wanblad’s views echo other mining chief executives, who are all assessing the impact of higher tariffs, particularly on resource-rich Canada, which has reserves of oil and gas and metals such as gold and copper.Speaking to the Financial Times in January before the tariffs were announced, William Oplinger, the chief executive of aluminium producer Alcoa, said a tax on Canadian imports would mean “aluminium prices in the US would be substantially higher”.“Ultimately it will be in the price of pick-up trucks and beer cans,” he said. “It’s really hard to determine how much demand destruction we’ll see . . . If prices are substantially higher in the US that has to put some downward pressure on aluminium demand.”Duncan Hobbs, an analyst at trader Concord Resources, said the impact of the tariffs would be reflected in the premiums metal users paid on top of the benchmark exchange price for physical metals in the US. Analysts at BMO said higher premiums were likely to endure until “Canadian producers and US consumers alike can reroute supply chains to avoid the new duties”.Practically, that is likely to mean Canadian metals being diverted to Europe and the US importing more from other regions such as Australia, they said.Such a change would “create longer supply chains which will result in a sustained increase in US premiums”.Speaking at the Investing in African Mining Indaba in Cape Town on Monday, South Africa’s mining minister Gwede Mantashe called on African countries to halt mineral exports to the US in retaliation for Trump’s decision to suspend funding aid programmes on the continent.“They want to withhold funding, but they still want our minerals,” he said. “Let us withhold minerals. Africa must assert itself.” More

Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldCryptocurrency prices tumbled after Donald Trump threatened sweeping tariffs on the US’s largest trading partners, undermining investors’ early expectations the US president would deliver a boost to the industry.Bitcoin sank as much as 7 per cent to $92,500 on Monday, its lowest level in three weeks, leading a rout of the sector. Ethereum, the second-largest and widely used in decentralised finance trading, fell more than a fifth to $2,565 per token. The two tokens retraced some of their losses after Mexico and the US agreed to put tariffs on hold for a month, pushing bitcoin to above $101,000.The declines took the losses over the weekend to a nominal value of $430bn, according to CCData, amounting to a 13 per cent decline of the entire market.Traders shied away from riskier assets after Trump slapped steep import duties on goods from Mexico, Canada and China. The sharp falls unravelled many cryptocurrency price gains since Trump’s inauguration two weeks ago, when investors had hoped he would boost their fortunes.“There’s good Trump and bad Trump,” said Geoff Kendrick, global head of digital assets research at Standard Chartered. “The good version of Trump is [him saying] the industry is going to move forward . . . regulatory changes. Bad Trump is things like tariffs and more volatile markets, which is . . . less helpful,” Kendrick said.Trump exuberantly courted the digital asset industry during his election campaign, winning financial and vocal backing from the sector. In return he has signed an executive order supporting the growth and use of digital assets and blockchain technology and vowed to create a national stockpile of bitcoin, moves that investors celebrated. But his tariffs jolted the market and sent shares in crypto companies lower. Shares in crypto exchange Coinbase lost as much as 5.6 per cent and bitcoin-hoarding software group MicroStrategy shed 5.4 per cent in early trading in New York. They later regained losses with Coinbase down 2.38 per cent and MicroStrategy up 3.67 per cent.“Trump said no one has to pay taxes on gains in crypto and then got rid of all the gains,” said Tyler Hogge, partner at Pelion Venture Partners. Among other coins, Ripple’s XRP and Cardano’s ADA tokens fell as much as 26 per cent and 15 per cent respectively on Monday. XRP later rose to be up 3.2 per cent while ADA was still down about 2.5 per cent.Memecoins such as Dogecoin, backed by Elon Musk, dropped 12 per cent before recovering to be up 2.9 er cent. Trump’s own memecoin plunged as much as 23 per cent, to take its total losses since a peak two weeks ago to more than 75 per cent. It later recovered to be down about 10.6 per cent. The memecoin for Melania Trump lost 15.3 per cent, but later recovered to be down about 5 per cent.“A tidal wave of fear, uncertainty and doubt has been unleashed across the cryptocurrency market,” said Petr Kozyakov, chief executive of crypto payments company Mercuryo. He added the collapse in value of the Trumps’ memecoins “underlines the highly speculative nature of meme tokens and the high risks that they pose to the uninformed”.Since becoming president, Trump has increased his personal interest in crypto. The president and his wife launched their own memecoins in January, to backlash from crypto executives who warned the speculative tokens would damage the industry’s reputation.Last week, Trump Media and Technology Group, in which Trump is a majority shareholder, said it would invest up to $250bn into crypto and other assets.Click here to visit Digital Asset dashboard More

Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldThe fabled stock market vigilantes are going to have to work much harder than this to tame Donald Trump.Since Trump’s re-election, a lot of investors and analysts have clung to the notion that it’s OK, the president won’t do anything too wild with economic policy because he uses stocks as real-time popularity gauges and will avoid doing anything to upset them. A short, sharp drop in stocks in response to any peculiar announcement would soon force a change of heart, or so the theory goes.That may still be true at some point. But it’s not now. Instead, the immediate market reaction to Trump’s announcement over the weekend of imminent steep taxes on goods from neighbours and allies Canada and Mexico, and milder additional duties on goods from China, was rather tame.The benchmark S&P 500 index opened 1.4 per cent lower — not great, but hardly a disaster. An immediate 5 per cent plunge in the index and maybe some circuit-breaker suspensions in the worst-affected big-name stocks might have been enough to alarm the president, but not this.One possible reason for the relative calm is that a large slice of investors think starting a trade war with Nato allies is an actively good idea — for the US economy, for geopolitical stability, or both. Maybe money managers are cheered by the sight of USAID being put in peril or by Elon Musk’s Department of Government Efficiency gaining access to the plumbing of the Treasury department. Let’s say for now that is a theoretical possibility but not the most likely explanation.Instead, the ho-hum reaction, which is mirrored also in the dollar (up a bit, nothing too bracing) and in Asian and European stocks (down a bit, not a bloodbath) reflects a few important assumptions.One is that, to quote John McEnroe, he cannot be serious. The inevitable rise in costs for consumers of imported goods, potential resurgence in the very inflation Trump vowed to defeat, and damage to global relations all point to a change of heart at some point soon. The self-harm is just too great. As Jan Hatzius and others at Goldman Sachs put it, “while the outlook is unclear, we think the Canada- and Mexico-focused tariffs are likely to be short lived”.This turned out to be rather prescient. Even before the new taxes kicked in, Trump and Mexico’s president said they were on hold for a month. But the evidence so far this year suggests it is flat-out dangerous to assume calm heads will prevail.The other possibility is that investors are just really bad at reading Trump. He has been a fan of tariffs for decades. He used them liberally in his first term in office. He spoke about them constantly on the campaign trail. He spoke about them at his inauguration. But markets have failed to take him at his word.Investors thought enlightened self-interest would give the president pause. Then they thought Treasury secretary Scott Bessent would act as an adult in the room, sensitive to the cold hard realities of economics and able to steer the president away from his darker impulses. None of this has worked.“Trump has made an end to the self-delusion in markets, the media and in politics that his tariff threats should be taken with a grain of salt,” wrote Philip Marey, a strategist at Rabobank.So, now that markets are on a low-salt diet, it is worth taking Trump entirely literally and entirely seriously on a range of geopolitical issues. One is Europe. Stocks there have been on a great run of late, as the very early days of Trump 2.0 have not delivered tariffs on the bloc. But as Trump reminded us today, he is serious about the EU, which he accused on Monday of conducting “an atrocity” in its trade relations with the US. Buckle up.Another is Panama and Greenland. I keep asking bankers and investors what would happen if Trump really did try to secure new territory there. They keep laughing me off, although one fund manager suggested buying German government bonds. This is getting less funny by the day.Even in a best-case scenario where Trump extracts whatever concessions he wants to backtrack on some or all of the new tariffs, significant harm has already been done. “Even if shortlived, threatened tariffs have two consequences,” said Paul Donovan at UBS. “Distrust may make negotiating trade deals more difficult. If the news cycle makes US consumers fearful about real income growth or job security, they may be less inclined to spend.”The economic pain, then, can still be real, even just from threats. But it is ambitious to assume stock vigilantes are going to stop it. Trump will chalk up this early reaction as a win and a validation by Wall Street of his efforts to make America great [email protected] More

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$99 for your first yearFT newspaper delivered Monday-Saturday, plus FT Digital Edition delivered to your device Monday-Saturday.What’s included Weekday Print EditionFT WeekendFT Digital EditionGlobal news & analysisExpert opinionSpecial featuresExclusive FT analysis More