Economy

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Abu Dhabi artificial intelligence group G42 is set to expand in the US, as the oil-rich Gulf state plans to invest tens of billions of dollars in the country and position itself as a global leader in the emerging technology.The AI firm has recently established a US company as part of a move to increase its presence in the country, according to corporate filings.The AI group, which is backed by Abu Dhabi sovereign investor Mubadala, confirmed to the Financial Times that it was “committed to the USA market expansion and has established a legal entity towards that strategy”. People familiar with the matter added that some of G42’s subsidiaries — which include AI applications, cloud computing and data centre companies — are expected to make announcements about US business plans in the coming months. The expansion comes as the United Arab Emirates is betting big on AI, putting the technology at the heart of its economic diversification plans and even lawmaking. This has driven even greater investments into the US as part of a push to deepen collaboration over the powerful technology.G42 is chaired by the UAE’s powerful national security adviser Sheikh Tahnoon bin Zayed al-Nahyan, who has spearheaded Abu Dhabi’s AI efforts with Washington and made clear it views the US as the most important source of AI technology. Greater US presence will help Abu Dhabi companies get those investments done, the people said. Sheikh Tahnoon met with President Donald Trump at the White House in March, in a trip aimed at strengthening bilateral co-operation. The White House said after the visit that the UAE was committed to a $1.4tn, 10-year “investment framework” in the US, eclipsing the $600bn pledged to be invested over four years by regional rival Saudi Arabia. Filings show that a company called G42 USA was incorporated in Delaware in January. Its cloud and enterprise subsidiary Core42 has already opened companies in the US and announced plans to launch its services in the country.G42 last year moved to invest $335mn in US chipmaker Cerebras, a deal that was cleared by Committee on Foreign Investment in the US (Cfius) last month — although it was only permitted to purchase non-voting shares. The Abu Dhabi group’s move to accelerate its expansion under the Trump administration comes after Peng Xiao — G42’s China-born chief executive who has become a UAE citizen — sought to cut ties with Chinese hardware suppliers including Huawei following scrutiny by US lawmakers. Last year Microsoft invested $1.5bn for a minority stake in G42. It also has other US investors, including Ray Dalio’s family office and private equity firm Silver Lake. Further details of G42’s expansion in the US remain unclear. The group’s data centre company Khazna told the FT it did not have plans to immediately start work in the US.“While we’re currently focused on opportunities across Apac and other priority regions, we’re closely observing developments through G42’s expansion in the US and will look to support and grow alongside that initiative when the time is right,” said Hassan Alnaqbi, Khazna’s chief executive. Amid President Donald Trump’s tariff blitz, UAE officials have been keen to highlight the Gulf state’s willingness to bet on America for the long term, as well as its favourable trade surplus with the US. “UAE investment institutions are probably one of the largest foreign direct investors into the US economy for the last 20 years,” Mubadala chief executive Khaldoon al Mubarak said at a conference in Washington last month.Additional reporting by Tim Bradshaw in London and George Hammond in San Francisco More

Donald Trump’s return to the White House is reviving a stalled plan to forge a strategic partnership between the EU and a key Indo-Pacific trade bloc, according to EU officials and senior diplomats.Plans to build stronger links between Brussels and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership — a group of 12 countries that includes Canada, Japan and Mexico — have gained momentum following Trump’s “liberation day” tariffs announcement in April. A European Commission official said that while it is “still very early days”, the two sides have “moved into a space where we’re willing to look at some sort of structured co-operation with [the] CPTPP”. European Commission president Ursula von der Leyen told the FT in April that the two sides wanted to co-operate on “rules about how fair trade around the world is functioning to the better of mankind”.Both blocs wanted to use the current turmoil to look into what had to be improved at the World Trade Organization “and how can we work closer together to make this happen”, von der Leyen said.© Kai Fosterling/EPA-EFE/ShutterstockThe renewed openness in Brussels to a partnership, which could potentially include closer ties on both digital and goods trade, marks a step-change in attitude at the highest levels of the EU.The idea would throw an umbrella over national economies accounting for roughly 30 per cent of global GDP, and would send a signal that the majority of the global trading system is committed to preserving the rules-based order now threatened by Trump tariffs, officials on both sides said.A previous attempt to deepen ties in 2023 did not gain diplomatic traction, but a report at the time by Sweden’s National board of Trade, an independent government agency, argued that a deal between the blocs could make them “the centre of gravity in world trade”.The CPTPP was founded in 2018 and includes Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the UK and Vietnam. It offers equal treatment for investors and more deeply integrated goods trade. The EU already has bilateral deals with nine CPTPP members.Among CPTPP countries, the most vocal backing for closer EU ties has come from New Zealand, Canada and Singapore, but diplomats said that Japan was also quietly supportive.© Claudio Reyes/AFP/Getty ImagesCanada’s foreign ministry said the country was committed to strengthening its trade relations with Europe and the Indo-Pacific region, although a spokesperson insisted “no decisions or agreements have been made”.The prime ministers of both New Zealand and Singapore have also endorsed the idea of deeper co-operation between the two blocs in recent weeks. A mechanism for converting such warm sentiments into a formal dialogue process has yet to be established, diplomats said, partly because Australia currently holds the rotating presidency of the CPTPP and held a general election this weekend.The formation of a new Australian government is expected to lead to a resumption of stalled EU-Australia bilateral trade deal talks, which could also provide a political forum to open a wider EU-CPTPP dialogue, EU diplomats said.Another CPTPP diplomat said that the mechanisms for improved EU co-operation could be raised at a meeting of trade ministers at the Asia-Pacific Economic Cooperation (APEC) meeting in South Korea this month.Supporters of a rapid deal include Cecilia Malmström, a former EU trade commissioner now at the Peterson Institute for International Economics, who said there was clearly “renewed momentum” behind the idea.“If this happens, it needs to happen rather quickly — this year,” she added. “The EU is a slow-moving animal, but just look at the last three months, there is a real urgency around really trying to defend rules-based trade,” she told the FT.The parameters of any arrangement are also still to be agreed. Von der Leyen said there were no plans for the EU to join the CPTPP. One CPTPP official said a possible framework could involve a “twin track” process comprising a “new code of conduct” in which ministers jointly affirmed their commitment to WTO rules, alongside a separate dialogue to discuss harmonising rules in key areas such as digital trade and sustainability.At the same time, in an effort not to be presented as an anti-US bloc and in acknowledgment that some of Washington’s trade grievances were justified, an agreement could also look to engage with reforms to the WTO.The most ambitious proposals for a deal between the two blocs have also raised the possibility of the two sides agreeing to “cumulation” of the so-called rules of origin, which are used in Free Trade Agreements to determine whether a product has sufficient local content to qualify for preferential lower-tariff access to a market. Supporters of this idea say it would enable EU and CPTPP companies to more easily integrate their supply chains, and allow them to more easily import goods into each others’ countries. The idea was floated by the Board of Trade in Sweden and again in a recent report by the Brussels-based Bruegel think-tank, but Commission officials were clear that this was not currently an option for the EU.Additional reporting Nic Fildes in Sydney and Leo Lewis in Tokyo More

For countries that depend heavily on oil revenue, dropping prices are worrisome.Oil producing countries are bracing for a bumpy ride this year, with a precipitous drop in prices to the lowest levels in four years seen as the initial, alarming sign of looming turmoil.A price drop benefits any country seeking to cut its fuel bill. But in oil producing nations, lower prices can feed economic troubles, and sometimes political unrest, as governments slash spending.Analysts who had already been predicting lower oil prices because of softening demand amid increased global production said the possibility of a tariff trade war and the overall climate of uncertainty could well deepen producers’ woes.“The steep price dive and overall volatility is sending a very strong signal that the global economy is going to be rattled this year and that will translate into a lower demand for oil,” said Gregory Brew, a specialist on the geopolitics of oil and gas with the Eurasia Group, a New York-based risk analysis organization.Wealthy producers may be able to cushion the blowEarlier this year, the price for benchmark crude held steady around $73 a barrel, high enough to sustain the budgets of most producing nations. But some countries, like Saudi Arabia and the United Arab Emirates, base ambitious development plans on a price of at least $90 a barrel, analysts say.A huge, futuristic city project in Saudi Arabia is being financed with oil revenue.Planet Labs Pbc/Planet Labs PBC, via Associated PressWe 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 White House Watch newsletter for freeYour guide to what Trump’s second term means for Washington, business and the worldThe writer is the author of ‘Gomorrah’ and ‘ZeroZeroZero’. For over 20 years, he has lived under police protection due to threats received from the Neapolitan mafiaMafia leaders know that every economic decision that results in higher prices opens up a thriving smuggling market. The so-called “reciprocal tariffs” ordered by US President Donald Trump in April will see many more turn to smuggling. Mexican cartels, Italian criminal organisations, the Russian mafia and other groups already capable of trafficking illegal items into the US will now just as easily be able to smuggle legal ones. An immense new market — potentially comparable to Prohibition-era bootlegging — is appearing and organised crime stands ready to capitalise. US history shows us what might happen. Take the Embargo Act of 1807 when Thomas Jefferson imposed a total embargo on foreign trade to put pressure on Britain and France. This brought a massive increase in smuggling, especially in border regions such as Vermont and Maine. When the Smoot-Hawley Tariff Act of 1930 increased tariffs on more than 20,000 imported products, Italian-American mafia organisations began to structure themselves as middlemen as many small traders turned to illegal routes to maintain profit margins.Every tariff creates an appetite in the market that criminality steps in to satisfy. As price increases hit everything from game consoles to French wine to the textiles that already lie at the heart of smuggling operations, Trump’s tariffs will create more opportunities.     And when smuggling routes multiply, we know how goods will move: for example through the Mexican cartel Jalisco Nueva Generación, which is already accustomed to illegal fuel trafficking. In Utah in April, an American family was indicted for partnering with Mexican criminal organisations to smuggle nearly 2,900 shipments of stolen crude oil into the US. In 2024, a US company pleaded guilty to smuggling porcelain tiles from China and falsifying the origin as “Made in Malaysia” to avoid antidumping and countervailing duties.Before Trump’s tariffs, the smuggling market was almost all about counterfeit products from Asia. US Customs and Border Protection data tells us of seizures of $2.8bn of counterfeit goods in 2023 and $5.4bn in 2024, due to demand for more affordable fashion products. Most of the goods come from China and Hong Kong, which together accounted for about 90 per cent of the total seized for intellectual property rights violations in 2024. These routes will now also be used for legal products and dutiable goods. Increasing controls at ports is one solution but this will mean slowing down customs clearance. Criminal organisations choose ports not according to the level of corruption but according to speed; the faster a port, the more goods can be brought in without controls. The ports of Savannah, Georgia, Houston, Texas, and Long Beach, California, seem likely to be targeted by smugglers precisely because they are very fast in customs clearance. If they were to increase controls, they would slow down the efficiency of cargo transit. And labelling will no longer be sufficient in proving that production of an item of clothing takes place in a specific country. It seems likely that China, which already manages around 40 ports in Latin America, will use them to bring Chinese goods into the US that appear to be produced in South America. Is it possible that Trump really doesn’t know that tariffs will be a golden opportunity for smugglers? It may be that it doesn’t worry him because he is aware US companies need goods at pre-tariff prices in order to remain competitive. Smuggling could also provide him with a reason to keep up political pressure on foreign governments. While tariffs are his political move, smuggling will provide an illegal correction. This would not be Trump’s first exposure to such thinking. His mentor Roy Cohn in the 1970s represented mafia bosses such as Carmine Galante, Carlo Gambino and Nicholas “Cockeyed Nick” Rattenni, and advised the Genovese crime family. Cohn knew there are legal and illegal ways to get things done. For criminal organisations, there are the laws followed by businesses and then there are the “rules” — standard procedures to make a profit. Trump’s formal tariffs are the laws. Meanwhile, an informal black market will follow the rules. Smuggling will now become systemic. It will no longer be a strategy to obtain cheap or counterfeit products but a necessary method to stay competitive. And criminal organisations understand that the more the market demands smuggled goods, the harder it will be for customs to fight it. Eventually we will reach an equilibrium where smuggling in America becomes tolerated once again. More

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Unlock the White House Watch newsletter for freeYour guide to what Trump’s second term means for Washington, business and the worldCanada’s Prime Minister Mark Carney will meet Donald Trump in Washington on Tuesday in an effort to revive a crucial trading relationship with the US that Ottawa’s leader recently described as “over”.It will be Carney’s first foreign visit since his Liberal party won a general election on Monday after a campaign overshadowed by the US president’s taunts about Canada and his tariffs on some of its exports. Carney in Ottawa on Friday said he had held a “very constructive call” with Trump and the two leaders had agreed to meet next week in the US capital. “Our focus will be on both the immediate trade pressures, and the broader future economic and security relationship between our two sovereign nations,” he said. Carney also announced King Charles would deliver a speech to open the new parliament in Ottawa later this month. “This historic honour matches the weight of our times,” Carney said of the visit by the king, who is also Canada’s sovereign. It will be the first time in nearly 50 years that the monarch takes part in parliament’s opening. Carney was speaking at his first press conference since his Liberals defeated Pierre Poilievre’s Conservative party after a campaign dominated by the debate about Trump and Canada’s relationship with its most important trading partner. Trump’s mockery of Canada and its former prime minister Justin Trudeau, as well as the president’s threats to annex the country — which he described as a potential “51st state” — propelled the Liberal party from a distant second in polls last year to victory this week. Relations between the two allies and trading partners have been rocked by the tariffs announcement despite the US-Mexico-Canada free trade deal that the president negotiated during his first term.Carney vowed in a speech after his win on Monday that Trump would “never break” Canada, and said Ottawa would look to forge new trading alliances with countries in Europe and elsewhere. The prime minister on Friday said his meeting in the White House would address “complex” US tariffs affecting Canada’s automotive, steel and aluminium industries. “I go there with the expectation of difficult but constructive conversations,” he said.Carney, who was previously the governor of the Bank of England, said Trump had made no reference to Canada becoming a US state on their telephone all. “This will never, ever happen,” the prime minister said. Carney, who will lead a minority government after his party narrowly missed winning a majority of seats in parliament, outlined his vision to “advance the nation-building investments that will transform our economy”.US tariffs are affecting Canada’s economy.General Motors on Friday said it would cut production at a plant in Ontario that the union said would result in more than 2,000 job losses. In April, carmaker Stellantis announced it was “temporarily pausing production” for two weeks.“We are fighting hard for our auto sector, all our sectors, in these negotiations with the Americans,” Carney said.Goldy Hyder, chief executive of the Business Council of Canada, on Tuesday said the USMCA remained the best framework “to restore the certainty, stability and predictability” of the countries’ commercial relationship. Carney said Canada’s new cabinet would be sworn in during the week of May 12 and parliament would be recalled for the King’s speech on May 27. More

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The standoff over terms of negotiations, and whether they are happening, signals that a protracted economic fight lies ahead.As trade tensions flared between the world’s largest economies, communication between the United States and China has been so shaky that the two superpowers cannot even agree on whether they are talking at all.At a White House economic briefing this week, Treasury Secretary Scott Bessent demurred multiple times when pressed about President Trump’s recent claim that President Xi Jinping of China had called him. Although top economic officials might usually be aware of such high-level talks, Mr. Bessent insisted that he was not logging the president’s calls.“I have a lot of jobs around the White House; running the switchboard isn’t one of them,” Mr. Bessent joked.But the apparent silence between the United States and China is a serious matter for the global economy.Markets are fixated on the mystery of whether back-channel discussions are taking place. Although the two countries have not severed all ties, it does seem that they have gone dark when it comes to conversations about tariffs.“China and the U.S. have not held consultations or negotiations on the issue of tariffs,” Guo Jiakun, a spokesman for China’s foreign ministry, said at a news conference last Friday. “The United States should not confuse the public.”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