Economy

President Trump says he is outraged by the fact that the United States imports more goods than it sends to the rest of the world. What he rarely mentions, though, is that when it comes to services, the tables are turned.Service sectors — which include the finance, travel, engineering and medical industries and more — make up the bulk of the American economy. Exports of these services brought more than $1 trillion into the United States last year.But that dominance also gives other countries some clout in negotiations — including the ability to impose some pain on the U.S. economy as they look to retaliate against Mr. Trump’s tariffs on goods.The European Union, for instance, could use tools designed to restrict services coming into the bloc as a cudgel.“The real leverage that the Europeans have is ultimately on the services side,” said Mujtaba Rahman, managing director for Europe at the Eurasia Group, a political research firm. “It will escalate before it de-escalates.”The United States is the largest exporter of services in the world, and a large share of those services, from financial services to cloud computing, are delivered digitally. The country ran a trade surplus in services of nearly $300 billion last year.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

Until a few months ago, the Federal Reserve appeared close to achieving something that many doubted was possible. The economy looked on the cusp of a “soft landing,” a situation where inflation was headed back to the central bank’s 2 percent target without a recession. That put the central bank on track to steadily lower interest rates until borrowing costs reached a level that neither revved up growth nor slowed it down.President Trump’s global trade war has thrown a wrench in those plans. Facing extreme uncertainty about the economic outlook, the central bank has put further interest rate cuts on hold until it has a better sense of how tariffs will affect the economy.What policymakers are trying to sort out is whether they should be more concerned about the hit to growth that is expected from these levies or the probable boost to consumer prices. The “nightmare scenario,” according to Donald Kohn, the former vice chair of the Fed, is one in which inflation rises at the same time that the economy falters, a combination that carries the whiff of stagflation.Making that assessment is by no means a straightforward exercise. Much will depend on how long the tariffs are in place, how other countries retaliate, and how consumers and businesses adapt. Officials are also keeping close tabs on other aspects of the Trump administration’s economic agenda, including steep government spending cuts, immigration restrictions and deregulation. Tax cuts are also on the docket, but because those require congressional approval, their timing and scope remain unclear.At this stage, the economic data presents a mixed picture. Growth in the final quarter of last year was solid and the labor market has yet to show real signs of weakness. The unemployment rate, at 4.1 percent, remains historically low and layoffs have yet to rise in a material way.Most Americans do not expect this to last. According to recent sentiment surveys, the mood has significantly soured on the outlook because of Mr. Trump’s policies. Consumers now expect slower growth, higher unemployment and resurgent inflation.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

Companies added 155,000 jobs in March, a sharp increase from the upwardly revised 84,000 in February and better than the Dow Jones forecast for 120,000, according to ADP.
On the wage side, earnings rose by 4.6% year over year for those staying in their positions and 6.5% for job changers. The gap between the two matched a series low.

Private payroll gains were stronger than expected in March, countering fears that the labor market and economy are slowing, according to a report Wednesday from ADP.
Companies added 155,000 jobs for the month, a sharp increase from the upwardly revised 84,000 in February and better than the Dow Jones consensus forecast for 120,000, the payrolls processing firm said.

The upside surprise comes amid worries that President Donald Trump’s aggressive tariffs could deter firms from adding to headcount and in turn slow business and consumer activity. Trump is set to announce the next step in his trade policy Wednesday at 4 p.m. ET.
“Despite policy uncertainty and downbeat consumers, the bottom line is this: The March topline number was a good one for the economy and employers of all sizes, if not necessarily all sectors,” said ADP chief economist Nela Richardson.
Hiring was fairly broad based, with professional and business services adding 57,000 workers while financial activities grew by 38,000 as tax season heats up. Manufacturing contributed 21,000 and leisure and hospitality added 17,000.
Service providers were responsible for 132,000 of the positions. On the downside, trade, transportation and utilities saw a loss of 6,000 jobs and natural resources and mining declined by 3,000.
On the wage side, earnings rose by 4.6% year over year for those staying in their positions and 6.5% for job changers. The gap between the two matched a series low last hit in September, suggesting a lower level of mobility for workers wanting to switch jobs.

Still, the overall numbers signal a solid labor market. Recent data from the Bureau of Labor Statistics indicates that the level of open positions is now almost even with available workers, reversing a trend in which openings outnumbered the unemployed by 2 to 1 a couple years ago.
The ADP report comes ahead of the more closely watched BLS measure of nonfarm payrolls. The BLS report, which unlike ADP includes government jobs, is expected to show payroll growth of 140,000 in March, down slightly from 151,000 in February. The two counts sometimes show substantial disparities due to different methodologies.
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President Trump is set to unveil his most expansive tariffs to date on Wednesday afternoon, when he will detail potentially punishing levies on countries around the globe, including America’s largest trading partners.Mr. Trump has promised for months to impose what he calls “reciprocal” tariffs, which the president says will correct years of “unfair” trade in which other countries have been “ripping off” America.“We helped everybody, and they don’t help us,” Mr. Trump said on Monday.Exactly how he plans to structure the new tariffs is not yet clear. The White House press secretary said Tuesday afternoon that Mr. Trump had decided on a course of action and that the new tariffs would go into effect immediately, but that he and his trade advisers were continuing to hash out details.The president has talked about basing a new tariff rate for countries on the tariffs they place on American products, as well as other trading practices that the Trump team deems unfair.Mr. Trump has also considered a flat 20 percent tariff on all trading partners. Such a levy would be aimed more at generating revenue to offset the tax cuts that he hopes to push through Congress.Either approach would be a significant escalation toward a trade war that Mr. Trump seems eager to unleash. Governments across the world have been preparing to hit back if the president raises tariffs, raising the potential for a destabilizing economic battle that drives up costs as Mr. Trump tries to force supply chains back to the United States.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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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 Asia. In today’s newsletter: Andreessen Horowitz could join US TikTok bidChina’s latest military exercises around TaiwanIndonesia’s new sovereign wealth fund vows transparencyUS venture capital giant Andreessen Horowitz is in talks to invest in social media platform TikTok as part of an effort led by Donald Trump to wrest control of the popular video app from its Chinese owners.What we know: The group, whose co-founder Marc Andreessen is a vocal supporter of the US president, is in talks to add new outside investment that will buy out TikTok’s Chinese investors. The talks come as part of a bid led by Oracle and other American investors to carve it out of its parent company ByteDance. Andreessen Horowitz was approached as TikTok’s advisers and the White House sought to add financial firepower to ongoing discussions. The firm was strongly considering making an investment, said three people familiar with the discussions. Looming deadline: The Oracle-led bid recently emerged as the frontrunner ahead of a deadline on April 5, when a federal law would ban the app in the US unless its Beijing-based owner sells the American arm to non-Chinese entities, according to multiple people familiar with the matter. Trump connections: Marc Andreessen’s close ties to the Trump administration include helping recruit staff for Elon Musk’s US government cost-cutting unit, while former Andreessen Horowitz general partner Sriram Krishnan is serving as a White House adviser for artificial intelligence. Here’s the full story — plus more tech news below:And here’s what else we’re keeping tabs on today:Trump’s “liberation day” tariffs: The US president could trigger a $1.4tn trade war today when he plans to announce sweeping new tariffs on imported goods. Here’s how the worse-case scenario could unfold.Economic data: March inflation figures are due from Singapore, South Korea and Australia. Benjamin Netanyahu: The Israeli prime minister will visit Hungary, defying an arrest warrant from the International Criminal Court over alleged war crimes in Gaza.Five more top stories1. China has begun large-scale military and coastguard exercises around Taiwan, the latest round in Beijing’s escalating campaign to assert its claims of sovereignty over the island nation. Two people briefed on the situation said the Shandong, a Chinese aircraft carrier, was approaching waters 24 nautical miles off Taiwan’s coast yesterday, the closest it has ever been to the Taiwanese mainland. Here’s how Taipei responded.2. Indonesia will run its colossal new sovereign wealth fund “like a public company”, its chief investment officer said as he acknowledged investor concerns about the governance of a vehicle with $900bn in assets. Danantara, which became one of the world’s largest sovereign wealth funds overnight when it launched last month, is set to invest billions of dollars into priority sectors identified by President Prabowo Subianto.3. The US labour watchdog froze two cases against Apple days after Trump nominated an attorney who represents the tech group to be the agency’s top legal official. The National Labor Relations Board filed multiple complaints against the iPhone maker last year alleging it intervened against employee attempts to organise, but abruptly pulled back from two of the cases late last week, according to documents seen by the FT.4. The EU has a “strong plan to retaliate” against US tariffs expected today, the president of the European Commission has said. Ursula von der Leyen told the European parliament yesterday that the bloc was prepared to hit services exports including those from Big Tech companies if Trump imposed “reciprocal tariffs” on all imports into the US.5. Vehicle sales at China’s BYD soared 58 per cent in the first quarter in a stark contrast to an expected fall in demand for Tesla’s electric cars, as European consumers shun Elon Musk’s brand. Analysts warned figures set to be released today for Tesla’s first-quarter sales were likely to show a drop of more than 10 per cent. News in-depth© Alex Wheeler/FT montage/Getty ImagesKlarna has brought “pay in four” loans to everything from food to fashion. Now it has a $15bn New York IPO in its sights. Can the Swedish fintech finally silence the “buy now, pay later” doubters?We’re also reading . . . Chart of the dayInvestors are pouring cash into gold funds at the fastest pace since the Covid-19 pandemic, amid mounting concerns over the economic impact of Trump’s trade war.Take a break from the news . . . HTSI goes inside the Aman Nai Lert Bangkok, a new hotel in the heart of the Thai capital that pays homage to the man who shaped the modern city.The swimming pool at Aman Nai Lert Bangkok, Thailand More

The U.S. government is set to increase tariff rates on several categories of imported products. Some economists tracking these trade proposals say the higher tariff rates could lead to higher consumer prices.
One model constructed by the Federal Reserve Bank of Boston suggests that in an “extreme” scenario, heightened taxes on U.S. imports could result in a 1.4 percentage point to 2.2 percentage point increase to core inflation. This scenario assumes 60% tariff rates on Chinese imports and 10% tariff rates on imports from all other countries.

The researchers note that many other tariff proposals have surfaced since they published their findings in February 2025. 
Price increases could come across many categories, including new housing and automobiles, alongside consumer services such as nursing, public transportation and finance. 
“People might think, ‘Oh, tariffs can only affect the goods that I buy. It can’t affect the services,'” said Hillary Stein, an economist at the Boston Fed. “Those hospitals are buying inputs that might be, for example, … medical equipment that comes from abroad.” 
White House economists say tariffs will not meaningfully contribute to inflation. In a statement to CNBC, Stephen Miran, chair of the Council of Economic Advisers, said that “as the world’s largest source of consumer demand, the U.S. holds all the leverage, which means foreign suppliers will have to eat the economic burden or ‘incidence’ of the tariffs.” 
Assessing the impact of the administration’s full economic agenda has been a challenge for central bank leaders. The Federal Open Market Committee decided to leave its target for the federal funds rate unchanged at the meeting in March. 

The Fed targets its overnight borrowing rate at between 4.25% and 4.5%, with the effective federal funds rate at 4.33% on March 31, according to the New York Fed. The core personal consumption expenditures price index inflation rate rose to 2.8% in February, according to the Commerce Department. Forecasts of U.S. gross domestic product suggest that the economy will continue to grow at a 1.7% rate in 2025, albeit at a slower pace than what was forecast in January.  
Consumers in the U.S. and businesses around the world are bracing for impact.  “There is a reason why companies went outside of the U.S.,” said Gregor Hirt, chief investment officer at Allianz Global Investors. “Most of the time it was because it was cheaper and more productive.” 
Watch the video above to learn how much inflation tariffs may cause. More

Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldInvestors are pouring cash into gold funds at the fastest pace since the Covid-19 pandemic, amid mounting concerns over the economic impact of US President Donald Trump’s tariff war.Gold reached a record $3,148.88 a troy ounce on Tuesday, as part of a broader flight to haven assets such as US Treasuries and cash. It later fell back to $3,114, up more than 17 per cent this year — including its strongest quarterly performance since 1986. Investors are bracing themselves for Trump’s expansive new tariffs, which are due to be announced on Wednesday, a day he has dubbed “liberation day”. Many economists fear the move will hit global growth, triggering a search for safe assets. “Uncertainty is one of the main factors that has led to a renewed interest in gold,” said Krishan Gopaul, senior analyst at the World Gold Council, an industry body. “There is a general risk-off sentiment in the market at the moment.”Amid mounting fears of a global trade war, investors have poured more than $19.2bn into gold-backed exchange traded funds during the first quarter of this year — the biggest inflows in dollar terms since the pandemic, according to calculations from Standard Chartered.The amount of cash in investors’ portfolios — viewed as a gauge of caution — jumped by the largest monthly amount in five years, according to a recent fund manager survey carried out by Bank of America.US Treasuries have also made gains in the run-up to the tariff announcement, as investors seek to protect themselves against further volatility and hedge against risks to the American economy. Ten-year Treasury yields, which move inversely to prices, fell as low as 4.13 per cent on Tuesday — not far above their lowest level of the year. Yields on German Bunds, viewed as the haven Eurozone asset, were sent sharply higher last month as the country planned a huge spending drive, but fell back below 2.7 per cent this week for the first time since early March. “With a homegrown US slowdown potentially unfolding behind the tariff headlines, government bonds look [like] attractive risk-reducers at this point,” said Sunil Krishnan, head of multi-asset at Aviva Investors. “Gold is hard to add to, given the force of the move.”Central bank buying has been the main driver of gold purchases in recent years, but the recent surge in gold ETF inflows highlights how fears over the economy and stock markets have drawn in a broader range of investors as part of a hunt for haven assets.“The resurgence in ETFs has been the most notable shift in gold dynamics in recent weeks,” said Suki Cooper, precious metals analyst at Standard Chartered. Expectations of lower yields on other assets, combined with concerns that tariffs could hit inflation and growth, have helped fuel the recent flows, she said.Bullion’s sharp rally in recent months has prompted several banks to increase their gold price forecasts, including Macquarie, which now expects it to touch $3,500 this year. Tariff concerns have also driven a huge surge in physical gold bars being flown into New York, where stockpiles on Comex have reached record levels, although that flow has recently started to slow down.On Wall Street, defensive stocks seen as less exposed to economic growth have prospered. Healthcare stocks such as UnitedHealth and HCA Healthcare are up more than 10 per cent over the past month, while the broader S&P 500 index is down by about 5 per cent.“Very few assets are showing up as attractive on our screens at the moment,” said Pete Drewienkiewicz, chief investment officer for global assets at consultancy Redington. “So I don’t think it is surprising to see people moving a bit more defensive after such a good strong run [for markets].” More