Economy

Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldDonald Trump has recently notched up an impressive roll of investment pledges from companies as he attempts to turn the US into a manufacturing powerhouse. Last week, the chief of semiconductor giant Nvidia hinted at ploughing “several hundred billion” dollars into the country over the next four years. Multinational carmaker Stellantis, Japanese brewer Asahi, and South Korea’s automaker Hyundai have all recently unveiled plans for new US production. The White House proudly claims that “the list of manufacturing wins is endless”. The self-congratulation is premature. The Trump administration will find that there is a limit to how much investment it can attract, particularly if it persists with its central strategy of trying to prod businesses into the country with tariffs. For starters, the lead time to build a factory is often several years long. That means the costly decision to shift production to the US depends partly on how long businesses reckon the current protectionist stance will last. But companies have no clarity on what Trump’s plans to implement reciprocal tariffs next week looks like, let alone what US policy will be in a few years. With Trump’s import duties affecting numerous raw materials, such as aluminium and steel, producers will also wonder if domestic supply chains will be strong enough to meet their demand. Investors will be weighing up factors beyond tariffs too. The recent surge in US factory construction spending, which hit a half-century high in 2024, has largely been driven by financial incentives provided under the Biden administration. For instance, big investment pledges by semiconductor companies have been backed by subsidies from the Chips Act. But both that legislation and the Inflation Reduction Act — which offers tax credits for investments in renewable technologies — are in limbo under Trump, who has been deeply critical of them. Access to labour is another consideration. Right now, there are mounting warnings from industry that the White House’s large-scale plans to deport undocumented workers will exacerbate worker shortages, particularly in the manufacturing and construction sectors. New factories could face building delays. As it is, many companies complain of cumbersome and complex permitting processes. Signs of a slowdown in the US economy will also weigh on investors’ minds. Consumers, businesses and the stock market are flinching at the prospect of Trump’s inflationary tariffs and the widespread uncertainty.It will be tempting for the Trump administration to see recent pledges from manufacturers as proof that the threat of losing competitive access to the world’s richest consumer market is enough to attract investment. That will undoubtedly have played a role in some companies’ decisions. But broader factors are at play too. For instance, TSMC’s recent $100bn commitment included funds to boost research and development activities. Given the long timeframes to build factories, companies are also likely to be making decades-long decisions on the need to expand their US presence, regardless of tariffs. Still, for most foreign companies the least risky, and most logical, option would be to wait and see how US tariff plans evolve. Others may even double down on investment projects elsewhere, where the policy environment is more predictable. Smaller businesses, with less resilient balance sheets, might also find that they need to reduce their US exposure. Indeed, given America’s relatively high labour costs, the inability to procure low-cost imports from abroad could make some operations in the country less viable. There are bigger questions on why Trump believes a focus on manufacturing is the best path to greater US prosperity. But if the goal is to build more factories in the country, Trump is better off removing barriers to business, not raising them. More

IRS officials are expecting tax revenue to drop by more than 10% by April 15, the Washington Post reported.
Officials said the prediction is directly linked to shifting taxpayer behavior and President Donald Trump’s cuts at the IRS, the paper said.

Officials at the Internal Revenue Service and Treasury Department are anticipating tax revenue to drop more than 10% by April 15 compared with last year, the Washington Post reported Saturday, citing three people with knowledge of the situation.
The loss of tax receipts is expected as more individuals and businesses don’t file taxes or attempt to avoid paying balances owed to the IRS. The amount of lost federal revenue could top $500 billion, the paper said.

Officials said the prediction is directly linked to shifting taxpayer behavior and President Donald Trump’s cuts at the IRS, the Washington Post said.
Thousands are expected to lose their jobs at the agency as part of Elon Musk’s Department of Government Efficiency spending cuts. Experts have warned that the cuts during tax season could materially impact filers.
The IRS has also noted increased chatter online from people saying they won’t pay taxes this year or will make aggressive claims they aren’t eligible for in a gamble that they won’t be audited, the Washington Post reported.
The Treasury Department told the paper the story was “sensational and baseless” and said the anonymous sources “should be dismissed out of hand.”

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This article is an on-site version of our Swamp Notes newsletter. Premium subscribers can sign up here to get the newsletter delivered every Monday and Friday. Standard subscribers can upgrade to Premium here, or explore all FT newslettersShipbuilding and maritime security will be all over the news this week. Today, the US Trade Representative will hold hearings on proposed interventions to support the US shipbuilding industry, which both the Trump administrations (and the Biden administration) believe have been unfairly hit by Chinese mercantilism. While some of the groups testifying (including a number of private businesses, foreign companies and state actors) will try to argue that the state supports being proposed by the Trump administration are illegal or unwarranted, I don’t think it will make much of a difference. Shipbuilding is where Trump will put his industrial policy stake in the ground. Indeed, I’ve been told by sources in or near the White House that the president’s new executive order on shipbuilding may drop as early as the end of this week. (In my column today I wrote about how the administration’s efforts to build more maritime security are part of a new Great Game in the Arctic). A leaked copy of the order was floating around last week, and it includes some pretty ambitious, whole of government goals to reconnect military and commercial shipbuilding. They included beefing up training for the maritime workforce (which has dwindled in the US), penalising adversaries like China with port fees and other restrictions, and also rewarding companies and countries that support US flagged vessels and American shipbuilding efforts.As Mike Wessel, the shipbuilding 301 case co-ordinator (and a member of the US-China Economic and Security Review Commission) told me last week, “If all the policies being discussed are implemented and durable, it would be the biggest investment and commitment to US maritime capabilities since the Liberty shipbuilding programme of the second world war.” For those readers who aren’t ship buffs, this was the public-private war effort that resulted in over 2,700 vessels being built in 18 shipyards in the US between 1941 and 1945, as part of the country’s war effort. Basically, the US built these ships faster than the Germans could sink them.I’ve written much about the reasons why America needs to bring back shipbuilding capacity, from the need for more security in the face of Chinese and Russia aggression near US territorial waters, to America’s over-reliance on China for commercial shipping. Every day brings a new drumbeat of maritime risk. See recent headlines about Chinese warships sailing closer to Sydney as China looks to project its power in the Pacific.But there are challenges. America recently signed an agreement with the Canadians and Finns to build icebreakers together. But amid the president’s tariff troubles with Canada, Prime Minister Mark Carney announced a $6bn Canadian deal with Australia to build Arctic radars to detect hypersonic missiles. That money might have gone to the US, but Carney is no pushover and has made it clear that Canada isn’t interested in being the 51st state. There are now calls for Canada to cancel an F-35 fighter jet order from the US.Likewise, the new US maritime strategy, while it is bipartisan (there’s a SHIPs Act on the table that was crafted by Democratic Senator Mark Kelly and former Republican representative Mike Waltz, now the national security adviser) will also have to walk a fine line between military and labour goals. While the defence department wants as many ships in the water as quickly as possible, labour leaders — including the United Steelworkers and the other unions that brought the 301 case — want as many new jobs and as much capacity created in the US as possible.One model for this would be the purchase of the Philadelphia shipyards by Korean company Hanwha. Another would be the outsourcing of shipbuilding to yards in places like South Korea or Japan. Unions and some security hawks worry that this won’t enhance the industrial base in the US but rather recreate some of the problems of the past 20 years of outsourcing. Either way, the US is going to need help from allies like the Finns and Koreans to retrain workers.Industrial policy is a tricky business at the best of times. Add in Trump’s unpredictability and you have a fragile and potentially volatile scenario. Julius, my question to you is, how do you imagine America’s shipbuilding efforts will go? What opportunities and pitfalls do you see here? And do you think Trump will crack a bottle of champagne on a new US icebreaker before he leaves office?  Recommended readingLots of wonderful pieces in the FT this week: I agree with Constanze Stelzenmüller that reopening Nord Stream 2 would be absolute folly for Europeans, who should continue to move away from dependence on Russian gas. And John Thornhill’s opinion piece on the fifth estate (social media) is a must-read. The ubiquity and power of hyper-individualised, high-speed media is a fundamental challenge to our politics and economics, one we ignore at our peril.Meanwhile, I just finished reading When the Going Was Good, former Vanity Fair editor Graydon Carter’s memoir, and I must say that I was disappointed. As a former Condé Nast magazine person, I was drawn in by the possibility of outrageous anecdotes about the glory days of publishing. And there were some of those, but there was also just a lot of stale navel-gazing and stories about Carter’s Canadian youth that I could have done without. There was also some name calling of writers and editors which I never enjoy. The book made me feel we should all finally close this chapter of New York media history and move on.Julius Krein responds At this point, the American commercial shipbuilding industry is so hollowed out that the first step in rebuilding it must involve attracting foreign shipbuilders to the US. In this respect, there are parallels with the Chips Act, one goal of which was to entice TSMC and Samsung to build production facilities here. But we’re starting from an even weaker position in shipbuilding. In 2022, the United States built only five oceangoing commercial vessels, compared to 1,794 in China and 734 in South Korea. We will, therefore, need foreign companies to lay basic foundations in manufacturing process knowledge, workforce training, and so on.The Biden administration previously identified icebreaker ships as a promising starting point, and I would expect continuity here. In addition to the geopolitical importance of the Arctic, it may be easier for the US to compete in markets for relatively specialised vessels — such as icebreakers — where price and quantity are not the only factors that buyers typically consider. Moreover, there are some benefits to starting from virtually zero. The need to construct new facilities is an opportunity to deploy at scale the most advanced manufacturing technologies. It should also be easier to optimise the co-location of new commercial and defence production facilities, rather than deal with stranded legacy assets. This presents an opportunity to build a larger manufacturing ecosystem that includes the adjacent technologies, supply chains and applications required for any shipyard to operate effectively.Ultimately, however, the shipbuilding industry is a game of competitive subsidisation. The major shipbuilding nations provide considerable support to their industries, and Michael Lind has recently shown how the elimination of subsidies under the Reagan administration resulted in the precipitous decline of US shipyards despite the Jones Act.With that in mind, US policymakers will need to consider more robust forms of investment support, in addition to the measures already announced by the Trump administration. Both shipyards and the vessels they produce provide ample opportunities for creative public-private financing structures as well as procurement and contracting mechanisms. America has somehow managed to financially engineer seemingly everything except critical national security supply chains and technologies; shipbuilding offers a chance to rectify that.The president’s executive actions should also be supported by complementary legislation. The bipartisan Ships for America Act has already been introduced. Passing bills like this through Congress would not only put more resources behind shipbuilding efforts, but would also signal a bipartisan policy commitment — and one that is more durable than executive orders alone — to private sector investors.Finally, on the question of allies, I would personally encourage the administration to take a more “materialist” approach to foreign policy. A core tenet of the “nationalist” perspective that drove Trump’s rise is respecting the sovereignty of other nations, rather than intervening in their internal debates to impose American values, or projecting our domestic culture wars on to them. American right-populists did not like it when Democratic administrations intervened in foreign elections on behalf of progressive parties. They should not be especially surprised, then, if interventions in the other direction end up generating hostility and blowback. Re-industrialisation in general, and shipbuilding in particular, offers an opportunity for more constructive engagement.Your feedbackWe’d love to hear from you. You can email the team on [email protected], contact Ed on [email protected] and Rana on [email protected], and follow them on X at @RanaForoohar and @EdwardGLuce. 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This article is an on-site version of our Trade Secrets newsletter. Premium subscribers can sign up here to get the newsletter delivered every Monday. Standard subscribers can upgrade to Premium here, or explore all FT newslettersWelcome to Trade Secrets. Wednesday next week is apparently “Liberation Day”, when Donald Trump’s piecemeal approach of a steel and aluminium (aluminum, whatever) tariff here and a fentanyl duty there gives way to a glorious unified policy of “reciprocity”. (Disappointingly, they’ve gone for the second of the month rather than April Fools’ Day itself.) There was some chatter and media stories about this from various administration types last week, which solidified my default view that the “reciprocal” description is totally bogus and they’ll do whatever they feel like doing. Accordingly, I’ve relegated the issue to the second piece in today’s newsletter, the first one being what eager-beaver subsidy-busters in Brussels are going to do to a carefully constructed policy towards Chinese electric vehicles. The Charted Waters section, which looks at the data behind world trade, is on the Canadian dollar.Get in touch. Email me at [email protected] come, EV goMy ace Brussels colleagues bring the news that the European Commission is conducting a review under the EU’s newish foreign subsidies regulation (FSR). The target is the Chinese car company BYD’s electric vehicle plant in Hungary, and the suspicion is that it receives distorting handouts from the Chinese state. The FSR gives investigators a lot of powers to seize information (including, it seems, examine the email inboxes of company employees held on servers outside the EU) and punish wrongdoers by forcing them to divest or repay subsidies. You could see this dust-up over Chinese subsidies and EVs coming from a mile away (specifically from May 9 last year, for Trade Secrets readers) and it’s juicy stuff. Here’s why.The EU’s dealings with China over EVs (and green tech more generally) are a tricky balancing act. On the one hand are EU governments such as France, who want antisubsidy duties to protect carmakers from cheap Chinese imports. On the other are those German carmakers who don’t want to lose access to China’s market, whatever that’s worth for them these days. On the third hand are consumers and environmentalists who would actually quite like affordable electric cars if that’s not too much trouble. The fourth hand belongs to member state governments, who are less concerned about who builds car factories in their economies than that they get built.The compromise involves carefully calibrated, company-by-company antisubsidy duties to slow but not stop imports of Chinese EVs. The duties also give an incentive to Chinese manufacturers to set up in the EU (via joint ventures or otherwise) and hopefully bring transferable technology (oh, the historical irony) and value-added production, rather than just final-assembly plants.Now enters the fifth hand, in the form of the FSR investigation. Finding that BYD has benefited from government subsidies could upset that delicate balance, deterring Chinese carmakers from setting up in the EU by requiring them to repay subsidies or divest. One of the first targets for the FSR last year was the Chinese security-scanner company Nuctech. As with EVs, the EU initially imposed antidumping duties on Nuctech’s exports to Europe, which caused the company to “tariff-jump” and set up production inside the bloc. There’s always a tendency to think events like these are part of some cunning geopolitical game, particularly since the BYD plant is in Hungary, whose prime minister Viktor Orbán is a lot matier with Beijing (and Moscow and now also Washington) than most other EU states would like. But at its heart the FSR starts off as a technocratic process, in this case conducted by the fiercely independent competition directorate (COMP to its friends and its many enemies). COMP has had no problem in the past with very seriously annoying even the EU’s biggest member states in other areas such as state aid. See, for example, the Siemens-Alstom merger.That said, the FSR investigation could be made to pull in the same direction as the trade instruments rather than against it. If the probe proceeds to a later stage, the commission will have to apply a “balancing test” to assess whether the benefits to the internal market outweigh the distortions from the subsidy. Those benefits can include environmental protection and promoting R&D. Now, let’s say they decide that BYD bringing a lot of value-added production and technical knowhow to the EU makes Europe green and productive. Ta-da! That could get it off the subsidy penalties. The circle is squared. Is this how it’s going to work? Dunno. It’s what I’d do, though. Trump draws up his trade bucket listWriting about so-called reciprocal tariffs I do pause wearily to consider the words of the former Arizona congressman Mo Udall, who observed during a tedious debate in the House of Representatives that everything that could possibly be said had already been said, but that not everyone had yet had a chance to say it. Anyway, there are a few crumbs worth sweeping up and consuming from last week as Liberation Day draws nearer. So let’s dig in. Readers may remember my view that to do reciprocity properly — product by product and tariff line by tariff line — would be hugely complex and expose certain sensitive US sectors (cane sugar, dairy) to competition from cheap imports — and so was unlikely to happen.It’s not happening. Instead the extent of debate within the administration, to judge by last week’s stories, is whether every trading partner gets its own special bespoke tariff — “each country will receive a number”, as Treasury secretary Scott Bessent put it in an uninspiring appearance on Fox Business — or whether they would be put in one of several “buckets”, where they would have to share a number with others. Oh, and as of yesterday, the Wall Street Journal was reporting that cars and microchips, among other products, might be excluded entirely for the moment.The country that put a man on the moon is wondering whether it’s got the computational ability to create a number for each of its couple of hundred trading partners, or whether they have to share one among fifty.Little of this makes sense. What happens if you reduce your own tariffs just enough to escape the bucket you’re in? Do you automatically go into the next bucket down, even though there might be countries in that bucket with much lower tariffs than you? Why doesn’t each country in any given bucket immediately raise their tariffs to the level of the country in that bucket with the highest tariffs? Are you told the actual formula used to compute your number, in which case you can game it like crazy? Or do they go Kafka-style and just tell you what it is without explanation? If so, how are you supposed to bring it down except with trial and error?When they are calculating, say, the Chinese tariff number, do they compare it with their own existing tariffs on imports from China? Because those are a lot higher than the standard most-favoured-nation tariff. And if they’re complaining about the value added tax in other countries, which they bafflingly regard as a discriminatory trade measure, do they take into account US state-level sales taxes?Surely at the least the administration has decided whether these tariffs are on top of other tariffs, such as the existing steel and aluminium duties? Apparently not. Bessent last week looked startled at the question (11 mins 30 secs here) and punted it to the commerce department and US trade representative.The original so-called reciprocal trade act, wrong-headed and destructive though it was, at least had some coherent meaning and structure. Like all US trade policy these days, it’s being put through the administration blender and coming out as a kind of pulpy sludge that can be fashioned into any shape Trump likes. And it will probably fall apart before too long.Charted watersIf Trump is heading for a Mar-a-Lago Accord that will strengthen the Canadian dollar against the US dollar, the markets don’t believe it. The exchange rate has gone the other way over the past year and has been basically unchanged since his inauguration.Trade linksA paper from the European Council on Foreign Relations looks at the EU’s capacity to retaliate against tariffs and other aggression from the US.As happened during Trump’s first term, his administration is looking at the possibility of a bailout for American farmers caught in his trade war.The controversy over Elon Musk has put negotiations about a secure communications system between Italy and Starlink on hold, that country’s defence minister said. (I wrote last week about Europe trying to build alternatives to Starlink.)Bloomberg reports that China’s imports of commodities and cars from the US are collapsing.New Zealand and India are relaunching trade talks, with the Kiwis hopeful they can get a deal that opens up India’s dairy markets. Bless. Meanwhile, the EU’s recent surge of enthusiasm for its own bilateral deal with India didn’t last long.Trade Secrets is edited by Harvey NriapiaRecommended newsletters for youChris Giles on Central Banks — Vital news and views on what central banks are thinking, inflation, interest rates and money. Sign up hereFT Swamp Notes — Expert insight on the intersection of money and power in US politics. Sign up here More

Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldMexico will learn its fate just after April Fool’s Day. Donald Trump has called April 2 “liberation day”. For Mexicans, it will be the moment they discover the extent of the economic damage that Trump plans to inflict on their country.Much of the global economy will probably be hit by the tariffs America is set to announce on April 2. But the stakes are especially high for Mexico, which sends 80 per cent of its exports to the US. Trump has already imposed 25 per cent tariffs on both Canada and Mexico. About half of these new duties were swiftly put on hold. But they could all be reimposed next week.Mexico’s fate is worth watching for two main reasons. First, the economy’s unusual dependence on exports to the US means that Mexico’s social and political stability are at stake. Mexican economists believe that, in the worst-case scenario, Trump’s tariffs would cause a depression in their country.The second reason is that Mexico offers a test case for how to deal with Trump. While Canada has hit back at the US with tough talk and reciprocal tariffs, Mexico’s President Claudia Sheinbaum has played nice. She has emphasised her respect for Trump and has for now refrained from imposing retaliatory tariffs. Sheinbaum has also agreed to send 10,000 more troops to guard the US-Mexican border and deported 29 high-profile drug cartel leaders to America.Sheinbaum has been rewarded with praise from Trump, who has called her a “wonderful woman”. She is also enjoying sky-high opinion poll ratings at home. Internationally, she has been held up as an example of how to deal shrewdly with Trump’s America, with the New York Times praising her pragmatism and The Economist saluting her “diplomatic nous”. Reality is more complicated. As Luis de la Calle, a leading trade economist, pointed out to me in Mexico City last week, Canada and Mexico have so far been treated pretty well identically by the Trump administration. Sheinbaum’s critics also say that she is damaging the Mexican economy and future investment by pressing ahead with a plan to fire all the country’s judges and replace them with elected officials. With the local economy already struggling, Sheinbaum badly needs Trump to cut her a break. But, unfortunately for Mexico, Trump’s grievances go well beyond trade. Last month, the White House asserted: “The Mexican drug trafficking organisations have an intolerable alliance with the government of Mexico.” Joshua Treviño of the pro-Trump America First Policy Institute commented approvingly that this statement was a “seismic pronouncement that heralds a new era of confrontation between the two nations”.There is a serious debate in Republican circles about whether the US should use military force to strike the drugs cartels inside Mexico. This month, Defense Priorities, another think-tank that is influential in Trump world, warned: “‘Bomb Mexico’ is increasingly mainstream as a policy option for border security. It would be a grave mistake.” Some influential Mexicans will say quietly that it might not be such a bad thing if the Trump administration pushes their own government to take more aggressive measures against the drugs gangs — perhaps with significant American assistance.The damage that the cartels are doing to Mexican society is highlighted by the horrifying discovery of an “extermination camp” in the countryside where kidnapped recruits to an organised crime gang seem to have been murdered. More than 100,000 people are registered missing in Mexico, many thought to be victims of the cartels. But unilateral American military strikes against the cartels — while they might draw cheers from Trump’s base — would put the Mexican government in an impossible position. They would also risk drawing the US into another open-ended conflict without attacking the root causes of the problem, which include the flow of guns from the US to Mexico and America’s own demand for drugs. By suggesting that tariffs are the right tool to deal with narcotics, illegal immigration and trade simultaneously, Trump has made it harder for Mexico to craft a reasoned response. So Sheinbaum is left trying to humour and flatter the US president, while hoping that he gets distracted or that his advisers make him see reason. The reality is that tariffs would undermine the most advanced parts of Mexico’s economy and make the country poorer. That downward spiral would be likely to fuel nationalism and anti-democratic populism, while increasing the power of organised crime and driving more Mexicans to try to cross into the US.Mexico’s greatest hope is that the US itself would recoil from the shared pain caused by a tariff war. Americans rely on cheap, reliable supplies from Mexico for everything from fruit and vegetables to car parts and medical equipment. Higher inflation would be felt quickly in the US, while the promised re-industrialisation of America would be a long time coming, if it ever happened at all. Impoverishing and destabilising America’s southern neighbour and largest trading partner is obviously a bad idea — for the US and for Mexico itself. But, unfortunately, that is no guarantee that it won’t [email protected] 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 Americas. We start today with a request for help. April 29 marks the first 100 days of Donald Trump’s second term in office and to mark this milestone we plan to publish a reader Q&A. Email your questions to [email protected] and our experts will answer them. Now, on with today’s edition:Hopes for a “Trump bump” fade on Wall StreetCarmakers brace themselves for Trump’s tariffs The new nuclear arms raceAnd how Covid lockdowns changed the workplace Stock market falls and policy uncertainty are forcing dealmakers in the US to reassess expectations for a surge in activity this year.As the end of the first quarter approaches, the volume of takeovers globally has risen more slowly than many advisers expected at the end of last year when investment banking stocks hit record highs in anticipation of a “Trump bump”. The number of deals announced since the start of January is the lowest in more than a decade, according to data from Dealogic. There have been about 6,600 global transactions announced so far this quarter, down almost 30 per cent on a year earlier and 44 per cent below the peak in 2021.Wall Street has been trying to talk a dealmaking recovery into existence for two years after interest rate rises in 2022 killed off a pandemic-era boom. What started in 2023 as “green shoots” became “early innings” in 2024 and then “animal spirits” following Donald Trump’s victory in the US presidential elections in November. Yet, US stock markets have been gripped by fears in recent weeks about the health of the domestic economy, with the blue-chip S&P 500 index down nearly 4 per cent so far this year. Read more on the outlook for dealmaking this year. More market news: Large and persistent falls on Wall Street and for the US dollar are unusual, says Goldman Sachs in a new report. And here’s what we’re keeping tabs on today:War in Ukraine: The US and Russia have resumed talks in Saudi Arabia a day after American and Ukrainian negotiators met.Economic data: Mexico’s national statistics agency will publish data on consumer price changes in the first half of the month.Federal Reserve: Board governor Michael Barr speaks on “Small Business Lending” at an event in Washington hosted by the Aspen Institute.Canada: Campaigning begins in the country’s general election, following Prime Minister Mark Carney’s decision to set April 28 for the poll.Five more top stories1. Exclusive: Japan has not yet beaten deflation despite years of persistently rising consumer prices and the largest round of annual wage increases in three decades, the country’s finance minister has warned. Katsunobu Kato’s blunt assessment comes 15 months into the Bank of Japan’s efforts to “normalise” the economy. Read the full FT interview.2. Software giant SAP has overtaken Novo Nordisk to become Europe’s most valuable company, in the latest milestone for Germany’s surging stock market. Shares of SAP have risen more than 40 per cent in the past year as investors welcomed the shift of its business customers to the cloud. This is a developing story. 3. International carmakers are rushing to ship vehicles and core components to the US to get ahead of the next round of President Donald Trump’s tariffs. Trump has said that “reciprocal” tariffs on the US’s trading partners will come into effect on April 2 — the same day that a 30-day reprieve ends on the president’s pledge to impose 25 per cent tariffs on imports from Mexico and Canada. Here’s more on how the car industry is preparing.4. A Turkish court yesterday formally arrested the main challenger to the country’s longtime leader Recep Tayyip Erdoğan, threatening to escalate a crisis that has ignited mass protests and financial turmoil. The court ruled that Istanbul mayor Ekrem İmamoğlu should remain behind bars ahead of a trial on corruption allegations. The move against İmamoğlu has set off the largest opposition protests in more than a decade in Turkey.5. The head of law firm Paul Weiss yesterday defended his decision to strike a deal to end a dispute with US President Donald Trump. Brad Karp, the chair of Paul Weiss, wrote in a note to colleagues that Trump’s executive order “could easily have destroyed our firm”. Read more on the memo.Today’s Big Read © Adam James/FT; AFP/Getty Images/DreamstimeDonald Trump’s pivot to Moscow and scathing disregard for Nato has prompted old allies — from Berlin and Warsaw to Seoul and Tokyo — to confront what was seemingly unthinkable: how to prepare for a potential withdrawal of their US nuclear shield. We’re also reading . . . US exceptionalism: The long overdue rebalancing of global markets has only just begun, writes Ruchir Sharma, and is likely to be playing out for a long time. Why ships are the new chips: At the centre of the Trump administration’s world view is a desire to make America’s maritime capacity great again.Weight-loss drugs: Ozempic and Wegovy may mean vast gains for drugmakers but they could upend the insurance sector, writes Patrick Jenkins.Seven AI roles managers must master: Technology is handing leaders new challenges as some jobs are wound down, writes Andrew Hill.Chart of the daySome content could not load. Check your internet connection or browser settings.Argentina’s imports are rising rapidly as libertarian President Javier Milei bets on a strong peso and cheap foreign goods to help fight inflation. Italian pasta, Brazilian bread and Uruguayan butter have become increasingly visible on supermarket shelves in recent months while farmers quadrupled overseas tractor purchases in the first two months of 2025. But the peso’s strength has become politically fraught for Milei.Take a break from the news . . . The upheaval of Covid lockdowns prompted a rethink not just of where we work but when and why. FT writers and contributors assess what is different five years on. Recommended newsletters for youOne Must-Read — Remarkable journalism you won’t want to miss. Sign up hereNewswrap — Our business and economics round-up. Sign up here More

U.K. growth remains stagnant and the economy is plagued by longstanding structural issues, but reports indicate a growing sense of optimism around the country from overseas investors.
Higher capital spending, a regional defense spending boost and the possibility that the U.K. will swerve U.S. tariffs are all adding to this picture.
However, some note that the U.K. is not “out of the clear” from President Donald Trump’s tariff path just yet, and is already being hit by his steel and aluminum duties.

LONDON — Some investors are expressing a growing optimism about the U.K.’s economic outlook despite the country’s long-standing structural weaknesses, as its neighbors in the European Union deepen their trade dispute with the United States.
That upbeat tone wasn’t reflected in the messaging of the Bank of England, as it held interest rates steady last Thursday, citing increased geopolitical uncertainty and indicators of financial market volatility. However, U.K. economic growth — tepid at best for the last three years — is finally expected to pick up somewhat in 2025, with Bank of America analysts forecasting a 1.4% expansion.

Inflation is still expected to cool back near-target in the months ahead, the labor market is loosening but remains robust, and the U.K. government has a determined focus — at times controversially — to support growth and reduce the national deficit.
Sanjay Raja, chief U.K. economist at Deutsche Bank, said that, on a recent client trip to the U.S. he noted a “budding sense of optimism” around the U.K. not seen in some time.
Key factors included a pivot toward deregulation and focus on more capital spending, the potential for a strong trade deal with the EU in the coming year, and an expectation the the U.K. will “stay in the US’ ‘good books’ as a trade war kicks off,” Raja said in a note earlier this month.
U.S. President Donald Trump has expressed a willingness to spare the U.K. from blanket or targeted tariffs, with expectations bolstered after U.K. Prime Minister Keir Starmer conducted a friendly trip to the White House in February.

EU delays implementing first retaliatory tariffs on U.S. goods to middle of April

“Talk of a U.S. trade deal also surfaced in client conversations, and there was increased optimism that the U.K. may be spared from direct and widespread tariffs,” Raja said.

Some felt “structural growth could be on the rise after a steady decline since the global financial crisis,” he continued, while a broad European push to increase national defense spending could benefit U.K. corporates. Points of concern for investors remained January’s sell-off in U.K. government debt, fiscal headroom and the sustainability of spending cuts, Raja observed.

Still trade risks

The U.K. may have been spared the worst of Trump’s rhetoric so far — such as his threat of 200% tariffs on EU alcohol imports — but it is not totally immune from Washington’s protectionist push.
Gabriella Dickens, G7 economist at AXA Investment Managers, noted that the U.K. still faces a hit due to the new U.S. tariffs on steel and aluminum. The U.K. exported a total of £370 million ($479.7 million) in steel to the U.S. in 2024, according to trade group UK Steel, accounting for 9% of total U.K. steel exports by value. Britain’s aluminum exports to the U.S. totaled were valued at around £225 million last year, the U.K.’s Aluminium Federation says.
The U.K. will also be impacted by any slowdown in global trade, including if this leads to weaker demand in its key partners such as the EU, and if general uncertainty erodes business and consumer confidence, Dickens told CNBC.
“Investor sentiment may be boosted if the U.K. manages to avoid further tariffs, particularly if trade tensions ramp up with the EU,” Dickens said. In the unlikely event Trump follows through with his prior threat of blanket 25% tariffs on the EU, a “material boost” would be provided to the U.K. as manufacturers would likely look to relocate, she said.

EU delays implementing first retaliatory tariffs on U.S. goods to middle of April

The U.K. could still avoid further tariffs, since it has no large trade surplus with the U.S. and the majority of that is services-based. It has already pledged to boost its defense spending as a share of gross domestic product (GDP), avoiding much of Trump’s ire with other nations.
“Neither of these have spared the U.K. from the steel and aluminum tariffs, though,” Dickens added.
Lindsay James, investment strategist at Quilter Investors, also stressed the existing impact of steel and aluminum duties on the U.K. and flagged potential risks from the reciprocal U.S. tariffs due to be announced early April.
“The idea that VAT is some kind of tariff seems to have taken hold in the White House, placing the U.K. once again at considerable risk of coming into the crosshairs of U.S. trade policy,” James told CNBC.
“Whilst the reality is likely being willfully misrepresented by the White House in order to gain a negotiating advantage, the U.K. is not yet in the clear and, if Donald Trump’s demands on Ukraine are anything to go by, any future trade deal would likely come at a heavy price.”
James added that, while the government was improving the foundations of the U.K. economy in the long run, growth remained on a weak trajectory in the near term, with businesses hit by higher costs stemming from last year’s budget and continued issues with an “older and sicker workforce.”
“Whilst the [U.K.] stock market has so far benefitted from its perception of defensiveness, a modest starting valuation and a strong performance from heavily represented sectors such as oil and gas and financials, the divergence from the performance of the economy could lead to the large cap index continuing to outperform domestic stocks,” she said. More