Economy

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The UK government needs to be “more ambitious” in its negotiations with the EU in order to boost the country’s flagging goods exports, the head of the UK’s largest business organisation has warned.Shevaun Haviland, director-general of the British Chambers of Commerce, said she would keep pushing the government to build on the warm words of recent diplomatic exchanges on resetting UK-EU relations to deliver material improvements for exporters. “We feel like the mood music is moving in the right direction. That’s good, but it’s not even nearly enough,” she told the Financial Times ahead of the BCC’s international trade conference in London on Thursday.Haviland said the BCC would be looking to “apply pressure” on the government by hosting a meeting of UK and EU business and political leaders ahead of the EU-UK summit on May 19 that will formally kick off the reset process.“We absolutely want them to be ambitious . . . they need to set the ambition high and move quickly with a clear timeline.” Her intervention comes as Prime Minister Sir Keir Starmer’s government is in the midst of a delicate negotiation with Washington to try to avoid the “reciprocal tariffs” due to be imposed by President Donald Trump from the start of April.UK foreign secretary David Lammy will address the BCC’s conference and warn that Britain must grapple with broader economic flux. The “multilateral rules and institutions which were built to manage the global economy are not just facing challenges, they are under threat”, he will say, citing international climate finance and trade dispute resolution as crucial areas of dysfunction.Declaring the “laissez-faire approach to globalisation, which ruled from 1989 to 2008” to be “dead and buried”, he will say he has instructed the Foreign Office to “turbocharge” economically beneficial relationships, including with the EU, US and China — which account for two-thirds of Britain’s external trade — but also deepen partnerships with markets such as Japan. The move dovetails with wider reforms under way at the Foreign Office, including the creation of a departmental delivery board that will set hard targets for ambassadors and senior managers on trade and investment, migration and national security. Lammy is also planning to restructure the department, significantly boosting the UK’s diplomatic headcount overseas while reducing it in London. Haviland said that the government must keep a “cool head” with Washington while doing more to back British exports around the world that have underperformed both EU and other G7 economies since the Covid-19 pandemic. “The government needs to put more money into export support,” she said. “The government looks at it as a cost, but we’re telling them that it’s a return on investment because businesses that trade are more resilient, last longer, pay better and they pay more tax.” A 2024 study by Aston Business School estimated that UK exports to the EU were 17 per cent lower than if Brexit had not occurred, a hit acknowledged by Cabinet Office minister Nick-Thomas Symonds in a speech in Cambridge last week on the EU-UK reset.However, the government has said it will stick to its manifesto “red lines” on not rejoining the EU single market, entering a customs union with the EU or agreeing a youth mobility deal that would allow 18- 30-year olds on both sides to live and work in each others’ countries for two to three years.Haviland said the BCC continued to press the government to take deeper measures to improve trade, including joining the Pan-Euro-Mediterranean customs area, removing safety and security declarations for goods and seeking a deal to improve professional mobility.“We were with a chocolate business the other day. It exports to 50 different markets. It takes two days to get product to the US and sometimes it takes two weeks to get to France and Spain — still,” she added. 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 and welcome back to FirstFT Asia. In today’s newsletter: Trump’s policies weigh on the Fed’s outlookWhy China delayed BYD’s Mexico plantGoldman’s succession plans The Federal Reserve has slashed its US growth forecast and lifted its inflation outlook, underscoring concerns that Donald Trump’s tariffs will knock the world’s biggest economy.The Fed’s latest set of projections showed officials now expect GDP to expand by 1.7 per cent this year, with prices forecast to rise by 2.7 per cent. Policymakers kept the central bank’s main interest rate on hold yesterday.Fed chair Jay Powell acknowledged to reporters after the meeting that the US president’s plan to hit trading partners with sweeping tariffs had affected the central bank’s outlook for inflation and the economy.“Clearly some of it, a good part of it,” was related to the impact of Trump’s tariffs, Powell said, adding that they “tend to bring growth down and push inflation up”. He also said progress on inflation was “probably delayed for the time being”.The Fed’s new forecasts “signalled essentially that we are in a stagflation economy, with lower growth and higher inflation”, said Torsten Slok, chief economist at investment firm Apollo. Here’s what that means for US rate-setters. Read more news from a busy day in central banking:Japan: The Bank of Japan held interest rates as the rising risk of a global trade war and potential downturn in the US weighed on Japan’s hope for a sustained economic revival.Indonesia: The south-east Asian nation’s central bank intervened “boldly” in the foreign exchange market as the rupiah hovers close to five-year lows amid concerns over a sluggish economy.For more insight into what rate-setters are thinking, sign up for our Central Banks newsletter by Chris Giles if you’re a premium subscriber, or upgrade your subscription here.Here’s what else we’re keeping tabs on today:Economic data: Hong Kong reports February CPI inflation data and Australia publishes labour force figures for the month.Monetary policy: The People’s Bank of China announces its loan prime rate decision. Olympics: The International Olympic Committee will vote on a new president — the most powerful position in global sport.Results: CK Hutchison Holdings and China Mobile report 2024 full-year results.Five more top stories1. Turkish police have detained Istanbul’s mayor Ekrem İmamoğlu, the main political challenger to President Recep Tayyip Erdoğan, as the government’s sweeping crackdown on the opposition intensified. The Republican People’s party was set to name İmamoğlu, one of the country’s most popular political figures, as its presidential candidate on Sunday.2. China is delaying approval for carmaker BYD to build a plant in Mexico, after plans were first announced in 2023. People familiar with the matter said Beijing was worried that the smart car technology developed by China’s biggest electric-vehicle maker could leak across the border to the US. 3. President Donald Trump proposed that the US take over Ukraine’s nuclear power plants in a phone call with Ukrainian President Volodymyr Zelenskyy yesterday. Zelenskyy also agreed to back an American proposal to halt strikes on Russian energy infrastructure. Read more about their call.Israel-Hamas war: Israel has started a new ground operation in Gaza, reclaiming territory it ceded as part of a now-shattered ceasefire.Go deeper: How Trump’s peacemaking ambitions in Ukraine and the Middle East unravelled.4. China’s Hesai has denied short-seller allegations that the company misled investors over financial reporting and alleged ties to the People’s Liberation Army. Shares in the world’s biggest maker of laser sensors for EVs slid on Tuesday after Texas-based Blue Orca Capital released a report alleging the tech group was “dishonest” in insisting it was not involved with the Chinese military.5. Semiconductor materials group JX Advanced Metals surged on its first day of trading after raising $3bn in Japan’s biggest IPO in almost seven years. The listing served as a test of investor appetite for chip-related stocks amid a tech sell-off in recent weeks.The Big ReadGoldman chief executive David Solomon and his lieutenant John Waldron More

The Federal Reserve left interest rates unchanged on Wednesday for a second straight meeting. The March meeting was the central bank’s most direct acknowledgment to date that President Trump’s policies are set to have a real impact on the economy, stoking significant uncertainty about where inflation, growth and — ultimately — interest rates are headed. Here are the takeaways:Tariffs took center stage during the news conference with Jerome H. Powell. The Fed chair went as far as saying that tariffs likely mean “further progress may be delayed” on getting inflation back to the central bank’s 2 percent target. That recognition materialized in the higher inflation forecasts that officials penciled into new economic projections. By the end of the year, officials estimate that core inflation, which strips out volatile food and energy prices, will stay stuck at 2.8 percent, before declining to 2.2 percent in 2027.Fed officials paired their higher inflation forecast with lower estimates for economic growth, even as they stuck with previous projections that they would be able to lower interest rates by a half point this year, delivering two quarter-point cuts. The range of possible outcomes was wide, however, with eight policymakers forecasting either no additional cuts or just one this year. Only two thought the Fed would lower rates by 0.75 percentage points, or three cuts of a quarter point this year.In recent months, Mr. Powell has been adamant that the Fed is well positioned to respond to sharp shifts in the trajectory for the economy and could afford to be patient about making rate decisions given the solid foundation of the labor market. He reiterated that point, pushing back on the souring of consumer expectations about inflation and economy that has shown up in recent survey data.While the path forward for interest rates and the economy was the main focus of the March meeting, the Fed’s decision to slow the pace at which it is reducing its balance sheet drew some attention. Mr. Powell said the idea was to reduce the possibility of market ructions in funding markets. More

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The Federal Reserve has slashed its US growth forecast and lifted its inflation projection, underscoring concerns that Donald Trump’s tariffs and deep cuts to government agencies will knock the world’s biggest economy. The Fed’s latest set of projections showed officials now expect GDP to expand by 1.7 per cent this year, with prices forecast to rise by 2.7 per cent. Policymakers also kept the central bank’s main interest rate on hold at the end of a two-day meeting on Wednesday. Fed chair Jay Powell acknowledged to reporters after the meeting that the president’s plan to hit trading partners and other countries with sweeping tariffs had affected the central bank’s outlook for inflation and the economy.“Clearly some of it, a good part of it,” is related to the impact of Trump’s tariffs, Powell said. He also said that the Fed did “not need to be in a hurry” to shift rates giving “unusually elevated” uncertainty.Progress on inflation was “probably delayed for the time being”, Powell said.The Fed also announced that it was slowing down the pace of its quantitative tightening programme, lowering the amount of US Treasury debt it allows to roll off its balance sheet each month from $25bn to $5bn beginning in April.US equities hit their highs of the day following the Fed decision, with the S&P 500 up more than 1 per cent and the tech-heavy Nasdaq Composite jumping nearly 2 per cent. US government debt also rallied, pushing the benchmark 10-year Treasury yield down 0.04 percentage points to 4.25 per cent. More

Economic projections the Fed released Wednesday indicate that while officials see inflation moving up this year more rapidly than previously expected, they also expect the trend to be short-lived.
The position is significant with markets concerned that President Donald Trump’s tariffs could spark a broader global trade war that again would make inflation a problem for the U.S. economy.
Back in 2021, when inflation first rose past the Fed’s 2% target, Powell and his colleagues repeatedly said they expected the move to be transitory, a position that backfired.

The “good ship Transitory,” despite an ominous record, appears ready to sail again for the Federal Reserve.
Economic projections the central bank released Wednesday indicate that while officials see inflation moving up this year more rapidly than previously expected, they also expect the trend to be short-lived. The outlook spurred talk again about “transitory” inflation that caused a major policy headache for the Fed.

At his post-meeting news conference, Chair Jerome Powell said the current outlook is that any price jumps from tariffs likely will be short-lived.
Asked if the Fed is “back at transitory again,” the central bank leader responded, “So I think that’s kind of the base case. But as I said, we really can’t know that. We’re going to have to see how things actually work out.”
However, the Federal Open Market Committee outlook, with inflation hitting 2.8% in 2025 but quickly receding back to 2.2% then 2% in the succeeding years, indicates that officials do not expect a lasting burden from the tariffs.
“It can be the case that it’s appropriate sometimes to look through inflation, if it’s going to go away quickly, without action by us, if it’s transitory,” Powell said. “That can be the case in the case of tariff inflation. I think that would depend on the tariff inflation moving through fairly quickly and, critically, as well on inflation expectations being well anchored.”
Powell added that while sentiment surveys show some short-term inflation indicators have risen, market-based measures for longer-run expectations are well-anchored.

Worries over tariffs

The position is significant with markets concerned that President Donald Trump’s tariffs could spark a broader global trade war that again would make inflation a problem for the U.S. economy. Inflation had appeared to be on the run heading into this year, but the outlook is less certain now.
Back in 2021, when inflation first rose past the Fed’s 2% target, Powell and his colleagues repeatedly said they expected the move to be transitory, brought on by Covid-specific factors impacting supply and demand that ultimately would fade. However, inflation kept rising, eventually hitting 9% as measured by the consumer price index, and the Fed was forced to respond with a series of aggressive interest rate hikes not seen since the early 1980s.
In a speech last August at the Fed’s annual Jackson Hole summit, Powell even joked that “the good ship Transitory was a crowded one,” and he told attendees that “I think I see some former shipmates out there today.”
The room chuckled at Powell’s remarks, and the market Wednesday didn’t seem to mind the transitory talk. Stocks jumped as Powell spoke, and the Dow Jones Industrial Average closed up 383 points to 41,964, a reversal of fortune for a market in decline lately.
“‘Transitory’ is back, or at least that was the insinuation,” said Elyse Ausenbaugh, head of investment strategy at J.P. Morgan Wealth Management. “The market reaction, to me, says that investors are willing to believe that tariffs and other policies won’t create lasting inflationary pressures and that the Fed can stay in control.”
The Fed voted to keep its benchmark interest rate on hold as it weighs the impact of tariffs and fiscal policy from Trump. In addition, Federal Open Market Committee officials indicated that two more quarter percentage point rate cuts could be on the way this year, though Powell cautioned again that policy is not locked in, nor is the transitory inflation view on tariffs.
“We will be watching all of it very, very carefully. We do not take anything for granted,” he said. More

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Labor groups said working conditions had not changed enough to warrant the removal. The company is partly owned by donors to President Trump.The Trump administration on Monday quietly rescinded an order that had blocked a major Dominican sugar producer with political ties to President Trump from shipping sugar to the United States because of allegations of forced labor at the company.U.S. Customs and Border Protection modified a “withhold release order” that had been issued in 2022 for raw sugar and sugar products made by the Central Romana Corporation, blocking exports to the United States from the company. The Customs website now lists the order as “inactive.”Labor right groups expressed frustration at the change, saying that Central Romana, whose sugar had been sold in the United States under the Domino brand, had not significantly improved its labor practices.“We haven’t seen a significant enough change to warrant modification,” said Allie Brudney, a senior staff attorney at Corporate Accountability Lab, which has been monitoring working conditions on Dominican sugar farms. “This is a disappointing outcome, but we will continue to support workers in their fight for better conditions.”A U.S. official, who declined to be named because the person was not authorized to speak publicly, said that the decision to rescind the rule and allow the company to begin exporting had not followed established processes. The official cited Central Romana’s powerful ownership, and said that the decision was most likely made at the top levels of U.S. Customs and Border Protection.Hilton Beckham, an assistant commissioner of public affairs for Customs and Border Protection, confirmed that the order had been modified, saying that the decision followed “documented improvements to labor standards, verified by independent sources.” She declined to disclose those sources, citing confidentiality reasons.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