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Good morning from the Financial Times.
Today is Friday, April 25th and this is your FT News Briefing.
Tariffs are pushing some iPhone assembly out of China and this trade war is also causing a downturn in Chinese manufacturing.
Plus the Trump administration is trying to void paper checks.
Something that the non -U .S. mine kind of struggles to comprehend why checks have remained so popular in the U .S. I'm Mark Filippino and here's the news you need to start your day.
Apple plans to shift to India for the assembly of all U .S. iPhones as soon as the end of next year.
That's according to FT sources.
The company currently assembles most of its phones in China, but U .S. President Donald Trump is targeting the country with massive tariffs, and those have hit Apple hard. Apple still heavily relies on Chinese suppliers for earlier steps in the production process though.
Now the tech giant has already started diversifying its production to India, but it needs to ramp up its capacity there even more in order to meet U .S. demand.
Of course it's not just U .S. companies in China that have been bitten by tariffs.
Chinese factories are slowing production and furloughing some of their workers.
Many American companies are now canceling their orders and production lines are feeling the pressure.
I'm joined by the FT's deputy Beijing bureau chief Ryan McMurrow, who's been reporting on this.
Hey, Ryan. Hi there, thanks for having me on.
So tell me what we're seeing in Chinese factories, which companies or products are really being affected?
So from what we can see so far, it really seems to be a wide range of products, everything from shoe soles to blue jeans to electrical outlets to portable stoves.
It's factories that have a lot of orders that go to the US.
And what we heard universally was this is not a good time for them.
and the local governments with many exporters like Shenzhen or Dongguan, are starting to step up and put out policies to help affected factories.
But a lot of these factories will ultimately close if this trade war goes on.
And just do me a favor, Ryan, and remind me about the tariffs.
Where are we at with the US -China trade war?
So the US has hiked duties on China to 145 % for most products, although there's a large carve out for smartphones and other electronics.
And China's retaliatory tariffs are at 125 % for most U .S. products.
The Trump administration, in recent days, seems to be indicating they want to lower tariffs to some degree because these are very unsustainable for the U .S. economy.
And President Trump, day by day, seems to indicate that he more urgently wants a phone call with Xi but for now the Chinese are holding out.
And yesterday the Chinese commerce spokesperson said that China wanted to see all the unilateral tariffs put on China cancelled before negotiations could really get underway.
So who did you speak to and what you hear from workers?
So all together we probably spoke to about a dozen people, workers, factory owners, and some factory recruiters.
Many factories are putting their workers on leave, some factories are just cutting their overtime.
The factory recruiters are telling us job openings are diminishing and they're not sure what the future looks like.
Some workers have told us they don't have any wages and they're just put on leave. Other factories are mandated to provide their workers basic minimum wage.
And so the factories that are putting workers on leave in those areas, they're still getting something.
It's not very much and much less than what they usually earn, but it's still something that they can live on.
It sounds like these people are really struggling and these factories are in really rough shape.
How long do you think they can hold out for?
So a lot of factories in China are trying to transform their factory from exporting abroad to selling domestically and that's going to be more doable for some and less doable for others.
Some of the factory owners that we spoke to said they're looking at Europe so it seems likely there will be a lot of cheap Chinese goods on their way to Europe at some point.
point in the near future.
Big picture, Ryan. What does this mean for both the Chinese economy and the US economy?
So big picture with some Chinese factories trying to sell their products domestically, it's going to worsen the overcapacity problems that China's economy is already facing.
The country currently has a real estate crisis with property values continuing to fall.
So the economy in the recent year or two has been really relying on exports to produce growth, and so this trade war is really hampering the ability for China to continue to use exports as its growth model.
On the other side of the Pacific, in the U .S., the lack of products is probably going to worsen inflation problems, and some analysts think that there will even be empty shelves come summertime if this continues.
That's the FT's Ryan McMurrow.
Thanks Ryan. Thanks for having me on.
Google's parent company Alphabet had a very profitable first quarter.
Its net income jumped 46%.
That's thanks to growth in Google's search and advertising business plus a boom in AI related demand for cloud computing.
Investors were happy and Alphabet shares went up more than 4 % in after hours trading but things haven't been so rosy for the stock the rest of the year.
Shares have fallen about 17%.
Like most big tech companies, Alphabet has been affected by the threat of US tariffs.
People are worried about the levies disrupting supply chains and pushing consumers to cut back on spending.
The Trump administration is waging a war on paper checks.
The White House says they're costly and inefficient, but checks still remain stubbornly popular in the United States.
I'm joined now by the FT's US banking editor, Joshua Franklin to talk more about this.
Hey, Josh. Hey Mark.
So I did not know this, but Americans use paper checks way more than the rest of the world?
Exactly, Americans are the global leaders in checks.
They write going to one estimate, the number of checks that Britain, Australia, Italy, Germany and France write, combined.
So this really is American exceptionalism in action.
And it's pretty interesting, I think it's something that the non -U .S. mind kind of struggles to comprehend why checks have remained so popular in the U .S. Yeah, and Josh, what are the reasons?
So I think there's three big reasons why paper checks have endured in the U .S. in the way that they haven't in pretty much any other country in the world.
Part of that is the highly fragmented nature of the U .S. banking system, so it's pretty hard to form consensus to promote what could be a replacement system that would use electronic payments.
And then the other reason is there's a lot of incentives in the payments ecosystem for people to push credit card payments in the U .S. more so than in other parts of the world.
So if you have credit card and debit cards in the U .S., you have interchange fees or swipe fees that aren't really capped in the same way that they are in the EU, for example.
So that means that there's been a much slower push for direct account -to -account payments that could rival checks or credit card payments as an alternative.
And that's one of the reasons why you see small businesses are among the biggest proponents of checks, because they want to try to avoid these card fees.
And then the third reason is just local payments habits.
So once consumers tend to find a way of paying for something that works, it's very hard to wean them off it.
So, Josh, what is the Trump administration doing to cut back on the use of checks in the United States?
So it's coming from this executive order at the end of March from the White House where they mandated the federal government basically to cease issuing or accepting paper checks where it's legal to do so.
It's much more expensive to write out a check or even print a check and send it in the post than it is just to send an electronic payment.
And then also, there's just a lot more risk of something going wrong in that process.
So, if something gets lost in the post, maybe it gets stolen in the post, someone else can photocopy that check and then modify it to kind of repeat fraud with a single check multiple times.
So, it's a riskier form of payment than the electronic payments.
JS So what impact then do you think this executive order banning paper checks and the federal government will have more broadly?
Could it potentially lead to the death of the paper check?
I think the sun is setting on the paper check in the U .S. in the same way that it has already set in other parts of the world.
It's just setting more slowly.
I think this does help push that process along, especially when you consider that paying the government is a very popular form of check use in the U .S. About one in five payments in 2023 via check were to pay the government.
So that a lot of that is potentially going to go away.
So, I think this does usher along the process of the check fading from view.
But I don't think it's gonna go anywhere anytime soon.
I think it's still got a little bit longer left. JS Just Franklin is the FT's US Banking Editor.
Thanks, Josh. JF Thanks very much. JS We want to take a moment to honor a colleague.
Our audio engineer Joe Salcedo passed away suddenly.
Joe was a crucial member of our team.
He was amazing at polishing the audio in our shows, so that these episodes that you listen to every day sparkle, but above all else, he was a great guy, just an absolute pleasure to work with and a beloved member of our team and the FT's team in Manila.
Joe, you will be dearly missed.
The FT News Briefing is produced by Sonya Hudson, Fiona Simon, Lulu Smith, Ethan Plotkin, Kasia Brusalian, and me, Mark Filippino. We had help this week from Misha Frankle Duval, Andrew Georgiades, Katia Kumkova, Michael Lello, Peter Barber, David De Silva, and Gavin Cullman.
Our executive producer is Topher Forhas, Cheryl Brumley is the FT's global head of audio, and our theme song is by Metaphor Music.
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