Fallout from Trump tariffs deepens as nations race to offer concessions

Today’s agenda: The US pivot away from Europe; South Korea’s president removed; PwC China plans spin-off; and Norway trains Arctic troops

Good morning. We end the week by taking stock of the global fallout from Donald Trump’s “liberation day” and point out what to watch as the tariffs’ effects reverberate around the world.

The fallout so far: The tariffs have wiped out about $2.5tn of market value in Wall Street equities, with the rout deepening in Asian markets this morning as investors fled to safe assets. Shares of top private capital groups such as KKR and Apollo plunged, as did those of tech giants including Apple, with Trump’s levies expected to hit supply chains in Asia. The World Trade Organization has estimated a 1 per cent contraction in global trade volumes, while the IMF flagged a “significant risk” to the world economy.

Looking ahead: One of the biggest casualties will be the already slowing US economy. Americans will have to pay more for a variety of imported goods. Together with the damage to business investment, this has increased the risk of a recession, economists say. Markets expect inflation to rise sharply in the short term, making it harder for the Federal Reserve to cut interest rates to boost the economy.

As for US trading partners, almost every industry will be affected (see today’s featured chart below). The EU has set itself a four-week window for talks with the US before retaliating further. Europe will also have to prepare for a flood of cheap Chinese imports as badly hit Asian economies try to divert their goods. The UK faces a smaller levy than the bloc, but its manufacturing and agrifood export sectors will be hit at a time when they are already dealing with rising costs.

The next few days will see many countries rushing to placate Washington with concessions, with the basic 10 per cent duty kicking in tomorrow and higher “reciprocal” tariffs from Wednesday. Here’s more analysis on the fallout:

• Air freight: The cost of flying goods to the US has surged as businesses rush to get products into the country before they are hit by the tariffs.

• ‘Insane’ formula: Economists have poured scorn on the crude methodology used to calculate the “reciprocal” tariffs.

• US-China ties: Trump’s latest tariff attack on China could imperil any possible “grand bargain” between Washington and Beijing.

• Small nations: Some of the tiniest and poorest countries in Africa and Asia will be hit with the most punitive levies.

For more on the impact of Trump’s trade war, sign up for our Trade Secrets newsletter if you’re a premium subscriber, or upgrade your subscription here. Here’s what else we’re keeping tabs on today:

• Economic data: France, Germany, Italy and the EU have their construction purchasing managers’ indices, while the US reports employment data.

• Companies: Microsoft celebrates 50 years since Bill Gates and Paul Allen founded the company, while Sodexo has half-year results.

How well did you keep up with the news this week? Take our quiz.

Five more top stories

1. Exclusive: Europe must agree a “road map” with the US to shift the burden of defending the continent away from Washington and avoid a disjointed switch that Russia could exploit, Finland’s defence minister has said. Read the full FT interview with Antti Häkkänen.

2. South Korea’s president Yoon Suk Yeol has been removed from office four months after his shortlived attempt to impose martial law sparked a prolonged political crisis. The country’s Constitutional Court upheld Yoon’s impeachment, ending his presidency less than three years into his five-year term.

3. Exclusive: PwC China plans to spin off its Dark Lab cyber security arm in a private buyout deal as the Big Four firm seeks to improve liquidity and navigate the financial fallout from its audit of failed Chinese property developer Evergrande. Here’s how much the deal could generate.

4. Meta and the US Federal Trade Commission are set to face off in federal court this month in the first big test of whether the new Trump-appointed antitrust regulator will continue to crack down on Big Tech. Mark Zuckerberg has meet the president in recent days in an apparent last-minute lobbying attempt to avoid a court showdown.

5. Trump has fired several senior national security officials after a far-right activist and conspiracy theorist claimed they were disloyal to his “Make America Great Again” agenda. The firings came after Laura Loomer met the president this week and presented him with research into certain members of the National Security Council, urging him to sack them.

From the Magazine

In the depths of the cold war, US soldiers were a familiar sight in Norwegian garrison towns north of the Arctic Circle, but they left after the break-up of the Soviet Union. As hostilities with Russia have grown, they are back once again to learn how to fight in this inhospitable terrain.

We’re also reading . . . 

• The FT View: If they endure, Trump’s sweeping “reciprocal” tariffs will go down as one of the greatest acts of self-harm in US economic history, writes our editorial board.

• ‘Geoeconomics’: The growing field offers a guide for those perplexed by the US president’s seemingly self-sabotaging moves, writes Gillian Tett.

• India’s divide: Today’s Big Read looks at the deep-rooted tensions between the country’s more populous north and wealthy south, and how they may inflame politics.

For more analysis on the world’s fastest-growing big economy, sign up for India Business Briefing if you’re a premium subscriber or upgrade your subscription.

Chart of the day

Trump’s latest tariffs will hit almost every industry, with European carmakers such as BMW and Mercedes-Benz and luxury groups including LVMH and Ferragamo among the most exposed.

Take a break from the news . . . 

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