Economy

Unlock the White House Watch newsletter for freeYour guide to what Trump’s second term means for Washington, business and the worldDonald Trump has signed an executive order to implement his US trade deal with the UK, but while British carmakers and aerospace manufacturers are set to secure quick benefits, steel producers could have to wait longer.The president’s order will “operationalise” the US-UK agreement, under which Trump agreed to cut a 27.5 per cent American tariff on cars to 10 per cent for the first 100,000 vehicles shipped from the UK each year. The deal will also ensure UK exports of jet engines and other aerospace components to the US are spared from American tariffs.The waiving of aerospace tariffs is confirmation the UK will be exempted from any levies that emerge from a US national security probe that Trump has launched into the industry.In the US-UK trade deal unveiled by Trump on May 8 in the Oval Office, there was a promise that Britain would be spared from some national security tariffs if it met Washington’s requirements to exclude China from critical supply chains. The UK is the only country to have struck a trade agreement with the US since Trump launched his sweeping “liberation day” tariffs in April, threatening America’s trading partners with levies of up to 50 per cent. He subsequently paused the tariffs for 90 days. UK Prime Minister Keir Starmer has come under political pressure at home to implement the trade deal quickly, notably from industries affected by the tariffs.Trump and Starmer met briefly on Monday on the margins of a G7 summit in Kananaskis, Canada, to discuss the accord.“We just signed it and it’s done,” Trump told reporters shortly after the meeting. White House officials said Trump had signed the executive order that would implement the trade deal.“This is a very good day for both of our countries, a real sign of strength,” Starmer said.In return for cuts to Trump’s tariffs, the UK granted the US greater market access for beef, ethanol and industrial products.The UK government said it expected the trade deal’s provisions affecting the British car and aerospace industries to take effect by the end of the month.The text of Trump’s executive order directs US commerce secretary Howard Lutnick to formally change tariffs on UK goods within seven days of the document being officially filed.The order also said the US would in future negotiate with the UK over any potential American pharmaceutical tariffs that it might apply. The US-UK trade deal is meant to lower American tariffs on British steel and aluminium exports to zero, but there have been drawn-out negotiations over implementation of the plan.UK officials said “technical and legal” issues were continuing to delay the confirmation of a quota that would enable British exporters to avoid a 25 per cent steel global tariff imposed by Trump on national security grounds.Steel producers in the rest of the world are contending with a 50 per cent levy on their exports to the US after Trump doubled the existing 25 per cent tariff this month, but he offered the UK an exemption to allow time for implementation of the trade deal.The negotiations have been complicated by how a significant proportion of UK steel is reprocessed from imported material and does not meet an American requirement that it is “melted and poured” in the country of origin to qualify for tariff exemptions.UK steel industry bodies have said they do not expect arrangements consistent with the trade deal to be finalised until the end of the month at the earliest, and putting them into effect could take longer still.A Downing Street spokesperson said talks between the UK and the US were continuing on steel. “As the prime minister and President Trump have again confirmed, we will continue to go further and make progress towards zero per cent tariffs on core steel products as agreed,” they added.The Society of Motor Manufacturers and Traders, the British automobile industry trade body, described the latest development on the US-UK trade deal as “great news”.However, the decision to grant US ethanol producers a 1.4bn litre tariff-free quota, equivalent to the entire UK annual demand, has been attacked. Britain’s bioethanol industry has warned the trade accord will destroy domestic producers. More

This article is an on-site version of our Trade Secrets newsletter. Premium subscribers can sign up here to get the newsletter delivered every Monday. Standard subscribers can upgrade to Premium here, or explore all FT newslettersIt’s been a rare weekend without a shock-and-awe Donald Trump news announcement on trade, the main fare from the administration these days being an endless stream of wrong predictions that deals over the bogus “reciprocal tariffs” are going to happen at any minute. So let’s talk about something else. Today’s newsletter is on a topic that’s been brewing for a while, if that’s the right metaphor — the EU retreating from (“rationalising”, if you prefer) its various wheezes to impose more environmental and human rights standards on imports. Charted Waters, where we look at the data behind world trade, is on global oil prices. Get in touch. Email me at [email protected] takes on a lighter shade of greenThe EU loves, I mean loves, the idea that trade isn’t just about grubby mercantile gain but is also about exporting European values. Over the past decade, pressure from campaigners, sometimes bolstered by sneaky protectionism, has given European importers and hence foreign exporters a bunch of responsibilities, creating a grab-bag full of exciting new abbreviations.Chief among them are CBAM, the carbon border adjustment mechanism to stop emissions-heavy imports undercutting carbon-taxed EU production; EUDR, the deforestation regulation that bans the sale of products, including palm oil, coffee and beef, raised on recently cleared land; and CSDDD, the corporate sustainability due diligence directive, which holds companies responsible for environmental and labour abuses in their global supply chains.Whatever the intentions, they’ve all created a lot of bureaucracy and resentment, especially among low- and middle-income countries, which say they’re basically neo-imperialism in a progressive wrapper. To certify, say, an Indonesian smallholder oil palm grower, of whom there are several million, can mean an inspector armed with geolocation data has to turn up to each and every farm. (This at the behest of European countries that flattened their own forests centuries ago.)Recently there’s been a rethink thanks to the apparent fragility of global trade, threats of punishment tariffs from Trump, who regards such standards as protectionism, and a general backlash against environmental regulations. The EU decided last year to delay the introduction of EUDR by one year until 2026, and in April issued new guidance which considerably simplified (some would say weakened) the regulation.Recently French President Emmanuel Macron joined forces with Germany to argue for scrapping the due diligence directive, which at the least seems likely to end with it too being watered down. Given that France was one of the main progenitors, that’s quite the reversal.Pragmatism but not partnershipSo the EU has listened to developing countries’ concerns and a new era of mutual trade and prosperity can begin, right? Ish, verging on no. Lobbying from European business associations was almost certainly more influential in delaying and watering down the EUDR than protests from emerging markets (EM). And, critically, as Jodie Keane from the ODI Global think-tank said in a recent letter to the FT, there’s little sign the EU has developed a joined-up policy towards trade and development, particularly given the damage climate change can wreak on growth. If you’re in the right place, the view from some developing countries currently doesn’t look too bad. I talked recently to Odrek Rwabwogo, an economic adviser to Ugandan President Yoweri Museveni. Uganda has long exported unprocessed coffee beans to the EU and has struggled to move up the value chain, he says, because the big international coffee-roasting companies are reluctant to set up there.The EUDR created a threat even to Uganda’s existing exports, but that seems to have diminished with the pushing back of deadlines and easing of compliance standards. “There’s not much noise any more on this from the EU and we hope it ends well,” Rwabwogo told me. “We don’t hear the demands for workshops and ultimata on deadlines that we were suffering from about six, seven months ago. Out of two million households that grow coffee, we now have around 970,000 that are [EUDR] compliant.”Rwabwogo also says Ugandan agriculture luckily seems so far to have been spared the dislocations from floods and wildfires induced by climate change that have hit other coffee-producing countries. Although the big coffee processors still aren’t moving production to Uganda, the country has attracted some smaller ones. It has also diversified into other products, such as avocados for the European market, with the help of development assistance from the UK, traditionally a big aid donor. Exports have been boosted by direct flights to London, which restarted last month for the first time in a decade.There are, however, big buts and missed opportunities. Complying with the EUDR doesn’t mean the EU is helping Uganda build a value chain. “The discussion is on traceability,” Rwabwogo says. “It’s very, very extractive. If the EU said it would leave 50 per cent of the value chain in our country, it wouldn’t need to order us to do something like the EUDR because it would be in our enlightened self-interest.”Rwabwogo says there are no signs of aid drying up as yet. But the UK has savaged its overseas development assistance (ODA) budget to 0.3 per cent of gross national income from an already reduced 0.5 per cent, within which it dishonestly counts the costs of processing asylum seekers in Britain as aid. The EU has, in effect, redirected aid from supporting development in sub-Saharan African countries to aiding a horrendously abusive detention system for migrants in Libya and Tunisia.European politicians still sometimes talk about partnership with developing countries in Africa, but usually it doesn’t mean much any more. Easing off on the EUDR is welcome to low- and middle-income countries, but imposing and then removing an obstacle to EM exports to Europe doesn’t constitute an enlightened use of trade to support development.Charted watersGlobal oil prices predictably shot up as Israel attacked Iran. But it’s worth noting that, unlike during previous episodes of war in the Middle East, fracking has made the US a net exporter of oil and gas, consequently changing its direct incentives to get heavily involved in the region.Trade linksReuters reports that India will follow China in restricting exports of rare-earth minerals.Whither those bogus “reciprocal tariffs” and so-called negotiations? Nobody knows anything about what Trump will do, but Sam Lowe in his Most-Favoured Nation newsletter has a much better record of guessing than most, and here’s his bet. The FT’s Unhedged newsletter examines the perhaps surprising lack of inflation as yet from Trump’s tariffs.A Bloomberg story says that this week’s summit of leaders of the G7 rich nations will avoid even trying to issue a communiqué in case it simply causes a row.Veteran markets guru Mohamed El-Erian notes in the FT that the oil shock comes at a bad time for the global economy and will create stagflationary forces, and the FT’s Lex column agrees. Showing that not all globalisation is about hydrocarbons and shipping containers, this is a lovely piece in the FT on how Turkish barbers (sometimes “Turkish” barbers) built an international brand, specifically with regard to the UK.Trade Secrets is edited by Harvey NriapiaRecommended newsletters for youChris Giles on Central Banks — Vital news and views on what central banks are thinking, inflation, interest rates and money. Sign up hereFT Swamp Notes — Expert insight on the intersection of money and power in US politics. Sign up here More

Unlock the White House Watch newsletter for freeYour guide to what Trump’s second term means for Washington, business and the worldFormer European Commission chief Jean-Claude Juncker has criticised his successor, Ursula von der Leyen, for not engaging personally to quickly stave off Donald Trump’s trade war.“I think that the commission would have been better advised to try to have a meeting as early as possible, because it was foreseeable that he would come back to the [trade] issue,” Juncker told the Financial Times. “There will be no deal without the active presence of the president of the commission,” he added, speaking in his Brussels office five floors below von der Leyen’s.European Commission president Ursula von der Leyen speaks with Donald Trump prior to their meeting at the World Economic Forum in Davos in 2020 More

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This article is an on-site version of our Europe Express newsletter. Premium subscribers can sign up here to get the newsletter delivered every weekday and fortnightly on Saturday morning. Standard subscribers can upgrade to Premium here, or explore all FT newslettersGood morning. Iran launched a new missile barrage on Israel’s cities early today as the Middle East conflict entered a fourth day​. Earlier, Israel​’s military said its air force ​had ​struck missile sites in central Iran​. Meanwhile European Commission president Ursula von der Leyen said last night that “Iran is the principal source of regional instability” as G7 leaders gathered in Canada. Today, I preview the G7 summit where the spiralling conflict is set to dominate the leaders’ talks, and our energy correspondent reports on talks today about the nitty gritty of plans to end the EU’s last vestiges of Russian energy imports.Powder kegA G7 summit that was already jam-packed with contentious global fractures got significantly more tumultuous with the spiralling conflict between Israel and Iran, with fears of a full-blown war in the Middle East set to dominate the Canadian gathering.Context: Leaders of the G7 countries — Canada, France, Germany, Italy, Japan, the UK, US plus the EU — are meeting today and tomorrow in Kananaskis in the Canadian Rockies. The group of advanced economies was set up to co-ordinate policies on key issues such as trade and security.Before Israel’s strikes on Iran began last week, the summit’s preparations were focused on efforts by the European members to avoid a conflagration with US President Donald Trump, convince him to maintain support for Ukraine, and find a solution to his threats of major tariffs against EU goods.But the Middle East has exploded on to the agenda, and will overshadow much of the formal and bilateral discussions. EU leaders have called for de-escalation amid fears of wider regional instability, even as Trump issues bellicose threats against Tehran.Iran has threatened to attack American, British and French military assets in the Middle East if their forces are used to help defend Israel from Iranian counter-attacks. The UK moved additional fighter jets to the region over the weekend.There are also concerns about the impact on global energy markets, and the threat posed to trade to and from Europe if Iran or its allies seek to disrupt the vital Gulf shipping lanes.In a call with Trump on Saturday, European Commission president Ursula von der Leyen said they had “discussed the tense geopolitical situation in the Middle East as well as the need for close co-ordination on the impact on energy markets”.Today in Brussels, ambassadors will prepare for an emergency video conference meeting of EU foreign ministers scheduled for tomorrow to discuss the Middle East crisis and potential responses.G7 host Mark Carney, Canada’s recently-elected prime minister, had hoped to use the gathering to present a united western front on shared issues such as economic security, emerging technologies and migration, and has dropped the traditional joint communiqué in a deft move aimed at avoiding likely disagreements with Trump on issues such as climate change.But events in the Middle East are set to continually distract the leaders, and lay bare the fractious geopolitical theatre that they are grappling with.Chart du jour: To the coreWhile the EU is making moves to stop buying Russian fossil fuels, it has delayed plans to gradually cut itself from a smaller but far more tricky reliance: Russian nuclear technology.Small printEU energy ministers will discuss how to wean the bloc off the last vestiges of Russian fossil fuels today, as Brussels seeks to sever the last energy ties with its former supplier, writes Alice Hancock.Context: The EU has sanctioned most Russian oil and coal imports, and in May published a rough plan to fully cut Russian fossil fuels by 2027. Rather than using sanctions, Brussels wants to ban the contracts with Russia via trade measures, which can be passed by a weighted majority and prevent a likely veto from Slovakia and Hungary.But the commission stopped short of setting out the details, and EU governments and the gas industry are concerned whether the legal basis will be strong enough to call off the contracts due to force majeure.A full proposal is expected tomorrow, after energy ministers discuss the plan in Luxembourg today.Hungary and Slovakia have already said in a statement that the Russian fuel phaseout plan runs contrary to energy security objectives and “raises both legal and political concerns”. Any decision on the matter should be unanimous, they said.But a senior EU diplomat struck an optimistic tone. There had already been some “informal discussions” about the plan. Once the legislative proposal “was on the table with the nitty gritty legal basis” there would be “the usual debates and arguments among member states”.“But if you ask me,” they said, “the necessary support for this will be there”.What to watch today G7 summit in Kananaskis, Canada.EU energy ministers meet in Luxembourg.European parliament plenary session kicks off in Strasbourg.Now read theseRemote work: JPMorgan’s European chief is planning to run the bank’s continental operations from New York.Unreformed: After two men were sentenced for the murder of journalist Daphne Caruana Galizia, her son Paul writes about what Malta still owes her.Critical hit: Russia hit Boeing’s offices in Kyiv in what appeared to be a deliberate strike on the US aerospace company as part of attacks last week.Recommended newsletters for you Free Lunch — Your guide to the global economic policy debate. Sign up hereThe State of Britain — Peter Foster’s guide to the UK’s economy, trade and investment in a changing world. Sign up hereAre you enjoying Europe Express? Sign up here to have it delivered straight to your inbox every workday at 7am CET and on Saturdays at noon CET. Do tell us what you think, we love to hear from you: [email protected]. Keep up with the latest European stories @FT Europe 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 hereToday’s agenda: G7 summit; JPMorgan’s Europe chief relocates; Adnoc bids $19bn for Santos; profile of Gavin Newsom; and a deathbed letter to Vivienne WestwoodGood morning. We start the working week with the latest updates on the conflict between Israel and Iran, which has entered its fourth day.What’s the latest? Both sides traded strikes over the weekend and into this morning, with Iranian rockets hitting several locations in the greater Tel Aviv region today. Iranian state media claimed a power plant in Haifa was also struck. Earlier, the Israeli military said it had launched strikes against missile sites in central Iran. In a social media post, it also said it had hit “numerous” weapons production sites in Tehran.What’s the global fallout? Oil and gold prices jumped this morning. Israel’s decision to target Iran’s energy sector — with strikes on at least two gas processing plants and two fuel depots — has poured more risk into global energy markets. Investors are concerned that Iran could retaliate by striking energy targets in other Gulf countries or impede the flow of oil and gas through the Strait of Hormuz, through which a third of the world’s seaborne oil passes. What could come next: Benjamin Netanyahu has warned that regime change could “certainly be the result” of Israel’s attacks, in response to a question about assassinating Ayatollah Ali Khamenei. Israel’s prime minister declined to comment on reports that Donald Trump had vetoed an Israeli plan to kill Iran’s supreme leader, saying “we’ll do what we need to do”. The US president has also warned that the US “could get involved” in the conflict. We’ll bring you real-time updates on the war and its impact at our live blog. Here’s more analysis on the situation:Nuclear weapons? Experts say Iran has become a “threshold” state but question Israel’s claim that Tehran had begun an atomic bomb programme.What are Israel’s goals? If Iran’s Islamic regime falls, the alternative will not be a liberal pro-western government, writes former MI6 chief John Sawers.Why was oil output raised? With the conflict, the Opec+ cartel’s recent move to boost crude production is coming under intense scrutiny.Other world leaders, including European Commission president Ursula von der Leyen and UK Prime Minister Sir Keir Starmer, are hoping the G7 summit in Canada, which began yesterday, will help de-escalate the conflict. Apart from that, here’s what else I’ll be watching today:Opec: The cartel publishes its monthly oil market report.EU: Ministers meet to discuss how to wean the bloc off Russian nuclear imports.Five more top stories1. Exclusive: JPMorgan’s European chief plans to relocate from London to New York, while keeping his role running the bank’s Europe, Middle East and Africa business. The move by Filippo Gori, who is also the lender’s co-head of global banking, is the latest in a string of examples of senior bankers overseeing UK-based operations from the US. 2. Abu Dhabi’s national oil company is offering $19bn to take over Santos, leading a consortium to bid for one of Australia’s largest energy companies. Santos said its board would recommend the offer, subject to terms being agreed. Read the full story.3. Rachel Reeves will set out a 10-year infrastructure plan for Britain this week, starting with a new programme to repair crumbling bridges, flyovers and tunnels. Allies of the UK chancellor say she will commit to increasing the infrastructure budget to at least £725bn over the next decade.MI6: Blaise Metreweli has been appointed the new chief of the UK Secret Intelligence Service, becoming the first woman to lead the spy agency.4. Luca de Meo will step down as chief executive of Renault to take the helm at Kering, where he will lead efforts to turn around the struggling French luxury group, according to people briefed on the plan. The carmaker said he would remain in place at the company until July 15. More details on the move.5. Minnesota police have detained the suspect in the politically motivated killing of state representative Melissa Hortman and her husband, and the shooting of state senator John Hoffman and his wife. Vance Boelter was apprehended after a two-day manhunt across the US state. News in-depth© FT montage/GettyTo Israeli military planners, Iran’s Fordow facility is akin to Mount Doom: a tightly guarded nuclear enrichment plant, buried half a kilometre beneath a mountain, which is ringed by air defences and symbolically situated near the ancient religious city of Qom. Satellite analysis shows how the underground site has become central to Tehran’s nuclear ambitions — and a major challenge for Israel.We’re also reading . . . Gavin Newsom: Trump’s decision to send troops to Los Angeles has allowed California’s governor to sell his brand of resistance to the rest of the country.Chinese economy: Mounting calls on Beijing to “rebalance” by encouraging more consumer spending are misguided, writes Ruchir Sharma.Brazil’s beef barons: The New York listing of food giant JBS marked a dramatic comeback for brothers Wesley and Joesley Batista, who were in jail eight years ago.Chart of the day US green bond sales have fallen since Trump won a second term as president, as companies seek to avoid unwanted attention by backing away from or playing down their environmental activities. Take a break from the newsMalcolm McLaren and Vivienne Westwood were partners in life and art but the bitterness of their rupture never faded. Now, a never-before-seen 16-page deathbed letter, written by the man who invented punk, has shed new light on their “tempestuous” relationship. © Mirrorpix/Getty Images More

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Bank of England rate-setters already grappling with unpredictable US trade policy and unreliable UK data now face a fresh oil price shock as they meet this week to set borrowing costs in the wake of Israel’s air strikes against Iran. The potential for prolonged conflict and disruption to energy supplies would make the BoE’s Monetary Policy Committee even more inclined to caution at a meeting where it was already widely expected to hold interest rates at 4.25 per cent, economists said. Fallout from the air strikes on Friday would also make it even harder for the committee — deeply divided since its nine members split three ways in May — to convey a clear sense of how far or fast it might lower rates in future, they added. Jens Larsen, a former BoE official now at the Eurasia Group consultancy, said the Israel-Iran conflict was the latest in a sequence of geopolitical shocks making it difficult to set monetary policy around the world. “The Bank of England has said it will respond to the volatile geopolitical environment and repeated shocks by making greater use of scenarios to communicate all the uncertainty out there,” he said.“But so far this is very much a work in progress. It is hard to discern a clear narrative from the BoE on the outlook — they can’t afford to just throw up their hands and say they have no idea what is going on.” When the MPC cut rates by a quarter-point in May in a 5-2-2 vote, it repeated its guidance that it would take a “gradual and careful” approach to further monetary loosening. Markets have interpreted the wording as pointing to a 0.25 percentage point cut in interest rates each quarter. But the committee has rarely been so divided in its thinking. The last time there was a unanimous vote on monetary policy was in September 2021, when rates were at a historic low of 0.1 per cent. Last month, the MPC split three ways, with BoE chief economist Huw Pill joining external member Catherine Mann in voting for rates to be kept at 4.5 per cent, while fellow external members Swati Dhingra and Alan Taylor backed a jumbo half-point cut. Even among the five-member majority, the decision was “finely balanced”, according to minutes of the meeting, with some members, including governor Andrew Bailey initially minded to hold rates and swayed at the last minute by US President Donald Trump’s sweeping “liberation day” tariffs. The intense geopolitical uncertainty is only one reason why the MPC is so divided. The committee is also struggling to determine whether the UK economy — which suffered a fresh setback in April, with a 0.3 per cent drop in output — is on the brink of big job losses, or whether workers are still well-placed to press for wage rises that could fuel inflation. Doubt over the quality of crucial economic data is making it harder to answer these questions: in recent evidence to MPs, Bailey called attention not only to well-flagged problems with jobs data, but also to increasing volatility in GDP figures, and a “puzzle” in official data showing productivity had fallen in a way “usually associated with quite serious recessions”. Analysts are increasingly frustrated by the lack of clarity in the BoE’s own messaging. Andrew Wishart, senior UK economist at Berenberg, said one problem was that rate-setters appeared reluctant to comment too explicitly on the extent to which government tax policy had hit jobs. Bailey’s own reticence also made it harder to gauge the MPC’s direction of travel, Wishart said, with the governor giving “high-level” speeches on themes such as globalisation rather than a clear steer on his thinking.“It’s hard to pin him down . . . and since he is effectively the swing voter on the committee, that does make it much more tricky,” Wishart added.The BoE says that it wants to explain the uncertainties around its forecasts by making greater use of scenarios, setting out how inflationary pressures could evolve in different situations and force it to vary its policy approach. But analysts say the two scenarios set out in May’s monetary policy report have shed little light on the committee’s thinking — especially since MPC members do not necessarily align their own views with either scenario. “The scenarios haven’t really been particularly helpful,” said Andrew Goodwin, at the consultancy Oxford Economics, adding that they “felt like a box-ticking exercise” to follow up on the recommendations of a highly critical review by former US Federal Reserve chair Ben Bernanke. Rob Wood, chief UK economist at consultancy Pantheon Economics, agreed that the experiments with scenarios had not yet paid off. “It amounts to saying inflation could be higher or lower than you think,” he said. “Maybe it will improve over time, but I don’t think it is saying very much.” Economists are hoping the BoE will give a clearer steer on Thursday, following a run of weak data that will lessen the worries about inflation persistence. But if the Israel-Iran conflict triggers a sustained rise in oil prices it will only heighten the difficult trade-offs faced by the MPC. BoE chief economist Huw Pill last month voting for rates to be kept at 4.5 per cent. More