Economy

Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldChina could replace the US as the world’s dominant energy power as Donald Trump’s trade war rattles American oil producers and Beijing extends its cleantech lead, analysts have warned.The US president announced an aggressive new tariff regime earlier this month that sent oil prices sharply lower, and has also moved to kill the previous Biden administration’s drive to build a domestic cleantech industry to compete with China.The tariffs could make it harder for US oil producers to compete in its “most attractive export markets”, said a report from consultancy Wood Mackenzie, while the country was also being “significantly outpaced” by China in technologies such as lithium-ion batteries, electric vehicles and solar cells.US oil output soared during former president Joe Biden’s term and is now higher than that of any country in history. But it would start to decline by the early 2030s, said Wood Mackenzie, despite Trump’s vow to slash regulations and executive orders to support his “drill, baby, drill” energy strategy. “US upstream dominance is set to continue for some time yet on current trends. However, its leadership faces challenges and may eventually erode,” the report said. While Trump has backed down from some of the sweeping tariffs he announced on his “liberation day” on April 2 — and has spared energy imports from some duties — his trade war with China has triggered fears of recession and helped spark a vicious oil market sell-off in recent weeks. “Lower oil prices could have, depending on how low they go, quite a significant impact on the potential for the US oil production to continue to grow and perhaps cause a decline,” said Jason Bordoff at Columbia University’s Center on Global Energy Policy.Tariffs, including a 25 per cent tax on steel imports, are also likely to sharply increase American shale drillers’ production costs, oil executives and analysts have warned.“Thinking about steel tariffs and the equipment used in wells, producers are worried about oil costs inflating by mid single to low double digits,” said Robert Clarke, upstream research vice-president at Wood Mackenzie.Shale oil producers have warned that plunging oil prices, Trump’s tariff war and policy uncertainty mean they face their worst crisis since the coronavirus pandemic shattered the sector in 2020.The concerns about China’s cleantech dominance echo warnings from energy experts and renewables industry executives, who have said the Trump administration’s hostile approach to green energy could cement China’s control over the sector.  “It will be hard for the US to catch up [to China], however, there are other options, like diversifying the supply of domestically produced solar panels,” said David Brown, a director in Wood Mackenzie’s Energy Transition Practice. “But you’re seeing that debate play out now in Congress, over how much government support there should be for new energies.”Bordoff said building supply chains at home within “any meaningful timeframe” was a “more daunting prospect than anyone in Washington seems to want to acknowledge”. On Wednesday the Trump administration scrapped a $5bn offshore wind project that Norway’s Equinor was developing off the coast of New York City — the administration’s latest move to halt Biden’s renewable energy programme.Trump is also threatening hundreds of billions of dollars in loans, grants and tax breaks to cleantech developers as he unpicks the Inflation Reduction Act, the Biden climate law stuffed with subsidies to support huge projects to break American dependence on Chinese technology.While the US’s low-carbon energy production was expected to keep rising, China’s global market share in EVs, batteries and energy storage would too, Wood Mackenzie said, as the county capitalised on its low-cost manufacturing. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Blackstone president Jonathan Gray has warned that the US economy faces the risk of a recession unless Donald Trump can rapidly strike trade deals, becoming the latest Wall Street boss to ratchet up pressure on the administration.The US president last week announced a 90-day suspension of the steep “reciprocal” tariffs the White House had imposed on most of America’s trading partners, paving the way for negotiations with dozens of countries.Gray, who oversees the day-to-day operations at the investment group, said: “I would expect an economic slowdown. How significant the economic slowdown is will be directly correlated to the length of the tariff diplomacy.”The Blackstone president added: “The recession risk is directly tied to the length of the uncertainty”, saying that a speedy resolution to the trade talks would be “positive for the economy and markets”.Trump’s climbdown came after the aggressive duties unleashed days of market turmoil. The US president, who has said that more than 70 countries are lining up to negotiate trade agreements, held talks with Japanese officials over a potential deal this week.The comments from Gray come after JPMorgan Chase chief executive Jamie Dimon said he hoped the White House would soon reach “agreements in principle” with the US’s trading partners.Stock and bond markets have stabilised since Trump’s “reciprocal” tariffs pause, but the White House has increased duties on China and also kept a baseline 10 per cent levy on imports from all countries.Gray said the ructions in markets had created opportunities for Blackstone, which has $1.2tn in assets, for new investments. “[You] have to anticipate that we are in a period of heightened volatility and uncertainty, but in some cases, we are seeing prices start to reflect that and it can create opportunities for us to invest,” he said.Blackstone on Thursday reported first-quarter results that surpassed Wall Street’s expectations, with its distributable earnings — a metric favoured by analysts as a proxy for the group’s cash flows — climbing 11 per cent to $1.4bn.The company raised $62bn from investors in the quarter, its biggest haul in almost three years, with its credit and insurance business attracting $30bn.Led by chair and chief executive Stephen Schwarzman, Blackstone also raised $11bn for its funds from wealthy individual investors. About a quarter of the group’s total assets are now managed on behalf of individual investors, up from almost nothing a decade ago.This month Blackstone announced a plan with Vanguard and Wellington Management to create funds that would invest in public and private assets and cater to affluent investors. Blackstone is betting that the cohort will help drive its growth in coming years. More

Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldWhen you’re forced to listen to Trumpite complaints about America’s trading partners ripping off the US, one grievance in particular routinely emerges: US roads and garages are full of Volkswagens, Hyundais and Toyotas, but the rest of the world won’t buy American cars.Europe is the main target of this outrage, and the old statistic gets another airing that the EU imposes a 10 per cent tariff on autos from the US, four times the 2.5 per cent the latter charges on cars from Europe. In reality it’s the US’s own long-standing auto protectionism that has fostered an inward-looking and globally uncompetitive industry and one now falling behind in the electric vehicle (EV) revolution. Donald Trump’s utterly absurd 25 per cent tariff on cars and car parts shows he has learnt the wrong lesson.To address that well-worn talking point: the EU import duty on standard cars such as hatchbacks and minivans is indeed 10 per cent versus the US’s 2.5 per cent. But the US production of light trucks, including pick-ups, has long sheltered behind a 25 per cent tariff wall. The duty is known as the “chicken tax” after Lyndon B Johnson imposed it in 1964 in retaliation for European levies on American poultry.Industry experts say the Big Three car companies in Detroit — Ford, General Motors and Chrysler (now part of the Stellantis group) — have accordingly increasingly focused their innovation on making pick-up trucks and used the same platforms and components to develop gas-guzzling large sport utility vehicles (SUVs). Felipe Munoz, senior analyst at the market intelligence company Jato Dynamics, told me that while pick-ups and heavy SUVs were only 17 per cent of US light vehicle sales, “it’s where the Big Three US manufacturers make most of their money in the American market”. The rest of the world, however, tends to have narrower roads and higher fuel taxes than the US. “The protection has made the US car manufacturers less competitive globally,” Munoz told me. Japanese companies make family cars popular around the world: Detroit does not. The biggest car exporter from the US is the German BMW, not a US manufacturer.When American car companies have actually responded to their European customers, they have succeeded, including by manufacturing there. Ford has had a long-standing position in the European market, including consistently being one of the best-selling brands in the UK. But it’s now struggling, having discontinued popular smaller cars to concentrate on SUVs. GM five years ago sold the Opel brand it had run in Europe for decades to focus on bigger vehicles in its home market.It’s not EU protectionism that hurts American carmakers abroad. The European Commission has long had an open offer to the US to cut all industrial goods tariffs including cars to nil, which the US has failed to take up. Still the sense of victimhood persists. Despite Tesla’s pioneering role in EVs, the traditional US manufacturers ceded ground to China by being slow to move into the new technology, even more than their sluggish European counterparts. The EU has recently taken a pragmatic approach of using targeted tariffs, together with joint ventures and tech transfer with Chinese companies, to give its carmakers space to catch up in its domestic market.But the Biden administration attempted to create a North American EV industry behind a protective wall. It created limited tax credits while hitting Chinese imports with 100 per cent tariffs and banning Chinese auto software, pressing Canada and Mexico to do the same. As of 2023, the share of EVs in total US auto sales was around half that in Europe and a quarter of that in China. Trump has gone even further and imposed tariffs in an attempt to repatriate car production from Canada and Mexico. This is a potentially catastrophic move, even more so if he removes the current tariff exemption for car parts that are eligible for the US-Mexico-Canada trade deal. It was nonetheless supported by the leadership of the UAW, the carworkers’ labour union, dismaying its Canadian counterpart.Increasingly, the disarray in US trade policy means that relying on the American market, large though it is, carries serious risks. Jato Dynamics calculates that Trump’s tariffs could actually hit the big three US manufacturers harder than their Japanese and European competitors, since the former depend so much on the US market and source from Canada and Mexico.The FT reported this week that the Chinese EV manufacturer BYD has begun to regard its absence from the US market as a benefit. Unlike its rival Tesla, it can get on with conquering the rest of the world rather than anxiously watching for Trump’s next twist and turn, such as his vague suggestion on Monday that he might suspend car tariffs for a while.The US has squandered its historic lead in auto manufacturing by the very trade barriers it rails against abroad. Trump’s tariffs will drag it even further behind. It would be hard to invent a more poignant cautionary tale about the damage that protectionism can wreak at [email protected] More

This article is an on-site version of our FirstFT newsletter. Subscribers can sign up to our Asia, Europe/Africa or Americas edition to get the newsletter delivered every weekday morning. Explore all of our newsletters hereGood morning and welcome back to FirstFT. Today we’re covering:Jay Powell’s inflation warningNvidia’s chief executive in BeijingTrump’s stand-off with HarvardAnd the outlook for the dollarPresident Donald Trump’s tariffs are “likely” to put at risk the Federal Reserve’s goals of keeping prices and unemployment in check, chair Jay Powell warned yesterday, as he emphasised the US central bank’s focus on inflation.What else did the Fed chair say? Powell, speaking at the Economic Club of Chicago, said: “The [Trump] administration is implementing significant policy changes and particularly trade is now the focus. The effects of that are likely to move us away from our goals.” He added: “Without price stability, we cannot achieve long periods of strong labour market conditions.” Powell also said that the president’s tariffs had been “significantly larger than anticipated” and that “the same was likely to be true of the economic effects, which will include higher inflation and slower growth”. He said the effects of the tariffs were “likely to move us away from our goals”.What was the reaction to Powell’s speech? US stocks extended a sell-off that began early yesterday. The S&P 500 ended the day down 2.2 per cent at 5,275.70. Gold rose 0.4 per cent today to hit another record high of $3,357.78 and the dollar fell to a fresh six-month low. Stock markets in Asia and Europe were mixed. “Powell is between a rock and a hard place,” Tom Graff, chief investment officer at Facet, told Reuters news agency. “The Fed can’t act proactively to stem any potential economic weakness, given that tariffs are likely to also cause inflation.” Powell’s comments suggest there is a divergence between those members of the Federal Open Market Committee who feel the impact of tariffs on inflation will be short term, such as governor Christopher Waller, and those who think it will be a longer-term problem. Read more on Powell’s comments. For more on monetary policy, sign up for our Central Banks newsletter by Chris Giles if you’re a premium subscriber, or upgrade your subscription.Here’s what else we’re keeping tabs on today:EU interest rates: The European Central Bank is widely expected to lower borrowing costs to 2.25 per cent, the seventh cut since June. Turkey’s central bank is expected to halt its easing cycle. Companies: American Express, Blackstone, Netflix, State Street and UnitedHealth report results. Chinese tea chain Chagee is set to brave choppy markets after raising more than $400mn in its New York initial public offering.Meloni in Washington: Italy’s prime minister will seek to jump-start trade talks between the EU and US when she meets Trump at the White House. Separately, secretary of state Marco Rubio and special envoy Steve Witkoff are due to hold talks with President Emmanuel Macron in Paris.Canada’s election: The leaders of the main political parties gather for a televised English language debate in Montreal.Join Unhedged’s Robert Armstrong and other FT experts next Wednesday for a subscriber-only webinar, as they break down how Trump’s policies are reshaping markets. Register for free.Five more top stories1. Nvidia chief executive Jensen Huang has arrived in Beijing after new curbs from Washington on the chipmaker’s China sales sent its shares tumbling. The trip comes at the invitation of the China Council for the Promotion of International Trade, a government-affiliated trade group heavily involved in facilitating US-China business relations. Here’s more on the visit.More on Nvidia: The chipmaker was blindsided by Trump’s new export controls on its best-selling artificial intelligence chip in China.Congressional investigation: The House of Representatives China committee said DeepSeek posed a “profound threat” to US national security and asked Nvidia to explain how the Chinese company obtained US chips to power its app.2. Trump announced there had been “big progress” after meeting Ryosei Akazawa as Japan sought to become the first major economy to secure a reprieve from US tariffs. Japanese officials said the unanticipated personal meeting with Trump was a possible sign of the president’s keenness to hammer out trade deals with allies. Read more on the outcome of the talks. 3. Trading in two little-known New York-listed stocks soared in the weeks before the companies announced the appointment of Trump family members to their advisory boards. Shares of drone maker Unusual Machines almost tripled and Trump Tower-based fintech group Dominari saw its share price rise 580 per cent before their respective disclosures, which experts have described as “clearly unusual”.4. Santander has overtaken UBS as continental Europe’s most valuable bank after Trump’s tariff-induced market rout hit the Swiss lender harder than its peers. The shift marks a symbolic turnaround for Santander, which has struggled to boost its languishing share price for much of the past decade, and underscores the challenges facing UBS.5. Astronomers have found signs of biological activity on a planet 124 light years from Earth, in what they call the strongest evidence yet of extraterrestrial life. The discovery was made on K2-18b, a distant water-covered planet that is 8.6 times bigger than Earth. Here’s what they detected.Today’s big read© FT Montage/Getty Images/DreamstimeSince entering the White House, Trump has launched an attack on US universities that has few parallels in the history of the federal government’s interactions with the higher education sector. The latest salvo in the war against elite universities came this week, when Trump moved to strip Harvard of its tax-exempt status. For Trump the campaign is central to his culture wars, but the project has the clear imprimatur of Stephen Miller, the president’s deputy chief of staff, who is driving much of the domestic agenda. We’re also reading . . . US tariffs: Trump’s tariffs are not designed as economic policy but as a means to compel loyalty to the president, writes Chris Murphy, junior US senator for Connecticut. The ‘Chinese Dream’: Xi Jinping’s vow of a “great renewal” is no less a political anchor for China than Maga is for Trump’s America, writes Stephen Roach. Brooke Masters: Just when American finance was looking unstoppable, Trump pulled out the rug, writes the FT’s US managing editor.Chart of the day“The US has benefited from reserve currency status for 100 years. It’s taken less than 100 days to unwind it,” says Gregory Peters, co-chief investment officer at PGIM Fixed Income. Can the fall of the dollar eventually erode the currency’s unique role in the global economy and financial system? Some analysts and investors now think the scale of the Trump shock could end a near-century of dollar dominance. Take a break from the newsIt is easier to acknowledge the less good parts of yourself when you’re told they were pre-determined by the stars, writes Jemima Kelly. Follow the FT’s resident contrarian as she tries to make sense of astrology.© Tabby Booth More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Nvidia chief executive Jensen Huang visited Beijing on Thursday after new curbs from Washington on the US chipmaker’s China sales sent its shares tumbling.According to two people familiar with his travel schedule, Huang met Nvidia clients, including the founder of generative artificial intelligence start-up DeepSeek, to discuss new chip designs for Chinese customers.He then held separate talks with Chinese vice-premier He Lifeng, according to one person familiar with the meeting.Huang said China was “a very important market for Nvidia” and expressed hope that his company could “continue co-operating” with the country, according to state broadcaster CCTV.On Tuesday, Nvidia said it expected a $5.5bn hit to earnings from new US export restrictions on its H20 chip, a lower-powered model that had already been designed to comply with Joe Biden-era controls limiting exports to China.Huang’s talks indicate that Nvidia is not willing to give up on the Chinese market and is considering designing yet another chip for it even though its previous efforts have been banned by Washington.Plans for the Nvidia chief’s visit to Beijing were finalised after US President Donald Trump’s unexpected move to ban the H20 chip.The group reported $17bn in sales from China last year, but faced growing threats to its business from Beijing even before Trump interceded.In previous trips to China, Huang has shied away from publicised meetings with high-level officials.According to a person familiar with the matter, Huang’s latest visit to China came shortly after the State Council agreed to a meeting request from Nvidia earlier this week.Huang met DeepSeek founder Liang Wenfeng in Beijing, two people familiar with the trip said, to discuss how to design next-generation chips for China that would meet client needs and the regulatory requirements of both the US and China.DeepSeek, an Nvidia customer, in January rattled US tech stocks when it unveiled a competitive AI model that achieved a similar performance to US rivals but appeared to be trained at a fraction of the cost. Nvidia’s effort to maintain its sales in China comes as the country has been forced to prepare to decouple from the US amid Trump’s escalating trade war.The White House has applied additional tariffs of 145 per cent on imports from China, a level that Beijing has matched in retaliation.China has pushed to build up its domestic semiconductor industry and directed domestic tech companies to buy Huawei’s AI chip. The Chinese tech champion is working to address difficulties in using its Ascend AI chip for model training, which has left domestic companies reliant on Nvidia.Huang has called Huawei “China’s ‘single most formidable tech company’”.Nvidia has faced regulatory scrutiny in both Washington and Beijing. China’s antitrust regulator in December announced it was probing the company and reviewing if it had violated commitments made to Beijing when seeking approval for the purchase of an Israeli networking company.The trip comes as US lawmakers are demanding information from Nvidia on whether DeepSeek was able to obtain export-controlled chips.Nvidia declined to comment on Huang’s trip. More

Hi from Taipei, everyone! This is Cheng Ting-Fang, your TechAsia host for this week.It’s been a roller-coaster two weeks for many supply chain executives and managers, with the world’s two largest economies slapping tariffs of 125 per cent or more on each other and the US threatening “reciprocal” tariffs on most of its trading partners and further tightening AI chip export controls.Key suppliers across Asia providing everything from components to final assembly for Apple, Samsung, HP, Dell, Amazon and Meta have been on call nearly 24/7 to deal with the fallout — and with some close contacts at these suppliers, I feel like I am sitting in the back seat watching this real-life drama unfold.“I might need to see a psychiatrist for my mental health,” a manager at a component supplier told me. “Before I went to sleep, customers said they needed to hold all US shipments the next day, but when I opened my eyes, an urgent notice had come saying they now wanted manufacturing to come back at full speed and to move all orders in the third quarter to now to take advantage of the 90-day reciprocal tariff pause.”This is just one example of the kinds of messages I have been receiving lately. The relentless pace of these policy changes is punishing, and the uncertainty and pressure even more so.Fang Leuh, chair of TSMC’s affiliate chipmaker Vanguard International Semiconductor, was very open about the challenges. He said that before Trump’s tariffs, his company was eyeing “mild growth” for 2025, but now they need to “revisit” that outlook. When asked about potential growth drivers for this year, the chair said there was “nothing to write home about”.Yesterday evening, I had a phone call with another long-time industry friend whose company serves major PC makers. He told me that some new problems had emerged: even some products made in China for non-US markets still need materials from American suppliers, like 3M and DuPont. Such components became 125 per cent more expensive overnight due to China’s retaliatory tariffs. To make matters more disturbing, some tech brands have hinted that they could ask suppliers to cut prices in the second half of 2025, as shifting supply chains eat into their profits.For more than two decades, consumers worldwide have been able to take for granted that top-tier tech products like iPhones and MacBooks will arrive on time and at reasonable prices thanks to a massive, efficient electronics supply chain working around the clock. This golden era may already be coming to an end.I remember loving a children’s book called Monty when I was little. In the story, an alligator named Monty ferries a rabbit, a frog and a duck across the river to school every day. The trio relies on Monty but constantly criticises his swimming and speed. Then one morning, Monty is gone — the alligator is on vacation. The three friends try every way imaginable to cross the river on their own but fail, finally realising just how vital Monty is.By undermining the ultra-efficient global supply chain, the US now faces its own “Monty moment”. The ripple effects of this decision will be felt by the entire world.TSMC’s new tech takes shapeIn an ever-changing geopolitical landscape, tech companies must continue to innovate to survive. Nikkei Asia’s Cheng Ting-Fang reports that TSMC is finalising the first design for its next-generation chip packaging technology, which involves a radical change in substrate shape to help leading AI chip developers such as Nvidia, Amazon and Google boost computing performance.The chipmaker is targeting small-volume production of the so-called panel-level packaging in 2027, with the first pilot development line in the Taiwanese city of Taoyuan. Sources told Nikkei Asia that the first generation of this packaging method will use a 310-mm-by-310-mm square substrate, the material on which chips are built.If successful, TSMC’s move to a radically different chip packaging approach will significantly impact the product and R&D road maps of many equipment manufacturers. US, Japanese and Taiwanese chip tool makers have already started redesigning their machines to accommodate the new form factor. This square-shaped substrate can integrate more AI superchips than traditional round wafers, enabling even more powerful AI computing.Optical advanceApple supplier TDK is claiming a major breakthrough in technology to speed up data processing and solve a key bottleneck for the expansion of generative artificial intelligence, writes the Financial Times’ Harry Dempsey in Tokyo.Once famous for cassette tapes with its logo visible on advertisements in London’s Piccadilly Circus, the Japanese group believes its world-first spin photo detector — a melding of optical, electronic and magnetic elements — will be a gamechanger for boosting data transmission and reducing the power consumption of data centres.A demonstration conducted with Nihon University showed a response time of 20 picoseconds, or 20 trillionths of a second, which is 10 times faster than traditional semiconductor-based photo detectors.Although the path to commercialisation is set to take up to five years and require co-operation from integrated circuit designers, TDK’s new tech highlights how the transfer of data between processing units has become one of the key issues in developing generative AI.Other industry leaders, including the world’s largest chipmaker TSMC, are also throwing resources at solving the problem through next-generation silicon photonics that make use of optical technologies to overcome the current constraints of electronics.Live in the momentShares of major Chinese and Taiwanese tech suppliers took a beating in the days and weeks after Trump unleashed his “reciprocal” tariffs, offering a gauge of the supply chain disruption this policy is expected to bring.Some executives even say the uncertainty now exceeds even that seen during the Covid-19 pandemic, Nikkei Asia’s Lauly Li and Cheng Ting-Fang write. A manager at one supplier said they are living as if there is no tomorrow due to the extremely low visibility of future demand.With the 90-day pause on most “reciprocal” tariffs and a temporary exemption for smartphones and laptops, brands such as HP, Dell and Meta are urging suppliers to boost production for the US market. Apple, meanwhile, has been asking suppliers to build more products since earlier this year due to tariff uncertainties and is auditing suppliers’ non-China production facilities. The company has also asked suppliers to prepare to assemble over 90 per cent of its new iPhones, set to launch later this year, in India for the US market.However, game consoles were not lucky enough to be covered by the US tariff exemptions, meaning units shipped from China could face charges as high as 145 per cent. This poses a significant challenge for Nintendo’s highly anticipated Switch 2, as the majority of its production currently takes place in China, as Li and Cheng report.Come togetherTwo heads are better than one. This line of thinking has inspired Japanese automakers including Toyota, Nissan and Honda to come together to develop a standardised design for next-generation automotive chips by March 2029, Ryohtaroh Satoh of Nikkei Asia writes.This initiative, being spearheaded by the Automotive Software Platform and Architecture (ASRA) consortium, aims to solidify Japan’s automotive leadership and enhance its competitiveness against Chinese rivals like BYD, which have gained market share in key regions thanks to their line-ups of cheaper, more electrified offerings.Key chip and component suppliers, such as Denso and Renesas Electronics, are also on board. By standardising automotive chips, these companies hope to gain stronger bargaining power and higher production volumes with leading contract chipmakers like TSMC, which may otherwise prioritise more lucrative AI chip orders over those for automotive applications.Suggested readsJapan stem cell researchers claim success in Parkinson’s treatment (Nikkei Asia)Top Trump official tells Europe to choose between US or Chinese communications tech (FT)Pakistan names controversial Binance founder as crypto adviser (Nikkei Asia)Sony makes ‘tough decision’ to raise PlayStation 5 prices in Europe and UK (FT)South Korean robot AI start-up draws funding from ANA, KDDI, VC firms (Nikkei Asia)China can flick EU ‘kill switch’ — Europe mulls cyber attack risk (Nikkei Asia)The Chinese goods Americans most rely on, from microwaves to Barbies (FT)SoftBank-backed start-up aims to ride DeepSeek buzz with cheap AI servers (Nikkei Asia)Nintendo plays it safe with Switch 2 — but Mario Kart gets a radical makeover (FT)If Trump is trying to suppress China, he’s going about it all wrong (FT)#techAsia is co-ordinated by Nikkei Asia’s Katherine Creel in Tokyo, with assistance from the FT tech desk in London. Sign up here at Nikkei Asia to receive #techAsia each week. The editorial team can be reached at [email protected]. More

While the Trump administration has largely focused on pressing ahead on his tariff plans, Beijing has rolled out a series of non-tariff restrictive measures.
China is seen by some as seeking to broaden the trade war to encompass services trade — which covers travel, legal, consulting and financial services — where the U.S. has been running a significant surplus with China for years.
“Beijing is clearly signaling to Washington that two can play in this retaliation game and that it has many levers to pull, all creating different levels of pain for U.S. companies,” said Wendy Cutler, vice president at Asia Society Policy Institute.

Dilara Irem Sancar | Anadolu | Getty Images

China last week announced it was done retaliating against U.S. President Donald Trump’s tariffs, saying any further increases by the U.S. would be a “joke,” and Beijing would “ignore” them.
Instead of continuing to focus on tariffing goods, however, China has chosen to resort to other measures, including steps targeting the American services sector.

Trump has jacked up U.S. levies on select goods from China by up to 245% after several rounds of tit-for-tat measures with Beijing in recent weeks. Before calling it a “meaningless numbers game,” China last week imposed additional duties on imports from the U.S. of up to 125%.
While the Trump administration has largely focused on pressing ahead with tariff plans, Beijing has rolled out a series of non-tariff restrictive measures including widening export controls of rare-earth minerals and opening antitrust probes into American companies, such as pharmaceutical giant DuPont and IT major Google.
Before the latest escalation, in February Beijing had put dozens of U.S. businesses on a so-called “unreliable entity” list, which would restrict or ban firms from trading with or investing in China. American firms such as PVH, the parent company of Tommy Hilfiger, and Illumina, a gene-sequencing equipment provider, were among those added to the list.
Its tightening of exports of critical mineral elements will require Chinese companies to secure special licenses for exporting these resources, effectively restricting U.S. access to the key minerals needed for semiconductors, missile-defense systems and solar cells.
In its latest move on Tuesday, Beijing went after Boeing — America’s largest exporter — by ordering Chinese airlines not to take any further deliveries for its jets and requested carriers to halt any purchases of aircraft-related equipment and parts from U.S. companies, according to Bloomberg.

Having deliveries to China cut off will add to the cash-strapped plane maker’s troubles, as it struggles with a lingering quality-control crisis.
In another sign of growing hostilities, Chinese police issued notices for apprehending three people they claimed to have engaged in cyberattacks against China on behalf of the U.S. National Security Agency.
Chinese state media, which published the notice, urged domestic users and companies to avoid using American technology and replace them with domestic alternatives.
“Beijing is clearly signaling to Washington that two can play in this retaliation game and that it has many levers to pull, all creating different levels of pain for U.S. companies,” said Wendy Cutler, vice president at Asia Society Policy Institute.
“With high tariffs and other restrictions in place, the decoupling of the two economies is at full steam,” Cutler said.

Targeting trade in services

China is seen by some as seeking to broaden the trade war to encompass services trade — which covers travel, legal, consulting and financial services — where the U.S. has been running a significant surplus with China for years.

Earlier this month, a social media account affiliated with Chinese state media Xinhua News Agency, suggested Beijing could impose curbs on U.S. legal consultancy firms and consider a probe into U.S. companies’ China operations for the huge “monopoly benefits” they have gained from intellectual-property rights.
China’s imports of U.S. services surged more than 10-fold to $55 billion in 2024 over the past two decades, according to Nomura estimates, driving U.S. services trade surplus with China to $32 billion last year.
Last week, China said it would reduce imports of U.S. films and warned its citizens against traveling or studying in the U.S., in a sign of Beijing’s intent to put pressure on the U.S. entertainment, tourism and education sectors.
“These measures target high-visibility sectors — aviation, media, and education — that resonate politically in the U.S.,” said Jing Qian, managing director at Center for China Analysis.
While they might be low on actual dollar impact given the smaller scale of these sectors, “reputational effects — such as fewer Chinese students or more cautious Chinese employees — could ripple through academia and the tech talent ecosystem,” he added.
Nomura estimates $24 billion could be at stake if Beijing significantly step up restrictions on travel to the U.S.

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Travel dominated U.S. services to China, reflecting expenditure by millions of Chinese tourists in the U.S., according to Nomura. Within travel, education-related spending leads at 71%, it estimates, mostly coming from tuition and living expenses for the more than 270,000 Chinese students studying in the U.S.
Entertainment exports, encompassing films, music and television programs, accounted for just 6% of U.S. exports within this sector, the investment firm said, noting that Beijing’s latest move on film imports “carries more symbolic heft than economic bite.”
“We could see deeper decoupling — not only in supply chains, but in people-to-people ties, knowledge exchange, and regulatory frameworks. This may signal a shift from transactional tension to systemic divergence,” said Qian.

Could Beijing get more aggressive?

Analysts largely expect Beijing to continue deploying its arsenal of non-tariff policy tools in an effort to raise its leverage ahead of any potential negotiation with the Trump administration.
“From the Chinese government’s perspective, the U.S. companies’ operations in China are the biggest remaining target for inflicting pain on the U.S .side,” said Gabriel Wildau, managing director at risk advisory firm Teneo.
Apple, Tesla, pharmaceutical and medical device companies are among the businesses that could be targeted as Beijing presses ahead with non-tariff measures, including sanction, regulatory harassment and export controls, Wildau added.

Shoppers and staff are seen inside the Apple Store, with its sleek modern interior design and prominent Apple logo, in Chongqing, China, on Sept. 10, 2024.
Cheng Xin | Getty Images

While a deal may allow both sides to unwind some of the retaliatory measures, hopes for near-term talks between the two leaders are fading fast.
Chinese officials have repeatedly condemned the “unilateral tariffs” imposed by Trump as “bullying” and vowed to “fight to the end.” Still, Beijing has left the door open for negotiations but they must be on “an equal footing.”
Earlier this week, White House press secretary Karoline Leavitt said Trump is open to making a deal with China but Beijing needs to make the first move. “The ball is in China’s court: China needs to make a deal with us but we don’t have to make a deal with them,” she said.
In response to that remark, a spokesperson for China’s ministry of commerce said at a daily briefing Thursday that Beijing is open to negotiate with Washington on economic and trade issues, but the U.S. must “stop its threats and blackmailing,” according to a CNBC translation.
“In the end, only when a country experiences sufficient self-inflicted harm might it consider softening its stance and truly returning to the negotiation table,” said Jianwei Xu, economist at Natixis. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Show video infoDonald Trump’s tariffs are “likely” to put at risk the Federal Reserve’s goals of keeping prices and unemployment in check, chair Jay Powell warned, as he emphasised the US central bank’s focus on inflation. The Fed chief said on Wednesday: “The [Trump] administration is implementing significant policy changes and particularly trade is now the focus. The effects of that are likely to move us away from our goals.”While US rate setters would aim to “balance” their goals of keeping inflation near 2 per cent and maximising employment, they would need to remember that “without price stability, we cannot achieve long periods of strong labour market conditions”, Powell said in remarks to the Economic Club of Chicago.Powell also said the president’s tariffs announced so far had been “significantly larger than anticipated”, adding that “the same was likely to be true of the economic effects, which will include higher inflation and slower growth”. US stocks extended a sell-off that began earlier on Wednesday as the Fed chair spoke, with the S&P 500 ending the day down 2.2 per cent. European and Asian stocks were mixed on Thursday, with China’s CSI 300 flat and Japan’s Topix up 1.3 per cent. The Stoxx Europe 600 was down 0.1 per cent and the FTSE 100 was 0.6 per cent lower in early trading.Powell said Trump’s tariffs might place US rate setters “in the challenging scenario in which our dual-mandate goals are in tension”.“If that were to occur, we would consider how far the economy is from each goal, and the potentially different time horizons over which those respective gaps would be anticipated to close,” Powell said. Several Fed officials — including John Williams, head of the New York Fed, and governor Christopher Waller — have said inflation is likely to surge in the coming months on the back of the administration’s proposed tariffs. While Waller thinks the impact of tariffs will prove shortlived, other members of the rate-setting Federal Open Market Committee which Powell chairs believe Trump’s tariffs have increased the odds that inflation will be a longer problem for US consumers.Trump has repeatedly called on the Fed to cut interest rates, posting on his Truth Social platform last month that officials should act as “US Tariffs start to transition (ease!) their way into the economy”.The Fed’s preferred personal consumption expenditures price index rose at an annual pace of 2.5 per cent in February, above the central bank’s target. Recent surveys have shown that consumers and businesses are expecting strong price rises in the near future as the new taxes on imports ripple through the economy. The Trump administration’s policies have placed the Fed in “wait and see” mode, after the FOMC made a series of cuts over the second half of last year. The US central bank has kept its benchmark federal funds target range at 4.25-4.5 per cent this year, with officials saying they are well-placed to respond once the economic data show the effects of the president’s policies on American businesses and households. More