Business
Following a round of talks in Geneva, America and China agreed to pull back from their trade war and slash tariffs, for 90 days at least. Donald Trump said some of the duties could be reimposed if no progress was made in further negotiations, but at probably a far lower rate than the 145% tariff America ended up levying on Chinese goods. Scott Bessent, the treasury secretary, said America would now aim for a strategic, and not a general, decoupling from Chinese trade. In another sign of a thaw in the trade war, China reportedly lifted its ban on Chinese airlines taking delivery of Boeing aircraft.
Stockmarkets surged in response to the rapprochement on trade. The S&P 500 erased its losses for the year, though is still below its February peak. The NASDAQ Composite and Dow Jones Industrial Average weren’t far behind. The gains were led by chipmakers such as Nvidia and AMD, and Tesla, which saw its market capitalisation climb above $1trn again.
Before the breakthrough in Geneva America struck a trade deal with Britain, the first in a line of countries that Mr Trump says are eager to come to reciprocal agreements. The deal, covering mostly cars and beef, was comparatively small potatoes in the wider trade war. The bulk of trade between the two countries is in services, which are not subject to tariffs.
The American government’s receipts from customs duties hit a record $16.3bn in April, over double the $7.1bn that was collected in April 2024.
Honda and Nissan both tore up their annual profit forecasts because of the hits they expect to take from tariffs. The Japanese carmakers have factories in America but also produce vehicles in Mexico to sell in the US. Nissan’s troubles pre-date the imposition of the levies. It is restructuring its business, and this week announced that it would cut 20,000 jobs, 15% of its global workforce, and close seven of its 17 plants.
The perils of predictions
Foxconn lowered its outlook for the year, in part because of uncertainties in trade but also because of currency fluctuations. The contract manufacturer, best known for assembling the iPhone in China, is building a factory in Mexico to produce Nvidia’s GB200, which brings together several processing units in one superchip.
Mr Trump’s trade duties have not caused America’s inflation rate to jump, so far at least. The latest figures showed annual inflation slowing to 2.3% in April from 2.4% in March. Month-on-month consumer prices rose by 0.2%. Economists think tariffs will eventually cause inflation to spike in the coming months.
Britain’s economy grew by 0.7% in the first quarter of the year, compared with the previous three months, slightly more than markets expected.
The pharmaceutical industry found itself caught in Mr Trump’s cross-hairs, when he signed an executive order that would force companies to lower the price of their drugs to align with those in other countries. The president is seeking price reductions of between 59% and 90%, and is threatening to take action if the industry doesn’t comply. But the order is fraught with difficulties, including the fact that generic drugs, which account for most American prescriptions, are far cheaper in America than in other rich countries.
Deep pockets of the state
Mr Trump’s trip to the Middle East saw a raft of trade deals, including $142bn in defence equipment to Saudi Arabia that America described as the largest such pact in history. Qatar agreed to buy up to 210 Boeing aircraft. And the United Arab Emirates, already a global hub for artificial intelligence, hoped to strike deals to import advanced chips. Meanwhile, Saudi Arabia announced the creation of a new state-backed company to develop AI infrastructure and data centres. Humain will own AI assets as well as invest in them, with a focus on large language models based in Arabic. Nvidia and AMD will supply it with state-of-the art chips.
As the Gulf states increase their public investments in AI, SoftBank, by contrast, denied reports that it is hesitating over its commitments to the technology because of market uncertainty. The Japanese tech conglomerate’s chief financial officer said it was “very much making progress” in choosing data centres for Stargate, America’s vast AI project, in which SoftBank is a major investor. SoftBank made its first annual profit in four years for the 12 months ending March, helped by the performance of its telecoms companies. Its Vision Fund 1, which houses investments in firms such as ByteDance, made a gain, but its Vision Fund 2, which invests in more recent startups, booked a loss.
CATL, based in China and the world’s largest producer of batteries for electric vehicles, hopes to raise $4.6bn from its forthcoming secondary listing, which would make it the world’s biggest stock offering so far this year. The shares are due to start trading in Hong Kong on May 20th.