Economy

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The decorative cowboy boots and soccer balls covered in stars and stripes in Walmart’s superstore in Grapevine, Texas have a proudly American aesthetic.But like thousands of other products in Walmart’s stores they are imported from China, meaning that when Walmart reorders them they will carry a 125 per cent tariff.Tariffs represent a massive challenge for the largest US retailer, but at a much anticipated investor event in Dallas this week that was overshadowed by questions over the fallout from President Donald Trump’s erratic trade war, Walmart’s executives sought to convince attendees that tariffs were an opportunity to win market share.“We see opportunities to accelerate share gains and we’re maintaining flexibility to invest in price as tariffs are applied to incoming goods,” John David Rainey, Walmart’s chief financial officer, told the audience. Walmart is returning to the same playbook that has seen it win market share from supermarkets, big-box merchandisers, department stores and discount dollar stores during the inflation wave of the past few years.The retail giant used its financial heft to secure favourable terms with suppliers and hold prices down, which kept its existing customers happy and attracted more middle-class shoppers, too.Walmart navigated through the tariffs introduced by Trump on China during his first term in office, but Trump’s 2025 trade war is of an entirely different magnitude and far more unpredictable.As attendees filed out of the formal presentations made by Walmart executives in a downtown Dallas hotel, to make their way on to buses for store tours, Trump announced he was pausing the imposition of tariffs by 90 days on countries willing to negotiate with the US. The decorative cowboy boots in Walmart’s superstore in Grapevine, Texas are imported from China More

The consumer price index fell a seasonally adjusted 0.1% in March, putting the 12-month inflation rate at 2.4%, down from 2.8% in February.
Excluding food and energy, so-called core inflation ran at a 2.8% annual rate, having increased 0.1% for the month. That was the lowest rate for core inflation since March 2021.

Consumer price inflation eased more than expected in March as President Donald Trump prepared to launch tariffs against U.S. trading partners, the Bureau of Labor Statistics reported Thursday.
The consumer price index, a broad measure of goods and services costs across the U.S. economy, fell a seasonally adjusted 0.1% in March, putting the 12-month inflation rate at 2.4%, down from 2.8% in February.

Excluding food and energy, so-called core inflation ran at a 2.8% annual rate, having increased 0.1% for the month. That was the lowest rate for core inflation since March 2021.
Wall Street had been looking for headline inflation of 2.6% and core at 3%, according to the Dow Jones consensus.

Slumping energy prices helped keep inflation tame, as a 6.3% drop in gasoline prices helped drive a 2.4% broader decline in the energy index. Food prices climbed 0.4% on the month. Egg prices rose another 5.9% and were up 60.4% from a year ago.
Moreover, shelter prices, among the most stubborn components of inflation, increased just 0.2% in March and were up 4% on a 12-month basis, the smallest gain since November 2021. Used vehicle prices were off 0.7% while new vehicle costs increased just 0.1%, ahead of tariffs that are expected to hit the auto industry hard.

Airline fares declined 5.3% in March and motor vehicle insurance dropped 0.8% and prescription drugs fell 2%.

Stock market futures indicated a sharply lower open on Wall Street following the release, while Treasury yields also were negative.
The report comes a day after Trump’s stunning reversal of parts of his tariff plans as he announced a delay in some of the most aggressive of the duties put in place against dozens of nations. Instead, Trump let stand a 10% blanket levy on all imports announced last week and set a 90-day window during which the White House will negotiate the higher tariffs.
While Trump campaigned on bringing down inflation, progress had been slow to start 2025.
The president nevertheless has called on the Federal Reserve to lower interest rates. Central bank officials have expressed a reluctance to move with so much policy uncertainty in the air, and market pricing indicates the Fed will wait until June before lowering rates again.
The nature of the tariffs has led most economists to expect a significant bump in inflation, though that’s less clear now that Trump has opened the negotiation window.
“Today’s softer than expected CPI release feels backward looking given the large changes to trade policy seen in recent days,” said Kay Haigh, global co-head of fixed income and liquidity solutions at Goldman Sachs Asset Management. “Going forward the Fed is likely to face a difficult trade-off as tariff driven price increases start to feed through to the inflation data and activity remains soft.”
Futures market pricing after the CPI report indicated little change in market expectations for interest rates, with traders pricing in three or four cuts by the end of the year.
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Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The writer is a global economist and author of ‘The New China Playbook: Beyond Socialism and Capitalism’Technological leaps are rarely born in comfort. They are forged in conflict, competition and necessity. From nuclear energy to the space race, and now the unfolding artificial intelligence rivalry between the US and China — innovation accelerates when the stakes are highest. US President Donald Trump’s catastrophic tariff war may inflict serious economic pain on China, but it could also ignite a technological surge — not by design, but by necessity.Although China’s most urgent economic challenge remains internal, 125 per cent US tariffs give Beijing a clear pretext to act — to stimulate aggressively, subsidise strategically, sharpen its survival instinct and double down on technological supremacy.If Washington’s aim is to suppress China’s rise, it’s going about it all wrong.Tariffs don’t just alter trade flows — they redirect resources and reshape industrial structures. If Trump’s goal was to curb China’s technological progress, he would keep tariffs low on the bulk of Chinese exports to the US, locking the country into low-margin basic manufacturing. He would encourage high-tech exports to China, making sure that progress in its advanced components stalls.But this is the opposite of what’s happening. Ironically, just as the “China shock” pushed the US out of low-end manufacturing, the “Trump shock” is propelling China to reallocate resources into higher value, advanced technologies that compete directly with the US.Beijing has drawn its conclusion: innovation and core technology control is the only sustainable defence against tariffs. Companies with proprietary technology — like Huawei and BYD — are more insulated from tariffs and supply-chain shocks. China envisions a new tech supply-chain model: regional production, tech sovereignty and global supply-chain redundancy.Never have technology and innovation been as central to China’s national agenda as they are today. The “AI+” strategy aims to rapidly embed AI in all sectors possible. Low-cost AI model creator DeepSeek was born under constraint. It is now being deployed around the world.In 2019, a Rmb200bn “bottleneck technologies” fund was established to ensure 70 per cent domestic substitution in critical areas within three years. China is investing heavily in photonic quantum computing, building low-orbit satellite networks to rival Elon Musk’s Starlink and laying the foundation for commercial space stations. It is targeting breakthroughs in chipmaking equipment and leads the world in factory robot density.  If China had been drifting towards elevated state-led agendas, the tariff shock is pulling it back to economic fundamentals. The trade war is functioning as a reset, reaffirming the primacy of growth and competition. Support for the private sector is showing signs of revival. Tax relief and business-friendly policies are returning. Technological restrictions often have unintended consequences. Rather than stalling progress, they redirect demand inward. Take semiconductors: China consumes a third of global chips and once relied heavily on US suppliers. Sanctions didn’t reduce that demand — they rerouted it. Now, domestic companies such as SMIC are reporting record revenues and reinvesting in R&D. As the Chinese saying goes, good companies don’t “lie flat” — they adapt. The first wave of Trump’s sanctions sparked a globalisation frenzy. Chinese companies moved quickly to relocate production, expand into new markets and alter their business models. Shenzhen-listed Transsion now holds 51 per cent of Africa’s smartphone market. Smartphone maker Xiaomi derives 75 per cent of its revenue from overseas.Rising tariffs also accelerate the shift towards digital supply chains, service trade and cloud infrastructure — trends that play to China’s strengths in digital platforms, AI and ecommerce. Though still a manufacturing powerhouse, China accounts for less than 6 per cent of global service trade, leaving vast room to grow as that explodes relative to goods.  History has seen this dynamic before. When Napoleon tried to cripple British trade through the Continental System, Britain pivoted towards Asia, Africa and the Americas, towards industrialisation and mechanisation. Rising costs and pressure on wages were the catalysts for the steam engine, textile mills and naval power.   The US may be repeating that mistake. If making America great again is its goal, Trump should not fear a comfortable China; he should fear a constrained one.  More

This is an on-site version of the White House Watch newsletter. You can read the previous edition here. Sign up for free here to get it on Tuesdays and Thursdays. Email us at [email protected] morning and welcome to yet another new global trade order. Follow the latest developments on our live blog and you can measure the impact with our tariff tracker. Today let’s look at:Donald Trump blinked.After vowing not to back down from his aggressive, sweeping so-called reciprocal tariffs, the president made an abrupt reversal yesterday, authorising a 90-day pause in additional levies on a wide range of countries willing to negotiate with the US [free to read]. As he backed down, stocks soared to their best day in 17 years. The massive rally added about $4.3tn to the market value of the S&P 500, according to FT calculations.Trump played chicken with the market for an entire week, but his multi-front trade war had become unsustainable economically, financially and politically. While administration officials tried to paint the stunning shift as part of a master plan, Trump showed that he’s still vulnerable to backlash from Wall Street, lawmakers and donors.  He said he’d been mulling a pause for “the last few days” because “people were “getting . . . a little bit afraid” and “jumping a little bit out of line. They were getting yippie.” Once the market crisis extended to a sell-off in US government debt he buckled. The president started favouring advice from Treasury secretary Scott Bessent instead of trade hardliner Peter Navarro. He was also watching JPMorgan chief executive Jamie Dimon’s cable TV warning that the US was heading into a recession. “The bond market is very tricky, I was watching it . . . people were getting a little queasy,” Trump said as he explained his policy change yesterday.One Wall Street executive close to the White House told the FT’s James Fontanella-Khan that Bessent had helped Trump conclude that the US should pause tariffs on countries with which it has historically had good ties.“Trump is fine with Wall Street taking a hit but he doesn’t want the whole house to come down,” another person close to the White House told the FT’s Aime Williams. The president did, however, get more aggressive with Beijing, increasing additional levies on China to 125 per cent, escalating his trade stand-off with the world’s second-largest economy. As businesses scramble to adapt, some Chinese sellers on ecommerce platforms are raising prices by up to 70 per cent for US consumers.So just because the markets breathed a collective sign of relief yesterday, it doesn’t mean the trade uncertainty is gone. Investors are bracing for price falls ahead of the Wall Street open in 30 minutes.The latest headlinesWhat we’re hearingPodcaster Joe Rogan, left. His endorsement of Donald Trump was a critical moment in his election win last year More

The European Union will pause its first tranche of retaliatory tariffs on U.S. goods for 90 days, the European Commission announced Thursday.
EC President Ursula von der Leyen said the bloc had taken note of U.S. President Donald Trump’s own 90-day suspension of the highest rate of his sweeping global tariffs on Wednesday.
“We want to give negotiations a chance… if negotiations are not satisfactory, our countermeasures will kick in,” von der Leyen said.

In this photo illustration, a double exposure images shows U.S. President Donald Trump against the EU flag.
Sopa Images | Lightrocket | Getty Images

The European Union will pause the adoption of its retaliatory tariffs on a swathe of U.S. goods for 90 days, European Commission President Ursula von der Leyen said, a day after the White House issued a reprieve on most of its own levies.
On Wednesday, EU members voted in favor of the package, which was designed in response to the U.S. 25% tariffs on steel and aluminum launched last month. The duties were due to be finalized in the coming days, with an initial tranche set to come into effect on April 15. The full list of targeted items has not yet been published, though a draft document seen by CNBC in March listed products spanning clothing, poultry, grains, machinery and more.

“We took note of the announcement by President Trump. We want to give negotiations a chance,” von der Leyen said on Thursday.
“If negotiations are not satisfactory, our countermeasures will kick in. Preparatory work on further countermeasures continues. As I have said before, all options remain on the table.”
As well as Trump’s 25% duties on steel, aluminum and autos, the EU was hit with a 20% U.S. tariff rate on almost all goods as part of the sweeping duties announced last week.
Trump on Wednesday jolted markets when he revealed the reduction of new tariff rates on imports from most U.S. trade partners to 10% for 90 days to allow for trade negotiations.

Trump temporarily drops tariffs to 10% for most countries, hits China harder with 125%

U.S. stock markets soared on the news, while Asia-Pacific and Europe joined the rally on Thursday. The euro was 1.2% higher against the U.S. dollar at midday London time on Thursday, trading at $1.1079.

In a statement earlier Thursday, von der Leyen said she welcomed the pause of Trump’s full “reciprocal tariff” plan, calling it an “important step towards stabilizing the global economy.”
“Tariffs are taxes that only hurt businesses and consumers. That’s why I’ve consistently advocated for a zero-for-zero tariff agreement between the European Union and the United States,” she said.
As well as negotiating with the U.S. and forming countermeasures, the EU says it is also strengthening and diversifying its other trade relationships and reducing friction in its single market in response to Trump’s actions.
EU relations with the U.S. have soured significantly this year. Trump has repeatedly accused the 27-nation bloc of treating the U.S. “very unfairly” due to the imbalance in their trade in goods.
Across goods, services and investment, trade between the two economies is roughly equal, leading to questions over whether the EU could resort to targeting U.S. services including technology in its response. More

Was the president manipulating the market with his comments, as his critics say, or reassuring Americans, as the White House maintains?President Trump began his Wednesday with some advice for those rattled by his steep tariffs.“BE COOL,” Mr. Trump told his followers on social media after the markets opened. Just a couple of minutes later he wrote, “THIS IS A GREAT TIME TO BUY!!! DJT”Hours after that, Mr. Trump sent the markets soaring when he paused the levies for 90 days. The S&P 500 climbed several percentage points in a matter of minutes and was on its way to its best day since the recovery of the 2008 financial crisis.Soon after Mr. Trump’s pause, Democrats and government ethics experts asked the perhaps obvious question: Did Mr. Trump give the green light to his followers to cash in on a forthcoming rise in stock prices?“How is this not market manipulation?” Representative Mike Levin, Democrat of California, said on social media, referring to action that is potentially illegal. “If you’re a Trump supporter and you did what he said and you bought, then you did great. On the other hand, if you’re a retiree or a senior or somebody in the middle class over the last few days that didn’t have the tolerance for risk and you decided to sell, you got screwed.”The news of Mr. Trump’s pause came as Jamieson Greer, the U.S. trade representative, was testifying on Capitol Hill. Representative Steven Horsford, Democrat of Nevada, pressed him on Mr. Trump’s aim.“It’s not market manipulation,” Mr. Greer said. “We’re trying to reset the global trading system.”“How have you achieved any of that?” Mr. Horsford asked. “So if it’s not market manipulation, what is it? Who’s benefiting? What billionaire just got richer?”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

E.U. officials ​announced on Thursday that they would delay their plans for retaliatory tariffs after President Trump’s abrupt decision to hit pause on some of the levies he had placed on Europe and much of the rest of the world.Mr. Trump’s announcement, a day before, had signaled what European leaders were hoping for: a possible willingness to negotiate.Washington’s pivot came just hours after European officials had approved retaliatory levies of 10 to 25 percent on about $23 billion of U.S. imports. But given the American shift in stance, E.U. leaders said on Thursday that they would take a 90-day pause of their own.“If negotiations are not satisfactory, our countermeasures will kick in,” Ursula von der Leyen, president of the European Commission, announced in a statement. “Preparatory work on further countermeasures continues.”The Trump administration is specifically pausing what it has called “reciprocal” tariffs — across-the-board taxes that apply in different amounts to different countries. Mr. Trump announced those levies on April 2 and said that the European Union would face a levy of 20 percent. With his about-face on Wednesday, the bloc would most likely instead face a 10 percent across-the-board tariff for the next 90 days.But the 25 percent tariffs that Mr. Trump has placed on both cars and on steel and aluminum seemed to be still in place — and the retaliation that Europe approved on Wednesday was in response to those metal-sector tariffs, not to the tariffs that Mr. Trump has now delayed. The retaliation plan would have applied tariffs of 10 to 25 percent on a wide range of goods, including soybeans, peanut butter and hair spray. Officials will now “take a bit of time to think, take a bit of time to analyze, take a bit of time to reflect,” Olof Gill, a spokesman for the European Commission, said at a news conference on Thursday.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 deficits on the fiscal side that we’re likely to see in the GCC (Gulf Cooperation Council) countries, especially big countries like Saudi Arabia, are going to be pretty significant,” Goldman Sachs’ Farouk Soussa told CNBC.
Saudi Arabia needs oil at more than $90 a barrel to balance its budget, the IMF estimates. Goldman Sachs this week lowered its price forecast for 2025 to $62 for Brent crude.
Spending by the kingdom has ballooned due to Vision 2030, a sweeping campaign to transform the Saudi economy and diversify its revenue streams away from hydrocarbons.

Riyadh, Saudi Arabia.
Johnnygreig | E+ | Getty Images

Crashing oil prices triggered by waning demand, global trade war fears and growing crude supply could more than double Saudi Arabia’s budget deficit, a Goldman Sachs economist warned.
The bank’s outlook spotlighted the pressure on the kingdom to make changes to its mammoth spending plans and fiscal measures.

“The deficits on the fiscal side that we’re likely to see in the GCC [Gulf Cooperation Council] countries, especially big countries like Saudi Arabia, are going to be pretty significant,” Farouk Soussa, Middle East and North Africa economist at Goldman Sachs, told CNBC’s Access Middle East on Wednesday.
Spending by the kingdom has ballooned due to Vision 2030, a sweeping campaign to transform the Saudi economy and diversify its revenue streams away from hydrocarbons. A centerpiece of the project is Neom, an as-yet sparsely populated mega-region in the desert roughly the size of Massachusetts.
Plans for Neom include hyper-futuristic developments that altogether have been estimated to cost as much as $1.5 trillion. The kingdom is also hosting the 2034 World Cup and the 2030 World Expo, both infamously costly endeavors.

Digital render of NEOM’s The Line project in Saudi Arabia
The Line, NEOM

Saudi Arabia needs oil at more than $90 a barrel to balance its budget, the International Monetary Fund estimates. Goldman Sachs this week lowered its year-end 2025 oil price forecast to $62 a barrel for Brent crude, down from a previous forecast of $69 — a figure that the bank’s economists say could more than double Saudi Arabia’s 2024 budget deficit of $30.8 billion.
“In Saudi Arabia, we estimate that we’re probably going to see the deficit go up from around $30 to $35 billion to around $70 to $75 billion, if oil prices stayed around $62 this year,” Soussa said.

“That means more borrowing, probably means more cutbacks on expenditure, it probably means more selling of assets, all of the above, and this is going to have an impact both on domestic financial conditions and potentially even international.”
Financing that level of deficit in international markets “is going to be challenging” given the shakiness of international markets right now, he added, and likely means Riyadh will need to look at other options to bridge their funding gap.

The kingdom still has significant headroom to borrow; their debt-to-GDP ratio as of December 2024 is just under 30%. In comparison, the U.S. and France’s debt-to-GDP ratios of 124% and 110.6%, respectively. But $75 billion in debt issuance would be difficult for the market to absorb, Soussa noted.
“That debt to GDP ratio, while comforting, doesn’t mean that the Saudis can issue as much debt as they like … they do have to look at other remedies,” he said, adding that those remedies include cutting back on capital expenditure, raising taxes, or selling more of their domestic assets — like state-owned companies Saudi Aramco and Sabic. Several Neom projects may end up on the chopping block, regional economists predict.
Saudi Arabia has an A/A-1 credit rating with a positive outlook from S&P Global Ratings and an A+ rating with a stable outlook from Fitch. That combined with high foreign currency reserves — $410.2 billion as of January, according to CEIC data — puts the kingdom in a comfortable place to manage a deficit.
The kingdom has also rolled out a series of reforms to boost and de-risk foreign investment and diversify revenue streams, which S&P Global said in September “will continue to improve Saudi Arabia’s economic resilience and wealth.”
“So the Saudis have lots of options, the mix of all of these is very difficult to pre-judge, but certainly we’re not looking at some sort of crisis,” Soussa said. “It’s just a question of which options they go for in order to deal with the challenges that they’re facing.”
Global benchmark Brent crude was trading at $63.58 per barrel on Thursday at 9:30 a.m. in London, down roughly 14% year-to-date. More