Economy

Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldDonald Trump’s tariffs will send US inflation soaring to as high as 4 per cent this year, push unemployment higher and hit economic growth amid “pervasive” uncertainty, a top Federal Reserve official has warned. New York Fed chief John Williams said in prepared remarks on Friday that a “pervasive sense of uncertainty is becoming increasingly evident, especially in so-called soft data such as surveys and information from business contacts”. He added that there had been “a sharp decline in consumer sentiment, and business sentiment measures have weakened, too”. Williams said that he expected inflation to reach 3.5 to 4 per cent this year as a result of Trump’s tariffs, much higher than the Fed’s 2 per cent mandate and far above the 2.5 per cent February reading for the central bank’s preferred PCE inflation measure. He also said that he expected growth to “slow considerably from last year’s pace, likely to somewhat below 1 per cent”, while unemployment could rise from 4.2 per cent currently to 4.5 to 5 per cent. The gloomy assessment from one of the Fed’s most prominent officials comes as US financial markets have been rocked over the past week by Trump’s announcement of ultra-protectionist trade policies that he only partially rolled back. Last week, Jay Powell, the Fed chair, had warned that the tariffs proposed by the administration had been larger than expected and the result was likely to be higher inflation and slower growth. But Williams’ comments are more dire and more specific, and are far gloomier than the projections posted by Fed officials during their March meeting, which had inflation rising by 2.7 per cent and GDP expanding at a rate of 1.7 per cent. Despite the gloomy outlook, Williams said “the current modestly restrictive stance of monetary policy is entirely appropriate given the solid labour market and inflation still above our 2 per cent goal”.The comments from Williams came as data showed US consumers’ inflation expectations surging to their highest reading since 1981 in April, as sentiment fell sharply for a fourth consecutive month. Some content could not load. Check your internet connection or browser settings.The University of Michigan’s consumer sentiment index fell to a preliminary reading of 50.8 in April, its fourth successive drop and the lowest reading since June 2022, according to LSEG. Economists polled by Reuters had estimated a fall to 54.5 from 57 in March.  More

The producer price index, declined a seasonally adjusted 0.4% for the month, after rising 0.1% in February. Economists surveyed by Dow Jones had been looking for an increase of 0.2%.
More than 70% of the slide in final demand prices came from a 0.9% tumble in goods prices, a key measure as policymakers look for inflation drivers.

Wholesale prices unexpectedly fell in March, setting up a favorable inflation backdrop as President Donald Trump began intensifying tariffs against U.S. trading partners, the Bureau of Labor Statistics reported Friday.
The producer price index, considered a leading indicator for pipeline inflation pressures, declined a seasonally adjusted 0.4% for the month, after rising 0.1% in February. Economists surveyed by Dow Jones had been looking for an increase of 0.2%.

Excluding food and energy, the so-called core PPI also dropped, down 0.1% against the estimate for a 0.3% increase. The index less food, energy and trade services increased 0.1%.
Stock market futures and Treasury yields both were higher following the release.
More than 70% of the slide in final demand prices came from a 0.9% tumble in goods prices, a key measure as policymakers look for inflation drivers. Most of that drop was attributed to an 11.1% slide in gasoline prices. Services prices also pulled back, falling 0.2%.
Nevertheless, the indicators showed inflation still holding above the Federal Reserve’s 2% target.
Headline PPI showed a 2.7% 12-month rate, while the index excluding food, energy and trade services was at a 3.4% rate.

Moreover, March inflation measures will be viewed as somewhat stale considering the uncertainty behind Trump’s trade policy. The president slapped a broad 10% levy against all imports while also revealing a menu of individual duties against dozens of other trading partners. Trump on Wednesday backed off what he termed “reciprocal” tariffs, instituting a 90-day negotiation period in an effort to reduce the U.S. trade deficit.
The BLS on Thursday also reported that consumer price pressures were easing, down 0.1% for a headline rate of 2.4% and a core reading of 2.8% that was the lowest in four years.
Minneapolis Fed President Neel Kashkari, in a CNBC interview earlier Friday, said there was “a lot of good news under the hood” about the CPI report, though he noted that the inflation data gets “pretty stale, pretty quickly” in light of the tariff news.
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Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.China said it would increase its retaliatory tariffs on US goods to 125 per cent, in the latest escalation of the trade war between the world’s two biggest economies.China’s finance ministry said the increase from current additional levels of 84 per cent would take effect from April 12.But the ministry added that it would ignore any further US tariff rises on Chinese exports, “given that at the current tariff level, there is no market acceptance for US goods exported to China”.“The US’s imposition of abnormally high tariffs on China seriously violates international economic and trade rules, basic economic laws and common sense, and is completely unilateral bullying and coercion,” it said.The move is the latest in a week-long tit-for-tat between the two countries in which US President Donald Trump’s administration has attempted to isolate China after pausing some tariffs on other trading partners.It comes alongside a mounting wave of shipping disruption that threatens to break down international trade between the countries, with cancellations of shipments set to disrupt transpacific voyages.According to the state news agency Xinhua, Chinese President Xi Jinping said on Friday that “there are no winners in a tariff war” and “confronting the world will only lead to self-isolation”.The world was “undergoing accelerated changes unseen in a century, with overlapping risks and challenges”, Xi said.The chaotic rollout of Trump’s aggressive tariff agenda has convulsed markets since his “liberation day” announcement on April 2, wiping trillions of dollars from global stock indices and sending bond yields soaring.On Friday, the dollar slumped to a three-year low against the euro, which rose as much as 2.4 per cent against the US currency to $1.147, its highest level since February 2022, before paring some of its gains.Earlier this week, Trump introduced a 90-day pause for dozens of countries from his so-called reciprocal levies announced at that time, prompting a recovery in market prices. China was excluded from the reprieve.Trump last week introduced additional tariffs on China of 34 per cent, which added to two previous increases of 10 per cent. He has since repeatedly increased duties after retaliation from Beijing.Trump’s latest escalation this week has raised US duties on Chinese imports as high as 145 per cent.China’s average tariff on US imports now stands at 147.6 per cent, according to Chad Bown, senior fellow at the Peterson Institute.Some of China’s largest companies have begun rolling out measures to soften the impact of the US tariffs. Ecommerce group JD.com on Friday unveiled a Rmb200bn ($27bn) initiative to help suffering exporters, saying it would buy made-for-export goods to resell in China’s domestic market.The retailer added that Chinese companies that had been “going global” for years faced “challenges when shifting from exports to domestic sales, such as unfamiliarity with the local market and a lack of operational experience”.The supermarket unit of internet giant Alibaba also said it would work with exporters to expand their domestic sales.Additional reporting by Gloria Li in Hong Kong More

This article is an on-site version of our Swamp Notes newsletter. Premium subscribers can sign up here to get the newsletter delivered every Monday and Friday. Standard subscribers can upgrade to Premium here, or explore all FT newslettersI’ve been in several conversations recently with senior Democrats and advisers who are considering how to play Trump’s disastrous tariff rollout politically. In many ways, this is low hanging fruit — the president inherited the best post-Covid recovery in the rich world, and is now pushing the economy towards recession. His ridiculous “buy” post on social media, which preceded the 90-day pause on additional tariffs, only confirms that we are now officially living in a banana republic. Policy is being made by one guy who is unhinged.But putting that aside, many centrist Democrats are saying this is the moment for liberals to move completely away from the conventional economic wisdom of both the Trump and Biden administrations, which is that the global trading system must be rebalanced. To take that lesson from the past few days would be a mistake.Trump’s tariff chaos was an unnecessary economic own-goal (I’ll have more on that in my column on Monday) that will have lasting consequences. But going back to the 1990s isn’t going to fix what’s broken globally.Let’s do a quick history review. During Trump’s first term, then USTR Robert Lighthizer bravely raised the curtain on the imbalances between the US and China and forced everyone to stop pretending that China would get freer as it got richer. The US put very surgical and strategic tariffs on China, which didn’t cause inflation, mostly because China took the hit with a currency adjustment. Biden then comes in, keeps the tariffs in place, but also rolls out a true industrial strategy, the highlight of which was the reinvigoration of the American semiconductor industry, which happened faster than anyone imagined possible. The fact that this didn’t get more good press is shocking, but what’s even more amazing is that Trump didn’t continue the strategy. Instead he’s actively talking about dismantling the Chips Act.This isn’t how a president that really wants to reindustrialise the heartland acts. Now, to be fair, Biden’s industrial policy wasn’t perfect. He should have paid a bit more attention to the potential short-term hit from inflation, and didn’t do the clean energy transition perfectly. (It would have been great to create shared environmental and labour standards with Europe and avoid giving Brussels the sense that the US was trying to build its own EV industry at the expense of the EU.) But it was a great start, particularly given that the US hasn’t had major government market shaping since the New Deal.Now, we have Trump 2.0, tariffs, and an economic paradigm shift with no rudder. Rather than building demand signals with allies, the president fights the world all at once. And despite his executive order to revitalise US shipbuilding that (finally) came down Wednesday, there’s no real industrial policy.This, I believe, presents an opportunity for Democrats. Rather than saying let’s go back to the Clinton era, as the usual neoliberal suspects inside and outside the party seem to want to do (that’s just not a winning political message for working people), it’s a moment to focus on how and why this tariff strategy is potentially devastating for lower-income voters. First, it would raise inflation significantly because it’s everything, everywhere, at all once, and that always hits the poor hardest. Secondly, the places that would likely scale back jobs and investment in the short-term would be areas like Detroit, because complex machinery like cars have so many imported parts.Rather, Democrats should use the next two years to really focus on a digestible, politically salient message around trade. Policy wise, I think that includes tariffs on China, which is the real problem in terms of mercantilist practices and security issues, but also a clear plan for how to support workers and industries at home. My fear right now is that despite market chaos, Trump’s plan, assuming we end up with some moderate deals around lowering tariffs globally, will seem pretty good to working people, and we will have to deal with yet another four years of Republicans’ unfunded tax cuts, undermining of relationships with allies, and attacks on democratic values.Jonathan, you’ve just come over from the UK to the US as the FT’s US opinion editor. What’s your fresh-eyed view on my political advice to Democrats? And have we just had our own Liz Truss moment, or is that yet to come?Recommended readingJonathan Derbyshire responds Hi Rana. I certainly think this is Trump’s Liz Truss moment — which is to say that he learnt a painful lesson, as the former UK prime minister did with her 2022 “mini” Budget, about the power of the bond markets to discipline elected politicians.I have lost count of the number of times since Trump announced the 90-day pause on “reciprocal” tariffs that I have heard people quote James Carville’s famous line about wanting to be reincarnated as the bond market because “you can intimidate everybody”, including, as it turns out, an unconstrained second-term would-be strongman apparently able to bend corporate America, the legal profession and the Ivy League to his will.Carville might have been right about the power of the bond vigilantes, but, as you suggest, the Democrats should nonetheless be wary of harking back too much to the Clinton era. A few weeks ago, I met a former official in the Biden administration who told me Carville was right to advise the party to “roll over and play dead” — in other words, to stand back and allow the Trump administration to make mistakes and generally wear itself out. That both underestimates the zeal of this administration and overestimates the extent to which the normal rules of political gravity apply to this president, Wednesday’s lesson in the dangers of hubris notwithstanding.It has become something of an article of faith for many Democrats that they lost November’s presidential election because Kamala Harris and her running mate Tim Walz had more to say about the threat Trump poses to American democracy than they did about the price of eggs. I was struck by something Barack Obama said last week, which many in his party would do well to consider: “I think people tend to think democracy, rule of law, independent judiciary, freedom of the press, that’s all abstract stuff because it’s not affecting the price of eggs. Well, you know what, it’s about to affect the price of eggs.”Your feedback And now a word from our Swampians . . . In response to “Are we seeing the fall of Elon Musk?”:“[Elon Musk] built his wealth from the ground up (yes, I know he didn’t found Tesla!) — giving him the same title of oligarch, as Russia/India/etc’s politically connected kleptocrats isn’t fair . . . They’re useless thieves — the worlds greatest nepo babies. Elon Musk, for all his faults, is not that.” — FT commenter Murcielago_BoyIn response to “Is Trump going into nosedive?”:“I sense an ongoing struggle — both in your assessment and across the broader FT and mainstream media — to connect the dots in a way that fully makes sense of the current moment. That struggle, I believe, stems from an assumption that there is still some underlying rational logic driving recent political developments. What the US is grappling with, however, is the ascendance of ideology over facts. In the realm of ideology, facts no longer matter. Figures like Lutnick understand this well. Brazen lies and disinformation aren’t anomalies — they are means to an end, used to reinforce and legitimise a worldview. Repeat it so many times until it becomes the fact.” — FT commenter Third wise manYour feedbackWe’d love to hear from you. You can email the team on [email protected], contact Rana on [email protected] and Jonathan on [email protected]. We may feature an excerpt of your response in the next newsletterRecommended newsletters for youTrade Secrets — A must-read on the changing face of international trade and globalisation. Sign up hereUnhedged — Robert Armstrong dissects the most important market trends and discusses how Wall Street’s best minds respond to them. Sign up here More

President Trump has big ambitions for the global trading system and is using tariffs to try to rip it down and rebuild it. But the European Union is taking action after action to make sure the continent is at the center of whatever world comes next.As one of the globe’s biggest and most open economies, the E.U. has a lot on the line as the rules of trade undergo a once-in-a-generation upheaval. Its companies benefit from sending their cars, pharmaceuticals and machinery overseas. Its consumers benefit from American search engines and foreign fuels.Those high stakes aren’t lost on Europe.Ursula von der Leyen, the president of the European Commission, the E.U.’s executive arm, has spent the past several weeks on calls and in meetings with global leaders. She and her colleagues are wheeling and dealing to deepen existing trade agreements and strike new ones. They are discussing how they can reduce barriers between individual European countries.And they are talking tough on China, trying to make sure that it does not dump cheap metals and chemicals onto the European market as it loses access to American customers because of high Trump tariffs.It’s an explicit strategy, meant to leave the economic superpower stronger and less dependent on an increasingly fickle America. As Ms. von der Leyen and her colleagues regularly point out, the U.S. consumer market is big — but not the be-all-end-all.“The U.S. makes up 13 percent of global goods trade,” Maros Sefcovic, the E.U.’s trade commissioner, said in a recent speech. The goal “is to protect the remaining 87 percent and make sure that the global trade system prevails for the rest of us.”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

Minneapolis Federal Reserve President Neel Kashkari said recent market trends show investors are moving away from the U.S. as the safest place to invest.
Treasury yields are rising while the U.S. dollar has sagged against its global counterparts.
The central bank official said that is counter to what one might normally expect.

Minneapolis Federal Reserve President Neel Kashkari said Friday recent market trends show investors are moving away from the U.S. as the safest place to invest while President Donald Trump’s trade war escalates.
With Treasury yields rising and the U.S. dollar sagging against its global counterparts in recent days, the trends are running counter to what you might normally see, the central bank official said during a CNBC “Squawk Box” interview.

“Normally, when you see big tariff increases, I would have expected the dollar to go up. The fact that the dollar is going down at the same time, I think, lends some more credibility to the story of investor preferences shifting,” Kashkari said.
The 10-year Treasury yield has surged this week after Trump announced his intention to slap a 10% across-the-board tariff against U.S. trading partners and threatened to impose even harsher select levies before backing down Wednesday.
At the same time, the greenback has slumped more 3% against a basket of global currencies, with moves potentially signifying a turn away from safe-haven U.S. assets.
“Investors around the world have viewed America as the best place to invest, and if that’s true, we will have a trade deficit. So now one of the ways that expresses itself is in lower yields across asset classes in America,” Kashkari said. “If the trade deficit is going to go down, it could be that investors are saying, OK, America no longer is the most attractive place in the world to invest, and then you would expect to see bond yields go up.”
Kashkari noted, however, that he is seeing “stresses” but not significant dislocations in market functioning.

Kashkari does not vote this year on the rate-setting Federal Open Market Committee but will vote in 2026. He noted that his focus in the current environment is on keeping inflation expectations anchored, echoing other policymakers’ statements that rates are unlikely to move until there is clearer visibility on fiscal and trade policy.
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When Congress voted to normalize trade relations with China at the beginning of this century, U.S. manufacturers braced for a stream of cheap goods to begin flowing into U.S. ports.Instead, they got a flood. Imports from China nearly tripled from 1999 to 2005, and American factories, with their higher wages and stricter safety standards, couldn’t compete. The “China shock,” as it has come to be known, wiped out millions of jobs in the years that followed, leaving lasting scars on communities from Michigan to Mississippi.To President Trump and his supporters, those job losses are an object lesson in the damage caused by decades of U.S. trade policy — damage he promises that his tariffs will now help to reverse. On Wednesday, he further raised duties on imports from China, well beyond 100 percent, even as he suspended steep tariffs he had imposed on other trading partners.Few economists endorse the idea that the United States should try to bring back manufacturing jobs en masse. Even fewer believe that tariffs would be an effective tool for doing so.But economists who have studied the issue also argue that Mr. Trump misunderstands the nature of the China shock. The real lesson of the episode wasn’t about trade at all, they say — it was about the toll that rapid economic changes can take on workers and communities — and by failing to understand that, Mr. Trump risks repeating the mistakes he claims he has vowed to correct.“For the last 20 years we’ve been hearing about the China shock and how brutal it was and how people can’t adjust,” said Scott Lincicome, a trade economist at the Cato Institute, a libertarian research organization. “And finally, after most places have moved on, now we’re shocking them again.”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

The U.K. economy grew by 0.5% month-on-month in February, official data showed on Friday.
The latest print firmly beat analyst expectations near 0.1% in a LSEG survey.
The Office for National Statistics, which published the provisional figures, said a 0.3% expansion in the services sector had driven the surprise jump in growth.

People browsing stalls along Portobello Road Market on Feb. 22, 2025, in Notting Hill, West London.
Mike Kemp | In Pictures | Getty Images

The U.K. economy grew by a higher-than-expected 0.5% month-on-month in February amid a jump in the services output, official data showed on Friday.
Analysts had projected a monthly gross domestic product hike of 0.1% in February, according to LSEG data.

The Office for National Statistics, which published the provisional figures, said a 0.3% expansion in the services sector had driven the surprise jump in growth. In January, services had recorded a 0.1% monthly rise.
Production output saw a substantial recovery in February, notching 1.5% month-on-month growth compared to the monthly contraction of 0.5% seen in January. Construction output also staged a recovery in February, adding 0.4% on the month after falling 0.3% in January.
The British pound jumped against the dollar after the data release, rising 0.6% against the greenback to trade at $1.3047 by 8:08 a.m. in London.
In January, an early estimate showed the U.K. economy unexpectedly shrank by 0.1% on a monthly basis. That figure was later revised upward to show that economic growth was flat in January.
The U.K. economy has struggled to gain momentum over the past year. ONS data showed earlier this year that Britain’s GDP expanded by 0.1% in the fourth quarter of last year, after flatlining in the three months prior.

Friday’s figures are released as the U.K. braces for the economic impact of new 10% tariffs on its exports to the United States.
British lawmakers had been hoping to avoid the full force of U.S. President Donald Trump’s tariffs regime, with America accounting for 17% of Britain’s international trade in the year to September 2024 — making it the Britain’s largest trading partner.
Trump’s suspended reciprocal tariffs, if reinstated once their pause ends this summer, would slap the U.K. with additional 10% duties on British goods.
Suren Thiru, economics director at the Institute of Chartered Accountants in England and Wales, said that the uncertainty created by the tariffs would likely override Friday’s better-than-expected economic data, when it comes to the Bank of England’s decision whether to trim interest rates next month.
Markets are currently pricing in a 25-basis-points interest rate cut from the Bank of England in May, according to LSEG data, which would bring the central bank’s core interest rate down to 4.25%.
“Though activity rebounded strongly as services and manufacturing output rallied, February’s figures have been pushed firmly into the background by the financial market bedlam caused by Trump’s tariff announcements,” Thiru said.
“The greater global financial and economic instability caused by the US tariff announcements makes a May rate cut look more likely than not, by further fuelling rate setters’ concerns over the underlying resilience of the UK economy.”
Meanwhile, major welfare spending cuts and a greater tax burden on businesses have created concerns about the outlook for the economy.
Last month, the U.K.’s Office for Budget Responsibility halved its growth forecast for the U.K., slashing its outlook from 2% to 1% growth in 2025. More