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Good morning from the Financial Times.
Today is Wednesday, April 9.
And this is your FT News Briefing.
Trade tensions have reached new heights between America and China.
And nearly $2 trillion worth of pledged U .S. investments are now at risk.
Plus the FT's Katie Martin explains why markets might be in for even more pain.
Everyone's been betting on American exceptionalism.
Now it turns out that America is exceptionally bad.
I'm Mark Filippino and here's the news you need to start your day.
The Trump administration on Tuesday said it was pushing ahead with another 50 % tariff on China.
it marks a new US offensive in a brewing global trade war.
So this brings Trump's additional tariff rate on Chinese imports to 104%.
Amy Williams covers trade for the FT and she says that while there are exemptions for things like chips, pharmaceuticals and some metals, consumers will get hit hard if companies decide to pass on the costs of these taxes.
AMANDA So assuming that the thing that you're trying to buy is a piece of candy, a one dollar piece of candy from China would now cost two dollars and four cents.
It would have a one hundred and four percent markup.
JS Yeah. One hundred and four percent.
Let that sink in for a second.
And then extrapolate that out to the goods that are going to be a lot more than a piece of candy.
The world's biggest exporter, meanwhile, isn't exactly rushing to get on Trump's good side.
Beijing is digging its heels in, I think it's fair to say.
A lot of countries have picked up the phone to Trump, sent trade delegations, really tried hard to negotiate.
China fired back with its own tariff of 34 percent on all U .S. goods.
And that's what's triggered Trump to ratchet up the trade war even further and say, I'm going to do another 50 % on China.
U .S. stocks rallied early in the day yesterday but lost all the gains after traders started pricing in the possibility of a full blown trade war.
The S &P 500 ended the day down a little more than 2%.
Let's get started. Companies have promised to invest almost $2 trillion in the U .S. since Donald Trump retook office, but his trade policies could put a pin in their big spending plans.
That's because many of them have global supply chains that are impacted by the tariffs.
The FT's Tokyo correspondent Harry Dempsey joins me now to talk about this.
Hey, Harry. Hey. So Harry, which companies are we talking about who have pledged these trillions of dollars?
Some of the biggest ones have come from one called Project Stargate, which has been led by SoftBank, which was a big plan to invest huge amounts into data centers across the US.
And then Apple and Nvidia have also made big pledges to invest about 500 billion each into the US since Trump came into power.
And then SoftBank separately has pledged 100 billion.
Taiwan's TSMC, the world's largest chip manufacturer, has also pledged 100 billion.
And then after that, there's lots of other companies too, who have promised to invest slightly smaller sums, but still in the billions of dollars.
And how might the tariffs influence some of these companies?
Well, I think the big impact faced by all of the companies on the sharp end of these tariffs is this sort of double whammy effect where costs increase because their inputs or things they're importing into the US are going to simply cost more.
And then secondly, as a result of everything costing more, you know, the US consumer is not going to be able to afford to buy as many things, and therefore, demand is going to drop.
And so there has been growing concern that Trump's tariffs are going to cause a recession in the US.
And that macroeconomic downturn will certainly be bad for all of these companies.
How have companies looking to invest in the US been affected by the tariffs so far?
So Japan is the top source of foreign investment in the US.
And the prime minister of Japan Shigeru Ishiba, on Monday, expressed strong concerns that the tariff measures by the US could weaken investment capacity among Japanese companies on a phone call with Donald Trump.
South Korea's Hyundai has made one of the big investment pledges.
It offered to invest $21 billion into the US.
But you know, that didn't help South Korea to secure any form of exemption from these tariffs.
And so I think a lot of the other companies will be concerned about the same thing of, will these investment pledges actually help to get Trump off our backs or not?
Yeah, well, what's going to happen if companies start to pull their investments, though?
It's unclear this time what Trump really is trying to do with his tariffs.
I mean, before it was slightly clearer he was trying to re -shore a lot of manufacturing jobs to the U .S. But, you know, if you think about tariffs on, say, Bangladesh, I don't think Trump is trying to bring back garment manufacturing to the US, but he is very much still stuck in a mindset where he thinks that, you know, the nation has basically been ripped off for decades and decades.
And given that old view, maybe he's looking instead to sort of reset the revenue stream of the US government, in which case, it's not going to be a simple case of not just having some companies invest in the US and then Trump's going to drop the case against that particular nation, but I mean, everyone's flying in the dark on that.
That's the FT's Harry Dempsey in Tokyo.
Thanks, Harry. Thanks.
I'm going to be blunt here.
Global markets have gotten their butts kicked over the past few days.
Tariffs have caused a massive whiplash, the likes of which we don't often see, but believe it or not, things could get a lot worse.
So says our markets columnist and resident optimist, Katie Martin.
Hi, Katie. Hey, how are you doing, Mark?
Always looking on the bright side of life.
So Katie, I think I did a good job contextualizing how things are in the markets, but maybe you could do better.
How would you describe them?
No, I would describe it the same way as you did.
Market's got their butt kicked the back end of last week.
And at the start of this week, we saw some really heavy drops in global stock markets and particularly in U .S. stock markets.
You know, some of the worst days in the office for markets since the COVID crisis of 2020, cumulatively some of the biggest losses in U .S. stocks since the Black Monday crash of 1987, you know, these are not small moves, it's been really ugly out there.
Now, at the beginning of this equity selloff, we saw investors scurry into safe havens the way that they normally do.
We're talking government bonds, specifically U .S. treasuries and gold.
But then on Friday, last Friday, we saw a selloff in those areas.
Why is that very, very, very, very bad?
I do find it quite alarming.
It says that someone somewhere or perhaps multiple people in lots of places are in trouble here there must be some funds out there that are really suffering as a result of these really abrupt moves that we've had in markets and when hedge funds in particular get themselves into trouble they get a phone call from their bank that says right you need to give me some money right now to plug the gap that we've got in your trading portfolio and when they need to do that then they sell stuff that is liquid right it's easy to offload so that they can deliver cash over to their banks that includes stuff
like US government bonds and gold so So that's one of the reasons I think why we've had some pockets of sell offs in those markets that you would not normally associate with periods of stress like we're seeing now.
All right. So these investors, they're in need of cash, they're yanking their money out of anything.
What could that trigger on a larger scale?
I don't think we're close to the point where a big hedge fund collapses or anything.
But bear in mind, a lot of investors, whether they are like speculative hedge funds or whether of their slower moving asset managers.
Everyone's had the same bet on.
Everyone's been betting on American exceptionalism.
Now it turns out that America is exceptionally bad and so everybody's getting run over by the market in the same direction at once.
That can create situations where everyone's piling for the exits at the same time and that's why you get really quite large market moves.
And when you get large market moves, there's always someone somewhere who's left holding the baby.
And so there's a lot of funds that are in pain here, I think.
So, Cady, if you've got funds in pain, what could end up happening?
So one of the things that worries me about, OK, what if things break?
Where's the cavalry?
Is it the U .S. Federal Reserve?
Is it the central bank?
Well, difficult to argue that they can come in and cut rates and solve this issue, right?
Because one of the things that tariffs does is jack up inflation.
And the whole point of the US Federal Reserve is that it fights inflation, so it can't really cut interest rates into that kind of crisis.
The only thing that can really sort this situation out is if Donald Trump has a change of heart and the market is desperate for signs that he might be willing to scale this back or might be willing to delay it, but nobody really understands what Trump is trying to achieve or what bits he might be willing to negotiate on.
So it's really difficult to figure out what might make him blink.
That's the FT's Katie Martin.
Thanks, Katie. Pleasure.
You can read more on all these stories for free when you click the links in our show notes.
This has been your daily FT News Briefing.
Check back tomorrow for the latest business news.
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