Economy

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Donald Trump’s on-off tariffs have pushed currency volatility to multiyear highs and boosted demand for foreign exchange hedging products as companies struggle to adjust to market swings.Currency volatility has surged in recent days to levels last reached during the collapse of Silicon Valley Bank and Credit Suisse in March 2023, according to JPMorgan’s G7 and emerging market currency volatility indices.The uncertainty around Trump’s tariffs has created more demand for FX hedging products to offset sudden fluctuations in exchange rates that are hitting businesses with global operations, according to banks and executives at multinational companies.Nathan Venkat Swami, head of Asia-Pacific FX trading at Citigroup, said demand for hedging products had accelerated since November, when Trump was elected, on the back of uncertainty over his administration’s trade policies.“February saw a slowdown in activity due to the lunar new year holidays across a lot of Asia, but we saw volumes pick up again in March, with strong activity from corporate hedgers,” said Swami.Most multinationals hedge a portion of their earnings and raise or lower that level depending on the perceived risk of currency fluctuations. The heightened trade uncertainty has led companies to increase their hedging exposure.“As we became more risk-averse, we wanted to hedge more,” said a senior executive at a European healthcare company that manufactures and exports medical equipment from Europe to Asia.The company records sales in China’s renminbi, which until recently had been strengthening against the euro.It used the favourable exchange rate to buy FX contracts that offset the risk of the renminbi falling in value against the euro — an event that subsequently occurred following Trump’s “liberation day” tariff announcements on April 2.“Going forward, with high volatility, corporates are likely to reduce risk by entering into more hedging,” said the executive.In addition to greater corporate demand for FX instruments, a rotation out of US equities into other stock markets had further increased FX hedging volumes, said Wei Li, head of multi-asset investments for China at BNP Paribas. Investors can hedge their foreign equity holdings by shorting the local currency.“This year the whole market changed,” said Li. “That basically creates a lot of demand for FX hedging.”This has helped boost Wall Street banks, which reported strong first-quarter trading revenues amid high volatility triggered by the Trump administration’s market-moving announcements.Most hedging transactions, especially for lesser-traded currencies, are conducted “over the counter” between clients and banks, but public markets data shows growing demand for futures contracts too. Investors said this reflected a broader trend of increased demand for FX hedging products.In Hong Kong, open interest in renminbi futures — a measure of market activity — has risen to its highest levels since 2016, the year after a currency devaluation increased demand for hedging against the renminbi. On the Singapore stock exchange, FX futures volumes are on track to hit a record high this year.“Global investors are increasingly using SGX FX futures as effective and cost-efficient hedging instruments to manage heightened market and currency volatility,” SGX said in a statement to the Financial Times.But as Trump pushes to rework the global trade system, companies were “finding it harder to determine what their longer-term hedging requirements will look like given trade compositions will likely change”, said Swami.The threat of an economic slowdown could add to the pressure and lower demand for hedging.“If global growth gets affected by prolonged tariff uncertainty and trade starts getting hit, that’s a scenario where we could see FX volumes drop,” he said. More

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Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldThe US House of Representatives China committee has asked Nvidia to explain whether and how Chinese company DeepSeek obtained export-controlled chips to power its artificial intelligence app, which lawmakers say poses a national security threat.John Moolenaar, the Republican chair of the panel, and his Democratic counterpart Raja Krishnamoorthi on Wednesday wrote to Nvidia to obtain information about their sales to China and south-east Asia. The letter came after the panel released a report that said DeepSeek, which trained its model on Nvidia chips, posed a “profound threat” to US national security.Moolenaar said DeepSeek was a “weapon in the Chinese Communist party’s arsenal, designed to spy on Americans, steal our technology, and subvert US law”.The US has in recent years introduced sweeping export controls designed to make it harder for Chinese groups to obtain advanced American technology that could help its military.Scrutiny from the committee increases pressure on Nvidia over whether its sophisticated chips are being covertly sold to China, which the company has long said it works to avoid.Moolenaar claimed DeepSeek “exploited US AI models and reportedly used advanced Nvidia chips that should never have ended up in Chinese Communist party hands . . . That’s why we’re sending a letter to Nvidia to demand answers”.Nvidia on Wednesday pushed back strongly against any suggestion it might be responsible for export-controlled chips falling into the wrong hands, saying it followed the government’s directions on where it can or cannot sell chips “to the letter”.“The technology industry supports America when it exports to well-known companies worldwide. If the government felt otherwise, it would instruct us,” Nvidia added.The report came a day after it emerged that the US had imposed export controls on Nvidia selling H20 chips to China, blindsiding the company, which had expected relief from the restrictions. In a regulatory filing, it said the controls would lower its earnings by $5.5bn in the quarter to April 27. Nvidia relies on a complex network of supply chain partners such as Dell and Supermicro, which package its chips into servers and sell on to customers.It addressed suggestions in the congressional report that customers in China may be accessing its export-controlled chips via subsidiaries in Singapore, which accounted for 18 per cent of its 2025 fiscal year revenue, or $23.7bn.Nvidia said the revenue it reports from Singapore was based on billing addresses, meaning it often included subsidiaries of US companies. “The associated products are shipped to other locations, including the United States and Taiwan, not to China,” it said. The China committee’s report said DeepSeek transmitted data using infrastructure that was connected to China Mobile, a major Chinese telecoms provider that the Pentagon has designated as having connections to the country’s military.It added DeepSeek also integrated tracking tools from large Chinese tech groups, including ByteDance, the owner of TikTok, in addition to Baidu, a Chinese internet search engine, and Tencent.“This entangles DeepSeek’s data harvesting architecture with [People’s Republic of China] companies known for their roles in surveillance and CCP control, heightening the risk that foreign adversary entities could gain access to Americans’ private information,” the report said.DeepSeek did not respond to a request for comment. China’s embassy in Washington said the committee’s claims were “groundless” and Beijing opposed the “overstretching of the concept of national security and the politicisation of economic, trade and technological issues”.“The Chinese government attaches great importance to data privacy and security and protects them in accordance with the law. It has never required, nor will it require, companies or individuals to illegally collect or store data,” said Liu Pengyu, the embassy spokesperson.DeepSeek sparked a tech market rout earlier this year when it announced breakthroughs that appeared to shift the balance of power in an AI arms race between Washington and Beijing. In January Nvidia had about $600bn wiped off its market valuation as investors reacted to reports that DeepSeek had trained models that were competitive with the latest offerings from groups such as OpenAI at a fraction of the cost and using far less computing power.DeepSeek said it trained its “R1” model using clusters of Nvidia’s H800 chips, which are less powerful versions of its H100 chip. The H800 was specifically designed for the Chinese market to comply with US export controls and was later blocked by Joe Biden’s administration in 2023. More

Jerome H. Powell warned that President Trump’s tariffs could lead to a “challenging scenario” for the central bank.Jerome H. Powell, the chair of the Federal Reserve, stressed that the tariffs announced so far go well beyond what the Fed had expected even in its worst-case scenario.Haiyun Jiang for The New York TimesAs President Trump’s trade policy has started to take shape, officials at the Federal Reserve have been more vocal about how such sweeping tariffs will affect the economy.Jerome H. Powell, the chair of the central bank, recently warned that levies of the scope and scale Mr. Trump was pursuing would most likely lead to even higher inflation and slower growth than initially expected — the makings of what’s known as a stagflationary shock.Mr. Powell expanded on those remarks on Wednesday, stressing that the tariffs announced so far go well beyond what the Fed had expected even in its worst-case scenario. In a speech at the Economic Club of Chicago, he laid out in greater detail how the Fed would deal with a situation in which its goals for a healthy labor market as well as low and stable inflation clashed with each other.“We may find ourselves in the challenging scenario in which our dual-mandate goals are in tension,” Mr. Powell said. “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.”In a moderated discussion after his speech, Mr. Powell said the Fed would have to make “what will no doubt be a very difficult judgment” about which of its goals to prioritize.Mr. Powell’s comment accelerated a sell-off in stocks, with the S&P 500 ending the day down more than 2 percent. U.S. government bonds rallied, while the dollar continued to weaken against a basket of major currencies.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 White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldThe Trump administration has imposed sanctions on a Chinese refinery for buying Iranian crude oil, as Washington increasingly pushes Beijing to rein in oil purchases from the country to increase the pressure on Tehran.The Treasury department targeted Shandong Shengxing Chemical for allegedly buying more than $1bn in Iranian crude oil from sources that included a front company for Iran’s Islamic Revolutionary Guard Corps in violation of US sanctions.The measure marks the second time in a month that President Donald Trump has put sanctions on a “teapot” refinery — a term for independent Chinese refineries that are the main buyers of Iranian crude.“Any refinery, company, or broker that chooses to purchase Iranian oil or facilitate Iran’s oil trade places itself at serious risk,” said Treasury secretary Scott Bessent. “The United States is committed to disrupting all actors providing support to Iran’s oil supply chain, which the regime uses to support its terrorist proxies and partners,” he added.The Treasury department also imposed sanctions on several companies and vessels for helping Iran transport oil to China on ships that are part of a “shadow fleet” of vessels that seek to avoid detection.The package marked the sixth round of sanctions that Trump has placed on Iran as part of his “maximum pressure campaign”.They come as Washington and Beijing are in the middle of a trade war that Trump launched in January and escalated in recent weeks. The US has imposed a 145 per cent tariff on imports from China, which has retaliated with a 125 per cent tariff on American goods.The Trump administration has also stepped up pressure on China over its purchases of Iranian crude. The Biden administration was criticised by Republicans for failing to exert more pressure on Beijing to stop importing oil from Iran in violation of US sanctions. Dennis Wilder, who was a White House Asia adviser to president George W Bush, said former president Joe Biden “turned a blind eye to China’s purchase of up to 90 per cent of Iran’s oil exports”.“This was, in large part, out of concern that a fully enforced embargo on Iran would lead to a sharp rise in oil prices that would affect US consumers,” Wilder said. “Chinese oil purchases have helped build a close relationship between Tehran and Beijing in which China benefits by gaining greater commercial access in the region.”The new sanctions come as the Trump administration is holding talks with Tehran on curtailing the Islamic republic’s nuclear programme, prompting hopes of a breakthrough in one of the Middle East’s most intractable problems. Steve Witkoff, Trump’s special envoy, held indirect talks with Iranian foreign minister Abbas Araghchi in Oman on Saturday. The pair are due to hold a second round of talks this coming Saturday.“We firmly oppose the US abuse of unilateral sanctions and ‘long-arm jurisdiction,’ which undermines international trade order and rules, disrupts normal economic and trade exchanges, and infringes upon the legitimate rights and interests of Chinese companies and individuals,” said Liu Pengyu, the Chinese embassy spokesperson in Washington.   More

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