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    Despite Pope Francis’s wishes, there’s little appetite for richer nations to help the poorest

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    Pope Francis’s vast funeral in Rome on Saturday featured a certain amount of politicking amid the splendour, against the magnificent backdrop of St Peter’s Basilica.If the meeting between Volodymyr Zelenskyy and Donald Trump results in progress towards a less inequitable peace than the one currently envisaged by the US, perhaps that will be fitting, given the late pontiff’s consistent calls for an end to war.But in Washington last week, at the International Monetary Fund and World Bank, where the architecture is far less glorious, campaigners struggled to find much backing among the powerful for another aspect of Francis’s worldview – his calls to make 2025 a Jubilee year of debt forgiveness for the world’s poorest countries.A quarter century on from the hugely consequential Jubilee 2000 movement – in which churches played a major role – the pope had asked a commission chaired by the economist Joseph Stiglitz to report on the issue next month. Debt relief is also likely to be discussed at the UN financing for development conference in Seville in late June.But there was little optimism in Washington that any country is prepared to offer the necessary moral and political leadership to force the issue up the agenda. Certainly, it will not be the UK, which played a crucial role in the Jubilee 2000 campaign under Gordon Brown, but has shown little interest in the issue since imposing brutal cuts to aid spending, to boost defence.Meanwhile, ample evidence was shared in Washington to show how the situation is rapidly deteriorating. The IMF’s analysts warned that Trump’s dramatic shake-up of the global trading system, the final shape of which remains impossible to guess, will depress economic growth and ratchet up the risks of financial crisis.For emerging economies, the outlook is especially bleak. Many had already been left heavily indebted, after grappling with the Covid pandemic. And as the IMF’s Global Financial Stability Review made clear, one side-effect of the market chaos triggered by Trump’s “liberation day” is likely to be tighter financial conditions.That will make it harder, and more costly, for countries to refinance their debts – a problem the IMF said could be compounded by fresh volatility in the currency markets.The more is spent on debt repayments, the less is available for important areas of government spending that are necessary for development. As Achim Steiner, the head of the UN’s development arm, the UNDP,said on the sidelines of the spring meetings: “The debt servicing is essentially a defunding. We’re defunding, or forcing countries to take money out of their social and welfare and education budgets and health budgets just to service their debt. This is for obvious reasons bad: it’s not sustainable and ultimately contributes further to locking countries in into this stagnation.”He added: “If you are defunding your own education system, you’re locking yourself into a generation that is going to fall behind.”skip past newsletter promotionafter newsletter promotionA report by the British thinktank Development Finance International into tackling inequality in eastern and southern Africa, published at the spring meetings, found that 40% of countries in the region spent more on debt servicing last year than on healthcare and education combined. Since 2022, 80% have cut social spending as a share of their budget.This comes at a time when the economic impacts of the climate crisis are already being felt, in the soaring costs of extreme weather events for example. There is a consensus, at least outside the White House, that significant investment will be needed to manage the transition away from fossil fuels.Another report launched in Washington last week – from the expert panel on climate and finance, a joint project of the Colombian, French, Kenyan and German governments – warned of a “vicious circle”, between the “debt, climate and nature crises”.“Debt pressures and environmental vulnerabilities are most pronounced in the poorest and most credit-constrained countries … yet these countries account for only a tiny fraction of the consumption and emissions driving nature loss and climate change,” they said.Even the IMF itself suggested last week that debt restructuring may need to be part of the toolkit to respond to the rapidly changing economic and financial situation.“The path forward demands clarity and coordination. Countries should work constructively to promote a stable and predictable trade environment, facilitate debt restructuring, and address shared challenges,” it said in its World Economic Outlook.But campaigners complain that the IMF’s debt restructuring process, the Common Framework, is cumbersome and time-consuming – and can still leave beneficiaries with high servicing costs, because it does not contemplate debt write-offs.Scott Bessent, the US Treasury secretary, when he was not taking anti-woke side swipes at the IMF and the World Bank, said he would like to see the IMF get more involved in restructuring struggling countries’ debt. In a much-analysed speech, he said the IMF should “more proactively push official bilateral lenders to come to the table early, to work with borrower countries to minimise periods of debt distress”.Some development campaigners seized on his comments as a positive sign that the US would not stand in the way of multilateral efforts to ease the burden for the world’s poor.But others warned that in saying that he wanted to “make the IMF again”, and calling for it to be a “brutal truth teller”, Bessent appeared to be yearning for a return to the bad old days of economic shock theory, when the fund swept into struggling countries and imposed a prescription of harsh spending cuts and privatisation.Meanwhile, as they geared up to amplify Francis’s calls for a jubilee, some in Washington last week privately warned it may take a large-scale default to force the world’s powerful to accept the need to lift developing countries’ debt burdens. Let’s hope it doesn’t come to that. More

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      US consumer sentiment sees largest drop since 1990 after Trump tariff chaos

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      US consumer sentiment plummeted in April after Donald Trump’s trade war threw the global economy into chaos, according to a new report.The index of consumer sentiment, a score based on a monthly survey asking Americans about their financial outlooks, fell by 32% since January – the largest drop since the 1990 recession, according to the University of Michigan’s Institute for Social Research.“Expectations worsened for vast swaths of the population across age, education income and political affiliation,” said Joanne Hsu, director of the surveys of consumers, in a statement. “Consumers perceived risks to multiple aspects of the economy, in large part due to ongoing uncertainty around trade policy and the potential for a resurgence of inflation looming ahead.”In April, the index of consumer sentiment fell to 52.2, down from 57 in March. The last time the index fell below 55 was in the summer of 2022, when inflation rose to 9%.Consumer expectation of inflation also soared from 5% in March to 6.5% in April, the highest it has been since 1981.It is a sign that, despite his insistence that tariffs will “make a lot of money” and have not yet raised prices, Trump still has not convinced many Americans that his tariffs will actually work.Trump’s trade policies have scared investors, causing sell-offs in stock and bond markets. The president softened his tone earlier this week on his trade war with China after a volatile few weeks. Markets rallied after Trump said that his Chinese tariffs “will come down substantially”, though he also warned that “it won’t be zero.”But Wall Street tends to be more reactive than consumers, who have shown four straight months of declining sentiment on the economy. Even after Trump paused the highest of his reciprocal tariffs, causing stock markets to rise, consumer inflation expectations still remained much higher compared with March.Higher inflation expectations have also been paired with consumers anticipating slower income growth for the year ahead, meaning that more of them will be hesitant to spend in the months ahead – which all could ultimately mean a slowdown in the economy.“Without reliably strong incomes, spending is unlikely to remain strong amid the numerous warning signs perceived by consumers,” Hsu said. More

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      Ukraine, Gaza and Iran: can Witkoff secure any wins for Trump?

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      Donald Trump’s version of Pax Americana, the idea that the US can through coercion impose order on the world, is facing its moment of truth in Ukraine, Gaza and Iran.In the words of the former CIA director William Burns, it is in “one of those plastic moments” in international relations that come along maybe twice a century where the future could take many possible forms.The US’s aim has been to keep the three era-defining simultaneous sets of negotiations entirely separate, and to – as much as possible – shape their outcome alone. The approach is similar to the trade talks, where the intention is for supplicant countries to come to Washington individually bearing gifts in return for access to US markets.The administration may have felt it had little choice given the urgency, but whether it was wise to launch three such ambitious peace missions, and a global trade war, at the same time is debatable.It is true each of the three conflicts are discrete in that they have distinctive causes, contexts and dynamics, but they are becoming more intertwined than seemed apparent at the outset, in part because there is so much resistance building in Europe and elsewhere about the world order Donald Trump envisages, and his chosen methods.In diplomacy nothing is hermetically sealed – everything is inter-connected, especially since there is a common thread between the three talks in the personality of the property developer Steven Witkoff, Trump’s great friend who is leading the US talks in each case, flitting from Moscow to Muscat.View image in fullscreenTo solve these three conflicts simultaneously would be a daunting task for anyone, but it is especially for a man entirely new to diplomacy and, judging by some of his remarks, also equally new to history.Witkoff has strengths, not least that he is trusted by Trump. He also knows the president’s mind – and what should be taken at face value. He is loyal, so much so that he admits he worshipped Trump in New York so profoundly that he wanted to become him. He will not be pursuing any other agenda but the president’s.But he is also stretched, and there are basic issues of competence. Diplomats are reeling from big cuts to the state department budget and there is still an absence of experienced staffers. Witkoff simply does not have the institutional memory available to his opposite numbers in Iran, Israel and Russia. For instance, most of the Iranian negotiating team, led by the foreign minister, Abbas Araghchi, are veterans of the 2013-15 talks that led to the original Iran nuclear deal.Yuri Ushakov, Vladimir Putin’s chief foreign policy adviser, who attended the first Russian-US talks this year in Saudi Arabia, spent 10 years in the US as Russian ambassador. He was accompanied by Kirill Dmitriev, the head of the Russian sovereign wealth fund who then visited the US on 2 April.In the follow-up talks in Istanbul on 10 April, Aleksandr Darchiev, who has spent 33 years in the Russian foreign ministry and is Russian ambassador to the US, was pitted against a team led by Sonata Coulter, the new deputy assistant secretary of state for European and Eurasian affairs, who does not share Trump’s benign view of Russia.View image in fullscreenAs to the Gaza issue, Benjamin Netanyahu has lived the Palestinian conflict since he became Israel’s ambassador to the UN in 1984.Richard Nephew, a former US Iran negotiator, says the cuts to state department means the US “is at risk of losing a generation of expertise … It’s beyond tragedy. It’s an absolutely devastating national security blow with the evisceration of these folks. The damage could be permanent, we have to acknowledge this.”One withering European diplomat says: “It is as if Witkoff is trying to play three dimensional chess with chess grandmasters on three chessboards simultaneously, not having played the game before.”Bluntly, Witkoff knows he needs to secure a diplomatic win for his impatient boss. But the longer the three conflicts continue, the more entangled they become with one another, the more Trump’s credibility is questioned. Already, according to a Reuters Ipsos poll published this month, 59% of Americans think Trump is costing their country its credibility on the global stage.The risk for Trump is that the decision to address so much so quickly ends up not being a show of American strength but the opposite – the public erosion of a super power.In the hurry to seal a deal with Iran inside two months, Trump, unlike in all previous nuclear talks with Tehran, has barred complicating European interests from the negotiation room.To Iran’s relief, Witkoff has not tabled an agenda that strays beyond stopping Iran acquiring a nuclear bomb. He has not raised Iran’s supply of drones to Russia for use in Ukraine. Nor has he tabled demands that Iran end arms supplies to its proxies fighting Israel.That has alarmed Israel, and to a lesser extent Europe, which sees Iran’s desire to have sanctions lifted as a rare opportunity to extract concessions from Tehran. Israel’s strategic affairs minister, Ron Dermer, and Mossad’s head, David Barnea, met Witkoff last Friday in Paris to try to persuade him that when he met the Iran negotiating team the next day in Rome, he had to demand the dismantling of Tehran’s civil nuclear programme.Witkoff refused, and amid many contradictory statements the administration has reverted to insisting that Iran import the necessary enriched uranium for its civil nuclear programme, rather than enrich it domestically.Russia, in a sign of Trump’s trust, might again become the repository of Iran’s stocks of highly enriched uranium, as it was after the 2015 deal.Israel is also wary of Trump’s aggrandisement of Russia. The Israeli thinktank INSS published a report this week detailing how Russia, in search of anti-western allies in the global south for its Ukraine war, has shown opportunistic political support not just to Iran but to Hamas. Israel will also be uneasy if Russia maintains its role in Syria.But if Trump has upset Netanyahu over Iran, he is keeping him sweet by giving him all he asks on Gaza.Initially, Witkoff received glowing accolades about how tough he had been with Netanyahu in his initial meeting in January. It was claimed that Witkoff ordered the Israeli president to meet him on a Saturday breaking the Sabbath and directed him to agree a ceasefire that he had refused to give to Joe Biden’s team for months.As a result, as Trump entered the White House on 19 January, he hailed the “EPIC ceasefire agreement could have only happened as a result of our Historic Victory in November, as it signalled to the entire World that my Administration would seek Peace and negotiate deals to ensure the safety of all Americans, and our Allies”.But Netanyahu, as was widely predicted in the region, found a reason not to open talks on the second phase of the ceasefire deal – the release of the remaining hostages held in Gaza in exchange for a permanent end to the fighting.Witkoff came up with compromises to extend the ceasefire but Netanyahu rejected them, resuming the assault on Hamas on 19 March. The US envoy merely described Israel’s decision as “unfortunate, in some respects, but also falls into the had-to-be bucket”.View image in fullscreenNow Trump’s refusal to put any pressure on Israel to lift its six-week-old ban on aid entering Gaza is informing Europe’s rift with Trump. Marking 50 days of the ban this week, France, Germany and the UK issued a strongly worded statement describing the denial of aid as intolerable.The French president, Emmanuel Macron, is calling for a coordinated European recognition of the state of Palestine, and Saudi Arabia is insisting the US does not attack Iran’s nuclear sites.Witkoff, by contrast, has been silent about Gaza’s fate and the collapse of the “EPIC ceasefire”.But if European diplomats think Witkoff was naive in dealing with Netanyahu, it is nothing to the scorn they hold for his handling of Putin.The anger is partly because Europeans had thought that, after the Volodymyr Zelenskyy’s public row with Trump in the Oval Office, they had restored Ukraine’s standing in Washington by persuading Kyiv to back the full ceasefire that the US first proposed on 11 March.View image in fullscreenThe talks in Paris last week between Marco Rubio, the US secretary of state, and European leaders also gave Europe a chance to point out it was Putin that was stalling over a ceasefire.But instead of putting any countervailing pressure on Russia to accept a ceasefire, Witkoff switched strategy. In the words of Bruno Tertrais, a non-resident fellow at the Institut of Montaigne, Witkoff is “is now presenting a final peace plan, very favourable to the aggressor, even before the start of the negotiations, which had been due to take place after a ceasefire”.No European government has yet criticised Trump’s lopsided plan in public since, with few cards to play, the immediate necessity is to try to prevent Trump acting on his threat to walk away. At the very least, Europe will argue that if Trump wants Ukraine’s resources, he has to back up a European force patrolling a ceasefire, an issue that receives only sketchy reference in the US peace plan.The Polish foreign minister, Radosław Sikorski, addressing the country’s parliament on Wednesday, pointed to the necessity of these security guarantees. “Any arrangement with the Kremlin will only last so long as the Russian elite dreads the consequences of its breach,” he said.View image in fullscreenBut in a sense, Trump and Putin, according to Fiona Hill at the Brookings Institution, a Russia specialist in Trump’s first administration, may already have moved beyond the details of their Ukrainian settlement as they focus on their wider plan to restore the Russian-US relationship.It would be an era of great power collusion, not great power competition in which Gaza, Iran and Ukraine would be sites from which the US and Russia could profit.Writing on Truth Social about a phone call with Putin in February, Trump reported” “We both reflected on the Great History of our Nations, and the fact that we fought so successfully together in World War II … We each talked about the strengths of our respective Nations, and the great benefit that we will someday have in working together.”Witkoff has also mused about what form this cooperation might take. “Shared sea lanes, maybe send [liquefied natural] gas into Europe together, maybe collaborate on AI together,” he said, adding: “Who doesn’t want to see a world like that?” More

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      The Guardian view on the IMF’s warning: Donald Trump could cost the world a trillion dollars | Editorial

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      Wake up! When the most sober of global institutions, the International Monetary Fund, abandons its usual technocratic calm to sound the alarm on the political roots of global financial instability, it’s time to pay attention. The IMF is warning of a non-negligible risk of a $1tn hit to global output, as Donald Trump’s erratic “America first” agenda – part oligarchic enrichment scheme, part mobster shakedown – collides with a perfect storm of global financial vulnerabilities.Such a shock would be equivalent to a third of that experienced in the 2008 crisis. But it would be felt in a much more fragile and politically charged environment. This time, the crisis stems not just from markets but from the politics at the heart of the dollar system. The IMF’s latest Global Financial Stability Report sees the danger in Mr Trump’s trade policies, especially his “liberation day” announcements, which have pushed up America’s effective tariff rate to the highest in over 100 years.The IMF put investors on notice that Trumpian volatility was taking place as US debt and equities – especially tech stocks – were overvalued. It cautions that hedge funds have made huge bets that have gone sour, requiring them to sell US treasuries for cash and potentially deepening the chaos in bond markets. Ominously, the IMF draws the comparison, first made by the analyst Nathan Tankus, with the “dash for cash” in March 2020 during Covid, when the Federal Reserve rescued US treasury markets directly. Developing nations, already grappling with the highest real borrowing costs in a decade, may now be forced to take on even more expensive debt – the IMF warns – just to cushion the blow from Mr Trump’s new tariffs, risking a dreaded “sudden stop” in capital flows.At the heart of this chaos stands the US, the very country meant to uphold the global financial architecture. Just over a week ago, Adam Tooze of Columbia University wondered if markets had begun to “sell America” after US long-maturity bond prices fell precipitously. He thought that markets were no longer just responding to economic fundamentals but to politics as a systemic risk factor. In this case: Mr Trump’s tariff threats and his increasing political pressure on Fed’s chair, Jerome Powell. In essence, Prof Tooze gave us the theory; the IMF just confirmed the data.The US president’s continued attacks on the Fed chair over the weekend have only added to a flight from US equities, bonds and the dollar itself. The money is fleeing to safe havens such as gold. Some of the loss has been clawed back, but at what cost? Investors aren’t just jittery about inflation or growth – they’re hedging against political chaos. That might explain the seemingly divergent IMF messaging: blunt systemic warnings in its report versus the soothing market-facing comments from a senior official at the fund’s press conference. This is central bank diplomacy. The institution is signalling that it is worried while trying not to spark a self-fulfilling panic in treasuries and the dollar.The real concern here is not technical dysfunction in treasury markets or the mechanics of the Fed, which are the bedrock of the global financial system. It’s about the politicisation of the monetary-fiscal nexus under a Trumpian regime that is fundamentally hostile to the norms of liberal-democratic governance. When even the dollar is no longer a safe haven, what – or who – can be?Do you have an opinion on the issues raised in this article? If you would like to submit a response of up to 300 words by email to be considered for publication in our letters section, please click here. More

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      Peter Navarro: the economist who has outsmarted Elon Musk and has the ear of Donald Trump

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      Elon Musk called him “dumber than a sack of bricks” but, in the raw contest for political power, Peter Navarro has outsmarted the billionaire.The tumult in global trade shows that for now it is the 75-year-old economist, not Musk, who has Donald Trump’s ear in the Oval Office.Navarro is the US president’s chief trade adviser and the intellectual driving force behind the global tariffs and trade war with China. The chaos and uncertainty have been too strong even for Musk, the great disrupter, but Navarro’s silky mien still assures the US all is well.Even after the tech tycoon publicly compared him to a sack of bricks, and added that he was “truly a moron”, Navarro retained his composure. “I’ve been called worse,” he told NBC.That is true. Navarro has been called a charlatan and a criminal who risks driving the world economy off a cliff.It is a remarkable metamorphosis for a man who a decade ago was a little-known academic nearing retirement at the University of California, Irvine, a respected, stolid institution in Orange County.Then the professor’s hawkish views on China caught the eye of Trump’s 2016 presidential campaign and vaulted him to Washington, where he played key roles in economic policy, the Covid pandemic and the attempt to overturn the 2020 election, a vortex that landed him in jail – for contempt of Congress – only for him to re-emerge, more influential than ever, in Trump’s second administration.“This is the land of reinvention, both cosmetic and ideological, and he is part of that,” said John Pitney, a political scientist and author at Claremont McKenna College.Critics worry that Navarro is trying to reinvent economic rules and the postwar global order with improvisation and bluster that could trigger recession and backlash. For Trump, Navarro is the expert who can articulate a daring and necessary pivot to protectionism.Navarro’s early life, and career, suggested a different trajectory. The son of a musician and a secretary, he grew up on the east coast and obtained a master’s degree in public administration and then a PhD in economics from Harvard. His doctoral dissertation was not on trade but on corporations’ charity motives.He taught economics at San Diego universities and did research on public utilities before landing a tenure position as professor of economics and public policy at UCI in 1989. Tanned and svelte, he had the look of a glossy politician and ran as a Democrat for elected office, including for mayor of San Diego and Congress, but lost.In 2001 he switched to writing get-rich investing books such as If It’s Raining in Brazil, Buy Starbucks: The Investor’s Guide to Profiting from News and Other Market-Moving Events.In 2006 the professor took another swerve by publishing the first of a series of books, and accompanying documentaries, that assailed China as an insatiable menace that bullies, lies and cheats, especially on trade rules through currency manipulation, illegal export subsidies, intellectual property theft and polluting sweatshops.There is no evidence of causality but Navarro’s alarm coincided with California’s proliferating number of Chinese investors and students, notably at UCI, which prompted racially tinged nicknames such as the University of Chinese Immigrants and the University of Caucasian Isolation.Other economists also accused Beijing of unfair practices but Navarro’s radical critique put him on the fringe.In 2016 Trump reportedly instructed his son-in-law Jared Kushner to do research to bolster his views on China. Kushner found Navarro’s book, Death By China, on Amazon, and Navarro ended up advising the campaign.In an interview that year with the Guardian near his Laguna Beach home, Navarro endorsed Trump’s use of the word rape to characterise Beijing’s impact on the US. “It’s an apt description of the damage and carnage that China’s trade policies have wrought on the American economic heartland. What’s happening is rapacious.” He also endorsed Trump’s proposed 45% tariffs on Chinese goods, which he said would compel Beijing to back down. “We’re already in a trade war with China. The problem is we’ve not been fighting back. Trump, through tariffs, wants to call a truce.”Trump had few credentialed academics on his team so Navarro served a useful purpose, Pitney said. “He provided a degree of scholarly cover for what Trump was saying. That’s why he was brought into the administration.”Navarro’s standing in the White House survived the disclosure that his books cited a fictitious expert, Ron Vara, that is an anagram of Navarro. He sought to shrug off the deception by calling it an “inside joke” with himself and a “Hitchcockian writing device”.In Trump’s first administration, more mainstream economic advisers prevailed and there was no trade war. Even so, Navarro expanded his remit to public health during the pandemic, which afforded more opportunity to assail China, and established personal chemistry with the president that made him a survivor amid White House personnel flux.After his chief lost the 2020 election, Navarro promoted the theory that the election was rigged and sought to delay its certification. For rebuffing a congressional committee that investigated the January 2021 attack on the Capitol he was found guilty of criminal contempt and last year served four months in prison.Now back in the White House as Trump’s senior counsellor for trade and manufacturing, Navarro’s influence has been felt in tariffs, stock market volatility and grim economic warnings despite a pause in the most severe tariffs for 90 days.Navarro has a combative streak yet he chose to project indifference over Musk’s insults. “It’s no problem,” he told CNN. A White House spokesperson shrugged off the row: “Boys will be boys.” More

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      US begins inquiry into pharmaceutical and chip imports in bid to impose tariffs

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      The Trump administration is kicking off investigations into imports of pharmaceuticals and semiconductors into the US as part of an attempt to impose tariffs on both sectors on national security grounds, notices posted to the Federal Register on Monday showed.The filings scheduled to be published on Wednesday set a 21-day deadline from that date for the submission of public comment on the issue and indicate the administration intends to pursue the levies under authority granted by the Trade Expansion Act of 1962. Such inquiries need to be completed within 270 days after being announced.The Trump administration has started 232 investigations into imports of copper and lumber, and inquiries completed in the US president’s first term formed the basis for tariffs rolled out since his return to the White House in January on steel and aluminum and on the auto industry.The US began collecting 10% tariffs on imports on 5 April. Pharmaceuticals and semiconductors are exempt from those duties, but Trump has said they will face separate tariffs.Trump said on Sunday he would be announcing a tariff rate on imported semiconductors over the next week, adding there would be flexibility with some companies in the sector.The US relies heavily on chips imported from Taiwan, something the then president, Joe Biden, sought to reverse by granting billions in Chips Act awards to lure chipmakers to expand production in the US.Taiwan’s economy minister, Kuo Jyh-huei, said its government would run simulations for various levels of tariffs on semiconductors and seek talks with the US.Taiwan is home to TSMC, the world’s leading producer of the most advanced chips and a main contributor to the island’s GDP. Speaking to reporters outside parliament, Kuo said he would seek to ensure “fair competition” for the Taiwanese industry.The Taiwanese and US chip sectors are complementary, he added.The investigation announced on Monday will include pharmaceuticals and pharmaceutical ingredients as well as other derivative products, the notice showed.Drugmakers have argued that tariffs could increase the chance of shortages and reduce access for patients. Still, Trump has pushed for the fees, arguing that the US needs more drug manufacturing so it does not have to rely on other countries for its supply of medicines.Companies in the industry have lobbied Trump to phase in tariffs on imported pharmaceutical products in hopes of reducing the sting from the charges and to allow time to shift manufacturing.Large drugmakers have global manufacturing footprints, mainly in the US, Europe and Asia, and moving more production to the US involves a major commitment of resources and could take years. More

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      The Guardian view on Friedrich Merz’s grand coalition: gambling on a new centre ground | Editorial

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      Some years ago, hundreds of German finance ministry staff dressed in black and formed a giant zero to salute their boss, Wolfgang Schäuble, as he left office. It was a tribute to Mr Schäuble’s extreme fiscal conservatism, which had delivered Germany’s first balanced budget in the postwar period. Amid resurgent prosperity in the Angela Merkel years, the so-called black zero – symbolising a constitutional prohibition on public debt – had gradually acquired cult status.As a new administration prepares to take power in Berlin, it seems unlikely that human euro signs will welcome the latest politician to take on Mr Schäuble’s former role. But in dramatic fashion, the spending taps are set to be turned on. Via a swiftly staged March vote in the outgoing Bundestag, “debt brake” dogma was consigned to history by the chancellor‑elect, Friedrich Merz. The way was thus paved for groundbreaking expenditure on defence, and the overhaul of an economy being left behind in a changed, suddenly menacing world.So much for the theory – now for the practice. Mr Merz, the centre-right leader of the Christian Democratic Union (CDU), last week concluded the fastest set of coalition talks since 2009. Pending approval of the deal by Social Democratic party (SPD) members, he is expected to be sworn in as chancellor in by early May. In office, the “grand coalition” agreed between the CDU and the SPD – handed seven ministries including finance and defence – will immediately be confronted by challenges that dwarf those faced by almost all its predecessors.The US under Donald Trump, whether as economic partner or military ally, can no longer be relied upon – an era-defining shift whatever the outcome of the current tariff wars and Mr Trump’s negotiations with Moscow over Ukraine. China, once a vast outlet for the exports which fuelled growth, has morphed into a fearsome competitor, including on German soil. A stagnant economy, combined with a post-Merkel backlash against migration, has accelerated the rise of Alternative für Deutschland (AfD), one of the most extreme far‑right parties in Europe. Last week, a poll fatefully placed the AfD in the lead for the first time.The pressure from the right – both from within his own party and from the AfD – is having an impact. Mr Merz’s Trumpian promise to turn asylum seekers away at German borders from his “first day”, along with other draconian measures, will only allow the far right to up the ante still further. Meanwhile, he also appears to be looking for wriggle room on agreed coalition commitments to the less well off and to climate targets.Nevertheless, the broad economic thrust of the deal remains right for troubling times. The European Central Bank must play its part – by keeping yields on a leash. As Germany’s neighbours deal with similar geopolitical threats and uncertainties, the ability of the EU’s most powerful member state to show leadership and forge a path through the crisis will be crucial. With short-term growth acutely vulnerable to mood swings in the White House, the effects of spending will take time to be felt in people’s everyday lives. But the prospect of a transformative increase in public investment offers the hope of industrial renaissance and a restoration of voters’ trust in the political centre.Alongside his SPD counterparts last week, Mr Merz confidently announced that Germany was “back on track”. Europe badly needs him to be right.

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      ‘The sky won’t fall’: China plays down Trump tariff risks as stock markets rally

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      China has played down the risk of damage to its exports from Donald Trump’s tariffs, with an official saying the “the sky won’t fall”, as stock markets rose on Monday amid signs of a retreat on electronics restrictions.The world’s second-largest economy has diversified its trade away from the US in recent years, according to Lyu Daliang, a customs administration spokesperson, in comments reported by state-owned agency Xinhua.China has retaliated forcefully to Washington’s tariffs, with 125% levies on US imports against the US’s total of 145% border taxes on goods moving the other way. The trade war has prompted turmoil on financial markets since Trump first revealed tariffs on every country in the world on 2 April. Since then he has partly retreated on the highest levies on most trading partners for at least 90 days, but has doubled down in his spat with China.The White House offered further relief over the weekend with an exemption from the steepest tariffs for electronics including smartphones, laptops and semiconductors. Trump officials later appeared to walk that back with the commerce secretary, Howard Lutnick, saying such devices would be “included in the semiconductor tariffs which are coming in probably a month or two”.Trump said on Sunday night on his social network, Truth Social, that “NOBODY is getting ‘off the hook’”, highlighting that smartphones are still subject to 20% levies and suggesting they could still rise higher.However, investors on Monday appeared unconvinced by Trump’s attempts to play down the retreat. Japan’s Nikkei gained 1.2% while Hong Kong’s Hang Seng rose by 2.2% and the Shanghai and Shenzhen exchanges climbed by 0.8% and 1.2%, respectively. European stock market indices also jumped in opening trades, with London’s FTSE 100 up by 1.6%, Germany’s Dax up 2.2%, and France’s Cac 40 up 2%.“The sky won’t fall” for Chinese exports,” China’s Lyu said. “These efforts have not only supported our partners’ development but also enhanced our own resilience”.The customs report also played up China’s “vast domestic market”, and said “the country will turn domestic certainty into a buffer against global volatility”. China has increasingly tried to stimulate private consumption.skip past newsletter promotionafter newsletter promotionChina’s president, Xi Jinping, on Monday criticised the US tariffs, during a visit to Vietnam. Vietnam has in recent decades grown to become the eighth largest source of goods for US consumers, but it is facing the threat of 46% tariffs when Trump’s 90-day pause expires.In an article in a Vietnamese newspaper, Xi said that a “trade war and tariff war will produce no winner, and protectionism will lead nowhere”. More

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      US stock markets expected to recover after Trump drops tariffs on mobiles

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      US stock markets were expected to stage a recovery on Monday after Donald Trump excluded imports of smartphones and laptops from his tariff regime late on Friday night.Shares in Apple and chip maker Nvidia were on course to soar after tariffs on their products imported into the US were lifted for 90 days.The temporary reprieve was widely seen as a climbdown after pressure from Republican leaders concerned that the soaring cost of smartphones would spark a voter backlash. US retailers import about 80% of all smartphones, many of them from China, which Trump has slapped with tariffs totalling 145%.US Customs and Border Protection said items like laptops, hard drives, smartphones, flat-panel monitors and some chips would qualify for the exemption. Vital machines made outside the US that are used to make semiconductors were also excluded.It means these products will avoid the China tariff and the 10% baseline tariffs applied on other countries caught by the new regime.Speaking on Air Force One on Saturday evening, Trump said he would be more specific about the latest exemption rules on Monday. “We’ve been making a lot of money,” he said. “It’s been the other way around. Other countries, in particular China was making a lot of money.”It is not clear how long the exemption will last or whether separate tariffs will be negotiated on the specific products.China has responded with a tariff on all US exports of 125%. Beijing said at the weekend that the reprieve for smartphones was a “small step” toward easing the trade fight between the world’s two biggest economies.skip past newsletter promotionafter newsletter promotionHowever, the US commerce secretary, Howard Lutnick, said the reprieve was likely to be lifted in 90 days and reiterated Trump’s longstanding plan to apply a different, specific levy to the sector.Speaking on NBC, he said: “All those products are going to come under semiconductors, and they’re going to have a special focus-type of tariff to make sure that those products get reshored. We can’t be relying on China for fundamental things that we need.”Lutnick dismissed interpretations of Trump’s reprieve that argued it reflected the president’s realisation that his China tariffs were unlikely to shift more manufacturing of smartphones, computers and other gadgets to the US in the near future.On Sunday Trump warned that no country would be getting “off the hook” on his punishing tariffs, again singling out China for criticism. “NOBODY is getting ‘off the hook’ for the unfair Trade Balances,” Trump wrote in a post on his Truth Social platform. “Especially not China which, by far, treats us the worst!”Apple has spent decades building up a finely tuned supply chain in east Asia, including inside China. The firm has pledged to move some facilities back to the US over the next four years, which will cost it $500bn, including constructing a giant factory in Texas for artificial intelligence servers but was expecting to retain much of its international network as it expands its sales.Trump’s move at the start of April to impose tariffs on imports to the US battered the stocks of tech’s magnificent seven – Apple, Microsoft, Nvidia, Amazon, Tesla, Google parent Alphabet and Facebook parent Meta Platforms.At one point, they lost $2.1tn, or 14% of their value, from 2 April. Shares have recovered since last Wednesday after Trump paused the tariffs except on China, allowing tech firms to use India and other conduits to import smartphones. More