Economy

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The European Central Bank has signalled it is nearing the end of its rate-cutting cycle as it lowered borrowing costs by a quarter point to 2 per cent in response to uncertainty over the impact of Donald Trump’s trade war.Following the widely expected cut, ECB president Christine Lagarde said the central bank had “nearly concluded” the latest monetary policy cycle, which has led to rate-setters halving borrowing costs from a peak of 4 per cent since June 2024.The Eurozone would be in a “good position to navigate the uncertain conditions” facing the bloc, she added in an apparent reference to trade tensions between the US and EU.The euro climbed following Lagarde’s remarks, trading 0.3 per cent higher against the dollar at $1.145 by late afternoon in Europe. Traders reined in their bets on rate cuts, with swaps markets pricing in just one further reduction in the second half of the year. Prior to a press conference on Thursday at the ECB’s headquarters in Frankfurt, markets had implied a small chance of two further cuts.“She said several times ‘we are well positioned at the moment’,” noted Andrew Kenningham at Capital Economics. “[This] perhaps implies that interest rates don’t need to [fall] any more.”Kaspar Hense, a portfolio manager at RBC BlueBay Asset Management, said: “For the time being, the ECB can claim to have achieved a soft landing for Europe and the last mile seems to have come to an end.”Show video infoLagarde was questioned about her future at the institution, after World Economic Forum founder Klaus Schwab told the Financial Times that she had discussed cutting short her term as ECB president to join the body behind the annual meetings of business and political leaders in Davos in Switzerland. She insisted: “I am determined to complete my term. Period.”The central bank on Thursday lowered its inflation outlook for this year to its medium-term 2 per cent target, down from the 2.3 per cent it predicted in March. It also revised its estimate for 2026 to 1.6 per cent from 1.9 per cent previously, which Lagarde said was driven by volatile oil and gas prices and the stronger euro. The currency has unexpectedly strengthened since the US president’s “liberation day” tariff announcements.Core inflation, which strips out those volatile factors, is “hardly moving”, Lagarde said. The bank expects inflation to return to its 2 per cent target in 2027.Lagarde acknowledged that “uncertainty surrounding trade policies” risked weighing on “business investment and exports, especially in the short term”. But the bank has not changed its expectations for GDP growth of 0.9 per cent in 2025 and 1.1 per cent in 2026, arguing higher real incomes and a “robust” labour market “will allow households to spend more”. Additional reporting by Alan Livsey in London More

Unlock the White House Watch newsletter for freeYour guide to what Trump’s second term means for Washington, business and the worldDonald Trump’s second term as US president has been dominated by a trade war of his own making, but tracking its impact has been far from straightforward. Many executive orders imposing escalating tariff rates have been swiftly followed by White House climbdowns — the “Trump always chickens out”, or “Taco” theory. US trade data published on Thursday provides the first opportunity to see how Trump’s “liberation day” trade war, unveiled on April 2, applied in practice that month. The “effective tariff rate” calculation cuts through the tangle of headline rates to measure the duties as a percentage of actual import value.The charts below are all incomplete. They form an interactive test of the Trump Taco theory. How accurately can you fill them in?Some content could not load. Check your internet connection or browser settings.Trade data for May is expected to show a higher effective tariff rate. The Yale Budget Lab estimated that all Trump’s duties in effect today would lift the effective tariff rate to at least 14.5 per cent, the highest since 1938. Tariffs on iron and steel have been at the heart of Trump’s trade agenda as he attempts to revive the US’ manufacturing sector. Official import data differentiates between iron and steel as raw materials and pre-manufactured items. Both of which were targeted by Trump in his first term, but not at the same intensity.Some content could not load. Check your internet connection or browser settings.China has been hit with some of the steepest tariffs in Trump’s second term. But Mexico, the single biggest US trade partner, was also an early target of Trump tariffs back in February. How do their rates compare?Some content could not load. Check your internet connection or browser settings.Effective tariff rates vary enormously by product category. Some, such as knitted clothing, have been covered by relatively high duties for a number of years. Others, such as electrical equipment and toys, have surged under Trump’s new tariff regime from traditionally low levels. But some unexpected categories stand out. Take what has happened, for instance, to the effective tariff rate for “umbrellas, sun umbrellas, walking-sticks, seat-sticks, whips, riding-crops and parts thereof”?Some content could not load. Check your internet connection or browser settings.The effective tariff rate for umbrellas increased rapidly because the majority of US imports come from China, which was subject to the steepest Trump duties. The EU has been treated as a single bloc by Trump’s tariffs. But in practice individual countries are subject to very different effective tariff rates based on the type of goods they export to the US. This chart compares Ireland’s effective tariff rate to that of the EU as a whole.Some content could not load. Check your internet connection or browser settings.Ireland is relatively unscathed because pharma is the country’s main export to the US, which has been subject to exemptions. Trump has threatened to impose higher tariffs on the sector in future.Trump argued on “liberation day” that his higher tariffs would raise “trillions and trillions of dollars to reduce our taxes and pay down our national debt”.The chart below shows the difference Trump’s trade war has made to US customs revenues. Some content could not load. Check your internet connection or browser settings.The higher tariffs have driven up customs revenues. But the revenue generated in April are small beer in the context of US public finances, equivalent to less than 4 per cent of typical monthly federal spending. More

U.S. trade fell sharply as President Trump’s global tariffs began to weigh on imports.The U.S. trade deficit in goods and services narrowed sharply in April, falling to $61.6 billion compared with$138.3 billion in March as tariffs clamped down on global trade.U.S. goods imports fell significantly in April, dropping by 16.3 percent from March, the data released from the Commerce Department showed, as tariffs on exports from China and other countries weighed on trade. The sharp drop reflected the fact that importers had rushed to bring many goods into the United States at the beginning of the year to get ahead of tariffs ordered by President Trump.Exports rose slightly, up 3 percent from the previous month.Mr. Trump has imposed tariffs on a variety of industries and trading partners since coming into office in January, raising the U.S. tariff rate to levels not seen in a century. The president has temporarily suspended some of the tariffs to allow for trade negotiations, but many are set to snap back into effect in early July unless deals are reached.“The big swing in the trade deficit reflects the global trade war,” said Mark Zandi, the chief economist at Moody’s Analytics. “With the tariffs, goods imports collapsed in April, leading to a much smaller trade deficit.” Mr. Zandi added that a smaller trade deficit would likely result in higher gross domestic product in the second quarter, since a trade deficit is subtracted from that figure. But he cautioned that the tariffs would still have negative consequences for American consumers and the economy.“The higher U.S. tariffs have severely disrupted global trade, which will soon show up as higher prices for many of the goods Americans buy, weighing heavily on their purchasing power and spending, and by extension, the broader economy,” he said. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.UK inflation was overstated by 0.1 percentage points in April owing to an error in tax figures provided by a government department, the Office for National Statistics said on Thursday, in the latest blow to confidence in the quality of economic data.Annual inflation would have been 3.4 per cent in the month, according to the corrected data, rather than the 3.5 per cent initially reported. Economists polled by Reuters had expected a rate of 3.3 per cent, up sharply from 2.6 per cent in March.The correction affects one of the UK’s most market-sensitive economic data series, an indicator that has particular significance to government bond markets, currencies and Bank of England interest rate decisions. The BoE has been vocal about the difficulties it is experiencing deciding the path for monetary policy given uncertainty about the accuracy of official data, in particular labour market figures.Last month Sir Ian Diamond, stepped down as head of the ONS citing “ongoing health issues”, weeks after ministers commissioned a review of the agency’s leadership, culture and structure. Economists were taken aback by the leap in the vehicle excise duty component of inflation when inflation data for April was published on May 21. Traders trimmed back bets on BoE rate cuts in the wake of the figures, as some saw inflation proving stickier than the central bank had expected. The ONS said on Thursday that the Department for Transport had supplied the incorrect data as part of the process of calculating inflation. This had overstated the number of vehicles subject to VED rates applicable in the first year of registration, which led to headline consumer price and retail price indices being overstated. “No other periods are affected,” the ONS added in a statement. In line with its revisions policy, it said, the April figure would remain at 3.5 per cent in its historic series, but the ONS will be using the correctly weighted data from figures from May 2025 onwards. The DfT’s published official statistics were unaffected, the ONS added. The ONS noted that the error was isolated to one set of data used to calculate the VED index, but the agency added that it “is reviewing its quality assurance processes for external data sources in light of this issue”.The DfT did not immediately respond to a request for comment. Conservative shadow chancellor Sir Mel Stride said it was “thoroughly reprehensible” that the ONS was not able to give more accurate data. He singled out problems in the agency’s labour market survey, which has been beset by inaccuracies stemming from declining survey responses underpinning figures including the unemployment rate. “I don’t think that’s acceptable actually, and I’m surprised it has been allowed to persist for as long as it has,” he told an event at the Royal Society of Arts in London. Asked about Stride’s comments, a spokesperson for the ONS said: “We are working hard to address pressing issues and will publish a plan shortly to outline the restoration of our key statistical outputs.”The long-running problems with the labour market survey have raised doubts over key indicators such as unemployment, inactivity and productivity. But errors have also been found in other ONS data releases, including trade figures.“The trouble for the ONS is that this is part of a developing pattern of weakness which further undermines confidence,” said Tony Travers, a professor at the London School of Economics. “Given data and analytical advances in recent decades, this kind of failure is all the more problematic.”Rob Wood, economist at consultancy Pantheon Macroeconomics, said that while budget restrictions had compromised the ONS’s ability to produce accurate statistics, “errors . . . are piling up and have now at one time or another affected all the real key economic statistics of inflation, unemployment and GDP”.While the 0.1 point error in April’s inflation rate would not “make or break” the organisation’s credibility, said Wood, it was “crucial that the ONS climbs the mountain of restoring trust in its statistics”. BoE governor Andrew Bailey, when asked at the House of Commons Treasury committee on Tuesday about the impact of confidence in official data on central bank’s rate decisions, said: “It does have a bearing on it. “We certainly spend more time on it, and that’s obviously what we should do, given the uncertainty.” More

The European Central Bank has signalled it is nearing the end of its rate-cutting cycle as it lowered borrowing costs by a quarter point to 2 per cent. The euro climbed to trade 0.5 per cent higher against the dollar at $1.147 after remarks by ECB President Christine Lagarde that the central bank’s easing cycle had “nearly concluded”.Traders reined in their bets on future rate cuts, with swaps markets pricing in just one more reduction in the second half of the year. Previously, markets had implied a small chance of two further cuts.Thursday’s widely expected decision means the ECB has now halved its benchmark rate from a peak of 4 per cent over the past 12 months. Most analysts predict that the unexpected strength of the euro since Donald Trump’s “liberation day” tariff announcements in April, combined with lower energy prices and a potential rise in imports from China, will keep a lid on consumer price rises in the Eurozone. But economists and policymakers remain unsure over whether a trade war will ultimately dampen or speed up inflation.The ECB lowered its inflation outlook for this year to its medium-term 2 per cent target, down from the 2.3 per cent it predicted in March.Some content could not load. Check your internet connection or browser settings. 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 back to FirstFT. Today we’re covering: Big investors’ shift from the USTrump’s probe into Biden’s aidesThe collapse UK start-up Builder.ai Big Tobacco’s new nicotine hitBig institutional investors are shifting away from American markets as they “rethink” their US exposure.Why is this happening? President Donald Trump’s erratic trade policy has shaken global markets in recent months, sparking a sharp sell-off in the US dollar and leaving Wall Street stocks lagging far behind European rivals this year. Trump’s “big beautiful bill”, which the Congressional Budget Office yesterday forecast would add $2.4tn to Washington’s debt over the next decade, is escalating fears about the US debt mountain.Where are investors looking? Europe. Yesterday Apollo Global Management became the latest US investor to outline ambitious investment plans for Europe. It plans to invest $100bn in Germany. Investment groups such as Blackstone and New York-based Neuberger Berman have also cited the region’s relative stability, while Caisse de dépôt et placement du Québec, Canada’s second-largest pension fund, has said it would cut US exposure and increase investment in the UK, France and Germany. Here’s more on how Trump has shaken confidence in American assets and what else we’re keeping tabs on today:White House: Donald Trump welcomes the new German Chancellor Friedrich Merz to the Oval Office for their first face-to-face meeting. The German chancellor’s visit comes as the US-EU rift deepens. Interest rates: The European Central Bank is expected to cut borrowing costs after Eurozone inflation fell below its 2 per cent target. The decision comes a day after Bulgaria was given the green light to join the euro.Lex Greensill: The Australian financier is set to make his first public courtroom appearance since his eponymous lending company collapsed, in a London court case brought by a Credit Suisse fund against SoftBank.Companies: Long queues have formed outside stores around the world for the launch of Nintendo’s Switch 2 games console. Companies reporting results today include Broadcom, Brown-Forman, Lululemon Athletica and Victoria’s Secret.Five more top stories1. Donald Trump has launched a probe into aides of Joe Biden for allegedly concealing his mental decline. The investigation follows the release of a book last month by journalists Jake Tapper and Alex Thompson that contains damaging revelations about Biden’s declining mental and physical acuity. Read more on Trump’s latest effort to seek retribution against political foes.2. Vladimir Putin plans to retaliate for Ukraine’s drone attack on Russia’s bomber fleet, Trump said after an hour-long phone call with his Russian counterpart. The US president called it “a good conversation” in social media posts, but added that it was “not a conversation that will lead to immediate Peace”.More on Russia: Moldova’s prime minister has warned that Moscow wants to install a pro-Kremlin government and deploy 10,000 troops in a separatist region on Ukraine’s border.3. Trump’s trade war is an even tougher challenge for emerging market policymakers than Covid-19 was, a top IMF official Gita Gopinath warned. The fund’s first deputy managing director said the unpredictable impact of tariffs would make it particularly difficult for central bankers to support their economies. Read her full interview with the FT. 4. Wise, the foreign exchange fintech, has become the latest company to switch its primary stock market listing from London to New York. The company was founded by Estonians Kristo Käärmann and Taavet Hinrikus in London in 2010 and launched on the London stock market with great fanfare in 2021, with a valuation of close to £9bn. Here’s more on its decision to switch listing.More financial industry news: Citigroup has laid off 3,500 technology staff in mainland China as part of a push to cut costs and streamline its global operations.5. Donald Trump’s administration has said Columbia University no longer meets the standard required for accreditation due to its violation of federal anti-discrimination laws, sharply escalating its pressure on the institution. The action threatens Columbia’s access to tens of millions of dollars in tuition fees from government-backed student grants and loans to support students.News in-depthWhen Builder.ai raised more than half a billion dollars from some of the world’s top technology investors, including Microsoft and Qatar’s sovereign wealth fund, it had a simple pitch: it could use artificial intelligence to make building apps “as easy as ordering pizza”. But this week, the London start-up formally filed for bankruptcy in the US following an internal investigation which found evidence of potentially bogus sales. The FT spoke to former employees and reviewed documents to go inside the collapse of the UK tech unicorn.We’re also reading . . . US debt: An activist Treasury issuance strategy under Joe Biden has continued under Trump and is spreading internationally, writes economist Nouriel Roubini.Joe Biden: The former US president has become a scapegoat for a long-standing problem in his party, writes Janan Ganesh: a tolerance of obvious election losers.Akio Toyoda: More than 20 people who know the scion of Toyota’s founding family speak to FT Magazine on his rise — and the strains in his reign over a vast empire.Chart of the daySome content could not load. Check your internet connection or browser settings.In just a few years, nicotine pouches have taken off everywhere from Premier League locker rooms to Wall Street trading floors, gaining something of an anti-establishment reputation that has made them a cause célèbre for the Maga movement. The growth in sales of products such as Zyn and Velo is astonishing, but the health implications are little understood. Regulators around the world are cautious, but cigarette companies have seized on the trend. Can pouches save Big Tobacco?Take a break from the newsA 120-year-old Japanese stationery company has launched a self-declared “micromotivation” device — a gizmo that attaches to your pen or pencil to measure how much handwriting you have done (and pit your progress against everyone else). Leo Lewis explains how it works, and what it says about our obsession with self-quantification.The ‘Otona no yarukipen’ (adult motivation pen), a device that tracks writing progress More

The U.S. economy has contracted over the past six weeks as hiring has slowed and consumers and businesses worried about tariff-related price increases, the Fed reported.
On inflation, the report described prices as rising “at a moderate pace” and “widespread reports of contacts expecting costs and prices to rise at a faster rate going forward.”
Regionally, Boston, New York and Philadelphia all reported declining economic activity.
Richmond, Atlanta and Chicago were among the districts reporting better growth.

A store closing sign is displayed as customers shop during the last day of a store closing sale at a JOANN Fabric and Crafts location in a shopping mall following the company’s bankruptcy in Torrance, California, on May 27, 2025.
Patrick T. Fallon | Afp | Getty Images

The U.S. economy has contracted over the past six weeks as hiring has slowed and consumers and businesses worried about tariff-related price increases, according to a Federal Reserve report Wednesday.
In its periodic “Beige Book” summary of conditions, the central bank noted that “economic activity has declined slightly since the previous report” released April 23.

“All Districts reported elevated levels of economic and policy uncertainty, which have led to hesitancy and a cautious approach to business and household decisions,” the report added.
Hiring was “little changed” across most of the Fed’s 12 districts, with seven describing employment as “flat” amid widespread growth in applicants and lower turnover rates.
“All Districts described lower labor demand, citing declining hours worked and overtime, hiring pauses, and staff reduction plans. Some Districts reported layoffs in certain sectors, but these layoffs were not pervasive,” the report said.
On inflation, the report described prices as rising “at a moderate pace.”
“There were widespread reports of contacts expecting costs and prices to rise at a faster rate going forward. A few Districts described these expected cost increases as strong, significant, or substantial,” it said. “All District reports indicated that higher tariff rates were putting upward pressure on costs and prices.”

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There were disparities, however, over expectations for how much prices would rise, with some businesses saying they might reduce profit margins or add “temporary fees or surcharges.”
“Contacts that plan to pass along tariff-related costs expect to do so within three months,” the report said.
The report covers a period of a shifting landscape for President Donald Trump’s tariffs.
In early May, Trump said he would relax so-called reciprocal tariffs against China, which responded in kind, helping to set off a rally on Wall Street amid hopes the duties would not be as draconian as initially feared.
However, fears linger over the inflationary impact as well as whether hiring and the broader economy would slow because of slowdowns associated with the tariffs.
Tariffs were mentioned 122 times in Thursday’s report, compared to 107 times in April.
Regionally, Boston, New York and Philadelphia all reported declining economic activity. Richmond, Atlanta and Chicago were among the districts reporting better growth.
In New York specifically, the Fed found “heightened uncertainty” and input prices that “grew strongly with tariff-inducted cost increases. Richmond reported a slight increase in hiring despite Trump’s efforts to trim the federal government payroll.

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<!–> –><!–> [–><!–>President Trump has announced wave after wave of tariffs since taking office in January, part of a sweeping effort that he has argued would secure better trade terms with other countries. “It’s called negotiation,” he recently said.–><!–> –><!–> [–><!–> –><!–> [–><!–>The 90-day goal, however, is a tenth of the time it usually takes […] More