Good morning from the Financial Times.
Today is Tuesday, March 4th, and this is your FT News Briefing.
The White House is pulling the plug on military assistance to Ukraine, and U .S.
defense stocks are getting left in the dust.
Plus, we take a look at how tariffs on Canada and Mexico could mess with an iconic American car.
I'm Mark Filippino, and here's news you need to start your day.
U .S. President Donald Trump is suspending American military aid to Ukraine.
The White House made the announcement late last night.
Trump's been trying to end the war in Ukraine pretty much since taking office.
But he wants Kyiv to make concessions to Russia that Ukrainian President Vladimir Zelensky won't accept.
The U .S. has contributed a steady flow of weapons to Ukraine since Russia began its full -scale invasion more than three years ago.
Trump and Zelenskyy had a tense exchange during a visit to the White House last week.
They were scheduled to sign an agreement that would give the U .S.
access to Ukraine's critical minerals.
That did not happen, but some Republican lawmakers think the deal is still on the table.
Americans sure are passionate about their trucks.
Chevrolet's Silverado has been one of America's most popular pickups for decades now.
But the truck is mostly made outside of the U .S., which makes the car especially vulnerable to President Donald Trump's tariff plans.
On Monday, Trump said a 25 % levy on all Canadian and Mexican imports would go into effect at midnight.
Here to explain what it means for Chevy's owner, General Motors, is Kana Inagaki.
She's the FT's industry editor.
Hi, Kana. Hi. All right, so just walk me through the production process for a typical Silverado truck.
Sure. So we decided to focus on the Silverado truck because it's just a really good example of how complicated and interconnected and global the automotive supply chain is.
First of all, it's built in factories in the US, Mexico, as well as Canada.
And if you look at the components, the supply chain is even more complicated.
So, you know, for example, we can see the power steering and like the door trim panels come from Mexico.
The rear lighting could come from Canada.
The this is a really good example of, you know, just how complex the whole entire supply chain is for this pickup truck.
Yeah, it's like a supply chain Frankenstein, which kind of makes Trump's tariff threats even more palpable in this case.
But in what ways have they already affected GM's business planning?
So GM has said that, you know, it's actually been preparing for these tariffs since the election of Donald Trump.
And they've already shifted some production and reduced inventory at plants outside the U .S.
by nearly a third. But beyond the shifting of the production, just the whole level of uncertainty surrounding how much of these tariffs are actually going to be implemented, that has really made it difficult for carmakers to make these decisions because, you know, shifting production to the U .S.
is one possibility, but it takes time and it also is costly as well.
So that uncertainty has really added to the whole level of the challenges that these tariffs have posed for the industry.
Kana, it's important for our listeners to know we're taping this on Monday, and the tariffs are set to go into effect at midnight.
Say they do go into effect and they stick around for a while.
What could that do to the cost of a Silverado?
So already executives, not just as General Motors, but at Ford as well, have said that it's going to be very difficult for the carmakers to absorb the entire costs.
We know that ultimately the consumers will have to pay for the higher cost.
And so this will mean, you know, higher costs for the Silverado as well.
You know, with inflation as well, vehicle prices have already been rising.
So for consumers, the tariff costs will be another additional cost burden for them.
Okay. So besides the cost, what are some of the other potential downstream impacts of these tariffs for GM and other car companies like it.
Sure. So the biggest concern for the industry is that if the tariffs lead to higher costs of vehicles, then it will probably lead to lower demand for vehicles in general.
So that would really hit the car industry as a whole if, you know, they're selling less vehicles in the US.
I think some analysts have estimated that GM's operating earnings will take a 7 % hit.
So that would also, you know, add another layer a burden for GM.
Kana Inagaki is the FT's industry editor.
Thanks, Kana. Thank you.
Eurozone inflation fell for the first time in four months.
In January, it was at 2 .5 % year on year, but last month, down a smidge to 2 .4%.
Core inflation, which strips out changes in things like food and energy prices, was down in February as well, and importantly, price pressures on services fell to their lowest level since about a year ago.
All this is good news for people who are rooting for lower interest rates.
Experts say yesterday's report gives the European Central Bank a green light for more cuts, and the ECB is expected to do just that when it meets this week.
share prices in global defense stocks have shot up since donald trump returned to the white house but believe it or not america's top companies have been missing out on the party i'm joined by our industry correspondent sylvia pfeiffer to explain why hey sylvia hi mark okay so if not the us where are we
seeing a jump in defense stocks and why well the the sort of main rally has really happened in Europe.
If we look at what happened yesterday, shares in the biggest defence companies were all up over 10%.
So shares in Rheinmetall, which is Germany's largest defence company, was up about 14 % on Monday.
Leonardo, Italy's defence champion, was up over 15%.
And BAE Systems, which is the FTSE 100 company here in the UK, the shares gained just over 14 percent.
So it's a huge rally as investors are really betting that governments across the region will boost their military spending as Donald Trump's administration in the U .S.
has urged Europe to pay for its own security, really.
And like I said, the U .S.
is missing out on this, right?
But it's a little strange to me to hear that because aren't they also big suppliers of weapons to Europe?
Yes, they are. So the sort of so -called prime defence companies in the US, the Lockheed Martins, the Northrop Grummans, the General Dynamics companies, they have all supplied Ukraine as well, obviously, or most of them have.
But in the US, the narrative is a little bit different.
There's sort of uncertainty in terms of what might happen to defence spending in general in the US.
There is the prospect of cuts across government workforces by the Elon Musk led Doge department.
There is some concern that as Europe tries to bolster its own resilience that U .S.
companies might lose out to European players.
So there's a whole sort of mix of factors.
Sylvia, can you give me a sense of how much U .S.
defense stocks are trailing behind European defense stocks?
If you think of how the shares in European companies have surged almost 40 percent since Trump returned to the White House in January, by comparison, shares in the six largest defence companies have fallen about 4 % over the same time period.
So Lockheed Martin, Northrop Grumman, General Dynamics, Boeing.
So they are among the companies that are most heavily reliant on federal spending and also therefore brace for potential cuts to the Pentagon's annual budget.
There was a memo that came out recently from the defence department in the state saying they were aiming to cut about 8%, so that will be about $50 billion of spending in the fiscal year of 2026.
There's also a second thing on the horizon.
Donald Trump's new administration has talked a lot about the need to open it up to more technology -led players, the likes of Palantir and Anduril, who make a lot of drones.
So again, there's a sort of concern that these new technology -led players might be winners from any sort of shake -up in the Pentagon procurement.
So does this look like a permanent shift for the industry to you, Sylvia?
I don't think we can say that we'll see a repeat of the recent market moves.
I think some of the analysts are saying that some of the initial market reaction might be a bit of a stretch.
Even if there is higher defense spending in Europe, it will take time to filter down through to industry.
Similarly in the States, even if the short -term outlook is slightly murky, defense spending in the U .S.
is likely to rise over the long term, also given other tensions that the U .S.
is focused in Asia and in the Indo -Pacific.
So any sort of defense spending will take time to filter through.
So potentially not an immediate big bang for the sector in the short term.
Sylvia Pfeiffer is the FT's industry correspondent.
Thank you, Sylvia. Thank you.
Before we go, we had an incorrect figure in yesterday's show.
We should have said that during 2024, Deutsche Bank earmarked 1 .8 billion euros for potential losses.
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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