Aurelia Butler

Donald Trump and his team of economic advisers are racing ahead with an attempt to radically reshape the US economy from a consumption behemoth with a huge trade deficit to a manufacturing powerhouse. The economic pivot, which has focused on aggressive tariffs and significant cuts to government spending, has sent US equities reeling and prompted concerns about a potential slowdown in growth in the world’s largest economy. But Trump has insisted in recent days that he will press ahead.“Markets are going to go up and they’re going to go down but, you know what, we have to rebuild our country,” the president said on Tuesday.He later added in a speech to leaders of big US companies that levies against America’s biggest trading partners were designed to boost domestic jobs and industrial production: “The biggest win is if [businesses] move into our country and produce jobs. That’s a bigger win than the tariffs themselves,” he told the Business Roundtable. White House press secretary Karoline Leavitt said earlier on Tuesday that the Trump administration had kicked off an “economic transition”. “The president is unwavering in his commitment to restore American manufacturing and global dominance,” Leavitt said, as she vowed that “the America last globalist era is ending” and would be replaced by an “America first economic agenda”.Trump has tapped a cadre of former business leaders to direct his economic efforts. But compared with his first term, the new team is missing figures such as former Goldman Sachs chief operating officer Gary Cohn and ex-Treasury secretary Steven Mnuchin to moderate the excesses of his economic shock therapy.Top officials have instead backed the president’s message that the US may need a period of recession before reaping what they claim are the substantial benefits of Trumponomics.Kevin Hassett, the director of the National Economic Council, told CNBC on Monday that there were still “a lot of reasons to be extremely bullish about the economy going forward” and that any slowdown in the first quarter of this year was the result of “blips in the data”.Remarks by Treasury secretary Scott Bessent — a former hedge fund manager initially welcomed by Wall Street as a moderating influence — that the US economy would need a “detox period” and that there was no longer a “Trump put” preventing a fall in stocks have also provoked concern among investors.“Their approach is that you can’t make an omelette without breaking some eggs first,” said Paul Mortimer-Lee, a US-based economist for the National Institute of Economic and Social Research. “Trump has always said there would be pain before there was gain. I guess at some stage he will blink. If [stock markets] are down 20 per cent, there will be somebody to blame, somebody will get the sack.”Bessent in November also backed another broadly held view among Trump’s economic team — that Washington should push countries with big trade surpluses with the US to seek “Bretton Woods realignments” and peg their currencies at a higher level against the dollar. If they do not, they will no longer be seen as allies and face tariffs and fewer security guarantees.While Cohn publicly stood against tariffs during his time as head of the National Economic Council, and eventually resigned in March 2018 after losing a battle against steel and aluminium levies, Trump’s current advisers have tended to keep any disagreements about trade policies private.Differences in approach — such as commerce secretary Howard Lutnick’s more moderate stance and Bessent’s idea for any tariffs to be introduced gradually — have remained largely behind the scenes, even while markets have slumped and Wall Street banks have cut their growth forecasts.That has handed more power to Trump loyalists such as Peter Navarro, a staunch supporter of aggressive trade policy who often struggled to get his views turned into policy during the first administration. The rise of more radical figures during the president’s second term has helped turn an initial bump in stocks, amid promises of tax cuts and rapid deregulation, into a rout as investors wake up to just how fierce the administration’s resolve to press ahead with its agenda is.Some content could not load. Check your internet connection or browser settings.The uncertainty stoked by the possibility of more punitive tariffs on Mexico and Canada, two of the US’s biggest trade partners, as well as levies on the EU and other traditional allies, have driven the stock market sell-off.“As [businesses and investors] have started to see the effects come through, they realise these tariffs really are a killer,” said John Llewellyn, partner at advisers Independent Economics. “They work in the exact opposite direction to everything that has brought prosperity in the whole period of 80 years since the second world war.”The climate of uncertainty surrounding the new administration is also leading markets to second guess what comes next, with investors flagging up potential risks from several unorthodox policies Trump’s economic team has tabled.Some content could not load. Check your internet connection or browser settings.Lutnick earlier this month said he was considering ripping government spending out of the commerce department’s calculations of GDP to mitigate the impact of Elon Musk’s attempts to rein in federal spending on US growth through the tech billionaire’s so-called Department of Government Efficiency.“We’ve seen, not least in the collapse of inward investment into China, the extent to which it can sap confidence if people lose confidence, including in the data,” said Llewellyn. “People think the authorities must be hiding something and that therefore the economy must be doing less well.”Market speculation of a so-called Mar-a-Lago Accord — an idea dreamt up late last year by future chair of Trump’s Council of Economic Advisers Stephen Miran to weaken the dollar — has also raised concerns about the administration’s understanding of the complexities of the US Treasury market.An idea Miran put forth is his November paper — that countries hand over their current holdings of US government debt in return for century bonds and security guarantees — “could be seen by rating agencies as a technical default”, said Mahmood Pradhan, global head of macro at Amundi Asset Management.Some think the idea of an accord to weaken the dollar, which — as proposed by Miran and Bessent — would aim to mirror an earlier agreement signed in the Plaza hotel in New York in 1985, is wishful thinking in an environment where the US administration is destroying its relationship not only with markets, but also with foreign governments.“For the Plaza [Accord] of course, we had [James] Baker and [Ronald] Reagan and they were artists at making friends and influencing people. So they got a lot of people on board,” said Steve Hanke, a professor of applied economics at Johns Hopkins University who served under the Reagan administration. “I can’t really think of any country now, except maybe Argentina, that is very friendly with the United States.”Hanke added: “The idea of getting the gang together? I mean, can you imagine China agreeing to it?” Additional reporting by Steff Chávez in Washington; data visualisation by Oliver Roeder in London More

Mukololo Chanda still recalls the glory days of Africa’s “freedom railway”. Almost four decades ago, fresh from high school in Zambia, she began working as a switchboard operator on the railway built by Mao Zedong’s China that she believed would steer her newly independent country to prosperity.“It was the only reliable way to travel to many places — everyone was using it,” said Chanda, a bubbly 55-year-old who is now the station master in Kapiri Mposhi, from where the Tazara railway links copper-rich, landlocked Zambia to Tanzania on Africa’s east coast.One Must-ReadThis article was featured in the One Must-Read newsletter, where we recommend one remarkable story each weekday. Sign up for the newsletter hereBut decades of underfunding and mismanagement have today left its decaying wagons and tracks operating at a fraction of capacity. “I was working alongside Chinese [colleagues], everything was running smoothly and we were always paid on time,” Chanda recalled. “I’d like the Chinese to come back.”She is not the only one. Zambia — long a poster child for Beijing’s reach in Africa — and Tanzania are negotiating with a consortium led by the state-owned China Civil Engineering Construction Corporation for a $1bn concession to rehabilitate and run the iconic railway, reviving the strategic export route to Beijing.The railway is an exemplar of a revamped, leaner approach to Chinese overseas development that comes just as US President Donald Trump’s gutting of USAID and the UK’s slashing of its aid budget throws western approaches to foreign assistance into question.The future of aidThis is the second in a three-part series about how the US and other western nations’ turn against foreign assistance is rippling across the worldPart one: Can international aid survive?Part two: China’s plan to take on the US in AfricaPart three: How a country weans itself off aidChina has long taken a different path from western nations, focusing less on humanitarian aid and more on financing grand infrastructure projects that many African leaders say are needed to lift their countries out of poverty.Tazara showcases an attempt to use more equity investment by Chinese state companies after Beijing’s Belt and Road Initiative was marred by defaults in borrower countries, including Zambia.Fredrick Mutesa, the secretary-general of the Zambia-China Friendship Association, said that “there’s a feeling that there is no alternative to [the western] model of development, which is more aid than partnership”. Referring to China, he said: “To be able to see a country that has used a different path to development, it’s quite inspiring.”Whether it succeeds could have far-reaching implications for the deepening competition for influence in a continent that is home to rich deposits of copper and other critical minerals vital to the global energy transition.A rival US-backed project is under way to upgrade the colonial-era Lobito Corridor and ferry Zambia’s resources westward through Angola instead.Station master Mukololo Chanda said that almost four decades ago the Tazara railway was the ‘only reliable way to travel to many places’ More

In its most recent survey of national eating habits, Japan’s government discovered something unsettling. Adults in this wealthy, healthy country were now eating the smallest daily volume of vegetables since 2001.The reason? Inflation. At the beginning of March, prices of the three key ingredients of Japanese hotpot, a traditional winter dish — Chinese cabbage, leek and carrots — were respectively 227, 167 and 140 per cent above their long-term average. The Engel coefficient, which measures food as a proportion of household spending, is at a 43-year high. The collective decision to cut back on greens has come as the country undergoes what some see as its biggest economic inflection in over 30 years: the much-heralded “normalisation” of Japan’s relationship with money after a long period of stagnant prices and moribund growth. While many other countries have fought to keep inflation down, in Japan its return has been encouraged — at least by the central bank, and specifically in a broad-based form led by consumption and growth. In March 2024, the BoJ ended negative rates for the first time in 17 years, and has twice raised rates since then. The bank has implied that it will gradually push interest rates from 0.5 per cent, their current level, towards an unimaginable 1 per cent.The aim is to foster a virtuous cycle of rising prices and wages that could spur demand and generate moderate and steady growth. But, despite some positive signs, it has been a bumpy ride. A small increase in interest rates to 0.25 per cent in July caused a record one-day crash in the Tokyo equity market. And the increases are putting unfamiliar pressure on everyone from mortgage holders to chief financial officers, just as shareholders are pushing companies to make huge structural changes.Some content could not load. Check your internet connection or browser settings.Even if the broad measure of inflation excluding energy and fresh food shows prices still increasing steadily — 2.5 per cent in January — the acceleration in food costs is stoking a perception that the overall pace is faster. This has introduced fears about whether Japan’s attempt to normalise is actually producing the “wrong” type of inflation.Although companies are increasing wages at near-historic rates, they are not keeping pace with consumer prices. And consumers, rather than spending more, are feeling the pain and struggling to adjust. “When you go shopping for food, everything is going to be a bit more expensive,” says Ritsuko Ikeda, who is buying vegetables in Tokyo’s Sangenjaya district. “A couple of years ago, shops and food companies used to apologise when they raised prices, but now they don’t seem sorry: they just go ahead and do it.”For many Japanese people these new realities are disconcerting, says Naomi Fink, chief global strategist at Nikko Asset Management. “Your experience over years matters. But expectations can be broken suddenly.”“We are now at the point of shock,” she adds. “Even [with inflation] at 2 per cent, that for Japanese households is a shock.” Japan’s great inflection is happening under an extraordinary confluence of pressures. Geopolitics have pushed up prices of energy as well as food, both of which Japan imports in abundance. The yen, partly because of the Japanese corporate and institutional tendency to invest abroad, has been weak for an extended period. And the rate of population shrinkage in the country is approaching an average of two people every minute, reordering the way business thinks long term about labour supply and a historic duty to keep unemployment low. A crowded Ameyoko shopping street in Taito Ward, Tokyo, in December. While companies are increasing wages at near-historic rates, they are not keeping pace with consumer prices More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.A small cohort of global steel producers has emerged as unlikely winners from Donald Trump’s sweeping import tariffs, as the US president expands his trade war in an attempt to protect his country’s manufacturing industries.US steel prices have soared since Trump floated the prospect of a 25 per cent tax on imports of the metal — a key component for the auto, construction and packaging industries — from all trading partners.The tariffs came into force on Wednesday, although Trump retreated from a briefly touted proposal for an additional 25 per cent tariff on steel and aluminium imports from Canada.The higher tariffs are designed to be a boon for struggling US steelmakers, which have been hit by low demand and high inflation. “The one thing we do know is that the winners in the short term are the US producers,” said James Campbell, head of finished steel analysis at consultancy CRU.But a crop of European and Asian manufacturers with large footprints in America also stand to benefit from the levies. Overseas companies with US manufacturing facilities that could benefit include Australia’s BlueScope and Japan’s Yamato Kogyo.Shares in BlueScope, which generates almost half of its profit in the US and owns the North Star steel mill in Ohio, are up more than 20 per cent since the start of 2025.The share price of Yamato Kogyo, which produces steel through its local joint venture with North Carolina-based Nucor, has rallied 5 per cent this year as steel tariffs have given it a boost against Chinese competition.“Imposing this 25 per cent tariff means competition in the local market with imported material will be eased,” president of Yamato Kogyo Mikio Kobayashi told the Financial Times.Other European participants with US operations such as Sweden’s SSAB and Spain’s Acerinox, which manufactures steel alloys and stainless steel products, would benefit, said Boris Bourdet, analyst at Kepler Cheuvreux in Paris. Germany-listed Kloeckner, a steel distributor with a majority of its operations located in the US, could also emerge as a winner.Shares in US steel producers rose on Tuesday, even as Trump’s tariff war with Canada rattled equity markets. The large US producers, notably Nucor and US Steel, have rallied more than 10 per cent this year — a sharp turnaround for an industry that has suffered its worst year since Trump’s first term as earnings suffered amid weak demand.Philip Bell, president of US trade group the Steel Manufacturers Association, welcomed the tariffs, saying they would “correct the mistakes” of previous duties. During Trump’s first term and subsequently under then-president Joe Biden the US negotiated exemptions for important trading partners as well as individual companies.The US steel industry had been “subject to a lot of unfairly traded steel” and the recent rise in prices should be seen more as a “normalisation”, Bell said.The potential winners’ fortunes contrast with the expected negative impact on other steelmakers.S&P Global Ratings said the tariffs would be “particularly painful” for Korean steelmakers, which had benefited from relatively generous tariff-free quotas, although rising US steel prices could soften the blow.ArcelorMittal, the world’s second-biggest participant, operates a joint venture in the US but has significant production in Mexico and Canada.The group’s Canadian operation is a critical supplier to the US automotive sector, while its American facilities use semi-finished steel products from Mexico. Genuino Christino, ArcelorMittal’s chief financial officer, last month played down the likely impact. The company, he said, took a hit of about $100mn a quarter in 2018. Those higher costs, however, were offset by higher prices.Mills in Turkey also stood to gain, said Colin Richardson, head of steel at price-reporting agency Argus Media. With the US getting rid of all exemptions, imports from groups such as Çolakoğlu, Tosyali and Erdmir would now compete on a level playing field with European rivals that had benefited from carve-outs, he said, noting shipments from Turkey had started to rise in the past two weeks.Despite the fair wind for parts of the steel industry, economists have warned higher metals prices will raise production costs for manufacturing industries such as automotive and could stoke inflation in the US.The tariffs, Bourdet said, were “really intended for China” and could be a trigger to reduce the global oversupply from that country. “With tariffs all over the planet it will become less easy for China to export steel,” he said. More

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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 has backed down from plans to double US tariffs on Canadian steel and metal imports to 50 per cent just hours after first threatening the levies, rattling investors by intensifying the North American trade war. The move by the president comes after the Canadian province of Ontario earlier in the day suspended its own surcharge of 25 per cent on exports of power to the US, which Trump had cited as a reason for boosting tariffs on imports from Canada. The reversal marks a swift de-escalation of unprecedented trade warfare between the world’s largest economy and one of its three largest trading partners, and marks the second consecutive week in which Trump has softened planned tariffs on Canada. The US would still impose tariffs of 25 per cent on Canadian steel and aluminium imports from midnight, the White House confirmed, as part of broader tariffs on all steel and aluminium imports.In a statement released late on Tuesday, hours after Trump announced he would issue tariffs of 50 per cent on the Canadian metals, the White House said the president had “once again used the American economy . . . to deliver a win for the American people”.Ontario premier Doug Ford said earlier on Tuesday afternoon that he would suspend the 25 per cent surcharge following a “productive” conversation with US commerce secretary Howard Lutnick. Ford said he would meet Lutnick and US trade representative Jamieson Greer in Washington later this week to discuss the trade tensions.The premier’s U-turn was announced just a day after the surcharge was imposed, and came hours after Trump said the US would impose 50 per cent tariffs on Canadian steel and aluminium on Wednesday. “I have instructed my Secretary of Commerce to add an ADDITIONAL 25% Tariff, to 50%, on all STEEL and ALUMINUM COMING INTO THE UNITED STATES FROM CANADA, ONE OF THE HIGHEST TARIFFING NATIONS ANYWHERE IN THE WORLD,” the US president wrote on his Truth Social platform on Tuesday morning.The latest trade dispute sparked a further increase in volatility on Wall Street, briefly sending the US S&P 500 index sharply lower on Tuesday following a heavy sell-off the previous day. The S&P closed 0.8 per cent lower, cutting some of its losses. Shortly after his inauguration, Trump said he would impose 25 per cent tariffs on Canada and Mexico, but last week he granted a one-month reprieve for goods that met the rules of a 2020 free trade deal.The aluminium and steel tariffs are part of a separate set of duties to be imposed on producers across the world, which is due to take force on Wednesday.White House officials said the global 25 per cent tariffs on imports of the metals were intended to protect US domestic industry.Show video infoMark Carney, Canada’s incoming prime minister, described Trump’s latest escalation as “an attack on Canadian workers, families, and businesses”.Carney added that his government would “ensure our response has maximum impact in the US and minimal impact here in Canada”.The White House on Tuesday continued to dismiss widespread concerns over the market turmoil.“When it comes to the stock market, the numbers that we see today, the numbers we saw yesterday . . . are a snapshot of a moment of time,” said press secretary Karoline Leavitt.“We are in a period of economic transition,” she added.A closely tracked measure of the difference in US and London aluminium prices, called the Midwest premium, rose sharply on Tuesday, underscoring the rising costs facing American industrial groups. Futures tracking the premium, which follows prices of the metal delivered to plants in the US Midwest, rose as much as 18 per cent, according to FactSet data.Trump said that if Canada did not drop its “long time” tariffs, he would “substantially increase” levies on cars coming into the US, a move he said would “essentially, permanently shut down” the country’s carmaking industry. The president, who also suggested the US’s northern neighbour could no longer be assured that Washington would protect it militarily, added that “the only thing that makes sense is for Canada to become our cherished Fifty First State. This would make all Tariffs, and everything else, totally disappear.”Canada has strongly rejected such suggestions by Trump since his inauguration in January.Additional reporting by Steff Chávez in Washington More

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Investors fear Donald Trump’s tolerance for a steep stock sell-off is far higher than it was in his first term as they lose faith that financial markets will restrain the US president’s tariffs and spending cuts.US stocks have slumped in recent days, with the S&P 500 sinking more than 8 per cent from a record high hit less than three weeks ago, as Trump’s tariffs have triggered concerns over the trajectory of the world’s largest economy. Many investors and Wall Street banks had bet Trump would ultimately back off his most severe tariff threats and cuts to the federal government if markets respond violently, but hopes for a so-called Trump put have dimmed as markets shudder.“Markets are questioning the notion that the Trump administration would adapt policies in response to equity market volatility or economic growth concerns,” UBS told clients on Monday evening. Alex Kosoglyadov, a managing director of global equity derivatives at Nomura, said in late February “people were wondering whether [Trump] was going to take his foot off the gas pedal on tariffs and some of the federal spending cuts that were spooking markets”. “In the last couple of trading days, sentiment turned in the sense that there were very clear signs that the Trump ‘put’ either didn’t exist or was set lower than where people thought it was,” he said. The rising sense of gloom has not been limited to the stock market: Goldman Sachs and Morgan Stanley have trimmed their expectations for US economic growth on worries about tariffs, and retaliation from trading partners. Delta Air Lines on Monday evening also warned economic “uncertainty” had hit its business, prompting the carrier to sharply reduce its outlook for sales and earnings in the first quarter. The Vix index, a measure of expected volatility in US stocks, has soared from 12 to 28, above its long-term average of 20. The tech-focused Nasdaq Composite, which has surged in the previous two years, is down more than 13 per cent from its mid-December record high.During Trump’s first term, financial market turmoil was widely seen as a crucial guardrail in forcing him to reverse course on policies that were seen by investors as harmful, at least in the short term, to US economic growth. “Everyone thought the only way he backs off is if the stock market plummets,” said one trading executive at a Wall Street bank. “What people didn’t see was he’d change his narrative if the stock market plummets.” The White House doubled down on its dismissal of the financial market tumult following Monday’s steep equities sell-off.“We’re seeing a strong divergence between animal spirits of the stock market and what we’re actually seeing unfold from businesses and business leaders, and the latter is obviously more meaningful than the former on what’s in store for the economy in the medium to long term,” a White House official said.As US stocks have fallen sharply in response to the threat of tariffs against its trading partners, Trump made a big U-turn, delaying most of the levies on Canada and Mexico until April but has kept tariffs on China in place. On Tuesday, the president announced an additional 25 per cent tariff on Canadian steel and aluminium imports that will take effect on Wednesday. The move comes on top of an existing plan to impose a 25 per cent levy on steel and aluminium imports from all of America’s trading partners. US stocks extended their declines in early trading on Tuesday, with the S&P 500 down 1.5 per cent and the Nasdaq dropping 1.2 per cent.The White House on Tuesday continued to dismiss widespread concerns over the market turmoil, saying the US is undergoing an “economic transition”. “When it comes to the stock market, the numbers that we see today, the numbers we saw yesterday . . . are a snapshot of a moment of time,” said White House press secretary Karoline Leavitt.“We are in a period of economic transition,” she added.The drumbeat of comments from top Trump officials playing down fears of stock market trouble has been consistent.Treasury secretary Scott Bessent fanned investor concerns at the weekend, when he appeared to dismiss the idea that Trump would curtail some of his economic policies if the stock market were to keep tumbling.“There’s no put,” he said. “The Trump call on the upside is, if we have good policies, then the markets will go up.”Bessent also said the US economy might need a “detox period” to be less dependent on government spending.“There’s going to be a natural adjustment as we move away from public spending to private spending,” he said. “The market and the economy have just become hooked. We’ve become addicted to this government spending. And there’s going to be a detox period.”For Trump, “time is the only constraint”, said Barry Bannister, chief equity strategist at US bank Stifel. “Year one of any new administration is the time to break some eggs to make an omelette and the [Trump] administration’s ambitions are a broad revamp of the economic order.”But the risk that growth cools and inflation rises — known as stagflation — was growing as Trump pressed ahead on tariffs on America’s biggest trading partners, he added, leaving US equities exposed to a “pincer movement” of potentially slowing earnings per share and lower price to earnings ratios. “Will [Trump] have the fortitude to take serious pain? That’s an open question,” said Shep Perkins, chief investment officer at Putnam Investments. More