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Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.US factory activity declined in March, adding to fears that Donald Trump’s aggressive trade policies are weighing on the world’s largest economy. The Institute for Supply Management’s manufacturing purchasing managers’ index dropped to 49 in March from 50.3 the previous month, entering contraction for the first time in 2025. Economists polled by Reuters had forecast a smaller decline to 49.5. Factory orders and employment slumped, while price growth accelerated, as companies “responded to demand confusion” and uncertainty triggered by the prospect of higher tariffs on some of the country’s most important trading partners, said Timothy Fiore, chair of the ISM Manufacturing Business Survey Committee.Inventories, meanwhile, climbed to their highest level since 2022 in a sign that producers are stockpiling ahead of the expected new trade levies, according to Veronica Clark, an economist at Citi. The report comes amid mounting concerns that Trump’s multiple U-turns on trade policy are weighing on business confidence. Trump has declared that Wednesday will be “liberation day”, when he is expected to announce a sweeping escalation of “reciprocal tariffs” intended to punish other nations for what his administration views as unbalanced trade relationships and unfair taxes, subsidies and regulations.The ISM figures showed that the administration’s aggressive trade policies were “biting at” but “not derailing” the manufacturing industry, said Ryan Sweet, chief US economist at Oxford Economics.“Uncertainty is suffocating for the economy and it’s unlikely that dark cloud clears anytime soon.” He added, however, that the index was “nowhere near” a level that would signal the economy was in a recession.US stocks posted their worst quarter in almost three years at the start of 2025 — with the S&P 500 sinking nearly 5 per cent — as the Trump administration’s erratic tariff announcements weighed on investor sentiment. Closely watched surveys showed consumer confidence plunged to a four-year low while CEO confidence fell to its lowest level in more than a decade.“In the US, there is a clear crisis of confidence,” said Manish Kabra, head of US equity strategy at Société Générale. With all of the uncertainty generated by the White House in recent weeks, “it is remarkable that the S&P 500 is down only 5 per cent” this year, he added. More

Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldBusinesses have sharply increased shipments of imported goods into duty-free “foreign trade zones” as they make use of a Great Depression-era policy to get around US President Donald Trump’s erratic trade tariffs.Warehouse operators said customers had been rushing to stock more goods inside approved facilities that temporarily exempt businesses from paying tariffs, under laws originally introduced to mitigate the fallout from US protectionist policies in the 1930s.Organisations overseeing foreign trade zones have reported that interest is between two and four times higher since Trump returned to the White House in January, said Jeffrey Tafel, president of the National Association of Foreign-Trade Zones.On what Trump has dubbed “liberation day”, the president is on Wednesday expected to announce a suite of new trade measures. From Thursday the administration also plans to implement a previously announced proposal for 25 per cent tariffs on most car imports.Greg Nichols, head of customs services at DHL, said: “We’ve seen a huge uptick of companies that are interested in” foreign trade zones. The German warehouse operator said it offered 14 secured sites across the US, often near ports of entry.Although these sites were often more expensive to use than conventional warehouses, they offered the “opportunity to hold inventory in a bonded state close to where you need it, but to potentially be able to wait out the tariff situation to see if it changes”, Nichols added.Tafel said the Trump administration’s “ongoing and unprecedented executive orders on trade and tariffs [are] driving much of the increased interest”.Once goods are in the zones, businesses may later decide to move them into the US market and pay any tariffs that apply, or export products back out of the country without paying taxes.They can also import multiple parts for assembly inside foreign trade zones, only paying a tariff on the final product when it is sent to the US market.The increased use of the zones, which NAFTZ said were located in every US state, is the latest example of businesses rushing to navigate Trump’s trade threats, which they believe may still be reversed.The US president has in recent weeks threatened blanket tariffs on goods imported from a number of trading partners, while repeatedly delaying and backtracking on his threats.Since the US enabled the creation of foreign trade zones in 1934, after the country’s Smoot-Hawley tariffs of 1930 exacerbated the global Great Depression, there are now 261 such areas overseen by organisations including state and port authorities.Many multinationals, including BMW and Airbus, have previously received permission to manufacture within these zones. But it typically took between six and nine months to obtain approval for a new site, said an executive at a logistics group with multiple approved warehouses, who asked not to be named.He said his company was therefore experiencing a “significant increase” in demand, receiving up to a dozen calls from customers each week about its approved facilities. The executive said that, even during Trump’s first term, interest in foreign trade zones was limited, as businesses were generally given more time to prepare for new tariffs.Now Trump’s more rapid rollout of trade restrictions through executive orders is prompting businesses to seek “more flexibility and control” by stockpiling goods at risk of being caught. These goods included car parts, pharmaceutical products and air conditioning units, the executive said.Tafel said that continued interest in foreign trade zones would “depend entirely on how the newly announced tariffs are implemented” and any curbs on using these areas. But he added that NAFTZ’s upcoming annual Spring Seminar in Georgia in May was “trending towards being the best attended ever” based on the numbers that have already signed up.Ahead of the “liberation day” tariffs, one logistics executive said he was “confident that [carmakers] will be assessing” whether they can get authorisation to manufacture in foreign trade zones.Nichols said DHL was hearing about “increased interest” in manufacturing in these zones, and added that the logistics group was considering increasing its number of approved warehouses.“It’s an active discussion . . . there could be a real need for additional zones.” More

This is an on-site version of the White House Watch newsletter. You can read the previous edition here. Sign up for free here to get it on Tuesdays and Thursdays. Email us at whitehousewatch@ft.comGood morning and welcome to White House Watch! As we plot our April Fool’s pranks, let’s take a look at:On Donald Trump’s calendar, tomorrow is “liberation day”.What is he celebrating? A global commerce rebalancing that will end an era of trading partners ripping off the US, according to the president. But much of the country is uneasy about tomorrow, when Trump will set high new levies on imports from a wide range of allies and adversaries alike. His “reciprocal tariffs” are intended to punish other nations for their own duties on US goods, plus other policies Washington dislikes.Canada, Mexico, the EU, China and India will probably be among affected trading partners. Foreign diplomats and officials, business leaders and lobbyists have been pleading with the administration to pare back their plans, but White House press secretary Karoline Leavitt said yesterday that there would be “no exemptions at this time”. Some content could not load. Check your internet connection or browser settings.The sweeping levies on imported goods will take American protectionism to a level not seen since the second world war. And there remains a lot of uncertainty. There’s already been a US equity sell-off, a drop in consumer confidence and warnings from pollsters over the president’s handling of the economy.“I think there’s an enormous amount of anxiety,” Douglas Holtz-Eakin, a former White House official under George W Bush and founder of the American Action Forum, told the FT’s James Politi. The White House is running “a real risk of recession”, Holtz-Eakin added, in its attempt to raise tariffs that Trump trade whisperer Peter Navarro had said could be worth as much as $600bn a year.Tomorrow, Trump could kick off a $1.4tn trade war. An econometric analysis of a worst-case scenario, where US trade partners retaliate against Washington, found that it could result in widespread global trade disruption, rising prices and falling living standards.It seems Wall Street is not looking forward to “liberation day”, stocks posted their worst quarter in almost three years yesterday on fears that the tariffs will usher in a period of stagflation.The latest headlinesWhat we’re hearingElon Musk’s latest electoral obsession is a state supreme court race in Wisconsin.The billionaire Trump adviser has pumped an unprecedented $22mn into conservative Brad Schimel’s campaign for a seat on Wisconsin’s highest court. A win for Schimel over opponent Susan Crawford would reverse the liberals’ majority on the bench.Musk also appears laser-focused on this race because of how Wisconsin’s electoral map could, in two years, shape the balance of the US Congress.Musk’s cash injection has helped it become the most expensive judicial race in US history, with total spending expected to top $100mn.As Wisconsinites hit the polls today, Democrats are hoping that a backlash against Musk will help drive their supporters to vote and deliver a victory.If it weren’t for Musk, Scott, a 52-year-old Republican-leaning IT worker in Appleton, Wisconsin, might never have turned out to vote. Scott, who is planning to vote for Crawford, told the FT’s Joe Miller:It’s concerning that the world’s richest person is getting involved in politics. He certainly has the resources available to him to possibly sway some elections.The Democratic party has seized on the fact that Musk is less popular in the state than Trump, flooding the airwaves with an advertising campaign called “People vs Musk”.It features the Tesla boss wielding a chainsaw and celebrating cuts made by his so-called Department of Government Efficiency (Doge), and a clip of him making a gesture at a Trump rally that critics claimed was a Nazi salute.The Democrats’ playbook is being watched closely by campaign strategists across the country, since Musk is expected to support pro-Trump candidates in races of all sizes ahead of the 2026 midterm elections.ViewpointsRecommended newsletters for youFT Exclusive — Be the first to see exclusive FT scoops, features, analysis and investigations. Sign up hereBreaking News — Be alerted to the latest stories as soon as they’re published. Sign up here More

Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldSir Keir Starmer will on Tuesday tell his cabinet to prepare for the imposition of US tariffs on British exports this week, with business and trade secretary Jonathan Reynolds warning it was “a very serious and significant moment” for the UK.Downing Street has conceded it is almost certain that US President Donald Trump will include Britain in a new wave of reciprocal global tariffs on Wednesday, with potentially far-reaching consequences for the British economy. Starmer still hopes Britain can secure a trade deal with the US to mitigate the impact of the tariffs, but weeks of trade talks and diplomatic courtship of the president have failed to produce a result.Ministers are now drawing up plans to mitigate the fallout of a global trade war.Reynolds said on Tuesday that Britain would put in place anti-dumping measures to stop Britain being flooded with cheap goods diverted from the US market.The Office for Budget Responsibility on Tuesday repeated a warning that Rachel Reeves’ fiscal headroom of £9.9bn could be obliterated if Trump unleashes a full-scale trade war. US tariffs of 20-25 per cent on UK goods would “knock out all the headroom the government currently has” if maintained for five years, OBR committee member David Miles told MPs. Lord Peter Mandelson, the UK’s envoy to Washington, held last-minute talks with US officials in the White House on Monday, and Downing Street said discussions would continue beyond the expected introduction of tariffs on Wednesday, which Trump is calling “Liberation Day”.But Reynolds on Tuesday conceded that it was likely that Britain — similarly to the rest of the world — was about to be hit by new Trump tariffs. “It might not be possible for any country in the world to be exempt from the initial announcements,” Reynolds said, but added that Britain would continue to pursue a trade deal with the US.“It’s not about sucking up to anyone or not responding — it’s about pursuing our national interest,” he said, arguing that British business was not pressing for the UK to impose immediate reciprocal tariffs.Unlike Canada or the EU, Starmer has rejected retaliatory tariffs for now, hoping Trump can be persuaded that Britain, which has a balanced trading relationship with the US, should get a special deal.Britain has offered to scale back or scrap its digital services tax, which raises about £800mn a year and mainly affects US tech groups, as part of a proposed deal.Reynolds denied that US concerns about free speech in Britain had played any part in trade talks, saying that such worries were being expressed by the state department rather than trade negotiators.But he told the BBC: “It’s a very serious and significant moment. That’s why we have been so resolute in pursuing our national interest and putting the UK in the best place of any country to navigate some of these pressures.”He said he was ready to impose quotas and tariffs on certain products to protect British companies from the dumping of heavily discounted products that had been destined for the US.Britain already had in place quotas and 25 per cent tariffs on some steel and aluminium products, following Trump’s earlier announcement of US levies on the sector, Reynolds added. He said he would apply the same principle in future as Trump widens his tariff net to “ensure we’re not on the receiving end of dumping”. However, he admitted there would inevitably be “an impact from that kind of activity”.Although business broadly backs Starmer’s “cool-headed” approach to the threat of tariffs, the prime minister will face political heat — particularly from the anti-Trump Liberal Democrats — for attempting to curry favour with the US president while so far getting little in return. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.In the 1980s, Japanese carmakers were accused of gutting the US car industry. In response, the Reagan administration negotiated voluntary export restraints — politely worded, but unmistakably coercive, pressuring them to make more cars in the US to maintain market access. As the Trump administration imposes a new round of tariffs on foreign-made cars and components, it is tempting to draw parallels to the past.Once again, Asian carmakers, now including South Korean groups Hyundai and Kia, find themselves at the centre of US trade policy. But this time, the consequences run deeper and are more destabilising — not because protectionism is new, but because the auto industry has fundamentally changed.Back then, a car was mostly steel, rubber and mechanical simplicity. Today, the average vehicle contains more than 30,000 parts. In the early 1990s, electronics made up just a tenth of a car’s total cost. Today, it is up to about 50 per cent, driven by the growing use of sensors, electronics and chips in modern cars, as well as the higher number of components overall. That complexity has resulted in sprawling, globally integrated supply chains, finely tuned over decades for just-in-time delivery and multi-region sourcing. Today’s cars are no longer single origin products, but the sum of countless cross-border transactions. Yet that interdependence becomes a liability when trade actions shift focus from finished cars to the components that make them possible.Trump has dismissed concerns about rising prices, saying he “couldn’t care less” if automakers raise prices because Americans would simply start buying American-made cars. But what exactly is an American-made car? A 2021 Tesla Model X, assembled in California, sources nearly half its parts from outside North America. A car built in Alabama might still rely on chips from Taiwan, sensors from Japan, transmissions from Germany and batteries from China. Increasingly, a “Made in the USA” badge is less a reflection of origin than of branding.Asian automakers are in a particularly precarious position. For decades, they have invested billions in US manufacturing, from vehicle assembly to battery and steel production. Hyundai recently announced a $21bn investment, including a $5.8bn steel plant in Louisiana. Toyota announced new investments of more than $18bn since 2021 to expand its US manufacturing base. In theory, such moves would afford a buffer against trade volatility. In practice, however, these investments unfold over years. Building a new production facility can take up to five years. Localising a supply base, requalifying vendors under US regulations and scaling domestic capacity for parts historically sourced abroad are decade-long efforts.Tariffs, on the other hand, can be imposed overnight. Trump’s first term was marked by abrupt reversals: steel tariff exemptions granted, then revoked; tariffs on Mexican cars proposed, then withdrawn; and sweeping tariffs on $300bn worth of Chinese goods including iPhones as well as French exports such as wine and handbags, threatened then reversed. Unsurprisingly, automotive executives named geopolitical risk as one of their top planning concerns in a 2023 Deloitte survey.Unlike Europe, South Korea and Japan have fewer levers to pull in response. When Trump imposed steel and aluminium tariffs in 2018, the EU retaliated with precision — targeting bourbon whiskey, blue jeans and Harley-Davidson motorcycles, products tied to politically sensitive and Trump-aligned US states. Japan and Korea by contrast do not import enough US goods to make retaliation effective — the US runs a trade deficit with both — and their close defence ties with Washington limit escalation. That leaves Asian carmakers in a tough bind: invest billions to expand US operations under rules that could vanish with the next administration, or hold back and risk falling behind in a key market. Neither path offers real stability. In an industry that invests on decade-long cycles, policy built on a four-year election window is not just inconvenient, it is existential.Protectionist measures can have a place, when they are part of a broader, long-term industrial strategy. But without that foundation, automakers are left making billion-dollar bets in the face of unpredictable politics. The greatest threat is not the tariffs themselves — it is the uncertainty they inject into a capital-intensive, globally dependent industry. In the end, that volatility may prove to be the most damaging tariff of all.june.yoon@ft.com More

This article is an on-site version of our Chris Giles on Central Banks newsletter. Premium subscribers can sign up here to get the newsletter delivered every Tuesday. Standard subscribers can upgrade to Premium here, or explore all FT newslettersOver the past week, numerous news organisations reported that Donald Trump has not yet decided on his trade policy. So, on the eve of tariff day — the day when US citizens will be subjugated to self-imposed trade barriers — I cannot explain the new tariff landscape, but I can examine the effects of the US president’s policies so far. I am not going to exaggerate or take a deliberately contrarian view and I am fully aware that when the UK voted for Brexit, early economic signals were false friends. But it is hard to avoid the distinct stagflationary whiff coming out of the US. It is faint, but unpleasant. It was not there before the US election in November and has grown stronger since Trump’s inauguration in January. If the trends continue, Federal Reserve chair Jay Powell will not be able to say the US economy is “strong” for much longer. Soft dataThe first place to look are the surveys of economic activity and inflation, which have often proved useful leading indicators. Starting with consumer confidence, the two long-running sources are compiled by the University of Michigan and the Conference Board think-tank. As shown in the chart below, which normalises the two measures so they can be included in one diagram, both have slumped since January. The Michigan survey is distorted by highly partisan biases, and the divergence of the two indicators since the 2021-22 inflation is notable, so the trends need to be treated with some caution. But an increase in pessimism is evident. The question is whether these surveys will translate into spending caution among consumers. On this, Powell is sceptical, repeating that “the relationship between survey data and actual economic activity hasn’t been very tight”. Some content could not load. Check your internet connection or browser settings.It is not just consumer confidence surveys that show a decline in economic sentiment. The Fed’s Beige Book in March recorded weaker activity than in January and stronger price pressures across much of the US. The Dallas Fed energy survey showed greater pessimism in the oil business, with executives saying that the administration’s chaotic policy process dimmed the outlook. The inflationary part of stagflation is evident also in the University of Michigan consumer survey and in the New York Fed one-year ahead survey, but not its five-year ahead figures. Some content could not load. Check your internet connection or browser settings.Hard dataHard data arrives with a delay but is much more accurate. So far, the best evidence came last Friday from personal consumption expenditure data for February. Expenditure ticked up since a fall in January, while incomes grew strongly and markets were spooked. But let’s not go over the top. There have been similar dips in expenditure before, as is clear from the chart below. The latest indication of consumer caution might be the start of something new, or just another wiggle in a line that is often volatile around a clear upward trend. Some content could not load. Check your internet connection or browser settings.If the expenditure data is inconclusive, the inflation data is showing definitive signs of stickiness above the Fed’s 2 per cent target. While there might be some seasonal adjustment problems distorting the three-month and six-month rates, they are nevertheless rising. So is the FT core measure, which aggregates other underlying measures of inflationary pressure in a statistically optimal way. As Powell said last month: “Inflation has started to move up now, we think partly in response to tariffs and there may be a delay in further progress over the course of this year.”Some content could not load. Check your internet connection or browser settings.One article of faith for the Trump administration is that those outside the US pay the costs of tariffs by reducing prices of goods as they land in the country. Even though that belief runs counter to most of the evidence from 2018, officials such as Peter Navarro, White House senior counsellor for manufacturing and trade, keep repeating it (5:40 from an interview on Sunday).Being a stuck record on a topic does not mean you are right, however. That data is far from reassuring from a US administration perspective. A 10 per cent tariff increase on Chinese goods went into effect on February 4. Recent official figures show import prices from China before tariffs are applied rose 0.5 per cent in February alone, half of their whole rise since December 2023. If anything, the early evidence is that Chinese suppliers are using tariffs as an opportunity to disguise their own price increases in the spirit of Isabella Weber’s “sellers’ inflation” idea. That is not a good sign for the US. The tariffs might get absorbed in the American supply chain, but there is no evidence so far that any other country pays. Market dataInformation can also be derived from financial markets on output and inflation. Stock market declines this year suggest there are emerging concerns about output, while financial market data on inflation expectations are mixed. These have risen for the coming five and 20 years. But there has been little movement in expectations for the five years between 2030 and 2035. It is fair to say the movements, in the chart below, are not huge, although they are upwards. Some content could not load. Check your internet connection or browser settings.The Fed’s responseAs highlighted in the FT Monetary Policy Radar collection of Fed officials’ comments, Federal Open Market Committee members have become much less sanguine about inflation. Austan Goolsbee, president of the Chicago Fed, said the trends so far had not been 1970s-style stagflation, but it is a time to “wait and see” on rates. Mary Daly, president of the San Francisco Fed, said the lack of progress on inflation made her uncomfortable about “starting any kind of rate path declines right now”. Thomas Barkin of the Richmond Fed worried that the anchor on inflationary expectations was looser than it was, as did Alberto Musalem, president of the St Louis Fed. Susan Collins at the Boston Fed worried that tariffs might have more of an inflationary impact than she previously thought, while Raphael Bostic of the Atlanta Fed said inflation was going to be “bumpy and not move dramatically and in a clear way to the 2 per cent target”.That whiff of stagflation is real.What I’ve been reading and watchingOn Friday, the Washington DC Court of Appeals allowed the sacking of National Labor Relation’s Board member Gwynne Wilcox to stand on a two-to-one decision. The judgment airs the arguments on both sides that will ultimately go to the Supreme Court. Remember, if Wilcox loses, the Fed’s board is unlikely to be protected any longer against summary dismissal It seems as though Trump’s response to auto executives’ warnings about price rises was to threaten price controls. Even economist Arthur Laffer is worriedWriting in the FT, Italy’s central bank governor Fabio Panetta warns that estimates of neutral interest rates are only helpful when policy is far from this level. Given the uncertainties, he calls for an end at the European Central Bank to using words such as “restrictive” when officials really have no ideaHopefully, this video with Stephen Miran, chair of the US Council of Economic Advisers, is the end of talk of a Mar-a-Lago Accord. The interview is also notable for asserting that exporters to the US have “no alternative” to selling in America in another example of the administration’s hubrisA chart that mattersDelivering a fascinating Mais Lecture last week, ECB executive board member Isabel Schnabel examined the importance of financial literacy for decision-making for both people and central bankers. There is little doubt that those who understand basic financial concepts make better decisions, she said. This provides the rationale for the FT’s financial inclusion and literacy campaign, currently being evaluated by King’s College London.Schnabel went further and showed with a series of charts that — to the extent that financial literacy matters more than just income or education with which it is correlated — households perceptions of inflation linger more among those with low financial literacy. Monetary policy is therefore more effective if people are better informed. Some content could not load. Check your internet connection or browser settings.Recommended newsletters for you Free Lunch — Your guide to the global economic policy debate. Sign up hereThe Lex Newsletter — Lex, our investment column, breaks down the week’s key themes, with analysis by award-winning writers. Sign up here More