Trump starts trade war with Canada, Mexico and China, threatens EU

Today’s agenda: Trump threatens South Africa aid; EU, Nato and UK discuss security; companies cosy up to Musk; Meta’s big bet on VR; and Big Read on Jared Kushner

Good morning. We start the working week in a new era of global trade wars launched by Donald Trump, after he announced tariffs on America’s biggest trading partners over the weekend. Here’s what we know.

A recap on the tariffs: On Saturday, the US president ordered steep tariffs of 25 per cent on imports from Canada and Mexico with a lower 10 per cent on Canadian energy, and 10 per cent on China on top of existing levies. Canada responded with 25 per cent tariffs on a range of US goods worth $107bn, while Mexico announced tariffs without giving details. Beijing said it would file a lawsuit with the World Trade Organization.

What’s the immediate fallout? The tariffs shook markets this morning as the US dollar surged. The Canadian dollar reached its lowest level against the currency since 2003, while the Mexican peso slid more than 2 per cent. The euro lost 1 per cent and Asia-Pacific currencies also fell. US stock futures fell sharply and Asian markets declined in early trading.

Trump faced a backlash in the US, including from some in his own Republican party. Trade groups for consumer goods, oil and automakers all lined up to warn of inflation from the new tariffs and potential chaos in supply chains.

Looking ahead: Trump said just hours ago he would “definitely” impose tariffs on the EU. The bloc has prepared contingency plans, including potential retaliatory tariffs of 50 per cent or more on certain US imports, and had earlier said it would “respond firmly”. Later today, Mexico’s President Claudia Sheinbaum is set to unveil her first retaliatory measures.

After Trump’s tariffs kick in tomorrow, US consumers could face higher prices for popular goods such as tomatoes, avocados and tequila. The president is aware of the political risk he is taking, telling reporters there will be “a little pain” in the short term but that “people understand that”.

Follow our live blog as we bring you the global reaction from Trump’s tariffs. And here are some recommendations to help you unpack the fallout from his trade war:

• Explainer: These are the industries that will probably be hit the hardest.

• ‘Buy Canadian’: A wave of anger and economic nationalism has swept across a country famous for its politeness.

• The FT View: The US will be one of the main victims of Trump’s absurd trade war, writes our editorial board.

Sign up for our White House Watch newsletter for the latest updates on Trump’s second term. And here’s what else we’re keeping tabs on today:

• Economic data: The US, UK, Eurozone, Canada, France, Germany and Italy issue purchasing managers’ indices, while the EU also publishes its consumer price index.

• Starmer in Brussels: The UK prime minister and Nato secretary-general Mark Rutte will join EU leaders to discuss the continent’s security. Scroll down for an opinion piece by Greece’s leader on European defence.

• Companies: Thames Water’s debt restructuring plan is due to be heard in London’s High Court, while Julius Baer reports results.

Five more top stories

1. Trump has vowed to halt all future US assistance to South Africa over its land expropriation policies, triggering a fall in the rand. The US president claimed recent measures enabled the government to confiscate land unfairly and accused South African authorities of treating “certain classes of people VERY BADLY”.

• More on US aid: The future of the main US agency for foreign aid is in doubt after its website went dark, some officials were put on leave and Trump said it was “run by a bunch of radical lunatics”.

2. Exclusive: Companies from Boeing to Amazon are cutting deals with Elon Musk’s businesses or touting links with the Tesla and SpaceX chief as he solidifies his power within Trump’s administration and begins to radically restructure the US government. Here’s how corporate America is cosying up to the world’s richest man.

3. Exclusive: Meta’s total investment in virtual and augmented reality is set to top $100bn this year, as its chief executive Mark Zuckerberg has declared 2025 a “defining year” for its smart glasses. The company’s latest annual report also revealed it invested $19.9bn in its Reality Labs division last year, a new high after more than a decade of heavy losses. Read the full story.

4. US secretary of state Marco Rubio has told Panama’s president to reduce China’s influence over the Panama Canal or face immediate consequences. According to the US state department, Rubio met José Raúl Mulino in Panama City yesterday and said Trump had determined that China had violated a treaty concerning its neutrality and posed “a threat to the canal”.

5. Exclusive: AstraZeneca turned down an offer of nearly £80mn in UK state support when it abruptly cancelled plans for a £450mn vaccine manufacturing site near Liverpool, according to people briefed on the matter. The pharmaceuticals group, Britain’s most valuable listed company, rejected the government’s offer at a tense meeting last week.

The Big Read

Since leaving Washington as a senior adviser to his father-in-law Donald Trump, Jared Kushner has built up a global portfolio of company stakes and property, across eastern Europe, the Gulf and Latin America. Many of those deals have been facilitated by contacts he made while in government — or by the high profile that comes from having been one of the US president’s most trusted aides. Kushner has demonstrated an ability to convert relationships and proximity to power into big investments.

We’re also reading . . . 

• Gaza truce: As Israel’s Benjamin Netanyahu prepares to meet Trump tomorrow, will he decide to stick with a politically perilous ceasefire?

• European defence: With the war in Ukraine and an unstable Middle East, Europe must take greater responsibility for its own security, writes Greek Prime Minister Kyriakos Mitsotakis.

• UK economy: Britain is in a low growth hole, and the government is right to try to dig it out, writes Martin Wolf.

• Global development: The future of international economic institutions is up for grabs, writes Adam Tooze, and the stakes could not be higher for Africa.

Map of the day

Trump’s demands to buy Greenland have spurred a surge of interest in the Arctic island’s mining companies and its potential to produce key elements used in everything from electric vehicles to missile guidance systems, investors said.

Take a break from the news . . . 

This fascinating FT Magazine profile of Tony Dominguez, a sober coach for the rich and famous, dives into the secretive world of recovery and the idea that you can buy your way out of crippling addiction.