Economy

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.A $35bn US semiconductor industry merger is being delayed by Beijing’s antitrust regulator, after Donald Trump tightened chip export controls against China in a move that exacerbated trade tensions between the world’s two largest economies.China’s State Administration for Market Regulation has postponed its approval of the proposed deal between Synopsys, a maker of chip design tools, and engineering software developer Ansys, according to two people with knowledge of the matter.The transaction between the American groups, which has received the blessing of authorities in the US and Europe, had already entered the last stage of SAMR’s approval process and was expected to be completed by the end of this month, said the people.The delay comes as Washington moved to ban chip design software sales by US companies, including Synopsys, to China in late May. That decision has contributed to the complexity of China’s approval process for this deal, according to a person with knowledge of the situation.The person added that approval, while taking longer than expected, could still come through if Synopsys were able to submit solutions that addressed the Chinese regulator’s concerns.However, another person with knowledge of the matter said SAMR’s approval process had recently been prolonged from its original 180-day schedule due to the complexity of the deal itself, rather than being directly linked with the ongoing trade war.On the company’s latest earnings call on May 28, Synopsys chief executive Sassine Ghazi said the company was “working cooperatively and actively negotiating with SAMR to secure China regulatory clearance”, and that it expected to close the deal “in the first half of this year”.The deal agreement includes a January 15 2026 “drop dead clause”, according to company filings.Synopsys declined to comment. Ansys did not respond to a request for comment. A call made to SAMR outside regular working hours was not answered.The move comes amid US-China trade talks. This week, Trump said the two sides had reached an agreement in London to reinstate the trade war truce reached in Geneva in May, when the US and China significantly cut the high level of tariffs they had imposed on each other.A senior White House official said this week that Trump could ease controls on technology exports to China if Beijing agreed to speed up shipments of rare earths.There have also been signs of a potential loosening of the US ban on selling chip design tools. Synopsys, which earlier stopped all sales to Chinese clients, has restarted selling intellectual property and hardware, while so-called electronic design automation-related software tools are still restricted, according to a person with direct knowledge of the matter.Silicon Valley-based Synopsys’s tools and intellectual property are used by chipmakers including Nvidia and Intel to help design and test their processors.The semiconductor designer has grown in recent years as Big Tech companies including Microsoft, Google, Meta and Amazon strive to create more of their own chips, in particular to handle artificial intelligence systems in the cloud.Ansys, which is based in Pennsylvania and has its origins in structural analysis tools, makes engineering simulation software used in industries from cars and construction to healthcare and defence.Additional reporting by Michael Acton in San Francisco and Ivan Levingston in London More

Canada is fast-tracking development of a critical minerals reserve over indigenous opposition to generate much-needed revenue in response to US President Donald Trump’s devastating tariffs.Trump is a “wake-up call” for the country to kick start its economy and developing the Ring of Fire” project in the far north of Ontario is “a top priority”, the province’s premier Doug Ford told the Financial Times. Ring of Fire “has more critical minerals than anywhere else in the world”, Ford said. “Our goal is to get things going in 24 months and seeing progress, building roads, and getting the transportation up there.”The deposit, about 1,000km north of Toronto, was discovered in 2008 and covers roughly 5,000 square kilometres. Named for its crescent shape and geological formation it contains vast quantities of minerals, including nickel, copper and platinum elements. But its location on lands belonging to First Nations tribes, as well as the huge costs and environmental risks involved in developing the region have delayed its progress.Indigenous groups, along with environmental and civil liberties organisations, fear the provincial government is using the tariff threat as a pretext for pushing through the project without proper consultation. Indigenous groups fear the province is using the US tariff threat as a pretext for pushing through the project without proper consultation More

The election of Donald Trump in 2016 was a watershed moment for Bao Phung.His family’s business A&M Flooring, a Vietnamese producer of premium wooden flooring, had initially struggled to compete against Chinese businesses when it was founded the year before.But after Trump came to power and unleashed a trade war on China, Bao saw A&M’s business flourish as American buyers rushed to source products from elsewhere. Profits rose even as local competition increased. Bao says dozens of Chinese companies have moved to Vietnam to avoid US tariffs, estimating there are now 20 times more competitors than a decade ago. As trade tensions between the US and China lingered during the Biden administration, business remained good. The US accounted for 95 per cent of the company’s total sales — until April 2. On Trump’s so-called “liberation day”, he announced Vietnam would face a 46 per cent tariff rate, one of the highest in the world. For A&M and its 120 employees, new orders from American clients slowed to a trickle. Like thousands of companies across Vietnam, it is now frantically trying to figure out its future. “Some of us [in the industry] are trying as best as we can to diversify,” says Bao, A&M’s assistant director. The company is seeking new customers in Japan and Europe. “But other than that, right now, we are on our hands and knees to pray that the negotiation between the US and Vietnam goes well.”Vietnam was one of the biggest winners from Trump’s first term as manufacturers moved production in droves to the country as part of their “China plus one” diversification strategy. Some content could not load. Check your internet connection or browser settings.The country’s recent economic success — with GDP growth at 7 per cent last year — has been driven primarily by exports to the US and surging investments from companies fleeing China. Foreign direct investment in Vietnam surged from $15.8bn in 2016 to $38.2bn in 2024, and it has become a critical link to global supply chains, hosting manufacturing heavyweights such as Apple, Intel, Samsung and Nike. As a result, the south-east Asian country is one of the most trade-dependent countries in the world, with the US accounting for nearly a third of its total exports. Now, its “China plus one” success has backfired as the US president takes issue with trading partners who have large surpluses with the US. Vietnam has the third largest, after China and Mexico.Vietnam’s ruling Communist party is acting with urgency to address the tariff threat. Party chief To Lam was one of the first world leaders to call Trump after the “reciprocal tariff” announcements, promising to remove all Vietnamese tariffs on American goods. But Trump’s actions have also served as a wake-up call — for local factories relying on the US, for American companies sourcing from Vietnam, and for the Communist party — about the vulnerability of the Vietnamese economy to external shocks.Many now fear its export-led growth model will soon run its course, throwing a wrench in Vietnam’s plans to become a developed country by 2045. In late April, the World Bank revised Vietnam’s growth forecast for this year down from 6.8 per cent to 5.8 per cent. Vietnam has become a critical link to global supply chains, hosting manufacturing heavyweights such as Nike More

This article is an on-site version of our FirstFT newsletter. Subscribers can sign up to our Asia, Europe/Africa or Americas edition to get the newsletter delivered every weekday morning. Explore all of our newsletters hereGood morning and welcome to FirstFT Asia. In today’s newsletter:Deadly plane crash near Ahmedabad airport in India US senator detained during press conferenceStablecoins go mainstreamWe start in India, where the country is grappling with the aftermath of the worst aviation disaster in more than a decade. More than 240 people died when an Air India flight to London crashed in Ahmedabad shortly after take-off on Thursday. The latest: Air India said 169 Indian nationals, as well as 53 British citizens, seven Portuguese and one Canadian were on board. At least one passenger survived and was taken to a hospital for treatment. The US transportation chief has said his department is working with the NTSB to assist India with its investigation of the crash.Some content could not load. Check your internet connection or browser settings.Boeing: The crash has brought more scrutiny to one of Boeing’s best-selling aircraft. The 787 Dreamliner has a “good in-service safety record,” according to an aviation consultant, but has suffered from production setbacks and attention from whistleblowers. Last year, the company rejected allegations about the aircraft’s structural integrity from a longtime in-house engineer.Read more on how Boeing CEO Kelly Ortberg and world leaders are reacting to the tragic crash.Here’s what else I’m keeping tabs on today and through the weekend:Economic data: The EU releases industrial production figures from April and first-quarter labour market data.G7 Leaders’ Summit: The annual meeting of international leaders begins on Sunday and will be hosted in Canada by PM Mark Carney. What is Europe’s game plan for handling Trump?Five more top storiesHow well did you keep up with the news this week? Take our quiz.1. A US Senator was forcibly removed by federal agents at a press conference held by homeland security secretary Kristi Noem. Democrat Alex Padilla was wrestled to the ground and handcuffed, but not arrested, the California politician later said. The altercation marks a new escalation after days of tensions in Los Angeles following protests over the White House’s efforts to deport millions of undocumented immigrants.Division among Democrats: The party has struggled to form a coherent message on immigration. Now, they are caught between whether to criticise the US president’s actions or condemn protesters.2. Donald Trump has warned an Israeli strike on Iran could “very well happen”. The comments on Thursday come as US and Iranian officials are due to hold a new round of talks over the Islamic republic’s expanding nuclear programme. Western diplomats say Tehran is keen to avoid military conflict, but it refuses to accept a US demand that the country stop enriching uranium domestically.3. Western companies say Beijing’s commerce ministry is demanding sensitive business information to secure rare earths and magnets. These include production details, images of products and facilities, and confidential customer lists. China has not said it would abandon its export controls and it was unclear if the country’s latest trade truce with the US would affect the approval process for shipments of the critical materials. Here’s more from businesses on how the controls have affected them.4. More than £185mn worth in properties linked to Bangladesh’s former land minister have been frozen by Britain’s National Crime Agency. The NCA’s freezing orders of more than 300 properties is one of the highest-profile developments yet in Bangladesh leader Muhammad Yunus’s effort to track down foreign assets.5. The dollar reached a three-year low after Trump told reporters he would outline new tariff rates to trading partners in the next couple of weeks. While trade tensions have continued to weigh on the dollar, stocks have since rebounded from their April plunge.Today’s big readStablecoins were created to boost trading in cryptocurrency markets, enabling buying and selling without the use of a bank. Until recently, ease of use and anonymity made them a de facto currency reserve for crypto traders and a conduit for crime including drug trafficking and money laundering. With Trump’s return to the White House, stablecoins are becoming increasingly mainstream — a development that could have profound implications for the global financial system.We’re also reading . . . Chart of the day South Korea’s main stock index has hit a more than three-year high, as investors bet on the country’s new left-wing government. During his campaign, president Lee Jae-myung promised the country’s retail investors that Kospi would reach 5,000 points during his term. The index has climbed more than 7 per cent since last week. Will it continue to rise?Take a break from the newsHigh above the Swiss alps, “Chrigel the Eagle” is on a historic unbeaten streak. Paraglider Christian Maurer has won every edition of the Red Bull X-Alps since 2009 and doesn’t plan on stopping. He shares with HTSI what it takes to be king of the mountains. © Sebastian Marko/Red Bull Content Pool More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Argentina’s monthly inflation rate has fallen below 2 per cent for the first time in five years, a boost for libertarian President Javier Milei in his war against the country’s chronic price pressures.Consumer prices rose 1.5 per cent in May from the previous month, the country’s statistics agency said on Thursday. This compares with 2.8 per cent in April and a 25.5 per cent high in December 2023, when Milei took office. However, annual inflation is still 43.5 per cent, one of the highest in the world.“We have the best president in the world,” economy minister Luis Caputo said on X as he shared the figure.The result bolsters Milei’s chances at October’s midterm elections, when price stability is his main message for voters who have suffered years of extreme volatility. It is a surprise victory for the president after he lifted a controversial currency control that had underpinned his fight against inflation.In April, as part of a $20bn loan deal with the IMF, Milei scrapped a fixed exchange rate that had dramatically strengthened the peso in real terms, acting as an anchor on local price rises but preventing the central bank from building up its scarce hard currency reserves. He floated the currency on April 14, raising expectations that inflation would jump as a result.“The government managed to keep the devaluation and pass-through to inflation to a minimum,” said Ramiro Blazquez Giomi, Latin America and Caribbean strategist at financial services group StoneX. Authorities have taken steps to attract more dollars to the exchange market, including a temporary tax break for agricultural exporters. That has bolstered the peso, though analysts warn it may weaken further as the often-volatile midterm election season gets under way.Milei’s sweeping austerity and deregulation measures have rapidly stabilised Argentina’s economy, which the IMF predicts will grow 5.5 per cent in 2025 as it rebounds from last year’s recession. However, economists warn growth has plateaued in recent months as productivity and investment remain weak. Investors also remain nervous about the government’s currency and reserve policy.Milei has been slow to build up the central bank’s reserves, which Argentina needs to make billions of dollars in foreign debt repayments this year. The IMF has postponed an initial target for the country to add about $4.5bn to its reserves by June 13, to July.Milei has refused to buy dollars in the way previous Argentine governments did — by issuing pesos to buy greenbacks in the official market — because he wants to avoid expanding the monetary base and weakening the peso, which could fuel inflation. He has also continued using reserves to intervene in peso futures markets, despite the IMF deal saying such intervention should only happen in exceptional circumstances.On Monday, the government announced measures to increase reserves, including a $2bn repurchase agreement with international banks, and a plan to buy dollars using pesos from Argentina’s fiscal surplus. Last month, the government also raised $1bn in a bond auction for international investors.Blazquez Giomi said the measures to increase reserves had “calmed doubts somewhat” but investors’ focus was now turning to flagging economic activity.“The stronger peso is [affecting the competitiveness] of exporting sectors . . . and consumer spending in some areas is still at recession levels,” he said. “It is possible that weaker activity starts weighing on certain groups of voters, instead of inflation.” More

Separate readings this week on consumer and producer prices were downright benign, as indexes from the Bureau of Labor Statistics reported both rose just 0.1% in May.
The months ahead are still expected to show price increases driven by President Donald Trump’s desire to ensure the U.S. gets a fair shake with its global trading partners.
So far, though, the duties have not driven prices higher, save for a few areas that are particularly sensitive to higher import costs.

Shoppers browse the frozen food cases at WinCo.
Joe Jaszewski | Idaho Statesman | Tribune News Service | Getty Images

Despite widespread fears to the contrary, President Donald Trump’s tariffs have yet to show up in any of the traditional data points measuring inflation.
In fact, separate readings this week on consumer and producer prices were downright benign, as indexes from the Bureau of Labor Statistics showed that prices rose just 0.1% in May.

The inflation scare is over, then, right?
To the contrary, the months ahead are still expected to show price increases driven by Trump’s desire to ensure the U.S. gets a fair shake with its global trading partners. So far, though, the duties have not driven prices up, save for a few areas that are particularly sensitive to higher import costs.
At least three factors have conspired so far to keep inflation in check:

Companies hoarding imported goods ahead of the April 2 tariff announcement.
The time it takes for the charges to make their way into the real economy.
The lack of pricing power companies face as consumers tighten belts.

“We believe the limited impact from tariffs in May is a reflection of pre-tariff stockpiling, as well as a lagged pass-through of tariffs into import prices,” Aichi Amemiya, senior economist at Nomura, said in a note. “We maintain our view that the impact of tariffs will likely materialize in the coming months.”

This week’s data showed isolated evidence of tariff pressures.

Canned fruits and vegetables, which are often imported, saw prices rise 1.9% for the month. Roasted coffee was up 1.2% and tobacco increased 0.8%. Durable goods, or long-lasting items such as major appliances (up 4.3%) and computers and related items (1.1%), also saw increases.
“This gain in appliance prices mirrors what happened during the 2018-20 round of import taxes, when the cost of imported washing machines surged,” Joseph Brusuelas, chief economist at RSM, said in his daily market note.
One of the biggest tests, though, on whether the price increases will prove durable, as many economists fear, or as temporary, the prism through which they’re typically viewed, could largely depend on consumers, who drive nearly 70% of all economic activity.
The Federal Reserve’s periodic report on economic activity issued earlier this month indicated a likelihood of price increases ahead, while noting that some companies were hesitant to pass through higher costs.
“We have been of the position for a long time that tariffs would not be inflationary and they were more likely to cause economic weakness and ultimately deflation,” said Luke Tilley, chief economist at Wilmington Trust. “There’s a lot of consumer weakness.”
Indeed, that’s largely what happened during the damaging Smoot-Hawley tariffs in 1930, which many economists believe helped trigger the Great Depression.
Tilley said he sees signs that consumers already are cutting back on vacations and recreation, a possible indication that companies may not have as much pricing power as they did when inflation started to surge in 2021.
Fed officials, though, remain on the sidelines as they wait over the summer to see how tariffs do impact prices. Markets largely expect the Fed to wait until September to resume lowering interest rates, even though inflation is waning and the employment picture is showing signs of cracks.
“This time around, if inflation proves to be transitory, then the Federal Reserve may cut its policy rate later this year,” Brusuelas said. “But if consumers push their own inflation expectations higher because of short-term dislocations in the price of food at home or other goods, then it’s going to be some time before the Fed cuts rates.”

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Unlock the White House Watch newsletter for freeYour guide to what Trump’s second term means for Washington, business and the worldDonald Trump has called Federal Reserve chair Jay Powell a “numbskull” for not cutting interest rates, saying the White House may “have to force something” if the US central bank does not reduce borrowing costs. The president on Thursday repeated his calls for the Fed to cut borrowing costs by a full percentage point — a measure Trump said would save the US hundreds of billions of dollars a year on its debt. “We are going to spend $600bn a year because of one numbskull that sits there, [saying] ‘I don’t see enough reason to cut the rates’,” Trump told reporters, referring to Powell, who he has nicknamed “too late”. The president added: “I may have to force something.”Trump did not specify what he meant by force — and said he would not fire the Fed chair ahead of the end of his term in May 2026. The president’s comments came less than a week before the central bank’s June meeting, in which policymakers are expected to hold rates steady. The Fed has this year halted a rate-cutting cycle that began in 2024 over concerns that Trump’s trade tariffs could fuel a fresh bout of inflation. At 4.25 per cent to 4.5 per cent, the Fed’s benchmark target range is more than double the main European Central Bank interest rate, following several moves by Eurozone rate-setters this year.Powell has repeatedly said the Fed will set rates based on data, rather than Trump’s wishes for lower borrowing costs, including at a meeting late last month that was held at the president’s request.Trump’s repeated attacks on Powell over his reluctance to cut rates this year have sparked speculation that he could speed up the nomination process for Powell’s successor.Remarks last Friday from Trump that he could make a decision on a potential successor “very soon” have led to speculation among some economists that he could nominate a “shadow Fed chair” in a bid to massage expectations of future rate cuts once his preferred candidate takes charge of the central bank. Treasury secretary Scott Bessent, who is seen as one of the leading candidates to replace Powell, proposed the idea of creating a shadow Fed chief in an interview in October. Stanford academic and former Fed governor Kevin Warsh, National Economic Council head Kevin Hassett and current Fed governor Christopher Waller are also considered potential candidates for the job. The “shadow” role could, in theory, move expectations of where interest rates will be years from now, which would — if credible — lead to immediate movements in US borrowing costs.However, Fed-watchers are sceptical on whether a shadow Fed chair could influence expectations of future rate cuts in an environment of heightened economic uncertainty.“Markets are not going to defer to an individual that is not yet confirmed as a member of the Fed board, much less the chair,” said Doug Rediker, managing partner at International Capital Strategies. “If you want to make sure you are upending investor confidence in an already tense Treasury market, then make sure you have competing voices on what the Fed is going to do.” He added: “The earlier Trump names someone, the more opportunity he or she has to say or do something that puts a bullseye on their head and for people to find reasons to oppose them.” More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The UK has agreed that Spain will check goods entering Gibraltar as part of a deal to remove border controls for people moving between the two territories, according to British and European officials.The Rock’s airport will be almost entirely closed to cargo, and trucks and ships will need to stop at Spanish customs near the border, said a European Commission official. A Spanish foreign ministry official said most checks would be done at the port of Algeciras.The British territory will also lift its sales tax from 3 per cent to at least 15 per cent within three years of the deal’s ratification to avoid unfair competition with Spain where VAT is higher, the European official added.The Spanish official said the tax deal meant “Gibraltar will implement for the first time an indirect tax on goods aligned with European VAT”.The Gibraltarian authorities have backed the deal since almost all goods already enter by land, the European official said, and the changes will allow its citizens to travel unhindered to Spain and to work in bordering areas.A UK official confirmed that Gibraltar had accepted the terms on sales tax and that goods imported to the territory will be checked and cleared by EU customs officers in Spain. A Gibraltar official did not immediately comment.There will be exemptions from checks for particular products, such as cars that are imported, refitted and exported again — a key segment of the Gibraltarian economy. Gibraltar’s port, which occupies a strategic position at the gateway to the Mediterranean, is a key asset for reasons other than cargo imports. It hosts British naval vessels, cruise liners and luxury yachts, and is a key fuel bunkering hub for vessels leaving and entering the Mediterranean.The territory was handed to the UK by the Spanish crown in 1713. While Spain claims sovereignty, the vast majority of its 34,000 people want to remain British.UK Prime Minister Sir Keir Starmer praised the deal unveiled on Wednesday, which solves one of the last big post-Brexit conflicts. Gibraltar’s first minister Fabian Picardo has also strongly supported the deal.Kemi Badenoch, leader of the opposition Conservative party, said on Thursday that while she had not yet seen the full details of the deal she was reassured by the fact Picardo has supported it.“I do actually trust his judgment,” said Badenoch, who was trade minister in the previous government. “My concern is that whenever Keir Starmer signs a deal it’s never a good deal. We always lose out.”Spanish border guards will check passports at the airport and port and can refuse UK citizens entry in some circumstances, since the abolition of the border in effect puts the territory in the EU’s borderless Schengen zone.The agreement, which must be approved by EU member states and the European parliament, was necessary if Spain was to allow a wider reset of relations with London, the European official said.“It would have been very difficult for . . . a number of states like Spain to conclude new agreements with the UK without finding a solution for Gibraltar,” they said.Madrid has been blocking British entry into some EU defence co-operation agreements because of its military presence on the Rock, where it has a naval and air base.At a summit last month the EU and UK agreed to negotiate a veterinary deal to smooth trade in food and animals and a security pact that could allow the UK defence industry to access EU money.” More