Economy

The decision concludes a week of speculation and competition among high-profile candidates vying for the influential role, which oversees economic policy, regulation, and international financial relations.Wall Street had been closely monitoring Trump’s pick, given his stated intentions to reshape global trade through tariffs and potentially expand the tax cuts implemented during his first term.The selection of Bessent, a 62-year-old veteran of the finance world, signals a move likely to resonate positively with markets. Analysts suggest his experience and market expertise may help temper fears of aggressive tariff policies.”Scott is widely respected as one of the World’s foremost International Investors and Geopolitical and Economic Strategists,” Trump said in a statement on Truth Social.”[He] has long been a strong advocate of the America First Agenda,” Trump continued, noting that Bessent would “support my Policies that will drive US Competitiveness, and stop unfair Trade imbalances.”Bessent, a known advocate for extending Trump’s initial tax cuts, is expected to champion similar measures in the administration. He has also defended the use of tariffs, which were a cornerstone of Trump’s campaign platform, describing them as a “useful negotiating tool.”But while he supports the use of tariffs, Deutsche Bank (ETR:DBKGn) strategists do not believe that Bessent is “a trade hardliner.”“He has generally argued in support of tariffs as a negotiating device and supported a gradualist approach with substantial forward guidance, even going as far as proposing implementing the 50- 60% tariffs on China by increasing 2.5 percentage points per month,” strategists noted.“Bessent’s presence should therefore act as a counterbalance to Trump’s most extreme impulses on tariffs,” they said, adding that his appointment “supports a baseline of a somewhat more strategic or gradualist approach to trade wars.”Separately, UBS strategists said the initial market reaction to Bessent’s appointment suggests that he is “seen by financial market participants as an anchor of stability and responsibility in the Trump cabinet.”“In fact, we think markets could start to see that the risks of higher inflation and interest rates are implicit constraints on the Trump policy agenda, with the eventual policy outcomes potentially less inflationary than some investors previously feared.”“While we do not rule out further volatility, we expect US Treasury yields to fall in the year ahead following the 65-basis-point rise over the past two months,” they added. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The writer is chief economist of the International Center for Law & Economics and writes the Economic Forces blogDonald Trump has promised a renewed push for tariffs when he returns to the White House. The stated goal is to protect American manufacturing jobs, but some approaches would achieve this far more effectively than others. The historical record shows that, while tariffs can preserve specific manufacturing jobs in the short term, poorly designed trade barriers destroy more American factory jobs than they save.  Understanding these trade-offs is crucial for policymakers determined to use tariffs. Trump has said he will impose tariffs of 25 per cent on all imports from Canada and Mexico, and an extra 10 per cent on Chinese goods. But implementation will be key.The key lies in modern supply chains. Today’s factories rely heavily on imported components. Indeed, nearly 20 per cent of US imports are so-called intermediate inputs used by domestic producers to make other goods. Trump’s 2018 tariffs applied primarily to these intermediate goods. This transforms how tariffs affect jobs. Rather than a simple trade-off between protected workers and hurt consumers, the effects ripple through manufacturing.Steel tariffs illustrate the pitfalls. While they benefit US producers such as Nucor and US Steel, they harm the much larger manufacturing sector that uses the metal — from Caterpillar’s construction equipment to Ford’s auto parts. These downstream industries employ far more workers than steel production. When Trump imposed 25 per cent steel tariffs in 2018, manufacturing employment declined in industries that used steel intensively. These job losses outweighed any gains in steel production.Tariffs on finished goods can sometimes protect jobs effectively, but success requires careful design. The washing-machine industry provides an example. When the US first imposed China-specific duties in 2017, manufacturers simply shifted production to Thailand and Vietnam. Only after the US enacted global tariffs in 2018 did Samsung and LG build American factories. While this eventually achieved the political goal of creating US jobs, it required comprehensive trade protection and came with higher prices for consumers.Protection is also possible when foreign producers cannot easily shift production. Take semiconductors: building new chip fabrication plants requires massive capital investment (typically $10bn to $20bn) and years of construction. In that case, a tariff may raise chip prices, protecting Intel’s employees. But those same barriers — huge capital requirements, specialised worker training, complex supplier networks — also make it harder to establish new domestic production quickly. The auto industry also illustrates both effective and counterproductive approaches to tariffs. The so-called “chicken tax” — named after an initial tariff on poultry — was a 25 per cent tariff on imported light trucks imposed in 1964. It helped Ford and General Motors dominate the US pick-up truck market for decades. The tariff worked because it targeted finished vehicles, not parts, and because domestic manufacturers could readily expand production. Over time, it even prompted companies such as Toyota, Nissan, and Honda to build US plants to avoid the tariff.But modern vehicle production is far more complex. When the Trump administration imposed tariffs on Chinese auto parts in 2018, it did not protect American jobs at all. Instead, it raised costs for US automakers who relied on imported components. Higher input costs led to slower export growth and job losses in affected industries.If the goal is to support high-value manufacturing, policymakers should focus on protecting advanced industries where the US has existing expertise. Targeted support for semiconductor manufacturers such as Intel or electric-vehicle battery producers could help domestic companies to gain scale in strategic sectors. In contrast, broad tariffs on basic materials such as aluminium mainly result in higher costs across manufacturing supply chains.For businesses seeking to plan ahead, the lesson is straightforward: what matters most is where new tariffs hit their income statements. Tariffs on final goods mainly affect revenue through higher prices or units sold. But tariffs on inputs directly inflate the cost side, squeezing margins and often forcing harder choices about moving production. Modern manufacturing involves complex international supply chains that tariffs can easily disrupt. The iPhone is not just “made in China”, but represents a global production network that includes American innovation and Asian manufacturing. Policymakers need to update their thinking accordingly. More

On a blustery October day, the remaining fragments of what was once Shanghai’s hottest bar and restaurant are being liquidated. The champagne glasses cost Rmb28 ($4), waistcoats hang from a Rmb1,500 lime-green screen, and a framed poster from the 1930s leans against the wall.M on the Bund closed its doors for the last time in February 2022, in the midst of China’s Zero-Covid policy. By the time its contents were finally sold off last month, they had already become relics of another era. For more than two decades, the restaurant had been the regular haunt of business people, financiers and visiting delegations to a booming city of over 20mn people. But if they were to visit Shanghai now, “they wouldn’t believe it’s the same place,” says Michelle Garnaut, the Australian restaurateur who founded the venue in 1999.More than 15 years after China pledged to turn Shanghai into an international financial centre, the port city has failed to live up to its early promise. Once positioned as the frontier of China’s gradual incorporation into a global economic system, its recent exceptionalism is today overshadowed by a growing rift between Beijing and Washington.In a city of shipping routes and western concessions, where the distinctive trees that line its avenues were initially introduced from Europe, an inward shift across Chinese politics that accelerated during the pandemic has shaken Shanghai’s international identity. Some content could not load. Check your internet connection or browser settings.A beneficiary of decades of economic growth since the country opened up in 1979, the city is the world’s biggest container port and a base for many foreign companies. But it now sits uneasily amid a new era of trade protectionism and mutual suspicion across the Pacific, and is increasingly disconnected from international finance.American law firms, once participants in huge cross-border financial flows, have left the city as foreign investment plummets. No western bank has participated in a single IPO on Shanghai’s stock market this year, and, in a domestically-focused market, the need for foreign staff is increasingly unclear. Asset management firms that flocked to the city in the hope of a loosening of China’s capital controls must reckon with the prospect that Beijing will tighten them instead.For Xi Jinping’s government, this is not necessarily a problem. A critique of finance that arose after the global crisis of 2008 has gained salience domestically, especially after a 2015 stock market crash and anti-pandemic measures that reasserted the dominance of the state. Beijing is now prioritising an internationalism based around exporting infrastructure and green technology that echoes its domestic model, and in which Shanghai plays a role.Many of the world’s leading foreign financial firms maintain at least a nominal presence in Shanghai, hoping for one of the many U-turns that have characterised its history. But, like the colonial-era banks and counting houses that neighboured the out-of-business M on the Bund, they risk being reduced to a facade.“This was really the last frontier of capitalism [in China],” says one person present at the fire sale, referring to the buzz of the restaurant’s heyday. “It’s all gone. It’s all changed.”In the early 20th century, Republican-era Shanghai was, for some, an oasis of free markets. On the Bund, the waterfront mirrors the architecture of London or New York — a legacy of British, French and American concessions established in the 19th century, carved out of the Chinese government’s sovereignty.A century later, after decades of closure, market forces seemed to be in the ascendancy once again. In spring 2009, Beijing’s state council, the country’s top decision-making body, set an ambitious target: Shanghai would become an international financial centre by 2020.Even if the term was not strictly defined, it signalled a wider opening-up and came a year after the Beijing Olympics had alerted the world to China’s economic miracle. The goal of becoming an international financial hub is “highly desirable” not only for the city, but for China more broadly, the Brookings Institution wrote in 2011. But it also noted the disappointments of Tokyo and Frankfurt, which had once held similar ambitions, and the importance of the rule of law. Shanghai was “on track” to meet its target, the American Chamber of Commerce said a year later in 2012.“I got excited, and I kept telling all the young people, the future of finance is Shanghai,” recalls Han Shen Lin, formerly deputy general manager for Wells Fargo bank in China and now China Country Director for The Asia Group, a US consultancy. At that time, “everyone thought China would succeed in loosening its capital controls,” he adds, a reference to the government’s practice of tightly controlling the flow of money in either direction across its borders. The project, he adds, also hinged on the free movement of information and people — both of which were tightly controlled in China.A view of the Pudong financial district from M on the Bund, which closed in February 2022 in the midst of China’s Zero-Covid policy More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.There is “room” for Chinese wind turbine manufacturer Mingyang to open a factory in Scotland, the country’s deputy first minister Kate Forbes has said, as she targets more jobs for the renewables sector.The company’s proposed manufacturing facility was earlier this year prioritised by a Scottish public-private programme matching the supply chain with developers.However, the proposed deal has triggered criticism from some politicians concerned about handing a critical aspect of the offshore industry to an entity from a “hostile” state.Denmark’s Vestas, another turbine manufacturer, is already pushing ahead with plans for a wind turbine facility in Leith, Edinburgh, although it has not yet made a final investment decision.  “I think there is room [for Mingyang and Vestas],” Forbes said in an interview with the Financial Times.“I think if you look at the ambitions right now for the transition, the transformation required in our supply chain needs to be enormous,” she added.Mingyang is closing in on a preferred supplier agreement for up to 6GW of floating wind capacity to decarbonise the oil and gas sector in the North Sea from UK developer Cerulean Winds, a potential anchor deal.Cerulean Winds, which is exploring options with potential global wind turbine manufacturers, said no formal agreements have been signed.Mingyang, China’s largest floating offshore wind company, is privately owned, but critics of the potential deal remain concerned over perceived risk of interference in corporations’ decision-making.The EU Commission is investigating whether Chinese manufacturers are getting unfair subsidies from Beijing, in a push to protect European industry.  A Mingyang wind turbine factory in China More

NEW YORK (Reuters) – Kenneth Leech, the former co-chief investment officer of Western Asset Management Co, was criminally charged on Monday with running a more than $600 million “cherry-picking” scheme in which he fraudulently favored some clients’ accounts over others when allocating trades.The U.S. Attorney’s office in Manhattan said Leech, 70, was indicted by a federal grand jury on four counts of fraud and one count of making false statements.Leech was the face of Western Asset Management, better known as Wamco, before being placed on leave in August when parent company Franklin Resources (NYSE:BEN) disclosed he was being investigated.Leech also faces related U.S. Securities and Exchange Commission civil charges. His lawyer called the charges “unfounded” and said Leech plans to defend himself vigorously.Authorities said the alleged scheme ran from January 2021 to October 2023, and involved placing trades and then waiting to see how they performed before allocating them to clients.”The scale and duration of Leech’s allegedly fraudulent conduct amounts to a shocking betrayal of his fiduciary obligations to his clients, who paid dearly for his transgressions,” Sanjay Wadhwa, acting director of the SEC enforcement division, said in a statement.San Mateo, California-based Franklin Resources was not charged.Clients pulled about $55 billion, or approximately 15% of Wamco’s assets under management, in the four months ending Oct. 31, with much of the outflows following Franklin’s disclosure of the investigation of Leech.Franklin had Wamco through its purchase of Legg Mason (NYSE:LM) in 2020.RUSSIA, CREDIT SUISSE DEBT LOSSESAuthorities said Leech improperly steered U.S. Treasury derivative trades that performed well on their first day to favored portfolios, while allocating worse-performing trades to other portfolios.Leech allegedly favored portfolios following a ” Macro (BCBA:BMAm) Opportunities” strategy, which he promoted as reflecting his best ideas, and breached his duties to investors in portfolios following “Core” and “Core Plus” strategies.According to the indictment, Leech became particularly attuned to supporting Macro Opportunities portfolios after they suffered big losses on Russian debt following Russia’s invasion of Ukraine in 2022, and on Credit Suisse debt when the Swiss bank collapsed in 2023.A mutual fund that Leech helped manage, Western Asset Core Plus Bond, has lagged at least 98% of its peers in the latest one-year and three-year periods, after largely outperforming since 2014, Morningstar data show.Prosecutors said Leech also lied to the SEC by testifying that he knew where he planned to allocate trades when he placed them.’UNBLEMISHED RECORD,’ LAWYER SAYSJonathan Sack, a lawyer for Leech, in a statement said the charges ignored key differences among fixed-income strategies and the “irrelevance” of first-day performance.”Ken Leech has an unblemished record over nearly 50 years as a trader and portfolio manager,” Sack said. “Mr. Leech received no benefit from the alleged misconduct. We are confident that he acted properly at all times.”Leech, of Pasadena, California, has until Dec. 6 to make an initial appearance in Manhattan federal court.The top criminal charges include investment adviser fraud and securities fraud, each of which carries a maximum 20-year prison term. Leech was also charged with commodity trading adviser fraud, commodities fraud and making false statements.On Nov. 4, Franklin said the U.S. Commodity Futures Trading Commission was also investigating the matter. Franklin also took a $389.2 million impairment charge for Wamco, leading to an overall quarterly loss.Wamco spokeswoman Jeaneen Terrio said the firm takes the matter “extremely seriously,” is continuing to cooperate with investigators, and has enhanced its trading policies and practices following an outside review.Shares of Franklin have fallen 24% this year, significantly underperforming the broader market.The criminal case is U.S. v. Leech, U.S. District Court, Southern District of New York, No. 24-cr-00658. More

The dollar rose over 2% against the Mexican peso and 1% against its Canadian counterpart.The dollar has been on the back foot in the past few days as U.S. Treasury markets cheered Trump’s pick of hedge fund manager Scott Bessent for U.S. Treasury secretary.”It’s almost as if Trump wants to remind markets who is in control, after nominating Scott Bessent as Treasury Sec – a man markets expected to cool Trump’s potency,” said Matt Simpson, senior market analyst at City Index.”But with the Canadian dollar rising against the Mexican Peso, markets are assuming this will hit Mexico the hardest.” While traders saw Bessent as an old Wall Street hand and fiscal conservative, he has also openly favoured a strong dollar and supported tariffs.The dollar index, which measures the U.S. currency against six rivals, was last at 107.37. The euro fell 0.6% to $1.043175, while sterling was last down 0.4% at $1.2516. The euro zone’s single currency had taken a hit on Friday as European manufacturing surveys showed broad weakness, while U.S. surveys surprised on the high side.On China, the president-elect said Beijing was not taking strong enough action to stop the flow of illicit drugs crossing the border into the U.S. from Mexico by curbing the export of drugmaking ingredients.”Until such time as they stop, we will be charging China an additional 10% Tariff, above any additional Tariffs, on all of their many products coming into the United States of America,” Trump said in a social media post.China has previously denied the allegations.The Australian dollar fell 0.75% to $0.64555, while the New Zealand dollar touched a one-year low and was last at $0.58075. Turning to cryptocurrencies, bitcoin was trading at $93,577, well below the record high of $99,830 it touched over the weekend.Bitcoin met profit-taking ahead of the symbolic $100,000 barrier, having climbed more than 40% since the U.S. election earlier this month on expectations Trump will loosen the regulatory environment for cryptocurrencies. More