The fallout from Trump’s ‘liberation day’ tariffs

Today’s agenda: Nato’s role in Ukraine truce; dealmakers lobby UK over carried interest; TikTok US buyout; Robin Harding on trophy sovereign funds; and the rise of Minecraft

Good morning. We start with the fallout from US President Donald Trump’s barrage of “liberation day” tariffs. Here’s what you need to know.

What’s the scale of the tariffs? There will be a 10 per cent levy on nearly all US imports from Saturday. Certain trading partners were hit with higher “reciprocal tariffs”, including 34 per cent on China (on top of an earlier 20 per cent), 20 per cent on the EU and 24 per cent on Japan. Mexico and Canada have avoided the reciprocal tariffs for now but will continue to face previous levies. Tariff-free trade remains in place for all goods that comply with the terms of the 2020 USMCA trade deal. Here’s a quick summary of the new duties.

How have countries reacted? Hours ago, the EU said it was “prepared to respond” and had countermeasures planned but emphasised it wished to negotiate first. The UK was relieved to get a 10 per cent rate, half the number Trump imposed on the EU, with Downing Street saying it had saved thousands of jobs and vindicated the prime minister’s approach. China has said it “firmly opposes” Trump’s moves and warned it will retaliate.

Where are markets? Global stocks plunged this morning, with benchmarks in Japan, South Korea and Hong Kong all falling, and S&P 500, Nasdaq and European stock futures also down. Some of the hardest hit in the initial market reaction were Big Tech and major retailers’ shares. Bond yields in the US and Japan also fell. The yen, a haven asset, extended overnight gains against the dollar. Gold prices rose to a new record, while oil prices slipped over fears energy demand would fall amid a trade war.

Follow our live blog as reactions from around the world stream in, and we have more analysis on the fallout below:

• ‘Self-defeating’: The diplomatic cost of the tariffs will be enduring, writes US national editor Edward Luce, and falling trust means fewer deals.

• Will Trump cave? As the weight of economic and political pressure piles up, how long will the president be able to sustain his aggressive trade policies?

• Trump tracker: Follow the latest data on imports, exports and trade balances with our interactive tracker.

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

• Economic data: France, Germany, Italy, the UK and the US have services purchasing managers’ indices, while the European Central Bank releases minutes from its latest monetary policy meeting.

• Nato: Foreign ministers gather in Brussels for a two-day meeting.

• EU-Central Asia summit: Uzbekistan hosts the first meeting between the bloc and leaders from Kazakhstan, Kyrgyzstan, Tajikistan and Turkmenistan.

Five more top stories

1. Exclusive: Nato could play a key role assisting a proposed European military mission to guarantee a peace deal in Ukraine under plans being sketched out by a coalition of Kyiv’s western allies. Officials told the Financial Times one option being considered was using the alliance’s command and control structures to deploy the “reassurance force”.

2. Exclusive: Top private equity firms are urging the UK government to water down proposed changes to tax on carried interest, the share of profits that dealmakers keep when they sell companies. People familiar with the matter said some international firms were telling their employees to avoid spending time in the UK.

3. Samsung has turned to Chinese technology groups to prop up its ailing semiconductor division as it struggles to secure big US customers. In one previously unreported deal, the South Korean company last year sold more than three years’ supply of logic dies — a key component in manufacturing AI chips — to a subsidiary of China’s Baidu.

4. Deloitte is trying to avoid liability over the collapse of one of the US’s largest nuclear power projects, asking a judge to throw out demands that the firm compensate shareholders who lost money. Shareholders of Scana, which abandoned construction of two nuclear reactors after delays and soaring costs, allege Deloitte helped to hide growing problems at the South Carolina utility.

5. The White House is close to endorsing a deal for US investors to buy TikTok’s American operations. Under the terms of the transaction, a group of new outside investors including Andreessen Horowitz, Blackstone and Silver Lake would own about half of TikTok’s US business, according to people familiar with the matter. That US unit would be spun off from its Chinese parent ByteDance.

• More TikTok: ByteDance plays a central role in China’s artificial intelligence ecosystem, giving the US more reason to be tough on its social media app, writes Chris Miller.

The Big Read

Trump’s rapid rapprochement with his Russian counterpart Vladimir Putin and apparent disdain for many of America’s Nato allies is causing consternation across central Europe. The move may suit the leaders of countries such as Hungary and Slovakia, but in the likes of Poland, Romania and the Czech Republic, it is causing ruptures to domestic politics.

We’re also reading . . . 

• AI’s ‘killer application’: Accelerating scientific discovery could be the technology’s single most important use, says Christopher Bishop, Microsoft’s AI for science research lead.

• Trophy SWFs: Everyone wants sovereignty and wealth, writes Robin Harding, but a fund is sadly not a reliable route for their creation.

• NHS England: Seen as a “sacrificial lamb” in the push for savings, the health service operator was axed after months of rising tensions with UK officials.

Chart of the day

US tariffs will rise to levels not seen since the Great Depression if the measures go into effect in the coming days. In a worst-case scenario, the ensuing trade war could cause a $1.4tn hit to the world economy, according to an econometric analysis.

Take a break from the news . . . 

Minecraft is, by a very long way, the best-selling video game of all time. Since its launch in 2011, it has sold 300mn copies and has players in every country, including Antarctica and Vatican City. With a film due for release this week, Tom Faber charts the rise of this simple but compelling game.