Economy

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 the first working day of June. On today’s agenda we have: Donald Trump’s trade war has slammed the brakes on a global dealmaking recovery for the private equity industry. A new forecast from consultancy Bain & Company found that a long-awaited rise in dealmaking had reversed since the US president’s “liberation day” tariffs announcement in April.The key findings: The value of deals for buyout funds to purchase companies in the second quarter is on course to fall 16 per cent from the first three months of 2025, according to the report. The figure for April was down 24 per cent on the monthly average for the first quarter. The value of assets fully or partially sold by buyout funds is on track to drop 9 per cent in the April-June quarter.The context: The data highlights the mounting difficulties for the private equity industry, after several years in which a lack of exits from portfolio companies has left traditional backers such as pension funds and endowments with less money to commit to new funds. For the first time in a decade, no buyout fund closed in the first quarter had raised more than $5bn of capital, Bain said.We have more on the mounting difficulties facing the private equity industry here and on global trade tensions below.Here’s what else I’m keeping tabs on today:Mexico judiciary elections: Counting has begun in Mexico’s first-ever judicial elections. The electoral authority announced late last night that 13 per cent of the country’s 100mn voters cast ballots at the polls. Results will be announced in the coming days.US monetary policy: Federal Reserve Bank of Dallas president Lorie Logan participates in moderated conversation at an event in Dallas and Federal Reserve Bank of Chicago president Austan Goolsbee will speak in Davenport, Iowa.Russia-Ukraine talks: Officials from the two countries meet in Istanbul for a second round of talks a day after Ukraine’s most audacious attack of the war.Companies: Campbell’s is expected to report a rise in third-quarter revenue, helped by demand for its soups and frozen meals.Five more top stories1. Treasury secretary Scott Bessent yesterday insisted the US would never default on its debt as he sought to assuage Wall Street’s concerns over the state of the country’s public finances. Investor jitters over the size of the US federal debt have mounted after Trump’s “big beautiful” budget bill was approved by the House of Representatives. It begins its passage through the Senate this week.Federal Reserve: The US central bank faces a tough summer ahead with a hostile White House, writes Mohamed El-Erian.Go deeper: The close relationship between US government bond yields and the dollar has broken down as investors cool on American assets.2. US authorities are investigating a possible terrorist incident in Boulder, Colorado, after a man allegedly attacked a demonstration in support of Israeli hostages in Gaza. Six people were injured in the assault. The FBI said the attacker was armed with a “makeshift flame-thrower” and was heard to shout “Free Palestine” during the incident.3. Nationalist Karol Nawrocki has narrowly won Poland’s presidential election, beating pro-EU rival and Warsaw mayor Rafał Trzaskowski. Nawrocki’s win is a rare overseas victory for Donald Trump’s Maga movement. US homeland security secretary Kristi Noem described Trzaskowski as “an absolute train wreck” on a visit to Poland last week. Here’s more on what Nawrocki’s victory could mean for Poland, the EU and the war in Ukraine. 4. France’s Sanofi is to buy Massachusetts-based Blueprint Medicines, the maker of the world’s only approved treatment for a debilitating rare blood disorder, for up to $9.5bn. Systemic mastocytosis is estimated to affect about 32,000 people in the US. Read more on one of the biggest biotech acquisitions of 2025.5. The Canadian Steel Producers Association has warned of “catastrophic” job losses, factory slowdowns and supply chain disruption after US President Donald Trump doubled tariffs on imports to 50 per cent. The steel industry in Canada employs 23,000 and supports an additional 100,000 indirect jobs, according to the CSPA.The Monday InterviewJony Ive and Laurene Powell Jobs More

The president is set to raise tariffs on steel and aluminum this week, even as the courts are challenging the legitimacy of other levies.The legitimacy of President Trump’s tariffs is being questioned by U.S. courts, but the president is showing no signs of backing off his favorite tool.On Wednesday, the tariffs that Mr. Trump imposed on foreign steel and aluminum are set to double to 50 percent, a move that the president has said will better protect domestic metal makers.In the coming days, the U.S. government is set to face off with states and businesses that have sued over the president’s tariffs, and both sides will be required to submit more information as judges work toward final decisions on the legality of Mr. Trump’s steepest tariffs.Last Wednesday, the Court of International Trade ruled that some of the steep tariffs that Mr. Trump had imposed were illegal, a significant setback for the president’s agenda.Less than 24 hours later, a separate court temporarily paused that decision. As judges weigh that appeal, the tariffs in question — which include the levies Mr. Trump imposed on Canada, Mexico and China for what he said was their role in the fentanyl trade, as well as the global tariffs Mr. Trump announced, and then quickly paused, in April — are expected to remain in effect at least until June 9.On Sunday, one of Mr. Trump’s top trade advisers insisted that the president would continue to find ways to hit other countries with tariffs even after the trade court ruled against the defining element of Mr. Trump’s strategy.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

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The world’s advanced economies risk a significant GDP loss if they move too quickly to localise supply chains as a result of the deteriorating geopolitical environment, the OECD has warned.Modelling by the international organisation found that aggressive reshoring of supply chains could decrease global trade by 18 per cent, with some countries losing up to 12 per cent GDP compared with persevering with a globalised trading regime.The Paris-based OECD, which represents most of the advanced economies, issued its warning as rising trade tensions between the US and China have intensified questions in boardrooms about the risk posed by integrated supply chains.Marion Jansen, head of the OECD’s trade and agriculture directorate, said the report provided a cautionary counter-narrative to advanced economies that were in danger of swinging too far in the direction of autarky.“In the past, we perhaps underestimated the risk of over-dependency on a single trade partner, but swinging too far towards localising and avoiding international trade would be another mistake, leaving us exposed to domestic shocks and huge inefficiencies,” she added.The OECD used econometric modelling to assess the impact of re-localisation, which it defined as imposing higher import tariffs, using subsidies to encourage domestic production and imposing restrictions on sourcing inputs from certain countries. Some content could not load. Check your internet connection or browser settings.The Supply Chain Resilience Review found that China’s rise as a manufacturing powerhouse over the past 25 years had shifted the balance of trade. Since 2009 export restrictions on critical industrial raw materials have increased fivefold, with China becoming a dominant trading partner for a growing number of countries. Dependency on China had “increased considerably” for several OECD member countries and regions since the mid-1990s, the analysis found, particularly in advanced manufacturing sectors such as cars, pharmaceuticals, lifts and machine parts. Canada, France, Germany and the UK were the most exposed to supply chain shocks, while countries that relied more on domestic production, including the US, Brazil and China, were relatively less exposed.As a result of its dominance of many advanced manufacturing sectors, China is the single most important country for creating “trade dependencies” for OECD members.By the early 2020s, the study found, China was the main trading partner in 30 per cent of cases where countries had “significantly concentrated imports”, compared with 5 per cent in the late 1990s. For OECD members, however, these dependencies were frequently “mutual”, playing out in both directions, while for other large non-OECD economies, such as Brazil, India, Indonesia and South Africa, the growth of import dependency with China “appears more one-sided”.Still, the modelling indicated that supply chain localisation made countries no more resilient to external shocks, with more than half the economies becoming more vulnerable to booms and busts than if they had continued with the interconnected global regime. “This runs counter to some of the claims in the general debate on the risks of GVCs [global value chains],” the report said, adding that “openness and geographical diversification” offered greater options for adjusting to disruptions.Data visualisation by Will Crofton More

Unlock the White House Watch newsletter for freeYour guide to what Trump’s second term means for Washington, business and the worldChina has accused the US of “seriously violating” a trade truce between the two powers and vowed to take strong measures to defend its interests as tensions reignited over the supply of critical minerals.China and the US agreed during talks in Geneva in early May to a deal that would temporarily reduce their tit-for-tat tariffs, which had soared as high as 145 per cent, and that Washington believed would restart the flow of critical rare earths and related magnets to the US. President Donald Trump on Friday claimed that Beijing had “totally violated” the agreement, as US officials grew increasingly frustrated with the slow pace of rare earth exports from China since the May 12 agreement. But on Monday, China’s commerce ministry said it had upheld the deal and accused Washington of introducing “a series of discriminatory and restrictive measures” in recent weeks that undermined the Geneva consensus and harmed “China’s legitimate rights and interests”.“If the US insists on going its own way and continues to harm China’s interests, China will continue to take strong and resolute measures to safeguard its legitimate rights,” the ministry said. Among the US actions cited in the statement were warnings against the use of Huawei chips globally, a halt to sales of chip design software to Chinese companies, and the cancellation of visas for Chinese students.US officials, for their part, believed the May 12 deal would unwind the export restrictions on rare earths Beijing unveiled in early April, and grew increasingly frustrated by the slow pace of approvals. People briefed on the matter said the US had privately raised the issue several times with Chinese officials since the Geneva deal and warned Beijing that it was an issue of highest concern in Washington, with Trump following it closely.This spurred China to hasten the issuance of licences for some US-bound rare earth shipments, according to one person familiar with the Chinese government’s thinking, citing bureaucratic reasons for the delays. The person said they believed this issuance had averted a full breakdown in the trade truce.While China had approved nearly a dozen rare earth shipments to the US, dozens more applications were in limbo, according to a person close to the US.“The fact that they are withholding some of the products that they agreed to release during our agreement, maybe it’s a glitch in the Chinese system, maybe it’s intentional, we’ll see after the president speaks with the party chairman,” said Treasury secretary Scott Bessent in an interview on CBS on Sunday. “What China is doing is they are holding back products that are essential for the industrial supply chains of India, of Europe, and that is not what a reliable partner does,” he said. Still, Bessent said he was confident Trump and Xi would be able to iron out differences over rare earths in an upcoming phone call, which some White House officials suggested could take place this week.China’s foreign ministry did not immediately respond to questions regarding a call. US officials have floated a Trump-Xi call several times without it coming to fruition. Michael Hart, AmCham China president, noted that, while rare earth export applications for US companies were moving slowly, Chinese suppliers had last week received approval to ship rare earths to several American automakers. “It’s a new process China is working through,” he said. “We have heard there are only a handful of officials reviewing thousands of applications.” The rise in US-China tensions sent Asian markets lower. Hong Kong’s Hang Seng index fell 0.8 per cent while Japan’s Nikkei 225 fell 1.3 per cent. The offshore renminbi weakened 0.1 per cent to 7.21 a dollar. Stock markets in mainland China were closed for a public holiday.Additional reporting by Arjun Neil Alim More

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On a typically sunny and breezy day at Lucky Cement in an industrial town outside Karachi, the powerful draughts from the Arabian Sea and Thar Desert and the scorching rays combine to generate more than half of the power it needs thanks to cheap Chinese wind turbines and solar panels.The 5mn tonnes of cement that its 1,300 workers produce at the Nooriabad plant is enough to build 100,000 houses. Since installing wind and solar sources last year, the facility now emits 60,000 fewer tonnes of carbon dioxide than it did when its electricity supply was fossil fuel-dependent.But the variability of the sun and wind means that it is relying for the rest of the time on dirty and expensive fossil fuel-based generators.Now Lucky Cement is working to plug the energy gap by storing power captured from 110-metre-tall wind turbines and a sea of shimmering solar panels sourced from China in a battery energy storage system — also sourced from China.The combination of a glut of lithium, a key battery material, and overcapacity of lower-tier China-made batteries has created a flood of cut-price battery energy storage systems for lower-income countries such as Pakistan.Lucky is investing roughly Rs1.5bn ($5.3mn) to convert a rubble-strewn site into a 20.7MW unit supplied by the world’s biggest battery maker CATL, which can hold enough energy to power up to 20,000 homes for an hour.The battery energy storage system will be Pakistan’s largest to date, Lucky said. “A price collapse in wind, solar and batteries has made the payback periods very competitive,” said Hassan Mazhar Rizvi, the factory’s general manager for power generation. “This will ensure smooth operations, and increase our solar and wind portions.”Chinese solar panel prices have plummeted in recent years as the cost of electricity from Pakistan’s grid has surged, prompting the country of 240mn people to import solar panels with the capacity to generate about 19GW last year, according to Jenny Chase, BloombergNEF lead solar analyst.Pakistan is still buying panels that collectively could generate 1GW to 3GW a month this year, she estimated, enough to power a city of millions.The battery storage system will help factories to more cheaply extend their operations beyond daylight hours and scale back the use of fossil fuels, compensating for reliability issues from the grid’s renewable sources.For households, hooking up to a battery is a way to store enough energy to cope with spontaneous blackouts and avoid higher rates for energy from the grid during peak usage times in the evenings.“The limit on the [solar] boom was always likely to be the number of daylight hours,” said Chase. “Larger solar systems are useful, because as well as meeting instantaneous demand they can charge the battery for later.”Show video info“Customer interest has gone through the roof,” said Mujtaba Haider Khan, chief executive of Reon Energy, a Karachi-based renewable energy and battery company.Reon’s energy storage systems, including the one purchased by Lucky, mix predictive software, CATL-made batteries and mostly Chinese-origin solar and wind technology, and can boost a factory’s clean energy usage and cut fossil fuel energy waste, said Khan.“Companies can now recover their investment in transitioning to predominantly renewable energy — using solar, wind and batteries — in less than two years.”The battery storage systems are still too expensive to be adopted as widely as solar has been in Pakistan in the near future. But distributors say prices are falling rapidly and demand continues to grow.Faaz Diwan, director at Karachi-based Diwan International, one of Pakistan’s largest solar and battery distributors, said the cost of the BYD batteries he sold had fallen by more than a third since last year to about Rs275,000 for a 5kWh unit that is enough to power a small house.His company has been importing more than 500 batteries a month since March, three times more than last year, as wealthier households, gyms, mosques and businesses gobble up storage systems to save money on air-conditioning ahead of summer.“Definitely, demand will go up this summer,” said Diwan, who estimated that the roughly Rs150mn in sales he was registering each month would double from July.Pakistan’s grid, meanwhile, faces what analysts have called a “death spiral” as usage falls and more bills go unpaid by poorer customers who cannot afford the jump in costs. Households that can afford solar panels are switching off.Since 2015, Pakistan has drawn in billions of dollars’ worth of sovereign-backed loans to finance new power plants and signed long-term liquefied natural gas deals with QatarEnergy and Italy’s Eni. Both efforts resolved the worst of the blackouts but proved costly, as Pakistan’s economic growth has not kept up with the demand projections made at the time. The result is a cash-strapped country that owes some $18bn in mounting power and gas sector debts.To bring down costs, the government, with the help of the military and intelligence services, has renegotiated contracts signed with local power producers. It has also pleaded with China to extend the time needed to repay the sovereign-backed loans and sought to defer or redirect LNG shipments.The government has introduced a levy on industries that use captive natural gas plants instead of energy from the grid, and converted savings from contract renegotiations and a downturn in global commodity prices into a power tariff reduction of between 12 and 17 per cent. It has also offered 2,000MW worth of excess power for crypto miners and artificial intelligence data centres.In April, power generation involving the grid, a proxy for consumption, rose almost 22 per cent year on year, but overall demand in the 10 months to April is still below where it was the year before. Javed Hassan, an Islamabad-based independent economic analyst, said the gain was “likely to be temporary”.Pakistan’s power minister Awais Leghari told the Financial Times that the government was working to create a more competitive electricity market and find other ways to sustain power cost reductions.“I can’t stop the evolution of technology,” he said. “Competition is a very healthy way to bring about efficiencies in the entire system.”Climate CapitalWhere climate change meets business, markets and politics. Explore the FT’s coverage here.Are you curious about the FT’s environmental sustainability commitments? Find out more about our science-based targets here More

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