Economy

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Chinese tea company Chagee surged on its Wall Street debut on Thursday, defying concerns about weak investor demand for new US listings and the intensifying trade war between the world’s two largest economies.Shares in the Shanghai-based chain, which specialises in coffee-style drinks such as “teaspressos” and oolong “teapuccinos”, rose as much as 49 per cent on its first day of trading on Nasdaq. The shares retreated during the afternoon to close 14 per cent higher.The listing made 30-year-old chief executive Junjie Zhang a billionaire, with his 19.9 per cent stake in Chagee now worth just under $1.1bn.Chagee sold 14.7mn shares at $28 each, raising $411mn, Bloomberg data show. The stock opened at $33.75, giving the company a fully diluted market capitalisation of more than $6bn. Thursday’s rally comes days after Donald Trump’s administration increased tariffs on Chinese goods to about 125 per cent, stepping up a trade war that economists expect to hit global economic growth.Chagee’s initial public offering is the largest Chinese listing in the US since electric vehicle group Zeekr raised $411mn last May, according to Renaissance Capital, a provider of IPO research. It also marks one of the most successful New York debuts this year.Bankers had expected the US IPO market to explode back to life under a Republican administration following a three-year dry spell, but several closely watched listings, including liquefied natural gas exporter Venture Global and data centre operator CoreWeave, earlier this year met with lukewarm investor interest.Several other large offerings were postponed shortly after Trump’s so-called “liberation day” tariff announcements on April 2, though broader market turbulence had not stopped “a wave” of 24, mostly microcap, Chinese companies from listing in the US this year, said Matthew Kennedy, a senior strategist at Renaissance.Chagee’s prospectus lists “trade disputes” and changing US “foreign investment laws” as crucial risk factors.Goldman Sachs this week highlighted growing concerns that Trump may force Chinese companies to delist from US stock exchanges, writing in a note to clients: “In an extreme scenario, US investors may have to liquidate $800bn worth of holdings in Chinese stocks.”A person close to Nasdaq told the Financial Times the exchange had not heard from the White House on the matter.Some market participants had questioned why Chagee, which hopes to expand overseas, chose the US, given rival Chinese tea companies Guming and Mixue have surged since they went public in Hong Kong in February and March, respectively.Those concerns appeared overblown on Thursday as Chagee’s stock surged, however.Chagee’s business in China was booming, according to the company’s IPO prospectus. It ran 6,440 tea houses — 97 per cent of which are in China — at the end of last year, up 83 per cent on 2023, while net revenues rose 167.4 per cent year on year to just under $1.7bn. Net income rose to $344mn.US coffee chain Starbucks, in comparison, has 7,600 stores across China.Citigroup, Morgan Stanley, Deutsche Bank and investment bank China International Capital acted as lead underwriters.CDH Investment Management, RWC Asset Management, Allianz Global Investors Asia Pacific and Orix Asia Asset Management had indicated their “nonbinding” interest in purchasing 51.7 per cent of the shares set to go on sale, Chagee said in its prospectus.About 9 per cent of Chinese tea by volume was exported to the US last year as suppliers rushed to beat expected levies under Trump. Chinese tea shipped to the US are set to face a tariff above 100 per cent.“Serious [US] tea drinkers will be seriously impacted,” said Dan Bolton, tea editor at STiR Coffee and Tea Magazine, adding the drink had historically been one of China’s “greatest ambassadors” and “paved the way for trade and negotiations”. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Some of Britain’s biggest supermarkets and food producers, including Marks and Spencer and J Sainsbury, have called on the EU to agree a deal with the UK government to help smooth exports of plant and animal products across the English Channel.The strong industry intervention in support of a “veterinary agreement” between London and Brussels comes as the two sides prepare for a summit on May 19 to “reset” trade and security ties that suffered as a result of Brexit. In a letter seen by the Financial Times, 12 companies told Maroš Šefčovič, the EU commission vice-president in charge of Brexit negotiations, that “at a time when trading relationships around the world are being challenged, now feels like an opportune moment to solidify our economic partnership”.“Unnecessary red tape” since Brexit meant moving food and drink had become “significantly more expensive”, added the letter, which was also signed by retailers Morrisons, Lidl and Ocado as well as meat processors Cranswick and 2 Sisters. It comes ahead of May 1 local elections in England, where Nigel Farage’s pro-Brexit Reform UK party is predicted to mount a strong challenge to Sir Keir Starmer’s ruling Labour party.The government has committed to seeking a veterinary agreement with the EU to remove border red tape, including export health certificates and other paperwork, which the supermarket bosses said was adding significantly to their costs.Both the EU and UK have signalled their intention to conclude a veterinary — or sanitary and phytosanitary (SPS) — agreement. But Brussels has made clear it will have to involve “dynamic alignment” with EU laws, where the UK must automatically transpose EU laws on to its statute book.Lord David Frost, the Conservative peer who negotiated the original EU-UK trade agreement, this week accused ministers of preparing to “sell out” the UK’s right to independent self-government by striking a veterinary deal.“It’s increasingly obvious that Labour are going to sell out the country once again,” Frost told The Sun newspaper, following reports that the government was considering accepting the jurisdiction of the European Court of Justice over some elements of the deal.Industry is concerned that a strong showing by rightwing populist Reform in pro-Brexit areas could rattle Starmer’s administration and reduce ambition for the EU-UK reset, which will also address other politically sensitive areas such as migration and fishing rights.One industry executive said the letter was intended to “stiffen spines” on both sides as the political debate around the reset heated up, and make clear that there were “benefits for everyone” in doing a deal in terms of jobs, growth and food prices. The EU accounted for more than 70 per cent of UK food and drink imports last year, worth £45bn, and 57 per cent of UK exports, worth £14bn.The food and drink industry has been among the hardest hit by Brexit. According to research published last month by the Food and Drinks Federation, UK food export volumes to the EU were down by 34.1 per cent last year compared with 2019, before Britain left the bloc.European food and drink imports to the UK rose 3.3 per cent last year compared with 2023, because European goods are subject to fewer checks on entering the UK than UK goods entering the bloc, the trade body found. The letter’s signatories said a deal to remove border frictions would boost economic growth and increase investment in the UK and EU.“It is ultimately the customers and communities we both aim to serve that suffer, as well as the farmers, growers, and workers in our supply chains across the UK and EU,” they wrote.The Cabinet Office said: “We welcome that major UK businesses support our manifesto commitment to negotiate an ambitious SPS agreement to put food on people’s tables more cheaply as part of our strategic alliance with the EU.”The European Commission declined to comment.Additional reporting by Laura Onita in London More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Uncertainty over global trade policies is “off the charts”, the head of the IMF has warned, saying Donald Trump’s tariffs were set to hit global growth, push up prices and potentially play havoc with financial markets. Kristalina Georgieva said on Thursday that the ongoing “reboot of the global trading system” by the US, the fund’s biggest shareholder, would lead to “notable markdowns” in growth estimates.But while the IMF will next week raise its forecasts for price pressures, it will stop short of predicting that the US president’s policies will push the global economy into an outright recession. “Financial markets volatility is up,” said Georgieva in a speech. “And trade policy uncertainty is literally off the charts.” Her comments came ahead of the IMF and World Bank’s spring meetings in Washington, where concerns over Trump’s threat to push US tariffs to their highest level in more than a century are set to dominate.Finance ministers from around the world are expected to use next week’s gathering to try to meet their US counterparts and negotiate a reduction in the tariffs announced by Trump on April 2.Ajay Banga, head of the World Bank, on Wednesday, called on governments “to care about negotiating and dialogue”. “It’s going to be really important in this phase,” he said, referring to the White House decision to pause implementation of the “reciprocal” tariffs for 90 days. “The quicker we do it, the better that will be.”The fund’s forecasting revisions will feature in the latest edition of its World Economic Outlook. In January, the IMF predicted a 3.3 per cent expansion in both 2025 and 2026, with the global economy boosted by the expectation of strong growth in the US. After Trump surprised markets with a far more aggressive trade policy than expected, many analysts downgraded their forecasts, with some now seeing a significant risk of a recession in the world’s largest economy.The Peterson Institute for International Economics said earlier this week that the US economy would grow by just 0.1 per cent — down from 2.5 per cent in 2024. Georgieva said the Trump administration’s tariffs were a response to an “erosion of trust”, triggered in part by more economic subsidies for exporters in some of the US’s biggest trading partners, including China and the EU. Washington has also provided manufacturing subsidies through measures such as former president Joe Biden’s Inflation Reduction Act, which gave tax breaks for producing green tech in the US. Both Trump and Biden have highlighted Beijing’s massive state support of its manufacturing industries as a problem for America. Trump has threatened Brussels with 20 per cent tariffs, while China faces levies of 145 per cent.Georgieva also warned that continuing uncertainty over trade policies risked creating more episodes of financial market stress, such as the sell-off last week when equity markets fell sharply and the US government’s borrowing costs rose. The IMF managing director described the movements in markets, which also saw the US currency drop, as “unusual”. “Despite elevated uncertainty, the dollar depreciated, and US Treasury yield curves ‘smiled’ — it is not the sort of smile one wants to see,” she said, adding that the movements “should be taken as a warning”. The fall in the dollar amid the market panic has led some to question whether its status as the global reserve currency is under threat. “Something that’s this well entrenched, that benefits from such strong network effects, there’s reason to be sceptical about a rapid unravelling [of the dollar’s status],” said Brent Neiman, a former US Treasury official under the Biden Administration who is now a professor at the University of Chicago. “But major changes about the extent to which the US is considered a place of stable policies and reliable commitment to rules and the current order could certainly have an impact.” More

Kristalina Georgieva, the managing director of the International Monetary Fund, warned in a speech that protectionism erodes productivity.The world economy is expected to grow slower this year and experience higher inflation than previously anticipated, according to new forecasts to be released by the International Monetary Fund that will show the global fallout of the U.S. trade war.The growth projections, to be released early next week, will offer the clearest indication to date of the damage that President Trump’s economic policies are having on global output. Since taking office in January, Mr. Trump has imposed a wide range of tariffs on most of America’s trading partners, while ratcheting levies even higher on imports from China, Canada and Mexico.“Our new growth projections will include notable markdowns, but not recession,” Kristalina Georgieva, the I.M.F. managing director, said on Thursday in a speech ahead of the spring meetings of the I.M.F. and the World Bank. “We will also see markups to the inflation forecasts for some countries.”Ms. Georgieva’s comments added to a growing chorus of top economic officials, including the heads of the Federal Reserve and the World Bank, who have sounded alarms this week about the potential harm that Mr. Trump’s policies could cause.The European Central Bank on Thursday lowered interest rates, saying that “the outlook for growth has deteriorated owing to rising trade tensions.” Central bankers, finance ministers and other policymakers will gather in Washington next week as they continue to grapple with how to respond.Ms. Georgieva was careful in her criticism of the Trump administration’s policies, which have created widespread uncertainty for businesses and are disrupting international supply chains. But she made clear her concerns about the costs of protectionism.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.Turkey’s central bank unexpectedly raised its key interest rate from 42.5 per cent to 46 per cent on Thursday, in its first monetary policy meeting since the arrest of President Recep Tayyip Erdoğan’s main political rival and the Trump administration unleashed a global trade war.The surprise decision, which Turkey’s central bank described as a show of monetary “decisiveness”, comes after political instability hammered domestic assets last month and sent the lira currency to a record low.The bank reversed a previous cycle of rate cuts, also raising its overnight lending rate to 49 per cent from 46 per cent, and said it would tighten policy further if there were any signs of rising inflation.The lira rose against the dollar after the bank announced its decision, which investors said was designed to reassure investors after the recent sell-off.“This is a sensible move that is probably worth even more for [its] strong signal of commitment to an orthodox approach [to monetary policy] than the hike itself,” said Kieran Curtis, head of emerging markets local currency debt at Aberdeen Investments. “Maintaining attractiveness of lira deposits is crucial,” he added.Earlier this month, President Donald Trump announced a so-called reciprocal tariff of 10 per cent levelled on all Turkish goods imported to the US, the lowest rate he applied to trade partners.Turkey is 18 months into an economic stabilisation programme that has sought to squash runaway inflation caused by the ultra-low interest rate policy previously favoured by Erdoğan. The programme faced its most severe market test on 19 March with the arrest of Istanbul mayor Ekrem İmamoğlu, which sparked a market panic and Turkey’s largest street protests in a decade.Investors and domestic savers fled from the lira and into foreign currency. In response, the bank held an emergency rate-setting meeting, where it suspended lending at its key repo rate and raised its overnight lending rate to 46 per cent, which in effect became the main interest rate.The lira has since stabilised at around 38 to the US dollar, but the central bank has since spent more than $46bn intervening to support the currency, according to estimates by Bürümcekçi Research and Consultancy.“Recent events — domestic politics and the global tariff war — have strengthened the Turkish central bank’s mandate to do whatever it takes to fight inflation. Reserve loss was [also] too much,” commented Tim Ash, a longtime Turkey watcher at BlueBay Asset Management.“Credit to the [central bank’s] governor and . . . team,” Ash added of Thursday’s decision. “They proved their independence in doing the right thing.”A cost of living crisis caused by high inflation has hurt Erdogan’s poll ratings, and, so far, he has allowed officials free rein to get inflation down, even if it has meant high interest rates.The bank said in a statement that its “tight monetary stance will be maintained until price stability is achieved via a sustained decline in inflation”. It added: “Monetary policy . . . will be tightened in case a significant and persistent deterioration in inflation is foreseen.” It also said it would resume lending at its key repo rate, which was suspended after İmamoğlu’s detention.“It’s clear that the central bank’s easing cycle has hit a major roadblock, and it could take some time before the easing cycle is restarted,” Nicholas Farr, emerging Europe economist at Capital Economics, said.Turkish inflation last month fell more than expected to 38 per cent. The bank is targeting 24 per cent by the end of the year. More

Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldThe European Central Bank has cut its benchmark interest rate by a quarter-point to 2.25 per cent as it prepares for economic fallout from the trade war ignited by US President Donald Trump.Thursday’s cut, which brings borrowing costs in the currency bloc to their lowest in more than two years, had been widely expected after Trump’s announcement of sweeping tariffs on most of the US’s trading partners on April 2. “The outlook for growth has deteriorated owing to rising trade tensions,” the ECB said in comments that accompanied the rate decision. It added that “the adverse and volatile market response to the trade tensions is likely to have a tightening impact on financing conditions”.But it dropped language from last month that referred to monetary policy becoming “less restrictive” in what some saw as a hint there could be less room to cut rates in the future.Pooja Kumra, rates strategist at TD Securities, said the ECB’s language change appeared hawkish but also highlighted the bank’s warning on the risks tariffs posed to growth, adding: “Feels that’s a balancing act between hawks and doves.” Ahead of the decision, Trump compared the ECB’s rate-cutting record with the US Federal Reserve, which kept rates on hold at its last meeting in March. Trump said Fed chair Jay Powell, who warned on Wednesday of the tariffs’ impact on US growth and inflation, was “always TOO LATE AND WRONG” and his “termination cannot come fast enough!”The ECB’s cut this week is the seventh reduction since it started cutting its deposit rate last June.Traders stuck to their bets of at least two further quarter-point cuts by the end of this year, according to levels implied by swaps markets after the decision.The euro was little changed at $1.135 immediately after the cut.Trump performed a partial U-turn last week, delaying his full “reciprocal tariffs” of 20 per cent on EU goods for 90 days, during which time a rate of 10 per cent will apply. But top central bankers say his protectionist policies are still likely to be a negative economic shock for the Euro area.The ECB is already confronting slower growth and cooling price pressures. In March, the central bank cut its 2025 growth forecast for the Eurozone to 0.9 per cent — its sixth consecutive reduction.Inflation edged down last month to 2.2 per cent — marginally above the ECB’s 2 per cent target — as service prices rose at their slowest pace for almost three years.Economists say inflation could be driven further down by this month’s oil price fall, the recent rise in the euro against the dollar, and a potential surge in Chinese imports to the Eurozone. All three developments are widely seen as consequences of Trump’s trade policy, at least in part. But the increase in debt-funded spending in Germany and elsewhere in the Eurozone could prove an inflationary pressure. More

President Trump lashed out on Thursday at Jerome H. Powell, the chair of the Federal Reserve, saying, “Powell’s termination cannot come fast enough!”Mr. Trump’s ire followed remarks by Mr. Powell on Wednesday, when he warned in a speech that the president’s tariffs could create a “challenging scenario” for the central bank by putting its two main goals — stable inflation and a healthy labor market — in tension.Mr. Powell reiterated that the Fed could afford to be patient with its interest rate decisions until it had more clarity about Mr. Trump’s policies. The Fed chair’s emphasis on the need to ensure that a temporary rise in inflation from tariffs did not become a more persistent problem suggested that the bar for further rate cuts was high.The president has been pushing for Mr. Powell to cut rate since returning to the White House. On Thursday, he referred to expectations that the European Central Bank would lower borrowing costs, saying the Fed should do the same.“The ECB is expected to cut interest rates for the 7th time, and yet, ‘Too Late’ Jerome Powell of the Fed, who is always TOO LATE AND WRONG, yesterday issued a report which was another, and typical, complete ‘mess!’,” Mr. Trump wrote on his Truth Social platform. “Oil prices are down, groceries (even eggs!) are down, and the USA is getting RICH ON TARIFFS. Too Late should have lowered Interest Rates, like the ECB, long ago, but he should certainly lower them now. Powell’s termination cannot come fast enough!”The Fed seeks to operate independent of political influence, something that Mr. Powell on Wednesday said was a “matter of law.” He also said the Fed’s independence was “very widely understood and supported in Washington and in Congress where it really matters.”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 writer is global head of research at Ashmore GroupIt is hard to talk about Brazil without acknowledging its potential. More than twice the size of India, Brazil is an energy, mining and agricultural powerhouse. It has a hyperconnected population, a well-educated middle-class and a sophisticated financial system. As per Jorge Ben Jor’s classic song “País Tropical”, it is a “tropical country blessed by god and beautiful by nature”.Despite all its strengths, investor confidence in Brazil is very low. Unsustainable fiscal dynamics under President Luiz Inácio Lula da Silva led to humiliating valuation levels by the end of last year. But betting on a collapse of the country’s social-economic structure is a mistake. With the highest real rates in the world, a weak currency and equity markets trading near 2008 levels, Brazil offers an enticing value opportunity for international investors. There are some signs of economic improvement that can be built on. GDP growth was 3.4 per cent in 2024, the strongest since 2011, excluding the pandemic rebound. Unemployment also fell from 15 per cent to 6.2 per cent, the lowest since 2015. However, growth is projected to drop to about 2 per cent this year. Lula’s government has repeatedly undermined its commitment to fiscal responsibility. Recent measures include a bill raising the income tax exemption threshold to R$5,000 (US$850) per month, which would leave at least 56 per cent of the country’s workforce paying no income tax. The government’s proposal to offset these losses by taxing the wealthiest 0.1 per cent has done little to assuage investor concerns as its approval is uncertain. Furthermore, quasi-fiscal measures — such as payroll-linked credit extensions — potentially mask deeper deficits. Fiscal profligacy has, in turn, prompted capital flight. A weaker currency has added to inflation, forcing the central bank to raise policy rates to 14.25 per cent today, or 10 per cent in real terms, the highest across emerging markets. This has put further strain on government finances. The cost of servicing debt accounts for most of the budget deficit, which stands at 8.5 per cent of GDP. Brazil’s net debt-to-GDP ratio is 61.4 per cent and gross debt approaches 76 per cent. Elections are not until October 2026 but are very much on investors’ radars. Lula’s approval ratings recently dropped to historic lows of 24 per cent. Voters blame his economic policies for their falling purchasing power and fear the prospect of future tax rises.This backdrop echoes that of the US, where the Democrats were voted out last year in part due to cost of living concerns. The parallel ends there, though. While Donald Trump passed through various court cases and was re-elected US president, Jair Bolsonaro is ineligible and likely to serve time for his role in plotting a coup to remain in power. The opposition could now rally around Tarcísio de Freitas, the current governor of São Paulo and former infrastructure minister who was not caught in the net of criminal proceedings against Bolsonaro. A technocrat and former engineer, Freitas has led the completion of several infrastructure projects and the privatisation of electricity provider Eletrobras. He also oversaw the approval of market-friendly legal frameworks for natural gas, railways and cabotage shipping. His approval rating is high, and he has the lowest rejection rates among potential candidates.Freitas becoming the opposition candidate and winning the election in 2026 could provide a positive confidence shock, boosting the currency and lowering inflation expectations. This would allow for rate cuts and therefore lower interest costs. Given the primary deficit is relatively small, lower interest rates would help to restore debt sustainability. Former presidents Fernando Henrique Cardoso and Michel Temer managed fiscal consolidations with anaemic GDP growth. Recent structural reforms under Lula suggest the economy can now expand by 2.5 to 3.5 per cent, making it easier to steer the country towards debt sustainability.Brazil needs to build. Capex to GDP has been below 20 per cent since the 1990s. The next government, whoever forms it, should find budgetary resources for infrastructure investment by announcing a credible four-year fiscal consolidation plan that could include freezing public sector hiring, and keeping entitlements below nominal GDP. They could then spearhead a Brazilian infrastructure renaissance that would attract further investments from the private sector. If capex to GDP can rise above 20 per cent again within a credible budget, Brazil will be back on track. More