US and China agree framework to restore trade truce

Today’s agenda: US inflation; UK spending review; LA curfew; and FT investigation on how smuggled fuel funds Mexican cartels

Good morning. We start in London, where the US and China have agreed a framework that restores a truce in their trade war after two days of negotiations.

What we know: The breakthrough came late last night after marathon talks at Lancaster House, a venue the UK provided as neutral ground. The US team included Treasury secretary Scott Bessent and commerce secretary Howard Lutnick, while China’s delegation was led by vice-premier He Lifeng. Chinese state media reported that both sides had agreed to implement a consensus reached in a phone call between US President Donald Trump and Chinese counterpart Xi Jinping. No further details about the framework were provided.

Why it matters: The framework returns the countries to a ceasefire agreed in Geneva last month, which had faltered after the two sides accused each other of violations over crucial goods such as rare earths and semiconductors. The truce involved slashing their respective tariffs by 115 percentage points, and provided a 90-day window to resolve the trade war. Ahead of the first round of talks in Switzerland, Bessent had warned that the high level of mutual tariffs had amounted to an effective embargo on bilateral trade.

The two teams will now present the deal to their respective leaders. Here are more details on this latest development in the trade war.

• Emerging markets: Trump’s trade war will depress growth in almost two-thirds of developing economies this year, the World Bank has warned.

• Global economy: The tariff war brings with it unpredictability and a consequent loss of confidence, writes Martin Wolf.

• EU-China trade: Brussels has imposed anti-dumping duties on Chinese plywood imports, days after Beijing tried to ease trade tensions.

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

• US inflation: Figures released today are expected to show an acceleration in consumer price growth last month.

• UK spending review: Rachel Reeves will put a £39bn “affordable housing” plan at the heart of her multiyear review, but the chancellor’s spending spree comes amid speculation she will soon be forced to raise taxes.

• Donald Tusk: Poland’s prime minister faces a confidence vote after his candidate lost this month’s presidential election.

• Brussels Forum: The EU’s chief diplomat Kaja Kallas is due to speak in conversation with the FT’s Henry Foy. For more analysis from our Brussels bureau chief, sign up for the Europe Express newsletter (Premium).

Five more top stories

1. US oil production will fall next year for the first time since the Covid-19 pandemic, according to a government forecast. The report highlights the stresses facing the sector, with rising supply from the Opec+ cartel and anxiety over Trump’s trade war pushing down crude prices.

2. Exclusive: European banks have spent more than €1.1bn on axing senior staff since 2018, an FT analysis shows, with the severance pot shared between 2,100 material risk takers across seven major lenders. The payouts, equivalent to about €540,000 per banker, underline the extent of the restructuring the industry has undergone in recent years.

3. The mayor of Los Angeles has announced a curfew for the downtown area that has been the centre of four days of protests marked by conflicts with police and vandalism. The move comes as Trump defended his move to deploy hundreds of marines and vowed to “liberate” California’s largest city.

• The ‘enemy within’: Trump’s recent move is his administration’s clearest step yet towards authoritarianism, writes Edward Luce.

4. Exclusive: Scania wants to form a consortium to buy Northvolt’s research laboratory to retain critical battery expertise in Europe, the Swedish truck company’s boss has said. Christian Levin told the FT that Scania was in talks with Sweden’s government and the European Commission, adding that the R&D unit had some of the smartest researchers in Europe and had “huge value”.

5. Meta plans to invest about $15bn in data-labelling start-up Scale AI and hire the group’s co-founder and top researchers, in one of the biggest deals of its kind. The deal would give Meta a 49 per cent stake and value the start-up at roughly $28bn, according to people with knowledge of the matter. It could be announced as soon as today.

• Snap’s ‘Specs’: The social media company plans to relaunch its smart glasses as it rejoins a costly battle over AI-powered wearable devices with Meta, OpenAI and Apple.

Visual investigation

In March, Mexican authorities seized a 46,000-tonne vessel suspected of illegally importing fuel from the US. A subsequent raid on nearby storage facilities uncovered weapons, tanker trucks and 10mn litres of diesel. But this was no isolated case. The FT has uncovered dozens of suspicious shipments, with millions of barrels of fuel falsely declared as industrial lubricant. Our latest visual investigation explores how the sophisticated smuggling operations fund Mexico’s cartels.

We’re also reading . . . 

• CEO pay and perks: Executives may find the idea of disclosing less about their packages attractive, but this carries its own risks, writes Brooke Masters.

• AI-powered drones: Ukraine’s attack on Russian airfields was carried out by quadcopters that could continue flying even after losing signal.

• WPP: Outgoing chief Mark Read pushed to adopt AI but, for an ad agency that still bills some clients by the hour, the disruption of its own business has unsettled investors. 

• MathGPT: New AI models could soon pose a threat to the world’s top mathematicians, writes Anjana Ahuja.

Chart of the day 

Private market funds have underperformed large-cap US stocks over commonly measured time horizons for the first time in nearly a quarter of a century, as a slowdown in private equity dealmaking activity hampers the sector’s returns.

Take a break from the news

When Nadya Tolokonnikova started “Police State”, a 10-day performance piece at Los Angeles’ Museum of Contemporary Art, last week, she could not have known the city would soon be plunged into unrest. “They always pick the scapegoat,” the founding member of Pussy Riot tells the FT. “In Russia it’s people who speak out against the regime. In America and Los Angeles, it’s migrants.”