Economy

Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldRepublican senator Ted Cruz warned of a potential “bloodbath” for his party in the 2026 midterm elections if Donald Trump’s tariffs send the US economy into recession.The senator from Texas also predicted a “terrible” fate for the world’s largest economy should a full-blown trade war erupt and Trump’s tariffs, as well as any retaliatory measures on US goods, stay in place long-term.Typically a Trump ally, Cruz’s comments on his Verdict podcast on Friday were the starkest warning from a member of the president’s party since his “liberation day” levies kicked off the global market rout. Republican lawmakers have begun to worry about the effects of Trump’s tariffs on the economy and their party’s prospects for keeping control of both chambers of Congress in the 2026 midterm elections. Their concerns grew as Americans watched about $5.4tn of stock market capitalisation evaporate over a two-day Wall Street rout.On Thursday, Republican Chuck Grassley introduced a bill in the Senate, alongside a Democrat, to reassert Congressional control of tariff policy. Under the proposed law, new levies would expire in 60 days unless approved by Congress, and there would be a mechanism for lawmakers to cancel tariffs at any point.Support for the bill grew on Friday as Republican senators Lisa Murkowski, Mitch McConnell, Jerry Moran and Thom Tillis signed on as co-sponsors. The bill is likely more symbolic than anything, but points to increasing discord within the Republican party as lawmakers worry about the effects of the trade policy on constituencies reliant on exports — and on re-election hopes.There were already signs of voter discontent this week, when an Elon Musk-backed conservative lost a state supreme court seat in Wisconsin to the liberal candidate. Republicans also underperformed their 2024 results in two special House elections in Florida.If Trump’s and any retaliatory tariffs remain in place long-term and push the US into “a recession, particularly a bad recession, 2026 in all likelihood politically would be a bloodbath. You would face a Democrat House, and you might even face a Democrat Senate,” Cruz said.Despite the 53-47 Republican majority in the Senate, “if we’re in the middle of a recession and people are hurting badly, they punish the party in power”, Cruz said.The Canada-born Texan did not share the president’s assessment that the tariffs would usher in “a booming economy”. Instead, Cruz said there could be “an enormous economic boom” only if the US and any retaliating countries slash their duty rates.But if “every other country on earth” hits the US with retaliatory tariffs and Trump’s so-called reciprocal levies remain in place, “that is a terrible outcome”, the senator warned.If the confrontation between the US and its trading partners escalates into a full-blown trade war, “it would destroy jobs here at home, and do real damage to the US economy”, Cruz said. It would also “have a powerful upward impact on inflation”. More

Some Republican senators on Capitol Hill, including one of President Trump’s most ardent supporters, have signaled their uneasiness to the sweeping global tariffs that the president announced this week and that sent global markets reeling.Senator Ted Cruz, Republican of Texas, warned on Friday that a future where other countries slap retaliatory tariffs on U.S. goods, as China has already done, was a “very real possibility” and would be a “terrible outcome” for the country.“It’s terrible for America,” Mr. Cruz said on the latest episode of his podcast. “It would destroy jobs here at home and do real damage to the U.S. economy if we had tariffs everywhere.”Mr. Cruz also said that a trade war would likely push inflation up and burden consumers with higher costs.“I love President Trump. I’m his strongest supporter in the Senate,” Mr. Cruz said. “But here’s one thing to understand: A tariff is a tax, and it is a tax principally on American consumers.”Mr. Cruz’s comments came just two days after the Senate, in a largely symbolic move, voted to halt planned 25 percent levies on Canada. However, the bill is almost certain to die in the House — and even if it does not, Mr. Trump would be unlikely to sign it.Mr. Cruz was not among the Republican senators who joined all Democrats in pushing the bill through. They were Senator Lisa Murkowski of Alaska, Senator Susan Collins of Maine, and Senators Rand Paul and Mitch McConnell, both of Kentucky.On Thursday, another top Republican senator — Chuck Grassley of Iowa — teamed up with a Democrat to introduce a bill aiming to reclaim congressional authority over the implementation of tariffs.The bill, which Mr. Grassley co-sponsored with Senator Maria Cantwell, Democrat of Washington, would require the president to give Congress 48 hours notice of any new tariffs. Congress would then have to approve those tariffs within 60 days, or they would expire. Mr. Cruz was not a co-sponsor. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.A number of upcoming US initial public offerings, including $15bn fintech Klarna and $50bn medtech company Medline, have been postponed as Donald Trump’s aggressive tariffs roil global financial markets.“Buy now, pay later” company Klarna, private equity-backed surgical products company Medline and ticket company StubHub intended to go public but those plans have been put on hold because of market turbulence, said people familiar with the matter. All the companies had confidentially filed plans to list shares in recent months. Once a company publicly files their IPO paperwork with the Securities and Exchange Commission, they put themselves on a footing to launch an investor roadshow after 15 days. Klarna was planning to start the investor roadshow for its $15bn listing next week, while Medline, which is backed by Blackstone, Carlyle and Hellman & Friedman, planned to file publicly earlier this week, aiming at a near-$50bn valuation, but both listings have been delayed indefinitely.Ticketing company StubHub and virtual physical therapy company Hinge Health publicly filed their paperwork last month and were planning to start their investor roadshows early in April, but were now holding off before starting talks with potential investors, people said. The companies were under no obligation to float within a specific timeframe and the listing could still happen in the weeks ahead, the people added. Bloomberg late on Friday reported Israel-based trading platform eToro had also paused plans for a US public offering that it filed paperwork to pursue last month. The US IPO market had begun to show some signs of life in recent weeks following a three-year dry spell induced by higher interest rates, with data centre operator CoreWeave earlier this month tabling the biggest tech offering since Arm Holdings in 2023.But market volatility unleashed by Trump’s tariffs has knocked equity markets and forced many companies that were hoping to go public to hold off. That marks a stark turnaround from the start of the year, when many bankers had said they expected the IPO market to boom under an ostensibly pro-business Republican administration.Global markets have plunged since Trump announced sweeping tariffs on US trade partners this week. The losses were extended on Friday as China announced retaliatory measures and investors took fright at the prospect of a full-blown global trade war.The S&P 500 ended Friday’s session down 6 per cent, while the tech-heavy Nasdaq Composite lost 5.8 per cent.Klarna declined to comment. Medline, Hinge Health and StubHub did not immediately respond to request comments. More

Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldDonald Trump’s bid to upend the international trading order with huge tariffs has wiped $5.4tn from US stocks in two days, as China hit back with its own levies, deepening fears of recession in the global economy. The S&P 500 index tumbled 6 per cent on Friday, following a 4.8 per cent drop the previous day, shedding $5.38tn in market value, in the wake of the US president’s “liberation day” announcement on Wednesday, according to Financial Times calculations based on FactSet data.The blue-chip index’s 9.1 per cent fall for the week was the biggest since the onset of the pandemic five years ago.Tech stocks, including behemoths such as Apple and Amazon, retreated, pushing the Nasdaq Composite down more than 20 per cent from its mid-December peak, tipping the gauge into “bear market” territory. Across the Atlantic, Europe’s Stoxx 600 shed 8.4 per cent on the week, while the UK’s FTSE 100 fell 7 per cent. MSCI’s Asia index fell 4.5 per cent.The turmoil underscores how Trump’s plans to enact a 10 per cent universal tariff and hit many countries with bigger “reciprocal” duties within days has shaken investor confidence and triggered fears of a slowdown in the world’s biggest economy. China, the world’s biggest exporter, added to the sense of gloom on Friday when it announced duties of 34 per cent on all US imports. “If the reciprocal tariffs are not walked back by April 9, which I don’t think they will be, you will probably be looking at a recession in the United States and the European Union,” said Ajay Rajadhyaksha, global chair of research at Barclays. “Unless there is a very quick end to this global trade war, we think we get a US recession this year.”Federal Reserve chair Jay Powell also warned on Friday that Trump’s tariffs would cause “higher inflation and slower growth”. “It is now becoming clear that the tariff increases will be significantly larger than expected. The same is likely to be true of the economic effects,” Powell said.Ahead of Powell’s speech, Trump had called on the Fed chief to lower borrowing costs, saying on his social media platform that “this would be a PERFECT time” to cut interest rates. He also said China had “PANICKED — THE ONE THING THEY CANNOT AFFORD TO DO”, in a reference to Beijing’s plan to retaliate against US tariffs with steep duties of their own.But the comments from the US president did little to calm equity markets amid wider fears of further deterioration in the economic outlook.JPMorgan on Friday slashed its forecast for the US economy, saying it now expected output to decline 0.3 per cent in 2025, on a fourth- quarter-over-fourth-quarter basis, compared with its previous estimate of an expansion of 1.3 per cent. The Wall Street bank added that “the recession in economic activity is projected to push the unemployment rate up to 5.3 per cent”. Citigroup similarly cut its US growth target for 2025 to 0.1 per cent from 0.6 per cent previously. “Uncertainty surrounding the US economic outlook is at its highest point since the Covid disruption. A modern developed economy has never increased tariffs this significantly or rapidly,” Citi said.The bearish sentiment was a sharp contrast to the strong employment report for March, released on Friday morning, which showed the US added more jobs than expected and a jobless rate of 4.2 per cent. In a sign of deepening anxiety across markets, investors fled lowly rated US corporate bonds and other risky assets as they rushed for shelter in havens such as Treasury bonds. The sell-off gained momentum as banks hit hedge fund clients with demands to stump up extra cash as portfolios were knocked by the market turbulence, while several companies including fintech company Klarna froze plans for initial public offerings.The Vix index, a measure of expected volatility in US stocks often called Wall Street’s “fear gauge”, soared 15.1 points to 45.1, the highest level since 2020.The rout extended to commodity markets, with international oil benchmark Brent on Friday sliding 6.5 per cent to settle at $65.58 a barrel, its lowest point in three years. US oil marker WTI fell 7.4 per cent on the day to settle at $61.99 a barrel, below the price many shale producers need to break even.The price of copper, often considered a proxy for traders’ view of the health of global industry, was down about 9 per cent in the UK evening. US Treasury bonds have been the primary beneficiary of the sell-off in stocks, with the 10-year Treasury yield — a rate closely tied to growth expectations — falling to 3.86 per cent, its lowest level since before Trump’s election.Additional reporting by Jamie Smyth in New York More

U.S. employers accelerated hiring in March, a surprising show of strength that analysts warned might be the high-water mark for the labor market as the Trump administration’s economic policies began to play out.Employers added 228,000 jobs last month, the Labor Department reported on Friday, a figure that was far more than expected and was up from a revised total of 117,000 in February. The unemployment rate rose to 4.2 percent, from 4.1 percent.The data, based on surveys of households and businesses conducted in the second week of March, do not reflect the sweeping tariff announcement that rattled markets this week, or the full extent of the job cuts resulting from President Trump’s efforts to reduce the federal work force.The market reaction to the report was scant, as traders were preoccupied with the threat of a trade war. The S&P 500 fell 6 percent on Friday. The glum investor mood followed Thursday’s huge sell-off, the biggest since the height of the pandemic, over the rollout of Mr. Trump’s worldwide tariff campaign.Still, Mr. Trump was quick to seize on the report as proof that his economic agenda was working. In a post on social media Friday morning, he wrote: “GREAT JOB NUMBERS, FAR BETTER THAN EXPECTED. IT’S ALREADY WORKING.”Unemployment rate More

Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldHedge funds have been hit with the biggest margin calls since Covid shut down huge parts of the global economy in 2020, after Donald Trump’s tariffs triggered a powerful rout in global financial markets. Wall Street banks have asked their hedge fund clients to stump up more money as security for their loans because the value of their holdings had tumbled, according to three people familiar with the matter. Several big banks have issued the largest margin calls to their clients since the beginning of the pandemic in early 2020.The margin calls underscore the intense turbulence in global markets on Thursday and Friday as Trump’s tariffs announcement was followed by retaliatory duties by China, and other countries readied their own responses. Wall Street’s S&P 500 share index was set to post its worst week since 2020, while oil and riskier corporate bonds have sold off heavily. “Rates, equities and oil were down significantly . . . it was the breadth of moves across the board [which caused the scale of the margin calls],” said one prime brokerage executive, adding that it was reminiscent of the sharp and broad market moves in the early months of the Covid pandemic. “We are proactively reaching out for clients to understand [risk] across their overall books,” said a prime brokerage executive at a second large US bank. According to two people familiar with the matter, Wall Street prime brokerage teams — which lend money to hedge funds — came into the office early on Friday and held all hands on deck meetings to prepare for the large amount of margin calls to clients.Thursday was the worst day of performance for US-based long/short equity funds since it began tracking the data in 2016, with the average fund down 2.6 per cent, according to a new weekly report by Morgan Stanley’s prime brokerage division.The report said that the magnitude of hedge fund selling across equities on Thursday was in line with the largest seen on record, as they dumped equity positions at a level in line with the US regional bank crisis in 2023 and the Covid sell-off in 2020.Selling was concentrated in sectors including megacap technology, groups exposed to artificial intelligence across software and semiconductors, high-end consumer, and investment banks.The selling drove US long/short equity fund net leverage, a measure of borrowing used to magnify bets, down to an 18-month low of about 42 per cent, the Morgan Stanley report said.The pain so far would have been greater had many hedge funds not been scaling back their stock positions and cutting their leverage with banks in recent weeks in response to the trade war Trump had been threatening. In a further sign of the tumult across the hedge fund sector, gold — a traditional safe haven for investors — dropped 2.9 per cent on Friday, despite the deep gloom among global investors. Suki Cooper, a precious metals analyst at Standard Chartered, suggesting the precious metal was being used to “meet margin calls.”Additional reporting by Kate Duguid in New York More

Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldMexican and Canadian officials spent Wednesday afternoon frantically searching Donald Trump’s “reciprocal tariff” list for the latest bad news from Washington, only to discover they had been granted a reprieve. An exemption for goods exported to the US under the three countries’ free trade agreement relieved those who had feared the US president would place further tariffs on his two biggest trading partners.“Mexico doesn’t have additional tariffs . . . that’s because of the good relationship we’ve built between the government of Mexico and the government of the United States, based on respect,” President Claudia Sheinbaum said the following day.But Canada’s Prime Minister Mark Carney, currently on the campaign trail ahead of a general election later this month, cautioned the “actions by the US administration, while not specifically targeting Canada, will rupture the global economy and adversely affect global economic growth”.In response, he announced 25 per cent tariffs on non-USMCA compliant vehicles imported from the US that will take effect in the coming days. According to a Canadian government official the measure is expected to raise C$8bn (US$5.6bn) that will be used to provide relief packages to protect workers and businesses. Some content could not load. Check your internet connection or browser settings.Despite the difference in tone, both leaders claim their approaches have helped them this week avoid what Trump calls “liberation day” tariffs. Although their free trade agreement with the US was agreed during Trump’s first term, the president has threatened them with tariffs for months, blaming Ottawa and Mexico City for soaring levels of illegal immigration and the trafficking of the deadly opioid, fentanyl.After imposing 25 per cent tariffs on steel and aluminium imports soon after taking office, in February the US president applied an addition 25 per cent levy on all imports from Canada and Mexico, apart from Canadian oil and energy products, which faced 10 per cent. Days later he postponed the measures, only to reverse his decision last month and then U-turn again. He also imposed 25 per cent tariffs on all car imports, regardless of whether or not they comply with the free trade agreement, known as the USMCA, that came into effect on April 2. Some content could not load. Check your internet connection or browser settings.In response Ottawa in March imposed a 25 per cent tariff on a broad range of US products worth C$29.8bn. Mexico has not retaliated, instead following what Sheinbaum calls a “cool headed” strategy of meeting Trump’s demands rather than confronting him.Mexican officials on Thursday said the strategy had borne fruit and they would focus on getting an even better deal. Economy minister Marcelo Ebrard said: “It’s a great achievement, I’d say, from the point of view of where we started not long ago that there would be no exemptions.”Sheinbaum and Carney have also enjoyed significant bumps in the polls since Trump began imposing tariffs on their countries. The US president’s levies, along with threats to annex Canada as a 51st state have provoked anger north of the border, with Canadians boycotting US goods and the new prime minister’s firm stance winning him plaudits at home. But despite avoiding the most recent tariff curveball, the impact of the existing levies could be severe. Some content could not load. Check your internet connection or browser settings.According to Trump’s latest executive order, Mexico and Canada’s 25 per cent tariff on non-USMCA goods would go down to 12 per cent if the US is happy with their compliance on stopping fentanyl and halting illegal migration.However, goods that do not comply with USMCA rules, as well as steel, aluminium and cars, will remain subject to the earlier 25 per cent tariff. Car manufacturing, long considered the heart of regional economic integration, with parts famously crossing all three nations for assembly, is particularly vulnerable to the levies, with millions of jobs dependent on the sector.Carmaker Stellantis has furloughed US workers and has paused some production in Mexico and Canada.Mexico’s economy is in a sharp slowdown and many economists believe it is sliding towards recession, while Carney has raised concerns that any negative impact of tariffs on the US economy could also hit its neighbours.“When the US has a recession it’s very difficult for Canada to avoid something similar,” he said. A broader change to the USMCA also looks likely, with Carney saying there had been “so many violations” that the free trade agreement needs “a renegotiation”.Nonetheless, Mexico remains upbeat, with Sheinbaum on Thursday trying to lure companies to invest in USMCA-compliant production in the country.“We think that with the dialogue we’ve established there are the conditions to have a better deal,” she said. More

U.S. Federal Reserve Chair Jerome Powell and U.S. President Donald Trump.
Craig Hudson | Evelyn Hockstein | Reuters

President Donald Trump on Friday called for Federal Reserve Chair Jerome Powell to cut interest rates, even as his tariff blitz roiled markets and raised fears of a rebound in inflation.
“This would be a PERFECT time for Fed Chairman Jerome Powell to cut Interest Rates. He is always ‘late,’ but he could now change his image, and quickly,” Trump said in a post on Truth Social. “Energy prices are down, Interest Rates are down, Inflation is down, even Eggs are down 69%, and Jobs are UP, all within two months – A BIG WIN for America. CUT INTEREST RATES, JEROME, AND STOP PLAYING POLITICS!”

Trump’s post comes as global equity markets are selling off sharply. The president’s new tariff policy, unveiled Wednesday, has raised concerns about a global economic slowdown.
The new trade policies may also be a barrier that keeps the Federal Reserve from cutting. The central bank has paused its rate cuts in recent meetings, in part because progress on reducing inflation appeared to have plateaued. The new tariffs could lead to a widespread rise in prices, at least temporarily, that further complicates the inflation picture.
On Friday, Powell told business journalists in Arlington, Virginia, that the Fed was “well positioned to wait for greater clarity” before making changes like rate reductions. He also said that the tariffs announced were “significantly larger than expected.”
Market-based interest rates have already fallen sharply this week, with the 10-year U.S. Treasury yield now below 4%. Treasury yields often fall when investors are worried about a potential recession.
Movement in the fed funds futures market implies that traders now expect at least four rate cuts of 0.25 percentage point from the central bank this year, according to the CME’s FedWatch tool. At a meeting last month, central bankers projected just two rate reductions.

Trump has downplayed concerns about this week’s market volatility, at one point comparing the reaction to a patient who undergoes surgery.
When asked about those comments Friday, Powell said, “I make it a practice not to respond to any elected officials comments, so I don’t want to be seen to be doing that. It’s just not appropriate for me.”
Trump regularly commented on central bank policy during his first term as president and was often at odds with Powell. That has led to speculation that he might look to remove the Fed chair before his term ends next year. Trump said in December that he does not intend to fire Powell, and the Fed chair has said he doesn’t think the president is legally allowed to do so.
The Fed has two main goals in promoting price stability and maximizing employment. The March nonfarm payrolls report released Friday showed a slight increase in unemployment to 4.2%, but the rise of 228,000 jobs was more than expected.
Friday’s jobs report does not reflect any impact of the tariffs announced this week.

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