Economy

President Trump and his supporters have clashed with mainstream economists for years about the merits of tariffs. Now, the world will get to see who is right, as the president’s sweeping levies on automobiles and auto parts play out in a real-time experiment on the global economy.In Mr. Trump’s telling, tariffs have a straightforward effect: They encourage companies to move factories to the United States, creating more American jobs and prosperity.But for many economists, the effect of tariffs is anything but simple. The tariffs are likely to encourage domestic car production over the long run, they say. But they will also cause substantial collateral damage that could backfire on the president’s goals for jobs, manufacturing and the economy at large.That’s because tariffs will raise the price of cars for consumers, discouraging car purchases and slowing the economy, economists say. Tariffs could also scramble supply chains and raise costs for carmakers that depend on imported parts, reducing U.S. car production in the short term.They could also lead to retaliation on U.S. car exports, as well as other products American companies send abroad, leading to damaging global trade wars.On Thursday, global stock markets fell, with auto stocks hit hardest, as investors absorbed the scope of Mr. Trump’s plans. Shares in General Motors, which imports many of its best-selling cars and trucks from Mexico, were down roughly 7 percent in midday trading. Stellantis and Ford shares were also lower. European shares closed lower Thursday, with carmakers suffering the worst losses.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

Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldShow video infoPrime Minister Mark Carney said on Thursday that Canada’s old relationship with the United States was “over” and vowed that there would be a “broad renegotiation” of the trade agreement between the countries.Speaking in Ottawa after meeting the nation’s provincial premiers, Carney said the tariffs imposed by US President Donald Trump would force Canada to rethink and reshape its economy and seek “reliable” trading partners.“The old relationship we had with the United States, based on deepening integration of our economies and tight security and military co-operations, is over,” he told reporters. “The time will come for a broad renegotiation of our security and trade relationship.” Carney’s comments appear to call into question the future of the USMCA, which was negotiated between the two countries and Mexico during the previous Trump administration and has been hailed as one of the world’s most important trade deals.Carney said Canada would fight American tariffs with retaliatory trade actions of its own “that will have maximum impact in the US and minimum impacts in Canada”. On Wednesday Trump said the US would impose a 25 per cent tariff on imports of foreign-made cars in a move he said was intended to boost the US auto industry. While USMCA-compliant components are temporarily exempt from the tariffs, the levy could have a big impact on the Canadian economy.Trump’s tariffs are intended to boost US industry, but shares in General Motors fell 7.4 per cent on Thursday. Shares in Ford, which manufactures fewer vehicles in Mexico and Canada than its rival, were down 3.9 per cent.Earlier this month Trump offered a reprieve to Canadian and Mexican carmakers when he temporarily exempted all goods that complied with the USMCA from new tariffs.“We will fight back with everything we have to get the best deal for Canada. We will build an independent future for our country, stronger than ever,” Carney said.The prime minister said the Canadian economy and its supply chains in critical sectors such as the auto industry would have to fundamentally change to insulate themselves from further tariffs and US hostility. “We are gonna have to do some things very differently,” he said.Tiff Macklem, governor of the Bank of Canada, has said US tariffs would likely put Canada in a recession and a “new crisis” was looming due to the trade war with the US.“Depending on the extent and duration of the US tariffs the economic impact could be severe; the uncertainty alone is already causing harm,” he said earlier this month as he announced another cut to interest rates.  Carney said Canada’s auto sector could survive Trump’s tariffs but would require “access to other markets”, and the country needed to “reimagine the auto sector and rebuild [and] retool”. He recently travelled to London and Paris, his first trip as prime minister, in a bid to beef up trade with other partners in the wake of US hostilities. Carney, who is in the middle of an national election campaign ahead of a vote on April 28, said he would speak to Trump in “the next day or two”.Some Canadian cabinet members could also head to Washington to meet their counterparts, he said. He added that the US president’s tariffs would “end up hurting American workers and American consumers”. More

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, happy Friday and welcome back to FirstFT Asia. In today’s newsletter we’re covering:Chaos in the car industryA ruthless bonus day at HSBCGeopolitical competition over Canada’s Arctic frontierThe global car industry has been thrown into turmoil by Donald Trump’s decision to impose 25 per cent tariffs on imports of foreign-made cars and parts. The move was the US president’s most aggressive trade policy move to date. Global reaction: Asian, European and North American countries warned of possible retaliation. French finance minister Eric Lombard attacked the US for “completely shifting its economic policy” and said “the only solution for the EU will be to raise its own tariffs on American products”. Japan’s Prime Minister Shigeru Ishiba said “every option” was under consideration while South Korea promised an emergency response.‘Devastating’ consequences: It quickly became clear that every carmaker, including Tesla and the US Big Three of General Motors, Ford and Stellantis, would be affected. Almost half of vehicles sold in the US are imported, while those assembled in the US on average source nearly 60 per cent of their parts from overseas. Bernstein analysts said the policy could introduce up to $110bn in annual tariff costs for the carmakers. The tariff policy, which analysts and investors have described as “a worst-case scenario”, “heavy-handed” and “devastating”, is unparalleled in its reach and scale.The tariffs are intended to boost US industry but shares in Ford and GM fell as much as 4.4 per cent and 8.2 per cent respectively yesterday morning in New York.What comes next: The tariffs will take effect from April 2, alongside reciprocal levies against US trade partners that are expected to be unveiled on the same day. Market research company Cox Automotive predicted that the confusion in the supply chain would lead to vehicle production in North America being disrupted by mid-April, resulting in US plants making 20,000 fewer vehicles per day, or about 30 per cent less than now. Here’s what else we’re keeping tabs on today and over the weekend:Economic data: Japan reports trade statistics while Canada and the UK release GDP estimates.Greenland: US vice-president JD Vance is set to visit an American military base in Greenland today, as Washington its pressure on the geopolitically crucial island.Results: PetroChina, Industrial & Commercial Bank of China and China Construction Bank report full-year 2024 results today.US-Japan relations: Trump’s defence secretary visits Japan for high-level talks on Sunday, which could cover whether Tokyo will raise its planned spending on defence.How well did you keep up with the news this week? Take our quiz.Five more top stories1. HSBC fired bankers on the day they were due to learn their bonus figures and gave no bonuses to many it let go. The move, which affected some staff at vice-president level and above in its UK investment banking unit, is a sign of how the lender is taking a more ruthless approach to costs under new chief Georges Elhedery.More financial news: Private credit is “not a bubble”, Apollo Global Management president Jim Zelter said at an event in Hong Kong yesterday. Read more of Zelter’s comments.2. Chinese financial authorities have told some companies and advisers that they can begin the process of launching mainland initial public offerings once more, in an early sign of a rebound in listings in the country’s economy. Groups in the technology, advanced manufacturing and consumer sectors have been told in the past few weeks that they can file IPO paperwork. Here’s why Beijing has shifted its approach to listings.3. The US is pushing for a sweeping new deal to control Ukraine’s critical minerals and energy assets, while offering Kyiv no security guarantees in return. The new draft deal seen by the FT is an aggressive expansion of Washington’s previous demands, as Trump pushes to end Russia’s invasion of Ukraine and recoup billions of dollars’ worth of military assistance.4. TSMC’s pledge to spend $100bn will do little to help the US restore its global lead in chipmaking, said former Intel chief Pat Gelsinger. While Taiwan Semiconductor Manufacturing Company announced plants in the US recently, its research and development was still in Taiwan, he said. “If you don’t have R&D in the US, you will not have semiconductor leadership in the US.”5. The US’s federal debt burden is set to surpass the peak it reached in the wake of the second world war in coming years, Congress’s fiscal watchdog has warned. The projections underscore growing concerns over America’s public finances and come just days after Moody’s delivered a warning about the sustainability of the country’s fiscal position.News in-depth© FT montage/Getty ImagesThe Trump administration’s cuts to the federal workforce are raising worries over the quality and credibility of US economic data. Economists are concerned that Elon Musk’s cost-cutting drive will undermine officials’ ability to collect, analyse and research statistics on the world’s biggest economy, dealing “a death blow to already very stretched survey operations”. We’re also reading . . . Map of the dayCanada’s Arctic frontier — an inhospitable tundra 200km north of the Arctic Circle — is emerging as the new frontline in a geopolitical contest with the US, Russia and China. The region’s increased accessibility as a result of climate change and Trump’s expansionist rhetoric are putting it higher on Canada’s military agenda.Take a break from the news . . . Heathrow’s chief executive reportedly knocked off at 12.30am last Friday to go to bed, leaving his deputy to decide whether to close the UK’s biggest airport after a fire broke out at a nearby power substation. The decision to step away received some criticism — but do CEOs always need to be on duty to do a good job? Read Emma Jacobs on the power of sleep in a crisis.Fatigue has been linked to a number of disasters, including the accident at the Chernobyl nuclear power plant and the Exxon Valdez oil spill More

Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldThe EU is considering hitting US services exports, including Big Tech’s operations, to retaliate against Donald Trump imposing 25 per cent tariffs on the car industry and promising a further round of measures next week.Brussels has already unveiled extra duties on up to €26bn of US goods after Washington imposed steel and aluminium tariffs. But European officials and diplomats said the scale of action by the Trump administration required it to consider using more powerful trade tools. The bloc has wide powers to suspend intellectual property rights and exclude companies from public procurement contracts under its Enforcement Regulation, which was strengthened in 2021 after a trade conflict with the first Trump administration.“The Americans think that they are the ones with escalation dominance [in the trade war], but we also have the ability to do that,” said one EU diplomat, adding that the aim was ultimately to de-escalate with a comprehensive trade deal.A fightback could include restrictions on the intellectual property of Big Tech companies. Another example would be banning Elon Musk’s Starlink satellite network from winning government contracts. Italy is already reconsidering whether to acquire the system.“Services is where the US is vulnerable,” a second diplomat said. Washington ran a €109bn trade surplus with the EU in services in 2023, compared with a €157bn deficit in goods.EU officials believe that the Trump administration will only be willing to negotiate after the US has erected a tariff wall that would demonstrate it is serious about securing better terms from trading partners that allegedly took advantage of its open market.The European officials are hopeful of making fast progress on an eventual agreement but acknowledge even this would not remove all additional tariffs imposed by Trump. “The view is that we have to respond. It is the only way to get a deal,” said a third EU diplomat. “We tried to talk.” Since the EU’s exports far outweigh its imports, the bloc would struggle to match US tariffs on goods. Brussels also does not want to halt gas supplies from the US to the continent.“There are only so many goods imports from the US that the EU can target before that damages the economy too much,” said David Henig, of the European Centre for International Political Economy think-tank. “If you don’t want to target energy, there’s a limit to what can be done on goods. Whereas on services there is greater room for retaliation without so much harm to the economy.”Some experts say that to inflict even more economic pain on the US, the European Commission would need to use its anti-coercion instrument (ACI), dubbed the “trade bazooka”. This tool could restrict the activities of US banks, revoke patents or prevent companies receiving revenues from software updates or streaming. “I would advise the European Commission to use the ACI,” said Ignacio García Bercero, a former senior commission official who led negotiations on a US-EU trade deal, the Transatlantic Trade and Investment Partnership, that were concluded without a deal.Any retaliatory measures taken by the EU would be drawn up by the commission but must be approved by a weighted majority of member states. EU countries are still negotiating the goods retaliation list drawn up in response to Trump’s steel and aluminium tariffs; France has pressed for bourbon whiskey to be removed to avoid fallout for its own drinks industry. The commission has postponed the measures, which also cover jeans, motorcycles and possibly soyabeans, until April 12. They will be discussed with national leaders before a final agreement.Diplomats and officials said there was scope for more goods tariffs in response to any US “reciprocal” tariffs that will be adopted by the White House next week and are expected by Brussels to be around 20 per cent. Aircraft, chemicals and pharmaceutical products could be hit. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Asian, European and North American countries have put Donald Trump on notice of possible retaliation against his 25 per cent car tariffs, threatening to ignite a full-blown global trade war. Japan’s Prime Minister Shigeru Ishiba said “every option” was under consideration and South Korea promised an emergency response after the US president announced the tariffs would go into effect on April 2, when Washington is also expected to apply a range of reciprocal tariffs against America’s trading partners. The car tariffs are Trump’s most aggressive trade policy move to date and hit shares in carmakers from Toyota to Stellantis to Porsche. Carmaker shares dropped around the globe. General Motors closed down 7.36 per cent in New York on Thursday, while Ford fell 3.88 per cent. In Europe, shares in Stellantis, the owner of the Fiat, Peugeot and Chrysler brands, dropped 4.23 per cent, Porsche dipped 2.4 per cent and Volkswagen fell 1.5 per cent.“We need to think about the best option for Japan’s national interest,” Ishiba told the country’s parliament on Thursday. “We are considering every option in order to reach the most appropriate response.”Industry executives warned Asian and European carmakers would be among the hardest hit. Luxury brands, such as Jaguar Land Rover and Aston Martin, are also exposed, because they do not make cars in the US.With $40bn of car sales to the US in 2024, Japan is the second-largest exporter of finished vehicles to the country after Mexico, where Japanese companies are the dominant manufacturers.As countries across the world prepared for a deadline less than a week away, Ursula von der Leyen, president of the European Commission, said the bloc planned on “safeguarding its economic interests” while seeking a negotiated solution to the dispute.Some content could not load. Check your internet connection or browser settings.French finance minister Eric Lombard attacked the US for “completely shifting its economic policy in a very aggressive manner”, harming both regions’ economies.“The only solution for the EU will be to raise its own tariffs on American products,” he added, telling France Inter radio that Brussels was working on a list of targeted products.By contrast, President Claudia Sheinbaum of Mexico, the biggest car exporter to the US, said her country was seeking to retain preferential treatment in talks with the Trump administration. “We are the only country that has this level of communication with the US government,” she said, adding that Mexico would give a more complete response when the fuller range of Trump’s tariffs — including reciprocal duties — is unveiled next week.Sheinbaum’s government says that, under new rules set out by the White House, tariffs on imported Mexican cars may be discounted because of their high US content.In the UK, chancellor Rachel Reeves signalled the British government had no plans to retaliate, saying it was not in a “position where we want to do anything to escalate these trade wars”.Canada’s Prime Minister Mark Carney had earlier denounced what he described as “a direct attack” on auto sector workers. But Trump gave no sign of backing down.“If the European Union works with Canada in order to do economic harm to the USA, large scale Tariffs, far larger than currently planned, will be placed on them both,” he posted on his Truth Social network early on Thursday.“FOR YEARS WE HAVE BEEN RIPPED OFF BY VIRTUALLY EVERY COUNTRY IN THE WORLD, BOTH FRIEND AND FOE. BUT THOSE DAYS ARE OVER — AMERICA FIRST!!!”European car-part manufacturers were also hit, with France’s Valeo down 7.7 per cent. The White House’s decision to impose duties on imported car parts as well as completed vehicles would inflict further damage, analysts said. Almost half of vehicles sold in the US are imported, and cars assembled in the US contain nearly 60 per cent foreign-sourced parts, according to research from Bernstein.Trump has said the steep tariffs will convince foreign companies to make more of their cars in the US, boosting the country’s manufacturing industry.Sigrid de Vries, director-general of European car industry body Acea, urged Trump to “consider the negative impact of tariffs not only on global automakers but on US domestic manufacturing as well”. European manufacturers export up to 60 per cent of the vehicles they make in the US, according to Acea. Additional reporting by Kana Inagaki and Mari Novak in London, Christine Murray in Mexico City and Anne-Sylvaine Chassany in Berlin; data visualisation by Alan Smith More

Young people are pointing out on social media various cultural and social trends they see in everyday life as signs of a forthcoming recession.
While these observations are meant as jokes, they underscore the anxiety young people feel when it comes to the economy.

Christina Locopo | CNBC

For economists, harbingers of a recession can include a slowdown in consumer spending and rising unemployment.
For the chronically online, indicators can range from the perceived fall of fake eyelashes to more commercials for online colleges. Or, maybe, it’s a skin care company selling eggs.

And for Sydney Brams, a Miami-based influencer and realtor, it’s a decline in prices on clothing resale platform Depop.
“I was literally running to my parents and my boyfriend, and I’m like, ‘Look at this. Look, something is very wrong,'” Brams told CNBC after seeing some Depop sellers “come back to Earth,” as she described it. “I feel like Chicken Little.”
Making a joke of so-called recession indicators in everyday life has gained traction in recent weeks as the stock market pullback and weak economic data raised anxiety around the health of the economy. This trend also underscores the uniquely sharp sense of financial dissatisfaction among America’s young adults.

Read more CNBC analysis on culture and the economy

Many of today’s young adults experienced childhood during the Great Recession and came of age as the pandemic threw everything from in-person work to global supply chains out of orbit. Now, they’re concerned about what’s been deemed a white-collar job market slowdown and President Donald Trump’s on-again-off-again tariff policies — the latter of which has battered financial markets in recent weeks.
To be clear, when they share their favorite recession indicators, they’re kidding — but they don’t see the future path of the U.S. economy as a laughing matter.

“It’s gallows humor,” said James Cohen, a digital culture expert and assistant professor of media studies at Queens College in New York. “This is very much a coping mechanism.”
These omens can be found across popular social media platforms such as X, TikTok and Instagram. Some users see cultural preludes to a recession in, say, Lady Gaga releasing her latest album or the quality of the new season of HBO’s “The White Lotus.” Others chalk up social trends such as learning to play the harmonica or wearing more brown clothing as forewarnings of a financial downturn on the horizon.

Social media users Sydney Michelle (@sydneybmichelle), left; Celeste in DC (@celesteiacevedo), and Sulisa (@ssclosefriendstory) share their personal “recession indicators” on TikTok.
Courtesy: Sydney Michelle | Celeste in DC | Sulisa | via TikTok

Just last week, several social media users saw a slam-dunk opportunity to employ variations of the joke when DoorDash announced a partnership with Klarna for users to finance food delivery orders. A spokesperson for Klarna acknowledged to NBC News that people needing to pay for meals on credit is “a bad indicator for society.”
Some content creators have made the humor an entry point to share budget-friendly alternatives for everyday luxuries that may have to go if wallets are stretched.
“We are heading into a recession. You need to learn how to do your nails at home,” TikTok user Celeste in DC (@celesteiacevedo) said in a video explaining how to use press-on nail kits as opposed to splurging at a salon.

Declining confidence

These jokes don’t exist in a vacuum. Closely followed data illustrates how this trend reflects a growing malaise among young people when it comes to the economy.
At the start of 2024, 18-to-34-year-olds had the highest consumer sentiment reading of any age group tracked by the University of Michigan. The index of this group’s attitude toward the economy has since declined more than 6%, despite the other age cohorts’ ticking higher.

This switch is particularly notable given that young people have historically had stronger readings than their older counterparts, according to Joanne Hsu, director of the Surveys of Consumers at Michigan.
A typically cheerier outlook can be explained by younger people being less likely to have additional financial responsibilities, such as children, Hsu said. But she added that this age bracket is likely grappling with rising housing costs and debt right now, while also feeling uncertainty tied to economic policy under the new White House.
“I have a suspicion that young people are starting to feel like — or have been feeling like — many markers of the American dream are much more difficult to reach now,” Hsu said.
Young people are also less likely to have assets such as property or investments that can buoy financial spirits when the economy flashes warning signs, according to Camelia Kuhnen, a finance professor at the University of North Carolina.
The potential for a recession, which is broadly defined as at least two consecutive quarters of the national economy contracting, has been on the minds of both Wall Street and Main Street. A Deutsche Bank survey conducted March 17-20 found the average global market strategist saw a nearly 43% chance of a recession over the next 12 months.
An index of consumer expectations for the future released Tuesday by the Conference Board slid to its lowest level in 12 years, falling well below the threshold that signals a recession ahead. Meanwhile, Google searches during a period in March for the word “recession” hit highs not seen since 2022.
This onslaught of news comes after Treasury Secretary Scott Bessent said on March 16 that there were “no guarantees” the U.S. would avoid a recession. Bessent said a “detox” period is needed for the national economy, which he and other Trump administration officials have argued is too reliant on government spending.

‘The vibes are off’

Though the recession humor has had a yearslong history online, it’s gained momentum in recent weeks as the state of the economy has become a more common talking point, according to Cohen, the Queens College professor. While a recession indicator entry was added to the digital culture encyclopedia Know Your Meme only this month, the jokes have tracked back to at least 2019.
“Especially with Gen Z, there’s a lot of jokes with never being in a stable economic environment,” said Max Rosenzweig, a 24-year-old user experience researcher whose personal recession indicator was the number of people he’s seen wearing berets. “It’s funny, but it’s like, we’re making light of something that is scary.”
Cohen said he heard from Gen Z students that this type of humor helped them realize others are experiencing the same uncertainty. These students may not feel control over the country’s economic standing, he said, but they can at least find community and levity in a precarious moment.
Cohen sees the recent surge of this humor as a sort of “barometer” for what he calls the vibes around the economy. His conclusion: “The vibes are off.”
Brams sees a similar story playing out in South Florida and on social media. “I’m not going to lie, it just feels really grim,” the 26-year-old said.
But, “it’s not anything that me or my friend or my boyfriend or my parents can really do anything about,” she said. “There’s no choice but to just stay in your lane, try to keep your job, try to find joy where you can and just stay afloat.” More

The tariffs on cars and auto parts that President Trump announced on Wednesday will have far-reaching effects on automakers in the United States and abroad.But there will be important differences based on the circumstances of each company.TeslaThe company run by Mr. Trump’s confidant, Elon Musk, makes the cars it sells in the United States in factories in California and Texas. As a result, it is perhaps the least exposed to tariffs.But the company does buy parts from other countries — about a quarter of the components by value in its cars come from abroad, according to the National Highway Traffic Safety Administration.In addition, Tesla is struggling with falling sales around the world, in part because Mr. Musk’s political activities and statements have turned off moderate and liberal car buyers. Some countries could seek to retaliate against Mr. Trump’s tariffs by targeting Tesla. A few Canadian provinces have already stopped offering incentives for purchases of Tesla’s electric vehicles.General MotorsThe largest U.S. automaker imports many of its best selling and most profitable cars and trucks, especially from Mexico, where it has several large factories that churn out models like the Chevrolet Silverado. Roughly 40 percent of G.M.’s sales in the United States last year were vehicles assembled abroad. This could make the company vulnerable to the tariffs.But unlike some other automakers, G.M. has posted strong profits in recent years and is considered by analysts to be on good financial footing. That could help it weather the tariffs better than other companies, especially if the import taxes are removed or diluted by Mr. Trump.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

There is no doubt the tariffs that President Trump said he would impose on imported cars, trucks and auto parts next week will raise prices by thousands of dollars for consumers.What is not clear is how soon those increases will kick in, how high they will go and which models will be affected the most.The tariffs — 25 percent on imported vehicles and automotive parts — are supposed to take effect next Thursday. But many car dealers said they were putting aside the question of price increases for now to focus on ending March with a sales flourish in the month’s final weekend.“I’m not really thinking about what to do about prices yet,” said Adam Silverleib, owner of a Honda store and a Volkswagen showroom in the suburbs south of Boston. “I’m trying to close out the month and move as many cars as I can.”Mr. Silverleib also pointed out that Mr. Trump had announced tariffs before only to delay them just before they were to take effect. “We’ll see if anything transpires in the next 96 hours,” he said on Thursday.Auto analysts estimate that the tariffs will add $4,000 or more to the prices of many new vehicles that are assembled outside the United States. For some high-end models, such as fully loaded pickup trucks, prices could rise $10,000 or more.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