Economy

With developing nations crushed by unaffordable borrowing and Washington on the sidelines, some leaders are brokering debt forgiveness deals.At a summit meeting in Rome last month, Prime Minister Giorgia Meloni of Italy announced that the European Union was working on a multimillion-dollar plan to provide Africa with some debt relief. The move followed a $15.5 million bailout of Syria by Saudi Arabia and Qatar, erasing the war-torn country’s debt to the World Bank and helping a regional neighbor rebuild.The steps are small given the magnitude of the crushing $8.8 trillion debt that weighs on poor and middle-income countries. Many of these nations spend more on interest payments than on schools and medical care.Ideas for a more coordinated approach to debt and development financing will be discussed at a United Nations conference this week in Spain. But the outlook for comprehensive action is bleak. Twenty-five years ago, wealthy nations, including the United States, struck an extraordinary agreement to forgive hundreds of billions of dollars in debt owed by poor countries.Today, President Trump’s retreat from multilateral organizations and relief programs, in addition to rising tensions between the United States and China, is hampering joint efforts to address the deepening sinkhole of debt.But as the world’s wealthiest country withdraws, China could do more to relieve the strain on struggling economies, experts say.No other country has lent more to Africa, Asia and Latin America than China. After a lending binge that began in the mid-2000s and gained momentum in the 2010s, China now accounts for nearly a third of loan repayments made by nations in these regions.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

Unlock the White House Watch newsletter for freeYour guide to what Trump’s second term means for Washington, business and the worldJapan has said it will not sacrifice its farmers to secure tariff exemptions from the US, as Tokyo and Washington hardened their positions in a rice diplomacy stand-off and hopes of an imminent trade deal between the allies faded.The comments from Japan’s chief cabinet secretary Yoshimasa Hayashi on Tuesday came as Donald Trump cast Japan, among other countries, as “spoiled” and the latest round of trade negotiations in Washington ended without clear progress.“We are not thinking about doing anything that would sacrifice the farm sector,” Hayashi said.Weeks of negotiations have produced a number of proposals aimed at breaking a deadlock, including Japan buying more US energy and agricultural products and new joint funding mechanisms for US manufacturing, according to people familiar with the talks.But none has succeeded at shifting the Trump administration’s commitment to reducing its trade deficit with Japan, which stood at $63bn for the Japanese financial year ending in March.In a post on his Truth Social site on Monday, Trump focused his ire on rice.“To show people how spoiled Countries have become with respect to the United States of America, and I have great respect for Japan, they won’t take our RICE, and yet they have a massive rice shortage,” wrote Trump.The combination of a poor harvest and policy has driven rice prices to more than double in the past year, causing temporary shortages, huge queues for cheaper rice and forcing the government to tap its strategic rice reserve to provide relief. Japanese rice production has for decades been an intensely political issue. The crop commands an outsized national importance and farmers have been a crucial base of support for the long-ruling Liberal Democratic party.The US exports some rice tariff-free to Japan under a World Trade Organization “minimum access” agreement, but Japan imposes a levy on any imports beyond a 770,000-tonne limit.Tokyo had initially hoped for a fast-track trade deal with Trump. But with both sides dug in, the LDP now faces the probability of a campaign for upper house elections on July 20 without a deal in place, according to people with direct knowledge of negotiations. That will raise the risk for Prime Minister Shigeru Ishiba, who is suffering low approval ratings and has a relatively fragile hold on parliament. It also comes as clouds are gathering over a Japanese economy that depends heavily on its car industry. The country’s automotive industry directly and indirectly employs more than 5.5mn people, according to the Japan Automobile Manufacturers’ Association.Tokyo has consistently demanded a full exemption from Washington’s blanket 25 per cent tariff on automotive imports, as well as the revocation of the 24 per cent “reciprocal” tariffs that Trump has threatened to impose on Japan. Those levies have been paused until a July 9 deadline to sign a trade deal.But Japan’s chances of securing any tariff exemption in the short term appeared to be low and falling, said two people close to discussions.In an interview with Fox News last weekend, Trump bemoaned the “unfair” trading relationship in blunt terms, claiming that the US “[takes] millions and millions” of Japanese cars, while the Japanese “won’t take our cars”.Japan’s biggest auto companies have established large manufacturing facilities in the US over decades. Car and truck exports to the US totalled 1.37mn vehicles in 2024, with the automotive sector representing about 28 per cent of Japan’s goods exports to the US. The US, in turn, exports few vehicles to Japan, where American car models are generally seen as too large and fuel consumptive.“I could send one [letter] to Japan: ‘Dear Mr Japan, here’s the story’,” Trump continued. “You’re going to pay a 25 per cent tariff on your cars.” More

Unlock the White House Watch newsletter for freeYour guide to what Trump’s second term means for Washington, business and the worldIndia is on track to seal an interim trade agreement with the US as soon as this week to avert Donald Trump’s “liberation day” tariffs, according to two people briefed on the talks.The interim deal, which would be among the first with a major US trading partner, would be an initial step towards a comprehensive bilateral accord between Washington and New Delhi. The two countries have said that they will seek to finalise the first tranche of the full agreement by autumn.India faces tariffs of as much as 26 per cent, among the highest against a major economy, under the levies that Trump unveiled on April 2. The US president has set a deadline of July 9 for new trade agreements to avert the levies.Rajesh Agarwal, who heads the Indian delegation, was in Washington on Monday to try to iron out the final details of the deal. S Jaishankar, India’s foreign minister, is expected to hold one-on-one talks with his US counterpart Marco Rubio on Tuesday or Wednesday on the sidelines of a meeting in Washington.According to the people briefed on the talks, the deal is expected to spare India’s big and politically influential agricultural markets, including wheat and dairy, from US tariffs, though they noted that the talks were still under way.A senior Indian government official, who asked not to be named, said there was “a lot of sensitivity” over its agriculture markets. India Business BriefingThe Indian professional’s must-read on business and policy in the world’s fastest-growing big economy. Sign up for the newsletter hereIndia has also agreed to import more natural gas from the US to bring down its trade surplus, which stood at $41.2bn for the 2024-2025 financial year, according to the people close to the Indian government.The two sides have agreed on tariff reductions on one or both sides on thousands of items. The countries had committed to more than double their bilateral trade to $500bn by 2030 during Indian Prime Minister Narendra Modi’s visit to Washington in February. Trump on Thursday promised a “very big” trade deal that would “open up India”. The following day, he said that his administration was “looking to get a full barrier dropping, which is unthinkable”. Agriculture and dairy products remain sensitive.India has managed to shield its dairy sector from foreign competition in other trade talks, including negotiations with the EU. The sector employs more than 80mn people, according to India’s government, many of whom are smallholders. There are concerns in India that foreign dairy products may come from cows that were raised on feed containing cattle products, making them off-limits to devout Hindus.Another person with direct knowledge of the talks said that India had agreed to import US farm goods such as nuts and fruits, despite pressure from US industry lobbies for market access.On Monday, White House press secretary Karoline Leavitt said US officials were “finalising” trade agreements. “You’ll hear from the president and his team, his trade team, very soon, when it comes to India,” she said. Modi’s government has embraced a more energetic trade agenda this year, concluding a long-awaited agreement with the UK in May and announcing plans to reach a pact with the EU by the end of 2025. New Delhi and Washington have forged closer defence, technology, and diplomatic ties in recent years in a shared front against China, and Trump has pushed India to purchase more US weapons in order to ease its trade deficit. However, Modi’s government openly objected last month after Trump claimed credit for ending a brief but bloody conflict with Pakistan and offered to mediate over the disputed territory of Kashmir. More

Unlock the White House Watch newsletter for freeYour guide to what Trump’s second term means for Washington, business and the worldDonald Trump’s top trade officials are scaling back their ambitions for comprehensive reciprocal deals with foreign countries, seeking narrower agreements to avert the looming reimposition of US tariffs.Four people familiar with the talks said US officials were seeking phased deals with the most engaged countries as they race to find agreements by July 9, when Trump has vowed to reimpose his harshest levies.The narrower, piecemeal plan for new deals marks a retreat from the White House’s vow to strike 90 trade deals during the 90-day pause in the sweeping “reciprocal” tariffs the president announced on April 2.But it also offers some countries a chance to strike modest agreements. The administration would seek “agreements in principle” on a small number of trade disputes ahead of the deadline, the people said. Countries that agree these narrower deals would be spared the harsher reciprocal tariffs, but left with an existing 10 per cent levy while talks on thornier issues continue, the people said.However, talks remain complex, and alongside its narrower approach to deals, the administration was also still considering imposing tariffs on critical sectors, people familiar with the matter said.The twin track, involving the threat of new tariffs alongside openness to deals, underscores the difficulty facing negotiators with Trump, who has used trade as a cudgel to secure concessions from other countries. Last week the president announced he would end trade talks with Canada, prompting Ottawa to immediately rescind a digital services tax that Washington objected to. Trump triggered a global stock market rout in early April after imposing steep tariffs on the US’s largest trading partners, following weeks of a chaotic trade policy rollout marked by reversals and U-turns. Although he has since walked back some of the most punitive levies, so far the US has only reached a trade pact with the UK and signed a tentative truce with China.Foreign negotiators are now trying to understand what will come next.The US commerce department had already launched national security probes — Section 232 investigations — into goods including copper, lumber, aerospace parts, pharmaceuticals, chips and critical minerals.Several countries in serious trade talks with the US have sought relief from existing sectoral tariffs of 25 per cent on cars and their parts and 50 per cent on steel and aluminium.The US’s trade deal with the UK provides a limited lower-tariff quota for British cars and pledges to negotiate other carve-outs for pharmaceuticals. The UK also won lower levies on steel and aerospace parts.People familiar with the talks said the poor visibility of possible new sectoral tariffs the US might impose at a later date were hindering discussions.On Monday, Treasury secretary Scott Bessent suggested the US was focused primarily on the reciprocal tariffs, and would leave sectoral levies until later. “The Section 232s take longer to implement, so we’ll see what happens with those,” he said in an interview with Bloomberg TV. It is also unclear how Trump will set any new tariff rates on countries that do not agree a new deal before the July 9 deadline. On Monday, White House press secretary Karoline Leavitt said Trump was meeting with his trade team to set tariff rates for “many of these countries if they don’t come to the table in good faith”.The president later suggested on his Truth Social account that Japan would be sent a new tariff rate, despite weeks of trade negotiations between them.“To show people how spoiled Countries have become with respect to the United States of America, and I have great respect for Japan, they won’t take our RICE, and yet they have a massive rice shortage,” Trump wrote. “In other words, we’ll just be sending them a letter, and we love having them as a Trading Partner for many years to come.”Some people familiar with the talks said there was also uncertainty about whether Trump would stick to his schedule about ending his 90-day pause. Bessent also told Bloomberg TV that any potential extensions to the July 9 deadline would be up to the president, but that he expected to see “a flurry” of deals ahead of the deadline. But last week the Treasury secretary told Fox News that the US was negotiating with 18 trading partners and agreements could be done during the summer.In May, two court rulings declared Trump’s use of emergency powers to impose reciprocal tariffs unlawful. The administration has appealed, but the rulings had also injected uncertainty into talks, people familiar with the negotiations said.The White House declined to comment. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Brazil and Mexico have begun preliminary talks to deepen their trade agreement as Latin America’s two largest economies seek to boost commercial partnerships beyond China and Donald Trump’s US.Diplomats from the two nations have held ongoing informal talks since Mexico’s President Claudia Sheinbaum took office in October to try to set the terms for formal negotiations, three people with knowledge of the matter said. In that time, left-wing leaders Sheinbaum and President Luiz Inácio Lula da Silva have met on four separate occasions. Both have publicly stated an intention to deepen economic ties. Brazil’s trade secretary is set to travel to Mexico City in August to look into it in greater detail, Sheinbaum said this month.“We can supply what Brazil doesn’t have and they can supply what Brazil has that we don’t, not only in terms of the trade agreement but also in terms of investments,” she said. Brazil and Mexico are Latin America’s two largest countries but have historically been distant because of rivalry over regional leadership, differing levels of economic openness and Mexico’s focus on the US, which is by far its largest trading partner.But President Donald Trump’s new trade tariffs and the Latin American countries’ ideologically compatible leftist governments made this an auspicious moment for closer ties, the people said.“There is a lot of enthusiasm from both countries, a lot of will from both,” one person involved in the talks said. “There is a deep political, programmatic and ideological affinity . . . the dialogue is at all levels.”Only 14 per cent of Latin America’s goods trade takes place within the region, a lower proportion than anywhere else in the world. Lula has long championed closer integration, believing that improving the region’s poor trade and infrastructure links is key to boosting prosperity.The two countries already have a limited trade agreement from the early 2000s that lowers or exempts import fees on about 800 product categories. Their bilateral trade has a lot of room for growth. It totalled just $13.6bn in 2024, according to official figures from Brazil, which recorded a $2bn surplus. The figure was a tiny fraction of the $840bn of goods traded between the US and Mexico last year — and the $161.8bn in 2024 exchanged between Brazil and China in 2024. For Mexico, which is gearing up for a tense renegotiation of its USMCA deal with the US and Canada, Brazil could offer investment opportunities in sectors such as aerospace and pharmaceuticals, while helping ease its dependence on the US for imports of grains including yellow corn.Brazilian officials say its industrial and agribusiness sectors are interested in increasing exports to Mexico.Both sides are treading cautiously to avoid upsetting the US or China, Brazil’s top trade partner and the biggest buyer of its commodities, saying the talks fall into their efforts to diversify their trading relationships. The two sides are yet to decide whether to simply expand their existing deal to reduce tariff barriers — possibly including an investment protection agreement — or embark on a bigger negotiation for a full trade agreement, one official said.Yet officials caution about the pace of proceedings with both governments’ resources limited — Mexico’s by USMCA talks and Brazil’s by elections next year. This could make an upgrade to the existing trade deal more realistic than fully negotiating a new one.Both sides were allowed to negotiate agreements with each other under their regional trade deals, officials said. Mexico’s automotive sector agreement with South America’s Mercosur customs bloc could also come into the bilateral negotiations, said two officials. Brazil’s trade ministry said conversations with Mexico were ongoing. Mexico’s foreign ministry did not respond to a request for comment. More

A proudly independent European nation confronted with a stark political choice: keep EU single market access but only by making financial payments, taking migrants and giving up judicial power.This time the question is not one for Brexit Britain — but Switzerland.After more than a decade of grinding talks with Brussels, the Alpine country has reached a deal to keep and improve its access to the EU’s single market.But the agreement — which will be put to a referendum — includes all the same thorny issues that have bedevilled the UK-EU relationship, including budget contributions, migration policy and the role of foreign judges. Nearly 1,000 pages of text, unveiled last month after a deal was signed in December, would finally anchor Switzerland more firmly to the world’s largest single market.But even the six market access agreements, which try to bring order to the tangle of previous arrangements, would still be on top of about 120 additional sectoral agreements that remain in place. If approved, the new framework binds Switzerland to mirror changes to EU legislation in areas including the regulation of goods, migration, electricity and transport — or face retaliatory measures. Bern would have little influence over how the rules develop, but it would be obliged to pay €375mn annually into the EU budget. © Fabrice Coffrini/AFP/Getty ImagesSwitzerland could be readmitted as an associate member into the bloc’s Horizon Europe science programme and become part of the nuclear science body Euratom and the student exchange scheme Erasmus.The pact in many ways parallels the UK’s struggle of balancing sovereignty with EU market access. In May, the EU and UK agreed a number of changes from fisheries to energy as part of a relationship “reset”. “There has been a pick-up in engagement and interest by the British in the negotiations we have been having with Brussels,” said one Swiss official. The negotiations also come as both London and Bern are seeking deeper defence and security ties with the bloc after President Donald Trump’s threats to withdraw US guarantees that have underpinned Europe’s security since the second world war.“The EU’s public position has long been that the Swiss and UK negotiations are separate, but in practice EU negotiators were keen to avoid setting precedents in one negotiation that might affect the other,” said Anton Spisak, an associate fellow at the Centre for European Reform. He added it was “no surprise” the same EU officials were involved in the Swiss negotiations and the recent UK-EU reset. There were nearly identical outcomes on issues like food safety (SPS) and governance in both agreements.Now Switzerland will have to accept or reject the deal, a process that will take several years. First will be a public consultation process until the autumn, then the text — possibly with some amendments — will be handed to parliament to start debating next year. The government aims to hold the referendum by June 2027, otherwise national elections later that year will push it into 2028. The “dynamic alignment” — automatic adoption of changes to EU laws — are on six key areas: mutual recognition of goods standards, electricity, food safety, air and land transport and freedom of movement. Bern can lobby Brussels and EU members when they work on updates to those rules, but has no say in the final outcome and faces sanctions if it fails to implement the changes.This will be uncomfortable for many Swiss given their deeply entrenched system of direct democracy. “The Swiss have always followed these updates anyway. But they want to have the ability to choose. That is the key difference for us,” said one Zurich-based financier. The agreements include an arbitration clause that ensures disputes are resolved by an independent panel — rather than unilaterally by EU courts — to address Swiss concerns over sovereignty and legal autonomy. But when the case involves EU law, the arbitration panel must ask the European Court of Justice, the bloc’s top court, for a binding interpretation. © Fabrice Coffrini/AFP/Getty ImagesCarl Baudenbacher, a lawyer and expert on international business law, argued the ECJ would be the true legal authority behind the scenes. “The arbitrators are legally obliged to ask the CJEU in the most important cases and the judgment is legally binding on the arbitration panel. It is essentially camouflage,” he said.Like in the UK, ECJ jurisdiction and the “dynamic” adoption of EU laws are becoming lightning rods for Switzerland’s own Eurosceptic movement. “The dynamic takeover of EU law and ECJ rulings ultimately changes the system of direct democracy in Switzerland. It downgrades our competitiveness,” said Kompass/Europa chief executive Philip Erzinger. The anti-EU group, started by private equity billionaires and other entrepreneurs, is gathering signatures to launch an initiative for the public vote on the matter. “For example, you don’t need an agreement on free movement of people to hire people from foreign countries,” Erzinger added.Switzerland’s far-right SVP is against the deal though it had found support on the left. The centrist parties such as the Liberals are yet to take a stance. There is also a question of punishment if Switzerland votes no. In 2021, when Switzerland walked away from talks, the EU retaliated by downgrading Swiss participation in the Horizon Europe. That could happen again if the deal was not ratified by the end of 2028.EU trade commissioner Maroš Šefčovič has refused to be drawn on possible action. But EU officials told the Financial Times that maintaining the status quo was not an option. Swiss officials say the erosion of the existing bilateral agreements could have serious long-term ramifications, for example in terms of Swiss export capacity, security and transport between Switzerland and EU countries.“If there is a No [vote], the EU feels this needs to be the end of the road for the bilateral way and the special treatment for Switzerland,” said an official familiar with thinking in Brussels. Others, however, think it is high time to do a deal with Switzerland’s largest trading partner. “We have been living with this drama since the 90s. Europe is our biggest trading partner and we need to solve the problem institutionally as opposed to sector by sector,” said Jean Keller, head of Geneva-based fund manager Quaero Capital. “Yes, we need to make sure things like workers’ rights are protected, but finally finding a framework that is durable for us to do business in Europe is imperative.” More

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This article is an on-site version of the India Business Briefing newsletter. To receive it in your inbox regularly, sign up if you’re a premium subscriber, or upgrade your subscription here.Good morning. The Brics meeting is this week, and both Prime Minister Narendra Modi and finance minister Nirmala Sitharaman are expected to travel to Brazil for it. Neither Russia’s Vladimir Putin nor China’s Xi Jinping are making an appearance. Is the grouping still relevant? Tell me what you think.In today’s newsletter, I’ll talk about how India has been buying more US oil to balance its trade with the US. In New Delhi, expectations are that an interim agreement will be signed before Trump’s 26 per cent reciprocal tariffs kick in next Wednesday — we’ll have an update on this by the end of the week. Will there be a third consecutive edition of this newsletter devoted to the trade deal? Odds are high! (Don’t come at me. It’s Trump’s world, we just live in it.)Oiling the deal’s wheelsIndia has more than doubled its oil imports from the US this year, partly to improve how its trade balance looks as it tries to negotiate a trade deal with Donald Trump. Official data shows India has cut crude imports from Russia, Saudi Arabia and Iraq by more than 70 per cent in the first four months of the year, while increasing supplies from the US by nearly 120 per cent. There was an uptick in procurement from both Russia and the US for May, as the government tried to insulate domestic petrol prices from the Middle East conflict. The country’s demand for oil has followed an upward trajectory over the past few years, and with limited domestic production, this means an increasing dependence on imports.Russia remains India’s biggest source of oil. After Vladimir Putin’s full-scale invasion of Ukraine, India shifted a large chunk of its oil procurement from the Middle East to Russia, which was selling at lower prices due to western sanctions. But what seemed like a good deal then could now prove a liability. The US Senate is considering a bill which would impose 500 per cent tariffs on countries that buy Russian oil. The Republican senator backing the bill, Lindsey Graham, has specifically called out India and China as the main targets of the proposed legislation. At the same time, New Delhi is trying to wrap up an interim trade agreement with Washington by the end of the week to avoid paying Trump’s 26 per cent levy on exports. During these negotiations, India has been trying to shift the narrative in two ways. First, the government has pushed back at Trump’s description of India as a “tariff king”, by proactively dropping duties on several categories of goods in the past six months. This newsletter covered the early deal sweeteners: the elimination of the “Google tax” and a tax cut that benefited American bike brand Harley-Davidson. Second, India is trying to reset the trade balance with the US, so that Trump does not use America’s trade deficit with India as a reason to impose higher duties. In the last fiscal year, India had a trade surplus of $45bn with the US.With the continued use of trade as a geopolitical weapon, India has to do a balancing act of what is best for its economy versus what is best for its foreign policy and national security. Increasing the share of American oil is a good way to appease a pugnacious Trump administration. Diversifying our sources of energy is also useful in the current climate of global uncertainty. We will know more about the contours of the trade deal with the US towards the end of the week. For now, fingers crossed. Has India got its strategy right in the trade negotiations with the US? Tell me what you think. Hit reply or email me at [email protected] storiesIran could restart enriching uranium in months, the UN’s nuclear watchdog says.Hong Kong’s bull market leaves China behind.The imposition of Hindi on southern states has struck a raw nerve, writes my colleague Chris Kay.SoftBank chief Masayoshi Son has hinted at succession plans.AirAsia is planning a Gulf hub and new European destinations this year.Can you leave a meeting early without causing a kerfuffle? That depends. Blood workAmazon has announced its foray into the diagnostics business in six cities in India More