Economy

Unlock the White House Watch newsletter for freeYour guide to what Trump’s second term means for Washington, business and the worldDonald Trump has hit out at Apple’s plans to produce more iPhones in India as a way of avoiding US tariffs on Chinese-made goods, as he continues to push the tech group to manufacture its best-selling device in America. Speaking in Qatar on the latest leg of his Middle East tour, the US president said he had “a little problem with Tim Cook yesterday” after the Apple chief executive confirmed last week that Indian factories would supply the “majority” of iPhones sold in the US in the coming months. The Financial Times previously reported that Apple planned to source from India all of the more than 60mn iPhones sold annually in the US by the end of next year. Trump criticised that idea on Thursday, saying he told Cook: “We are treating you really good, we put up with all the plants you built in China for years. We are not interested in you building in India.”He claimed that Apple would be “upping their production in the United States” following the conversation. Apple did not immediately respond to a request for comment. Trump’s comments are the latest sign of a cooling in the president’s relationship with Apple, one of America’s most valuable companies. Speaking at an event in Riyadh this week after announcing a multibillion-dollar deal to sell hundreds of thousands of Nvidia processors to a new Saudi artificial intelligence project, Trump lavished praise on the chipmaker’s chief Jensen Huang from the stage, saying: “Tim Cook isn’t here but you are.”Apple in February pledged to spend $500bn in the US during Trump’s four years in office, including producing chips and servers for AI. But the company faces huge challenges in replicating its vast Chinese supply chain and production facilities in the US, which rely on a skilled high-tech manufacturing workforce that is now overwhelmingly concentrated in Asia. Analysts estimate it would cost tens of billions of dollars and take years for Apple to increase iPhone manufacturing in the US, where it at present makes only a very limited number of products. US commerce secretary Howard Lutnick said last month that Cook had told him the US would need “robotic arms” to replicate the “scale and precision” of iPhone manufacturing in China. “He’s going to build it here,” Lutnick told CNBC. “And Americans are going to be the technicians who drive those factories. They’re not going to be the ones screwing it in.” Lutnick added that his previous comments that an “army of millions and millions of human beings screwing in little screws to make iPhones — that kind of thing is going to come to America” had been taken out of context. “Americans are going to work in factories just like this on great, high-paying jobs,” he added. For Narendra Modi’s government, the shift by some Apple suppliers into India is the highest-profile success of a drive to boost local manufacturing and attract companies seeking to diversify away from China. Mobile phones are now one of India’s top exports, with the country selling more than $7bn worth of them to the US in the 2024-25 financial year, up from $4.7bn the previous year. The majority of these were iPhones, which Apple’s suppliers Foxconn and Tata Electronics make at plants in southern India’s Tamil Nadu and Karnataka states. Modi and Trump are ideologically aligned and personally friendly, but India’s high tariffs are a point of friction and Washington has threatened to hit it with a 26 per cent tariff. India and the US — its biggest trading partner — are negotiating a bilateral trade agreement, the first tranche of which they say they will be agreed by autumn.“India’s one of the highest-tariff nations in the world, it’s very hard to sell into India,” Trump also said in Qatar on Thursday. “They’ve offered us a deal where basically they’re willing to literally charge us no tariff . . . they’re the highest and now they’re saying no tariff.” More

This article is an on-site version of Free Lunch newsletter. Premium subscribers can sign up here to get the newsletter delivered every Thursday and Sunday. Standard subscribers can upgrade to Premium here, or explore all FT newslettersI have had two takes on US President Donald Trump’s trade war in the past month. First, I pointed out that too many people accept the dubious claim that reducing the trade deficit will boost manufacturing, and explained why we should be sceptical. Second, I wrote about how a tax on imports hurts exports just as much (maybe more, as suggested by some modelling of Trump’s tariffs), so we shouldn’t expect it to reduce the trade deficit. I hope you will indulge me for a third go. Lost in all the commentary are the strong reasons why the US should actually want to maintain its trade deficit and why everyone else might treat it with benign neglect. So this week, Free Lunch rectifies that omission. Share your reactions at [email protected] is taken as axiomatic, way beyond Trumpian circles, that global financial “imbalances” are a bad thing. (Why the scare quotes? I don’t like the word “imbalance” because it seems to presuppose unsustainability: something out of balance can’t remain in that position for long. I prefer “asymmetries” as a more neutrally descriptive term.)But external surpluses and deficits reflect domestic saving and investment decisions. Economies that save more than they invest run external net surpluses (those extra goods they export over those they import pay for building up claims on capital abroad). Those that invest more than they save run external net deficits (those extra goods they import over those they export makes it possible to invest without cutting consumption as much, while building up liabilities to where the extra goods come from). This is the modern view of international economics: external “imbalances” are a function of macroeconomics, not of trade. Seen in a different light, net trade patterns are caused by financial flows and not the other way round. That’s another reason why, as I wrote last week, we shouldn’t expect trade policy to have much effect on net deficits or surplus. (Trade policy can and does affect gross bilateral trade flows, of course, as well as changing how trade affects specific sectors such as semiconductors.)Our default judgment about how appropriate those savings and investment decisions are should, I think, be neutral or positive. Countries make different decisions (through individual market action and public policy) about whether to be net savers or net borrowers. If a global financial and trade market makes all those desires compatible, that, in principle, gets every country what it wants, subject to making it compatible with what others want. The burden of proof is surely on those who want to criticise those domestic decisions.There are some obvious arguments that I’ll mention to put aside. One is that a government may make what we think of as bad choices. So a relatively poor country such as China could let its citizens consume more without investing less. Or it may not reflect our political or democratic sensibilities. So US elites did not for a long time have the interests of declining manufacturing areas at heart. These are valid critiques — of politically constrained domestic decisions. They are not valid critiques of the global financial and trading system.Such a critique would have to claim that there is something inherent to the system that makes it too difficult for a country to make the best choices for it. In the short run, there is a sensible Keynesian version of such an argument: a country that cuts domestic demand and hence imports, or acts to strongly expand exports and generate demand from other countries’ consumers, can cause slowdowns, recessions or unemployment in other countries which may not have the fiscal or other means to counteract it. Hence the label “beggar-thy-neighbour” policy. But to repeat: this can only be a short-term phenomenon. It is not an argument against long-term structural asymmetries, those that persist through the business cycle, including in times of full employment.And yet, there is a highly popular belief that China and other structural surplus economies force the US to run a structural deficit. When you pause to think about it, this is an odd view. Beijing’s policies no doubt aim to shape China’s net surplus. But why think of this as forcing Americans to do anything, rather than offering them a cheaper-than-otherwise opportunity to consume and invest more, if they want to? If Americans wanted to balance their external account, they could do so in many ways; most easily through a revenue-neutral tax reform that would provide an incentive to domestic business investment and reduce consumption. The fact that they choose not to do so suggests that they rather like the benefits that come with a structural trade deficit. And they are right, as we should be tempted to agree when we look at what those benefits are.An external deficit means you can invest more than you save; ie you don’t have to cut consumption as much. For the US, this “more” amounts to about $1tn a year of foreign-funded US investment, or just over 3 per cent of GDP. For comparison, total business investment is close to 14 per cent. As the chart below shows, EU businesses invest a solid 1 per cent of GDP less — and the bloc has a structural net surplus. What is more, 1 per cent of GDP is also how much more US businesses spend on research and development compared with their EU peers. And total US R&D spending has grown from about 2.8 per cent of GDP a decade ago to 3.6 per cent today, just while the external deficit expanded too. It is hard to avoid the conclusion that the US’s structural net inflow of capital is precisely what affords America its current innovative edge. For example, it allows the US to burn enormous amounts of cash to build data centres to train the large language models that have hit the world like a Sputnik flyover — without reducing consumption to fund those capital expenditures. Those amounts are set to exceed $300bn just this year. So that’s about a third of the current account deficit right there. For another example — this one to do with the semiconductor and green industry incentives of Bidenomics — construction spending on manufacturing facilities tripled (in nominal terms) to $240bn during the period of a widening trade deficit. Again, foreigners funded several hundred billion in hopefully productivity-enhancing investments, so that Americans did not need to sacrifice current consumption for future return.The point is that these — and many more investments — are things America is delighted to have. But without the external deficit, it would only be able to have them if it curtailed consumption. That is not an attractive alternative, judging from the recent slump in Trump’s popularity.What about the rest of the world? By running surpluses with the US, they are building up claims on the US economy. But more importantly, they are letting American businesses take the risk on the big investments that are not, as a result, being made in surplus economies. Whether that’s smart depends on your view of the risk. Massive capital spending to train LLMs will bring fortunes if the spenders can reap the return — but if they are just providing the early investments that everyone else can then just cheaply replicate, such as China’s DeepSeek, they will simply have subsidised the rest of the world. Something similar can be said for pharmaceutical research.So whether the rest of the world should be happy about the US sucking in investment funding depends on their assessment of the risks — but this is no systemic critique of “imbalances”, and there is a strong case for being grateful to America. Meanwhile, there are fewer ambiguities about how the deficit benefits the US. It’s like Trump’s old fever dream of building a big, beautiful wall and forcing Mexico to pay for it, except much more valuable and it’s Europe and China lending the money without having to be asked.Other readablesRecommended newsletters for youChris Giles on Central Banks — Your essential guide to money, interest rates, inflation and what central banks are thinking. Sign up hereIndia Business Briefing — The Indian professional’s must-read on business and policy in the world’s fastest-growing large economy. Sign up here More

Unlock the White House Watch newsletter for freeYour guide to what Trump’s second term means for Washington, business and the worldLower US tariffs on British steel, aluminium and car exports are unlikely to take effect for weeks, according to UK officials, as companies complain about continued uncertainty about the levies despite a bilateral trade deal.Prime Minister Sir Keir Starmer said last week the US had agreed in the trade accord to “remove tariffs” on UK steel and aluminium, as well as cut levies on British car exports to 10 per cent for an annual quota of 100,000 vehicles.US commerce secretary Howard Lutnick also signalled UK aerospace had secured a zero tariff rate, saying Washington had “agreed to let Rolls-Royce engines and those kinds of plane parts come over tariff free”. Officials in London and Washington said discussions were ongoing over how much UK steel and aluminium the US would exempt from President Donald Trump’s 25 per cent global tariff on those metals.UK officials also said Washington would need to follow due process in reducing tariffs on these three categories of British exports in the coming weeks, citing in particular the need to finalise bespoke quotas for steel and aluminium. They added it was more important to get the balance right for British industry than to push for a faster implementation of the UK-US accord, adding it was normal for trade deals to take several months to take effect.To adjust the US tariffs on UK cars, Washington would need to issue a document formally amending them and altering the level of duties collected by American customs officials. The UK’s five-page deal with the US aimed at reducing the impact of Trump’s tariffs was completed about five weeks after he unveiled steep levies against almost every major trading partner.The limited nature of the accord stands in contrast to the free trade agreements struck by the US with other nations, which typically result in documents ranging from hundreds to a few thousand pages and can take years to finalise. UK industry expressed concern at the uncertainty around the trade deal with the US, with executives at British carmakers saying they were still subject to a 27.5 per cent levy on exports to America.On Tuesday, Frank-Steffen Walliser, the boss of Bentley, the UK subsidiary of Volkswagen Group, told a Financial Times conference that uncertainty about when the US tariff would change on British car exports was leading consumers to delay purchases.UK aerospace executives said despite verbal reassurances from the British government that the sector would no longer be subject to a 10 per cent US tariff they had not received written confirmation. One executive said the industry needed “reassurance” the promised zero per cent tariffs would materialise. “We are confident it will come but it won’t come just yet,” they added. Adrian Musgrave, head of sales at Bridgnorth Aluminium, the only aluminium coil producer in the UK, said the company’s initial sense of “positivity” when the trade deal was announced had given way to one of “frustration”. “There is no timeline and no detail about this agreement,” he added. Gareth Stace, director-general of UK Steel, a trade body, said “question marks remain over the finer details”, particularly over how US supply chain requirements would work in practice.The UK was previously allowed to export up to 500,000 tonnes of steel a year to the US tariff-free under an agreement struck in 2022 with then- president Joe Biden. There is also concern in British industry over what implication, if any, a new US national security probe into imports of aircraft will have on the UK.The probe could lead to fresh tariffs on US imports of commercial jet engines and parts, and British executives said it was not clear if the trade deal meant UK industry would be exempt. David Henig, a former UK trade negotiator now at the European Centre for International Political Economy think-tank, said the uncertainty around the trade accord highlighted how rapidly the UK and US had moved to announce an agreement.“The problem with doing a quick trade ‘deal’ like this is that nobody knows when or how it is to be implemented, which leaves business winners and losers wondering what is going on and indeed whether it will happen at all,” he added.On Wednesday, Conservative leader Kemi Badenoch used Prime Minister’s Questions in parliament to pour scorn on the “tiny tariff deal” between the UK and US, which she said left Britain “in a worse position than we were”.Starmer hit back that the deal was responsible for saving thousands of British jobs, including at Jaguar Land Rover and British Steel.A UK government spokesperson said Britain “was the first to secure a deal with the US in a move that protects British business and British jobs across key sectors, from auto manufacturers to steel”.“Businesses have been at the heart of our approach throughout, and we have engaged extensively with them to understand their needs,” they added. More

Unlock the White House Watch newsletter for freeYour guide to what Trump’s second term means for Washington, business and the worldThe late Pope Francis had trenchant opinions on many subjects, and the sustainability of sovereign debt burdens in emerging markets was among them.Francis’s address on New Year’s Day this year asked “leaders of nations with Christian traditions to set an example by cancelling or significantly reducing the debts of the poorest countries”. The timing is appropriate: 2025 is one of the Catholic Church’s jubilee years, which come every 25 years and during which debts are traditionally forgiven. The previous one spurred the creation of the inspired global Jubilee 2000 campaign, which successfully argued for writing down the sovereign debt of nearly 40 poor countries. South Africa, which is chairing this year’s G20 of leading nations, has also put the issue on the agenda.As it happens, though, the problems of indebted low- and middle-income countries have recently dissipated. Donald Trump’s tariffs and massive cuts in overseas aid may show contempt for the welfare of the developing world, but emerging (middle-income) and frontier (lower-income, riskier) markets have performed relatively well.The consultancy Capital Economics calculates that the percentage of countries in debt distress, although it has ticked up a little, remains well short of the shocks inflicted by the Covid-19 pandemic and Russia’s invasion of Ukraine. The firm’s measure of EM currency risk has fallen. It is tempting fate to say this, but it looks as if the EM world is emerging from a five-year period of turmoil that hammered those dependent on exports and external capital.In practice, and purely by accident, Trump’s tariff wars have created a surprisingly benign environment for emerging markets. Although no one could claim with a straight face that he is judiciously managing the exchange rate lower as part of some fantastical “Mar-a-Lago Accord”, the dollar has weakened, benefiting EMs that borrow in the US currency. The traditional perverse effect whereby risk aversion arising from eccentric US policymaking actually causes a flight to safety and strengthens the dollar has so far been absent. The net effect of a shambolic trade strategy and weakening growth has also been to reduce US Treasury yields, similarly supporting capital flows to higher-yield markets elsewhere. The spread of EM bond prices over US bonds, which typically rises at times of financial market stress and uncertainty, has remained well contained.While the tariffs create intense uncertainty for EMs such as Bangladesh, Vietnam, Pakistan and Cambodia, which rely on exports to the US, Trump’s fire has been disproportionately concentrated on China. Other emerging and frontier market exporters have thus gained in relative access to the US market.Individually, some economies remain at high risk of renewed financial turmoil. Capital notes that countries such as the hardy crisis perennial Argentina, together with Sri Lanka, Mozambique, Egypt and (for obvious reasons) Ukraine, are still vulnerable to debt or currency risk, far more so than safer countries such as Vietnam. But it also says that some of those countries — including Argentina and Egypt, and particularly Turkey — have made strenuous efforts to improve their public finances and reduce those dangers. Predicting indefinite calm in middle- and low-income countries would be spectacularly unwise. Once Trump is done with yanking tariffs around, or as well as doing so, he might embark on tax cuts large enough to drive up interest rates and the dollar. China might also be a source of instability. There is always the risk Beijing will engineer a devaluation of the renminbi to offset the loss of competitiveness from US tariffs and to head off deflation, which will obviously affect other emerging markets.If there is a return to risk aversion and debt and currency problems in EMs, the world is not exactly perfectly placed to deal with them. The attempt to create a swift and predictable international debt-restructuring mechanism ran into disputes between China and other creditor nations, which stretched out the resolution of debt distress in Zambia and Sri Lanka over several years. The IMF and World Bank remain small relative to the size of global capital flows. And although Trump has historically been a big fan of creditors writing off debt to him and his companies, voluntarily or not, he’s unlikely to extend the same treatment on behalf of the US to debtor governments.In that case, Pope Francis’s successor, Leo XIV, will no doubt be ready to take up the call for widespread debt relief. But it seems unlikely that with Trump as US president he will get the same response as Pope John Paul II did from President Bill Clinton during the last jubilee 25 years ago.Emerging markets are doing better on their own than many investors expected. Given the state of international policymaking towards embattled debtor governments, that’s just as [email protected] More

“Making It Work” is a series about small-business owners striving to endure hard times.When a young hunter died, Lanae Strovers didn’t plan a funeral service with organ music and the Lord’s Prayer. After Ms. Strovers, a director at Hamilton’s Funeral Home in Des Moines, Iowa, heard the man’s family wish for one last hunt with him, she asked a gunsmith to put his cremated remains into some shotgun shells. Then she helped the family plan a hunt in his honor.For a beloved Little League coach, Ms. Strovers turned her funeral home into a mock baseball field, with bases, a popcorn machine and hot dogs. She created a circus — bouncy house, snow cones and all — to commemorate a child taken too soon. She hosted a cocktail hour for a woman who had been a model and fashion designer, building a runway and dressing mannequins in her clothing. In recent decades, the national cremation rate has skyrocketed. That’s led profits from funeral services to drop. At the same time, the costs of gasoline, embalming chemicals and staffing have risen. With the steadfast industry on uncertain footing, funeral directors have been forced to innovate.Lanae Strovers at Hamilton’s Funeral Home in Des Moines, Iowa, next to a coffin-like container used to transport cremation ashes.Eric Ruby for The New York TimesIn preparation for a memorial service, photos of the deceased would be placed on this table at Hamilton’s Funeral Home. Eric Ruby for The New York Times“ I don’t want to say that we’re going to become party planners,” said Ms. Strovers, who is a spokeswoman and trainer for the National Funeral Directors Association. “But I think that those two lines are crossing over and we just need to open up our thought process and be there to help the families.”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

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Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The director-general of the World Trade Organization has warned that bilateral tariff deals between the US and other countries could damage a core principle of trade equality.In an interview with the Financial Times at the end of a visit to Tokyo this week, WTO chief Ngozi Okonjo-Iweala said global trade was in a “crisis” despite the recent de-escalation of a tariff war between the US and China.Japanese officials have privately expressed concern that a hastily negotiated US-UK trade agreement sealed this month could encourage countries to consider expediency-driven bilateral deals that challenge the “most favoured nation” equality principle underpinning the WTO system.Asked if a pattern of such deals would damage that principle, Okonjo-Iweala said that there was such a risk.“That is why we’ve said to WTO members who are making these negotiations bilaterally that they should aim to be as WTO-consistent as possible,” she said, adding that despite recent tensions, 74 per cent of the world’s goods trade was still conducted on MFN terms.Under the MFN concept, countries must offer the same tariff rates to all countries unless they are reduced via a bilateral trade deal that covers “substantially all trade” — which the UK-US pact does not. Okonjo-Iweala said that although tensions between the US and China appeared to have eased since Beijing and Washington agreed a tariff truce at the weekend, the preceding spectacle of the world’s two largest economies imposing tit-for-tat tariffs in excess of 100 per cent would reverberate across the global economy.“When you see this decoupling, and if countries start to align with one side or another, that’s fragmentation. And we have shown that that could lead to a 7 per cent drop in real global GDP in the longer term, which is worse than the hit on global GDP during the 2008-09 financial crisis,” she said.The WTO should accept that large disruptive forces had hit world trade and should look at the reasons, including interrogating why the US had acted as it had and what aspects of the trading system needed to change, Okonjo-Iweala said.“We must not waste this crisis,” she said.“One of the silver linings in this whole crisis is that [WTO] members have come repeatedly to say how much they now value the system . . . and had actually taken it for granted,” Okonjo-Iweala said. “You know sometimes like the air you breathe. You go to the store, you find the things you want, but now they’ve come to value the system.” More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Vietnam, Indonesia and other countries in south-east Asia are caught in the crossfire of US President Donald Trump’s trade war with Beijing, with the region coming under mounting pressure to clamp down on the rerouting of Chinese goods as it heads into tariff negotiations with the US.Chinese exports to the region jumped more than 20 per cent last month, offsetting a plunge in US-China trade and highlighting accusations from the Trump administration that countries in south-east Asia were helping Chinese manufacturers avoid punitive tariffs.Officials and trade experts said this practice, known as trans-shipment, has become a critical issue in negotiations with the US, with the Trump administration demanding countries in the region crack down to secure relief from some of the highest levies imposed on America’s trading partners.“South-east Asia is coming under more pressure than other regions in the world . . . because of origin-washing,” said Sharon Seah, co-ordinator of the Asean studies centre at Singapore’s Iseas-Yusof Ishak Institute. “The US thinks that the Chinese will use [the region] as a backdoor to continue exporting to the US markets.”Countries in the region are hoping for further talks with US Trade representative Jamieson Greer at the Asia-Pacific Economic Cooperation meeting of trade envoys in South Korea this week, after Washington and Beijing announced a temporary truce in their trade war on Monday.Some content could not load. Check your internet connection or browser settings.Many companies assemble components manufactured in China in third countries in south-east Asia, or add enough value to the products to legally change their place of origin. However, some merely relabel their products without any added value, a practice that is illegal but difficult to trace.Vietnam has come under the most scrutiny. The country, which has the third-largest trade surplus with the US after China and Mexico, has emerged as a manufacturing powerhouse in the years since Trump’s first term as production shifted away from China. It has been singled out repeatedly by US officials for allowing trans-shipment, and was hit with 46 per cent tariffs on Trump’s “liberation day” salvo in early April, before being given a 90-day reprieve. Prime Minister Pham Minh Chinh told US executives in a meeting this week that Washington had stressed trans-shipment in tariff negotiations, according to Adam Sitkoff, executive director of the American Chamber of Commerce in Hanoi.“The top priority for the US side in these trade talks seems to be the trans-shipment issue,” said Sitkoff. Vietnam was already stepping up efforts to crack down on illegal trans-shipment, he added. Since Trump’s “reciprocal” tariff announcement, Indonesia, Thailand and Malaysia have also promised to increase scrutiny of trans-shipments. Vietnam’s Prime Minister Pham Minh Chinh at the World Economic Forum in Davos. He told US executives this week that Washington had stressed trans-shipment in tariff negotiations More