Economy

Unlock the White House Watch newsletter for freeYour guide to what Trump’s second term means for Washington, business and the worldDonald Trump said a new high-level round of trade talks between the US and China would take place on Monday in London, as Washington and Beijing move quickly to try to stabilise their fraught economic relations.The US president announced details of the negotiations a day after a phone call with Chinese President Xi Jinping during which the two leaders agreed to try to ease the trade war that has been shaking financial markets.Treasury secretary Scott Bessent, commerce Howard Lutnick and US trade representative Jamieson Greer will be meeting in London on June 9 with “Representatives of China, with reference to the Trade Deal”, Trump announced in a Truth Social post on Friday. “The meeting should go very well. Thank you for your attention to this matter!”The Chinese embassy in Washington did not immediately respond to a request for comment on the planned talks in London.The planned meeting in London next week comes little more than two months after Trump’s “liberation day” tariffs unleashed a tit-for-tat escalation in levies between the world’s largest economies that soared as high as 145 per cent. Last month in Geneva, Bessent sealed a deal on behalf of Trump to mutually reduce the tariffs in the face of a market backlash and concerns of severe damage to global supply chains.But even after the truce in Switzerland, tensions between the US and China have remained high. Some of the most notable sticking points, such as rare earth exports and trade in advanced technologies, including semiconductors, will be high on the agenda in the London negotiations.The launch of the new round of talks in the UK capital will be reassuring to investors, pointing to a desire in Washington and Beijing not to completely rupture the economic relationship.During the Biden administration, as well as during the first Trump administration, periods of economic friction between the US and China were often followed by periods of détente and dealmaking through similar ministerial-level talks.During their call, Trump and Xi also agreed to mutual visits of each other’s countries but have not settled on any dates.Wall Street took news of the talks in its stride on Friday. The S&P 500 held on to most of its gains from earlier in the session and closed 1 per cent higher. More

The writer is professor of economics at Harvard University and author of ‘Our Dollar, Your Problem’US fiscal policy is running off the rails, and there seems to be little political will in either party to fix it until a major crisis occurs. The 2024 budget deficit was a mind-blowing 6.4 per cent of GDP; credible forecasts suggest that the deficit will exceed 7 per cent of GDP for the rest of President Donald Trump’s term. And that is assuming there is no black swan event that once again causes growth to crater and debt to balloon. With US debt already exceeding 120 per cent of GDP, it seems a budget crisis of some sort is more likely than not over the next five years.True, if markets trusted US politicians to prioritise fully repaying bond holders — domestic and foreign — above all else, and not to engage in partial default through inflation, there would be nothing to worry about. Unfortunately, if one looks at the long history of debt and inflation crises, the overwhelming majority occur in situations where the government could pay if it felt like it. Typically, a crisis is catalysed by a major shock that catches policymakers on their back foot, when debt is already very high, and fiscal policy inflexible.Certainly the One Big Beautiful Bill Act preserves the tax cuts from Trump’s first term, which in all likelihood helped spur growth. However, the evidence from several rounds of tax cuts going back to Ronald Reagan in the 1980s suggests that they do not nearly pay for themselves. Indeed they have been the major contributor to the steady run-up in debt during the 21st century. And Trump’s new tax bill contains a raft of highly distortionary add-ons — no tax on tips, overtime or social security — that are not helpful. Not surprisingly, the Congressional Budget Office concluded that the bill would add $2.4tn to debt over the next decade.The real problem for politicians is that American voters have become conditioned to never having to deal with sacrifice. And why should they?  Since Bill Clinton last balanced the budget at the end of the 1990s, both Republican and Democratic leaders have tripped over themselves to run ever larger deficits, seemingly without consequence. And if there is a recession, financial crisis or pandemic, voters count on getting the best recovery that money can buy. Who cares about another 20 to 30 per cent of GDP in debt?What has changed, unfortunately, is that long-term real interest rates today are far higher than they were in the 2010s. Between 2012 and 2021, the inflation-indexed 10-year US Treasury bond yield averaged around zero. Today, it is over 2 per cent and, going forward, interest payments are likely to be an ever-larger force pushing up the US debt-to-GDP ratio. Real interest rises are far more painful today than they were two decades ago, when US debt to GDP was half what it is now.Why are real rates rising? One reason, of course, is record global debt levels, both public and private. This is only part of the story, however, and not necessarily the most important part.  Other factors — including geopolitical tensions, the fracturing of global trade, rising military expenditures, the prospective power needs of AI and populism — are all important. Yes, inequality and demographics arguably push the other way, which is why a number of prominent scholars still believe a sustained return to ultra-low real interest rates will ultimately save the day. But should the US, which aims to be global hegemon for another century or more, be betting the farm on this? Indeed, although long-term interest rates may fall, it is equally possible they may rise with the US 10-year rate, now around 4.5 per cent, eventually reaching 6 per cent or more. The rise will be exacerbated if Trump succeeds in achieving his dream of a lower US current account deficit, the flip side being less foreign money coming into the US.It will also be exacerbated if, as I argue in my latest book, US dollar dominance is now fraying at the edges as China continues decoupling from the dollar, Europe remilitarises and cryptocurrencies take market share in the massive global underground economy. Trump’s tariff wars, threats to tax foreign investment and efforts to undermine the rule of law will only accelerate the process. Indeed, if he succeeds in achieving his dream of closing up the US current account deficit, the reduced inflow of foreign capital will push US interest rates up further, and growth will also suffer.Just because the US debt trajectory is unsustainable does not mean it needs to end dramatically. After all, instead of allowing interest rates to continue drifting up, the government can invoke growth-stifling Japanese-style financial repression, keeping interest rates artificially low and thereby converting any crisis into a slow-motion crash.  But slow growth is hardly a desirable outcome, either. Inflation is the more likely scenario given the centrality of finance to US growth, with the government (whether Trump or a successor) finding a way to undermine the independence of the Federal Reserve. The US’s high debt and inflexible political equilibrium will be a major amplifier of the next crisis and, in most scenarios, the American economy and the dollar’s global status will be the losers. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.US import costs of steel and aluminium, used in everything from baseball bats to cars and aircraft parts, are expected to rise by more than $100bn after Donald Trump raised tariffs on the metals to 50 per cent this week.The higher levies that took effect on Wednesday will result in additional costs of $52.6bn a year on steel and aluminium products, according to estimates by Boston Consulting Group. The new rate takes the total expected costs on imports to $104bn, roughly double the $51.4bn impact forecast by the consultancy before Trump originally introduced a 25 per cent levy in March.Analysts said the complex web of tariffs imposed by the US and Trump’s frequent changes to his tariff regime have made it difficult to predict how the global trade of the metals would be affected and how much prices of the products would increase in the US.“We have not really seen changes in trade flows with a 25 per cent price hike so far,” said BCG’s managing director Nicole Voigt. “The question is, will we see it with a 50 per cent price hike and this depends on how the price movement [of the metals] will go.”During a UBS conference earlier this week, Ford’s chief financial officer Sherry House said half of the $2.5bn in gross tariff impact it forecast for 2025 came from parts that included steel and aluminium. The numbers could fluctuate due to the tariff negotiations between the US and China, House said, adding: “The China tariffs brings the parts piece down and the aluminium and steel brings the parts piece up. So the good news is they’re offsetting.”Canada and the European Union were the biggest exporters to the US of steel and aluminium products last year, while China was the largest for steel derivatives and Mexico for aluminium derivatives, according to the Congressional Research Service.The new US tariffs could result in export losses of up to $2bn for the metals sector in Canada for the rest of this year, $1bn for Mexico and $600mn for South Korea, Allianz Research estimated. European steel producers have warned that the 50 per cent tariff meant that most of the 3.8mn tonnes of EU exports to the US were now under a “de facto import ban”. They are worried that much of the steel from other countries that had been destined for the US market will now be deflected towards Europe instead, similar to what happened in 2018 when the first US tariffs were introduced. The European Commission this week reported large increases in import volumes and steep price drops for a series of steel products, including guitars to industrial robots, since the start of the year.Tariffs imposed during the first Trump administration reduced imports of steel and aluminium products by an estimated 24 per cent and 31 per cent on average, the US International Trade Commission found in 2023. While this raised average US prices of steel and aluminium by 2.4 per cent and 1.6 per cent respectively, American production of the metals only increased by a small amount. US steel producers have stepped up plans to expand production to boost capacity and help to fill some of the gaps that will be left by a drop in imports, but industry experts said it would take time before the new mills were operational. Philip Bell, president of US trade group the Steel Manufacturers Association, stressed that there had been “over $20bn of investment in new steel facilities” since tariffs were first announced in 2018.S&P Global Ratings estimates that the higher costs from steel and aluminium alone could hit earnings of industrial goods manufacturers by “5-10 per cent without price increases in 2025”. Don Marleau, sector lead for metals, capital goods and packaging at S&P Global Ratings, said while this meant that companies would need to raise prices by 2 per cent to hold profits steady, manufacturers were expected to share some of the rising cost burden to support sales. More

The Bank of Russia reduced its sky-high interest rates on Friday, as inflation eases and economic growth slows.
Some economists forecast the cut to 20% from 21%, but overall it was a dovish surprise to the market, with the ruble dropping against the U.S. dollar following the decision.
Russia’s war in Ukraine has led to intense pressure on its economy, with growth concentrated in manufacturing and supported by state spending.

A Moscow shopping mall pictured earlier this year.
Anadolu | Anadolu | Getty Images

Russia’s central bank on Friday cut its sky-high interest rates for the first time since September 2022, in a sign that inflation pressures — not long ago described by President Vladimir Putin as “alarming” — are beginning to ease.
The Bank of Russia took rates down by 100 basis points to 20%. They had been held at 21% since last October, the highest level since the new benchmark rate was introduced in 2013.

The inflation rate in April was 6.2%, it said, down from an average 8.2% across the first quarter of 2025.
“While domestic demand growth is still outstripping the capabilities to expand the supply of goods and services, the Russian economy is gradually returning to a balanced growth path,” the central bank said Friday, adding that monetary policy would remain tight “for a long period” in order to return inflation to its 4% target.
Russia’s full-scale invasion of Ukraine in February 2022 has put immense strain on prices, with a weaker ruble pushing up import prices, and on an economy it has had to re-orient through subsequent years of war.
Russia’s economy minister Maxim Reshetnikov had urged the central bank to cut rates earlier in the week, as concerns mount about falling output in various sectors. Russian gross domestic product growth rebounded strongly after a period of sharp contraction across 2022 and early 2023, but fell to 1.4% in the first quarter 2025 from 4.5% at the end of last year. Economists meanwhile note that growth has been concentrated in manufacturing, specifically in defense and related industries, and propped up by state spending.
Hopes at the start of the year that U.S. President Donald Trump might be able to push Moscow and Kyiv toward a lasting ceasefire or even a deal to end the war have dwindled quickly, and direct attacks between the countries continue.

Russia’s struggling war economy might be what finally drives Moscow to the negotiating table

Despite this, the ruble is the world’s best-performing currency so far this year, according to Bank of America, attributed to capital controls, policy tightening and a decline in the U.S. dollar. The greenback was 2.72% higher against the ruble on Friday following the rate cut announcement.
Nicholas Farr, emerging Europe economist at Capital Economics, said the cut to 20% was a dovish surprise to the market – meaning a deeper cut than expected – and forecast rates would end the year at 17% from a previous estimate of 18%.
“That said, demand-supply imbalances from the war suggest interest rates will need to stay in restrictive territory,” Farr added.

Stock chart icon

U.S. dollar/Russian ruble.

— CNBC’s Lee Ying Shan and Holly Ellyatt contributed. More

Hiring decreased just slightly in May even as consumers and companies braced against tariffs and a potentially slowing economy, the Bureau of Labor Statistics reported Friday.
Nonfarm payrolls rose 139,000 for the month, above the muted Dow Jones estimate for 125,000 and the downwardly revised 147,000 that the U.S. economy added in April.

The unemployment rate held steady at 4.2%.
Worker pay grew more than expected, with average hourly earnings up 0.4% during the month and 3.9% from a year ago, compared to respective forecasts for 0.3% and 3.7%.

Nearly half the job growth came from health care, which added 62,000, even higher than its average gain of 44,000 over the past year. Leisure and hospitality contributed 48,000 while social assistance added 16,000.
On the downside, government lost 22,000 jobs as efforts to cull the federal workforce by President Donald Trump and the Elon Musk-led Department of Government Efficiency began to show an impact.
Stock market futures jumped higher after the release as did Treasury yields.

Though the May numbers were better than expected, there were some underlying trouble spots.
The April count was revised lower by 30,000, while March’s total came down by 65,000 to 120,000.
There also were disparities between the establishment survey, which is used to generate the headline payrolls gain, and the household survey, which is used for the unemployment rate. The latter count, generally more volatile than the establishment survey, showed a decrease of 696,000 workers.

The report comes against a teetering economic background, complicated by President Donald Trump’s tariffs and an ever-changing variable of how far he will go to try to even the global trading field for American goods.
Most indicators show that the economy is still a good distance from recession. But sentiment surveys indicate high degrees of anxiety from both consumers and business leaders as they brace for the ultimate impact of how much tariffs will slow business activity and increase inflation.
For their part, Federal Reserve officials are viewing the current landscape with caution.
The central bank holds its next policy meeting in less than two weeks, with markets largely expecting the Fed to stay on hold regarding interest rates. In recent speeches, policymakers have indicated greater concern with the potential for tariff-induced inflation.
This is breaking news. Please refresh for updates. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Tata Steel has warned that it could be excluded from tariff-free access to the US under the UK’s trade agreement with Washington, putting more than £150mn worth of annual exports at risk. Britain’s largest steel producer, which owns the vast Port Talbot site in south Wales, fears that under the agreement announced between the UK and the US last month it will no longer be able to export to America because of the origin of some of its products. After closing its two blast furnaces at Port Talbot last year Tata has been importing steel from its sister plants in India and the Netherlands for processing in the UK to then ship to customers. However, this could breach US import rules that require all steel to be “melted and poured” in the country from which it is imported.Earlier this week US President Donald Trump exempted British steelmakers from a doubling of US steel and aluminium tariffs from 25 per cent to 50 per cent. Last month’s US-UK trade pact promised to lower these tariffs to zero, but it has not yet been agreed when this will take effect, leaving the industry in limbo. Exact details of the deal are also not yet finalised. Rajesh Nair, chief executive of Tata Steel UK, said in a statement on Friday that his company was urging the government to “secure a deal as soon as possible”.He said Tata would need to keep importing steel until its new electric arc furnace is operational from late 2027. It is therefore “critical for our business that melted and poured in the UK is not a requirement to access the steel quotas in any future trade deal”. “Even though we are not currently melting steel in the UK, we remain the largest steel producer in the country and our mills continue to transform imported steel coil and slab into high-value, specialist products which are not available from US producers and are therefore essential to our US customers,” he said. Tata has been warning ministers about the risks to its business for several weeks, according to people familiar with the situation. The company exports more than £150mn worth of steel to the US every year, including for packaging products. UK negotiators have been trying to secure a carve-out for Tata. One government official said the US talks were ongoing, adding that the UK was confident that all British steel producers — including Tata — would “feel the benefit of the deal.”The US is the UK’s second-most important export market for steel after the EU, worth about £400mn a year. British officials are also under pressure from Washington to ensure no Chinese steel enters the US via the UK, given the Chinese ownership of British Steel. The UK government seized control of Britain’s second-biggest steel producer in April. The government has defended its trade agreement with Trump. The UK, said a government spokesperson, was the “first — and currently the only — country to secure a trade deal with the US last month and we remain committed to protecting British business and jobs across key sectors, including steel, as part of our plan for change”. The government would “continue to work with the US to implement our agreement, which will see the 25 per cent US tariffs on steel removed”. More

At the worst point of the labor shortage that emerged in the wake of the Covid-19 lockdowns, Thunderdome Restaurant Group had 100 people sign up for a job interview and only 15 show up. Of the two workers it hired, one never came in.The job market has cooled significantly since then, and Joe Lanni, who runs the Cincinnati-based company with his brother, now faces a different dilemma: how to grow the business, which has over 50 locations, while controlling costs as concerns about the economy spread.So they’re rethinking menu items like freshly made tortillas that require a dedicated full-time worker. They are also planning to shutter a handful of locations where sales have been softest, while adding more outposts of their fast casual restaurants that are doing well.Uncertainty about the economy has skyrocketed as President Trump has begun to radically reshape the global trading system with tariffs, cut off a crucial supply of workers with an immigration crackdown and floated big changes to the rules and regulations that govern how businesses operate. Consumers, who fuel the American economy, have become more hesitant to spend, and according to recent surveys, both the services and manufacturing sectors are slowing.But the economy does not appear to be at the cliff’s edge just yet, and employers like Mr. Lanni don’t want to be too cautious and miss out on opportunities.As his restaurants gear up for outdoor service this summer, Mr. Lanni said, he still expects head count across the company to swell by about 200 people, to around 1,500 employees, before receding in the fall. The stakes are high, however.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

The drastic, sudden pullback in federal dollars is collapsing opportunities for many who’ve spent years in public service.After Matt Minich was fired from his job with the Food and Drug Administration in February, he did what many scientists have done for years after leaving public service. He looked for a position with a university.Mr. Minich, 38, was one of thousands swept up in the mass layoffs of probationary workers at the beginning of President Trump’s second administration. The shock of those early moves heralded more upheaval to come as the Department of Government Efficiency, led by the tech billionaire Elon Musk, raced through agency after agency, slashing staff, freezing spending and ripping up government contracts.In March, about 45 minutes after Mr. Minich accepted a job as a scientist in the University of Wisconsin School of Medicine and Public Health, the program lost its federal grant funding. Mr. Minich, who had worked on reducing the negative health impacts of tobacco use, observed that he had the special honor of “being DOGE-ed twice.”“I’m doubly not needed by the federal government,” he said in an interview.He is still hunting for work. And like hundreds of thousands of other former civil servants forced into an increasingly crowded job market, he is finding that drastic cuts to grants and contracts in academia, consulting and direct services mean even fewer opportunities are available.Some states that were hiring, another avenue for former federal government employees, have pulled back. So, too, have the private contractors typically seen as a landing place. The situation is expected to worsen as more layoffs are announced, voluntary departures mount and workers who were placed on administrative leave see the clock run out.More than 700 people attended a recent resource fair in Arlington, Va., to receive free consultation, professional headshots and workshops.Maansi Srivastava for The New York TimesWe 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