China retaliates against Donald Trump’s tariffs

Good morning. Today we saw the first clashes in Donald Trump’s trade war. We’ll bring you the latest and here’s what else we’re covering:

• Citi embraces hybrid working

• Carmakers brace for supply chain disruption

• Today’s chart on US industrial giants

• Vanguard cuts its fees

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China has targeted US energy, farm manufacturing and the auto sector in response to the White House’s 10 per cent tariffs, which went into effect at midnight.

Beijing said its tariffs of between 10 and 15 per cent on selected US imports would take effect next week, giving the two sides time to pull back from the brink of a trade war. US President Donald Trump is expected to speak to his Chinese counterpart Xi Jinping in the coming days.

China’s antitrust regulator also announced an investigation into Google for suspected violations of anti-monopoly laws as part of a broad range of measures against the US’s economic interests that also included export controls on tungsten and other rare metals used in technology products. In addition, Beijing added PVH Group, the company behind the Calvin Klein and Tommy Hilfiger brands, as well as biotech group Illumina to a national security blacklist.

Trump called the US tariffs an “opening salvo” in his renewed trade offensive against China. Earlier in the day, he postponed by a month his threat to introduce 25 per cent tariffs on imports from Canada and Mexico after speaking to the leaders of both countries. Read more on the sectors targeted by China.

• Diageo: The London-listed maker of Don Julio tequila, Guinness and Johnnie Walker whisky scrapped its long-standing sales growth guidance, blaming the uncertainty over US tariffs and weak demand in key markets.

For more coverage of global trade, sign up for Alan Beattie’s weekly Trade Secrets newsletter here if you’re a premium subscriber, or upgrade your subscription.

Here’s what else we’re keeping tabs on today:

• Markets: US futures suggest a slightly lower open on Wall Street but not the falls we saw at yesterday’s open as fears of a full-blown trade war recede for now. Here’s the latest.

• Economic data: Mexico’s central bank will update its forecasts for the country’s GDP growth, inflation, exchange rate and benchmark interest rate. Colombia’s central bank is due to release its quarterly monetary policy report.

• Results: Alphabet, KKR and Pfizer are among the companies reporting. See our Week Ahead newsletter for the full list.

• Congress: The US Senate’s finance committee will vote on whether to advance Trump’s nomination of Robert F Kennedy Jr to lead the Department of Health and Human Services.

• US: Trump hosts Israeli Prime Minister Benjamin Netanyahu, the first foreign leader to visit him at the White House since his second term began.

Five more top stories

1. The offices of the US Agency for International Development will be closed again today after secretary of state Marco Rubio said he had taken over as its acting director. The agency’s headquarters was unexpectedly closed yesterday after Donald Trump said on Sunday that it was run by “radical lunatics”. Here’s the latest on the confusion, which has seen staff locked out of their emails.

2. Exclusive: Citigroup will continue to allow most employees to work remotely at least two days a week in a move that puts it out of step with some rivals and the Trump administration. Here’s why chief executive Jane Fraser described flexible in-office work requirements as a competitive advantage.

3. Brussels is pushing ahead with the enforcement of its Artificial Intelligence Act even as Trump warns of retribution in response to the EU’s targeting of US tech companies. Officials said the European Commission is set to publish new guidance on banned uses of AI today. Here’s what to expect.

4. Elon Musk’s hopes of launching Starlink in South Africa are being delayed by infighting over equality laws that the US entrepreneur has characterised as “racist”. The dispute could become a test case of how far the African National Congress is prepared to dilute post-apartheid Black empowerment rules to attract investment.

• Palantir: Shares surged to a record high as Peter Thiel’s data analytics company reported forecast-beating results, raised its 2025 outlook and projected a windfall from Trump’s overhaul of the US federal government.

5. Vanguard is making good on promises to disrupt bond funds and continue to squeeze costs out of equity investing with the largest round of fee cuts in its history. The $10tn money manager announced it would lop between 1 and 6 basis points off the expense ratios of 87 funds, including many of its US and overseas index trackers, as well as popular actively managed stock and bond funds. Fee cuts are a Vanguard tradition.

Today’s big read

The auto sector is facing even more disruption from a global trade war than it experienced during the Covid-19 pandemic. Executives in the industry say the worst-case scenario, in which both US and retaliatory tariffs are implemented, would probably lead to a chain of bankruptcies among weaker car parts suppliers. This deep dive exposes which carmakers would be most exposed.

We’re also reading and listening to . . . 

Chart of the day

Boeing, GE and Eastman Kodak once epitomised US manufacturing prowess. But a lack of investment and an obsession with financial metrics drained the companies of their status. Have America’s industrial giants forgotten what they are for? asks Andrew Hill.

Take a break from the news . . . 

Beyoncé and Kendrick Lamar won music’s most coveted prizes at Sunday’s Grammy awards in a star-studded ceremony that doubled as a show of strength for Los Angeles after wildfires ravaged the city.