Good morning from The Financial Times.
Today is Friday, March 21st. This is your FT News Briefing.
NATO is considering how to move on from the US, and the UK is racing to avoid Trump's tariffs.
Plus, the Federal Reserve used to be the leader of global monetary policy.
There's a phrase which is that if the US sneezes, the UK catches the cold.
Bless you. But that seems to be changing.
I'm Marc Filippino and here's the news you need to start your day.
European countries are working on plans to replace the U .S. in the NATO Alliance.
That's according to FT sources.
The UK, France, Germany, and the Nordics are some of the powers putting their heads together.
The idea is to increase military investments to match most of what the U .S. spends now But that would take like five to ten years U .S. diplomats have been telling their European counterparts that President Donald Trump is committed to staying in this you But that seems to be changing I'm mark Filipino and here's the news.
You need to start your day So, how significant is this trade deal that they're talking about?
The trade deal in and of itself is not that significant.
It's quite a narrow deal they're trying to fix around AI, tech, cooperation, et cetera.
But the real value of this deal is that it might avoid or at least reduce or dilute the feared tariffs which Trump has threatened to bring in from April the second across the world on any measures that the administration considers to be unfair or inimicable to U .S. companies trading abroad.
All right. So what's on the table for this deal?
What could the Americans potentially get out of it?
One of the things that the U .S. wants to get rid of is the digital services tax.
That's a tax that was introduced in order to try and stop big tech companies from doing business in countries are not paying any tax.
That tax worth about $800 million to the UK Treasury.
The UK Treasury pretty cash strapped at the moment.
So we know that that is one of the areas that the US is demanding on and which the UK for now is digging its toes in on.
But what about the UK?
Would it get anything out of the deal besides avoiding tariffs?
Well, that's a pretty big besides because it's pretty clear that the White House is to go hard after Europe and so for labor the idea that we get a sweetheart deal with Washington, that we can avoid the worst of tariffs, that's going to be a victory for Keir Starmer and it will vindicate his belief that the UK can have a strong relationship both with the US in Washington and with Brussels.
Of course that's not without its risks because if the US demands too much from Starmer that could have two effects.
One is he could give away things like The digital services tax that are popular with British voters and will make him look like he's cow -towing to Donald Trump.
There's also a risk that if he gives too much to Washington to get this deal, that then that causes problems with his relationship with the EU.
And of course, the UK is also trying to reset its post Brexit trade deal with the EU.
And so Starmer's trying to walk a delicate line here, trying to walk a balance, trying to avoid things that are going to make his life difficult both with his party at home and with his relationship with the EU.
Where does this trade deal ultimately leave the relationship between the countries?
Do we still have, you know, that special relationship that Winston Churchill called it?
Yeah, the old special relationship.
It leaves it in a very delicate place.
I think the trouble is going to come when the price of a deal with the US starts to crystallize.
And so this idea that we're all talking, we can all be friends comes to a dead stop potentially when either we say, nope, we just can't accept the US demand to get rid of our digital service tax or we make concessions to the US that make life very difficult with the EU.
and so the question I think is just where the balance is going to land and frankly how hard the US is prepared to push its demands.
The US has or is defining tariffs incredibly broadly so it's not just that there's a straight tariff on a particular good, it's anything that might be construed as inimical to trade.
So VAT is one of the areas that they're looking at.
And so, in that sense, everything is on the table.
Peter Foster is the EFT's public policy editor.
Thanks so much, Peter.
My pleasure. It was a uniquely boring week in the land of central banks.
Federal Reserve, the Bank of Japan, and the Bank of England all met and they all kept interest rates on hold.
But if you zoom out, there's a bigger change happening in global monetary policy right now.
And it has to do with whether the fed is on the table for this deal.
What could the Americans potentially get out of it?
One of the things that the U .S. wants to get rid of is the digital services tax.
That's a tax that was introduced in order to try and stop big tech companies, right, interest rates should go.
whereas other Central Banks, as quite unusual, are doing their thing.
So the European Central Bank is cutting rates.
The Bank of England is also cutting rates, but it's been going much more gradually.
The Bank of Japan is in a rate rising cycle.
So you can see that in the big advanced economies, things are, you know, going in quite different directions in different places.
Right, so we've got this basically scattered mishmash of central bank monetary policy around the world.
But before that... ...in which the UK for now is digging its toes in on.
But what about the UK?
Would it get anything out of the deal besides, you know, avoiding tariffs?
Well, that's a pretty big besides, because it's pretty clear that the White House is going to...
...just exactly the phrase that says that you're not as divorced from the US as you think you are.
Because even though you're running an independent monetary policy, independent government policy, actually most governments are doing roughly the same thing at roughly the same time.
So how did that change?
Why is the Fed no longer leading the way on monetary policy?
Well I think the key reason is that the conditions are different if you take the two big advanced economies of the U .S. and the Eurozone.
Whereas in the U .S. If this inflation is sticky and is going in the wrong direction, just not terribly badly, but it is going in the wrong direction, it's going up again and the economy is slowing, so you're getting a whiff of stagflation there.
In the Eurozone, it's all pretty much on the downside.
The economy has been weak, but inflation really does look as if it's pretty much under control, so it's only a question of how much and how quickly does the European Central Bank need to cut rates.
So, you can see that the Fed is there sitting nervous about which direction even interest rates should go next, whereas the ECB has got quite a clear.
Things like the digital services tax that are popular with British voters and will make him look like he's cow -towing to Donald Trump.
There's also a risk that if he gives too much to Washington to get this deal, that then that causes problems with his relationship with the EU.
And of course the UK is also trying to reset its post brexit trade deal with the EU.
And so Stalin was trying to walk a delicate line here, trying to walk a balance, trying to avoid things that are going to make his life difficult, both with his party at home and with his relationship with the EU.
Where does this trade deal ultimately leave the relationship between the countries?
Do we still have, you know, that special relation?
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to crystallize. And so this idea that we're all talking, we can all be friends, comes to a dead stop, potentially, when either we say, no, we just can't accept the US demand to get rid of our digital service tax.
