Economy

Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldSix long months ago, when Donald Trump was campaigning to become the 47th president of the United States (remember that?) he promised to deliver a “winning” economy and to slash inflation. It seemed that voters believed him. No longer. This week, the Conference Board released a survey showing that consumer confidence has fallen to “the lowest level in 12 years and well below the threshold . . . that usually signals a recession ahead”. Worse still, voters expect inflation to exceed 6 per cent because of Trump’s tariffs — dramatically higher than last year. This might be skewed by partisan politics: Democrats are particularly gloomy, Pew data shows. And consumer sentiment surveys have mixed predictive value. But the Conference Board’s poll is echoed by surveys elsewhere. And this week Austan Goolsbee, a senior Federal Reserve official, warned that this sentiment swing will make it harder for the Fed to cut rates, as Trump badly wants (partly in order to avert a debt explosion).So what can the White House do? One obvious solution would be to reduce the angst and uncertainty about tariffs. But don’t bet on that happening anytime soon, least of all ahead of what Trump is calling “liberation day” on April 2. The president thinks that tariffs are a “beautiful word”, since they have given him leverage, and key advisers such as Peter Navarro deny that they are inflationary.However, another issue to watch instead is the price of oil. For this is now viewed by some Trump advisers as a crucial anti-inflation tool — albeit one that inadvertently also reveals the contradictions in their policymaking. On paper, Trump’s vision for fossil fuels seem clear. Scott Bessent, the Treasury secretary, has long championed a “three arrows” economic plan. This aims for a 3 per cent deficit, 3 per cent growth rate and an increase in oil and gas output by the equivalent of 3mn barrels per day.Bessent argues that Trump’s “drill baby drill” mantra will boost American industry. It will also increase America’s geopolitical dominance, by taking pricing and supply power away from Opec countries. More important still, lower petrol — or “gas” — prices could act as a deflationary force to offset the impact of tariffs, particularly when coupled with deregulation. Or so the argument in Trumpland goes. After all, energy is not just a big component of household spending; pump prices are one of the most visible barometers of inflation for voters. They are a heuristic, as Daniel Kahneman, the behavioural psychologist, might have said. And since lower oil prices would also squeeze the economies of producers such as Russia and Saudi Arabia, a side benefit is raising Trump’s leverage in any negotiations with these countries. Hence the chatter around the White House is that the president should target a price of $60, or even $50, per barrel — compared to around $70 today.However, there are three big headwinds to contend with. One is that Trump does not want to alienate the Saudi regime too deeply (although some advisers think that they could offset lower prices by purchasing Saudi oil to replenish low US stockpiles).A second issue is revealed in an extraordinary survey released by the Dallas Fed this week. This shows that shale producers view the current economic chaos and price chatter as such a “disaster” that they are refusing to raise production. Or as one respondent said: “The threat of $50 oil prices by the administration has caused our firm to reduce its 2025 and 2026 capital expenditures.” And while the Trump team is trying to counter this with loose permitting rules and performative attacks on renewable energy, JPMorgan calculates that the number of rigs has slightly fallen of late. This is a sharp, and ironic, contrast with what happened during the previous administration of Joe Biden, when the rig count surged.The third problem is Trump’s own geopolitical stance. Instability in the Middle East — for example, the recent attacks on the Houthis — typically raises the oil price. So do tariffs. This week, say, oil prices rose after Trump threatened sanctions, or secondary tariffs, against anyone buying Venezuelan oil.The next thing to keep an eye on is Canada. If Mark Carney, the new Canadian prime minister, wants to placate Trump, his best bet might be to pledge to sell (even) more of the 6mn barrels of crude oil his country produces each day to America (which is the world’s largest oil consumer), at cheap prices. Since Trump is personally fond of Carney, this might work. But it is unclear if Carney will play ball. And if he does not — and Trump unleashes a fully-fledged trade war — that may blow up a cheap energy policy (even if a recession would normally drag prices down). So if you are confused about Trump’s energy plan, you are not alone. And while fostering such confusion is partly a deliberate tactic designed to increase the administration’s negotiating leverage, not even Trump can ignore those consumer polls forever. If inflationary expectations keep surging, expect more “drill, baby, drill” memes. Yes, this is partly a Trumpian gesture of defiance. But it might yet become a squeal of desperation too. gillian.tett@ft.com More

Canada has long been the largest export market for the Pinot Noir grown on the hillside vineyards of Sokol Blosser Winery in Oregon. Now that market has disappeared.Alarmed by US President Donald Trump’s tariff threats and his calls to annex Canada, provincial authorities stopped purchasing alcohol from their southern neighbour. The national government has imposed 25 per cent tariffs on an array of US imports including wine, spirits and beer.The measures have delivered another blow to a US industry in decline as consumers cut their drinking.“We’ve been building this market for over 40 years and in one fell swoop, our president has basically lit that market on fire,” said Alex Sokol Blosser, president of the winery that bears his family name.Alex Sokol Blosser, president of Sokol Blosser Winery, said: ‘I don’t know if we can recover from this 51st state bullshit’ More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Athleisure maker Lululemon Athletica reported slowing traffic in its hundreds of US stores as worries over the economy prompt consumers to take a more cautious look at its $100 yoga pants.The Canadian company reported record revenue of $10.6bn for 2024, a rise of 10 per cent year on year, as new stores opened and sales at existing stores grew overall. Annual net income grew by 17 per cent to $1.8bn, also a new high.But the figures also revealed weakness in its biggest market of the US, whose 374 stores sell high-end Lululemon workout gear — and where consumer sentiment has been shaken by persistently high inflation and President Donald Trump’s tariffs on trading partners. Same-store sales in the Americas division were unchanged in the fourth quarter of 2024 and decreased by 1 per cent for the full year. Traffic to US stores has been declining in the company’s first quarter, which began in early February, executives said. “We started this year with several compelling new product launches, but we also believe the dynamic macro environment has contributed to a more cautious consumer,” Calvin McDonald, chief executive, told analysts. Citing a survey Lululemon conducted earlier this month, he added that “consumers are spending less due to increased concerns about inflation and the economy”. Shares of Lululemon fell by 10 per cent in after-hours trading in New York.A series of economic data releases, surveys and corporate announcements have pointed to consumer retrenchment as Trump unleashes tariffs on an array of imports and countries. A US consumer expectations index published by the Conference Board think-tank this week fell to the lowest level in a dozen years and one that usually signals a recession. Nike, the shoe and athletic apparel company that is a competitor of Lululemon, last week forecast an unexpected drop in quarterly revenue.Lululemon chief financial officer Meghan Frank told analysts its gross profit margin was likely to decline by 0.6 percentage points this year compared with 2024, in part due to “the impact of increased tariffs related to China and Mexico”. Both countries have Lululemon stores and are subject to new US tariffs.In a regulatory filing, Lululemon said most of its products were manufactured in Vietnam, Cambodia, Sri Lanka, Indonesia and Bangladesh.If the tariffs expand — as Trump aims to do next week — “we’ll continue to look across our cost structure as well as to pricing, should the environment change”, Frank said. More

Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldShow video infoPrime Minister Mark Carney said on Thursday that Canada’s old relationship with the United States was “over” and vowed that there would be a “broad renegotiation” of the trade agreement between the countries.Speaking in Ottawa after meeting the nation’s provincial premiers, Carney said the tariffs imposed by US President Donald Trump would force Canada to rethink and reshape its economy and seek “reliable” trading partners.“The old relationship we had with the United States, based on deepening integration of our economies and tight security and military co-operations, is over,” he told reporters. “The time will come for a broad renegotiation of our security and trade relationship.” Carney’s comments appear to call into question the future of the USMCA, which was negotiated between the two countries and Mexico during the previous Trump administration and has been hailed as one of the world’s most important trade deals.Carney said Canada would fight American tariffs with retaliatory trade actions of its own “that will have maximum impact in the US and minimum impacts in Canada”. On Wednesday Trump said the US would impose a 25 per cent tariff on imports of foreign-made cars in a move he said was intended to boost the US auto industry. While USMCA-compliant components are temporarily exempt from the tariffs, the levy could have a big impact on the Canadian economy.Trump’s tariffs are intended to boost US industry, but shares in General Motors fell 7.4 per cent on Thursday. Shares in Ford, which manufactures fewer vehicles in Mexico and Canada than its rival, were down 3.9 per cent.Earlier this month Trump offered a reprieve to Canadian and Mexican carmakers when he temporarily exempted all goods that complied with the USMCA from new tariffs.“We will fight back with everything we have to get the best deal for Canada. We will build an independent future for our country, stronger than ever,” Carney said.The prime minister said the Canadian economy and its supply chains in critical sectors such as the auto industry would have to fundamentally change to insulate themselves from further tariffs and US hostility. “We are gonna have to do some things very differently,” he said.Tiff Macklem, governor of the Bank of Canada, has said US tariffs would likely put Canada in a recession and a “new crisis” was looming 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 earlier this month as he announced another cut to interest rates.  Carney said Canada’s auto sector could survive Trump’s tariffs but would require “access to other markets”, and the country needed to “reimagine the auto sector and rebuild [and] retool”. He recently travelled to London and Paris, his first trip as prime minister, in a bid to beef up trade with other partners in the wake of US hostilities. Carney, who is in the middle of an national election campaign ahead of a vote on April 28, said he would speak to Trump in “the next day or two”.Some Canadian cabinet members could also head to Washington to meet their counterparts, he said. He added that the US president’s tariffs would “end up hurting American workers and American consumers”. More

This article is an on-site version of our FirstFT newsletter. Subscribers can sign up to our Asia, Europe/Africa or Americas edition to get the newsletter delivered every weekday morning. Explore all of our newsletters hereGood morning, happy Friday and welcome back to FirstFT Asia. In today’s newsletter we’re covering:Chaos in the car industryA ruthless bonus day at HSBCGeopolitical competition over Canada’s Arctic frontierThe global car industry has been thrown into turmoil by Donald Trump’s decision to impose 25 per cent tariffs on imports of foreign-made cars and parts. The move was the US president’s most aggressive trade policy move to date. Global reaction: Asian, European and North American countries warned of possible retaliation. French finance minister Eric Lombard attacked the US for “completely shifting its economic policy” and said “the only solution for the EU will be to raise its own tariffs on American products”. Japan’s Prime Minister Shigeru Ishiba said “every option” was under consideration while South Korea promised an emergency response.‘Devastating’ consequences: It quickly became clear that every carmaker, including Tesla and the US Big Three of General Motors, Ford and Stellantis, would be affected. Almost half of vehicles sold in the US are imported, while those assembled in the US on average source nearly 60 per cent of their parts from overseas. Bernstein analysts said the policy could introduce up to $110bn in annual tariff costs for the carmakers. The tariff policy, which analysts and investors have described as “a worst-case scenario”, “heavy-handed” and “devastating”, is unparalleled in its reach and scale.The tariffs are intended to boost US industry but shares in Ford and GM fell as much as 4.4 per cent and 8.2 per cent respectively yesterday morning in New York.What comes next: The tariffs will take effect from April 2, alongside reciprocal levies against US trade partners that are expected to be unveiled on the same day. Market research company Cox Automotive predicted that the confusion in the supply chain would lead to vehicle production in North America being disrupted by mid-April, resulting in US plants making 20,000 fewer vehicles per day, or about 30 per cent less than now. Here’s what else we’re keeping tabs on today and over the weekend:Economic data: Japan reports trade statistics while Canada and the UK release GDP estimates.Greenland: US vice-president JD Vance is set to visit an American military base in Greenland today, as Washington its pressure on the geopolitically crucial island.Results: PetroChina, Industrial & Commercial Bank of China and China Construction Bank report full-year 2024 results today.US-Japan relations: Trump’s defence secretary visits Japan for high-level talks on Sunday, which could cover whether Tokyo will raise its planned spending on defence.How well did you keep up with the news this week? Take our quiz.Five more top stories1. HSBC fired bankers on the day they were due to learn their bonus figures and gave no bonuses to many it let go. The move, which affected some staff at vice-president level and above in its UK investment banking unit, is a sign of how the lender is taking a more ruthless approach to costs under new chief Georges Elhedery.More financial news: Private credit is “not a bubble”, Apollo Global Management president Jim Zelter said at an event in Hong Kong yesterday. Read more of Zelter’s comments.2. Chinese financial authorities have told some companies and advisers that they can begin the process of launching mainland initial public offerings once more, in an early sign of a rebound in listings in the country’s economy. Groups in the technology, advanced manufacturing and consumer sectors have been told in the past few weeks that they can file IPO paperwork. Here’s why Beijing has shifted its approach to listings.3. The US is pushing for a sweeping new deal to control Ukraine’s critical minerals and energy assets, while offering Kyiv no security guarantees in return. The new draft deal seen by the FT is an aggressive expansion of Washington’s previous demands, as Trump pushes to end Russia’s invasion of Ukraine and recoup billions of dollars’ worth of military assistance.4. TSMC’s pledge to spend $100bn will do little to help the US restore its global lead in chipmaking, said former Intel chief Pat Gelsinger. While Taiwan Semiconductor Manufacturing Company announced plants in the US recently, its research and development was still in Taiwan, he said. “If you don’t have R&D in the US, you will not have semiconductor leadership in the US.”5. The US’s federal debt burden is set to surpass the peak it reached in the wake of the second world war in coming years, Congress’s fiscal watchdog has warned. The projections underscore growing concerns over America’s public finances and come just days after Moody’s delivered a warning about the sustainability of the country’s fiscal position.News in-depth© FT montage/Getty ImagesThe Trump administration’s cuts to the federal workforce are raising worries over the quality and credibility of US economic data. Economists are concerned that Elon Musk’s cost-cutting drive will undermine officials’ ability to collect, analyse and research statistics on the world’s biggest economy, dealing “a death blow to already very stretched survey operations”. We’re also reading . . . Map of the dayCanada’s Arctic frontier — an inhospitable tundra 200km north of the Arctic Circle — is emerging as the new frontline in a geopolitical contest with the US, Russia and China. The region’s increased accessibility as a result of climate change and Trump’s expansionist rhetoric are putting it higher on Canada’s military agenda.Take a break from the news . . . Heathrow’s chief executive reportedly knocked off at 12.30am last Friday to go to bed, leaving his deputy to decide whether to close the UK’s biggest airport after a fire broke out at a nearby power substation. The decision to step away received some criticism — but do CEOs always need to be on duty to do a good job? Read Emma Jacobs on the power of sleep in a crisis.Fatigue has been linked to a number of disasters, including the accident at the Chernobyl nuclear power plant and the Exxon Valdez oil spill More