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The Federal Reserve has defied weeks of pressure from Donald Trump and declined to cut interest rates while the impact of his trade war on inflation remains unclear.
The US central bank voted to hold base rates at 4.25pc to 4.5pc yesterday, with Jerome Powell, its chairman, insisting the president’s criticisms have no bearing on its decision making.
Mr Powell warned the White House’s trade policies had created “a great deal of uncertainty” and suggested that tariffs would crash the US economy unless Mr Trump backs down. He said: “If the large increases in tariffs that have been announced are sustained, they are likely to generate a rise in inflation, a slowdown in economic growth and an increase in unemployment.”
The hawkish comments sent US stocks down slightly, before rebounding. The Fed’s wait-and-see approach has riled Mr Trump, leaving him at loggerheads with the Mr Powell over the pace of rate cuts.
The president has repeatedly insisted the time is right to cut interest rates because inflation is cooling, and has even threatened to fire Mr Powell for resisting his wishes. The White House has pointed to cuts by other central banks as evidence the Fed should reduce rates. The Bank of England will announce its decision on UK rates on Thursday, in a move which could create more tension for the Fed.
In a sign of his anger, the president last month blasted Mr Powell on his Truth Social platform, saying that “there can be a SLOWING of the economy unless Mr Too Late, a major loser, lowers rates”. He later backed away from his threat to sack Mr Powell after spooking markets. Mr Powell, 72, has one year left of his second term.
The Fed chairman said on Wednesday that Mr Trump’s campaign to cut rates would not sway him and his rate-setting board’s decision on rate cuts. He said: “It doesn’t affect us doing our job at all. We’re always going to do the same thing, which is we’re going to use our tools to foster maximum employment and price stability for the American people. We’re always going to consider only economic data, the outlook, the balance of risks – that’s all we’re going to consider.”
Since Mr Powell last gathered the Fed’s board of governors in March, Mr Trump has slapped a 10pc baseline tariff on almost all US imports, with Chinese exporters receiving a 145pc rate. The White House also unveiled a slate of punitive “reciprocal” tariffs on almost every other country, but then paused them until early July to negotiate bilateral deals.
Mr Trump has signalled he is open to reducing the tariffs on certain countries in return for concessions on US trade. However, he said on Wednesday there was no potential to pull back tariffs on China.
The Fed has sat on its hands for three straight meetings, after a trio of cuts late last year. Mr Powell said on Wednesday it was possible to foresee a case in which monetary policy might need to be eased, and one in which rates might have to stay higher.
“I don’t think we can say which way this will shake out. I think there is a great deal of uncertainty about where, for example, tariff policies are going to settle out; and also, when they do settle out, what will be the implications for the economic growth and employment,” he said. “There is so much uncertainty. If you talk to businesses, or market participants, or forecasters, everyone is just waiting to see how developments play out.”
American companies and consumers have raced to stockpile imported goods ahead of tariffs, shrinking the US economy by 0.3pc in the opening quarter of this year – the first drop in US GDP in three years. Consumer spending has also slowed, growing by just 1.8pc in the first quarter, and government spending slumped 5.1pc.
Mr Trump has been impatient for Fed action to offset a short-term tariff hit to US growth. If rate cuts do not come, he is likely to blame the Fed rather than tariffs for mid-year economic woes.
Many economists expect a GDP rebound in the second quarter, as imports slow after the stockpiling frenzy.
09:01 PM BST
Wall Street drifts upwards after Fed warns of rising risks for economy
New York has ended in the green this evening after being reassured by the the Fed’s wait and see approach to interest rates.
US stocks were helped earlier today on hopes that the US would cut back on its trade hostilities with China. However, traders were unimpressed when Donald Trump said he would not reduce his 145pc tariffs on Chinese goods as a condition, pushed by China, for negotiations.
Wall Street was also pushed lower by news that Google could find more search engine competitors installed in Apple’s Safari web browser. Apple suggested that users are starting to seek modern AI search engines.
In preliminary figures at 9pm, the S&P 500 closed up 0.4pc, the Nasdaq rose 0.3pc and the S&P 500 finished up 0.7pc.
Thanks for joining us today. You can continue to read our latest on the economy and business here.
08:38 PM BST
White House says high inflation not returning
White House economic adviser Stephen Miran has told Fox News that the Trump administration does not believe that high inflation is coming back.
He said: “We did not believe that, and the president’s been very clear with his views about interest rates and monetary policy.”
It came after the US Fed warned that inflation “remains somewhat elevated” and that the risks of higher inflation had risen.
08:31 PM BST
Powell says he never seeks to meet with any president
Jerome Powell, the Fed chairman, has said that he never seeks to meet with any US president. To the extent he has had such a meeting, it is because the elected leader sought the interaction.
He said: “I’ve never asked for a meeting with any president and I never will. There’s never a reason for me to ask for a meeting. It’s always been the other way.”
08:20 PM BST
Fed lacks good options, says analyst
The risks of higher unemployment and higher inflation left the Fed with almost no good short-term options, a Wall Street analyst has said.
Julia Hermann, at New York Life Investments, said: “Their ability to pre-emptively cut rates to shore up economic growth is constrained by upside inflation risks, and then, conversely, their ability to pre-emptively hike rates to reduce inflation risk is constrained by downside risk to growth. So it’s a stagflation conundrum.
“We expect to see meaningful easing from the Fed only in the scenario that economic growth figures really disappoint.”
08:16 PM BST
Powell: ‘We will not be climate policy makers’
Jerome Powell has rejected criticism that the US Fed has taken on topics like climate change that are outside its mandate to address inflation and employment,
The Fed chairman said: “You’ve heard me say over and over again that we will not be climate policy makers.
“And that our role on climate is a very, very narrow one. And I think that’s what we’ve done.
“We’ve done really very little on climate. You can say that little bit that we’ve done was too much but I wouldn’t want to give any impression that we’ve taken climate in and it something that we’re spending a lot of time and energy on. We’re not. We have very, very narrow things - we did one guidance for the banks and we did a one-time climate stress analysis. And that’s it...
“It’s a real danger for us to try and take on a mandate like that that has very narrow application to our work.”
08:06 PM BST
US economy still healthy, despite uncertainty, says Powell
Jerome Powell has said that the US economy is still in a good place, despite all the uncertainty.
The Fed boss said: “It’s still a healthy economy, albeit one that is shrouded in some very downbeat sentiment on the part of people and businesses.”
08:05 PM BST
Powell: ‘very hard to say’ what the right action should be
Jerome Powell has said the Fed has to wait for more clarity as a result of the trade war.
The Fed chairman said: “My gut tells me that uncertainty about the path of the economy is extremely elevated and that the downside risks have increased...
“I think it’s obvious actually that the right thing for us to do ... is await further clarity and usually things clarify and the appropriate direction becomes clear. That’s what usually happens. Right now, it’s very hard to say what that would be.”
08:02 PM BST
Trump’s Fed criticism ‘doesn’t affect doing our job at all’
Jerome Powell has said that Donald Trump’s demands for rate cuts “doesn’t affect doing our job at all”.
He said: “We’re always going to do the same thing which is we’re going to use our tools to foster maximum employment and price stability for the benefit of the American people. We’re always going to consider only the economic data, the outlook, the balance of risks and that’s it. That’s all we’re going to consider.”
07:59 PM BST
Powell says ‘we don’t don’t know” if rate cuts will happen this year
Jerome Powell, the Fed chair, has said that there is too much uncertainty over Donald Trump’s tariffs to know if rate cuts will take place this year.
He said: “It going to depend. You have to just take a step back and realise this is why we are where we are. We are going to need to see how this evolves.
“There are cases in which it would be appropriate for us to cut rates this year.
“There are cases in which it wouldn’t. And we just don’t know.”
07:52 PM BST
Fed not ‘in a hurry’ over interest rates, says Powell
The head of the US Fed has said that the central bank is in no rush to change interest rates.
Jerome Powell told reporters: “We’re in a good position to wait and see.
“We don’t have to be in a hurry. The economy has been resilient. It is doing fairly well. Our policy is well positioned. The costs of waiting to see further are fairly low, we think. So that’s what we’re doing.
“The [Trump] administration is entering into negotiations with many countries over tariffs. We’ll know more with each week and month that goes by about where tariffs are going to land. And we’ll know what the effects will be when we start to see those things.”
07:45 PM BST
Powell warns of ‘great deal of uncertainty’ on tariffs
The head of the US Fed has said that Donald Trump’s tariff policies have created “uncertainty” that is hindering rate setting.
He said: “I think there’s a great deal of uncertainty about, for example, where tariff policies are going to settle out and also, when they do settle out, what will be the implications for the economy, for growth and for employment. I think it’s too early to know that.”
07:41 PM BST
Powell to ‘wait for greater clarity’ on effects of trade war
The US Fed is to wait and see just how big the effect of Donald Trump’s tariffs become before making interest rate cuts.
Jerome Powell, the Fed chairman, said: “For the time being, we are well positioned to wait for greater clarity before considering any adjustments to our policy stance.”
07:39 PM BST
Powell points to three-ponged hit from Trump tariffs
The chairman of the US Fed has warned over the economic damage of Donald Trump’s trade war.
He said: “If the large increases in tariffs that have been announced are sustained, there are likely to generate a rise in inflation, a slowdown in economic growth and an increase in unemployment.
“The effects on inflation could be short-lived, reflecting a one-time shift in the price level. It is also possible that the inflationary effects could instead be more persistent. Avoiding that outcome will depend on the size of the tariff effects, on how long it takes for them to pass through fully into prices, and ultimately on keeping longer-term inflation expectations well anchored.”
07:35 PM BST
Powell says Trump tariffs confused GDP figures
Jerome Powell, the Fed chairman, has said that US growth figures have been “complicated” by an “unusual swing” caused by companies stockpiling goods ahead of Donald Trump’s tariffs.
07:33 PM BST
Trump signals US might ease chip export curbs on some Gulf countries
President Donald Trump has said he will soon have an announcement on whether the US will ease microchip export restrictions to some Gulf countries.
“We might be doing that, yeah,” Mr Trump said. “And it will be announced soon.”
Mr Trump is preparing for his first major diplomatic trip next week that includes a three-country Middle East tour that begins in Saudi Arabia.
The Biden administration imposed strict controls on exports of American AI chips to the Middle East over fears the prized semiconductors could be diverted to China and harnessed to bolster Beijing’s military. But Mr Trump has made improving ties with some countries in the region a key goal of his administration.
Mr Trump also said that he also plans to soon address reports that the US is moving to change the name of the Persian Gulf to the Arabian Gulf or Gulf of Arabia. Such a move would be welcomed by Arab Gulf leaders and likely draw anger from Iran.
07:28 PM BST
Fed will not cut rates this year, warns economist
The US Fed will keep interest rates unchanged for the rest of the year, a leading economist has claimed.
Paul Ashworth, chief North America economist at Capital Economics, said: “We continue to expect that, with tariffs likely to generate a modest slowdown in GDP growth to around 1.5pc, the Fed will leave interest rates unchanged for all of this year.
“Even if we’re right and the 90-day pause on the higher reciprocal tariffs is extended repeatedly, with the tariffs on China specifically scaled back to closer to 60pc, then that would still push core inflation back towards 4pc.
“In theory, since tariffs represent a one-off shift in the price level, there’s a case to be made for looking through that pick up in inflation later this year, particularly with energy prices down sharply.
“But the risk of second-round effects will keep the Fed on hold, at least until a new chair is in place in May next year. Even then, we expect only [half a percentage point] of cuts in 2026.”
07:26 PM BST
Wall Street reacts calmly to Fed rate pause
US stock markets reacted to the Fed interest rate announcement by sending shares slightly higher. The S&P 500 and Nasdaq remain down overall today, while the Dow Jones is up.
US Treasury yields were little changed, while traders continued to eye a rate cut at the Fed’s meeting in late July.
07:17 PM BST
Trump to blame for interest rate decision, says investment manager
Donald Trump has prevented the US Fed from making a cut to interest rates, an investment manager has suggested.
Isaac Stell, investment manager at Wealth Club, said: “The Fed is currently in a holding pattern as it waits to see how the turbulence of the president’s tariffs impact the real economy.
“The Fed’s job has been made all the harder by the flip-flopping on policy which further clouds the landing site. Today’s decision has been driven by the resilience seen in the jobs market and the risks to the upside to inflation despite its recent downward trend...
“On the surface, the Fed appears to have chosen the sensible option, as taking undue risks without a clear line of sight is futile.
“However, this will do little to appease the White House. Jerome Powell is already under intense scrutiny and likely to be on the receiving end of another social media tirade. Despite this, the Fed captain’s resolve remains steadfast in the face of prevailing headwinds.”
07:15 PM BST
Trump rules out cuts to tariffs on China - for now
Donald Trump has said he will not cut tariffs on China as a way of encouraging negotiations with Beijing.
In a meeting with reporters, he said “no” when asked if he is open to reducing his 145pc duties on Chinese imports unilaterally.
07:04 PM BST
Fed holds rates steady, warning of rising risks
The US Federal Reserve held interest rates steady this evening but said the risks of both higher inflation and unemployment had risen.
The economy overall has “continued to expand at a solid pace” the Fed said, attributing a drop in first-quarter output to record imports as businesses and households rushed to front-run new import taxes.
The labour market also remained “solid” and inflation was still “somewhat elevated”, the central bank said, repeating the language used in its previous statement.
But the latest statement highlighted developing risks that could leave the Fed with difficult choices in coming months.
“Uncertainty about the economic outlook has increased further,” it said at the end of a two-day meeting during which officials agreed unanimously to keep the central bank’s benchmark interest rate steady in the 4.25pc to 4.50pc range.
“The Committee is attentive to the risks to both sides of its dual mandate and judges that the risks of higher unemployment and higher inflation have risen,” it added.
06:47 PM BST
Gains on Wall Street despite worries over future of Google
Wall Street offers a mixed picture this evening after worries about the competitive strength of Google’s search engine pulled down the Nasdaq.
Apple indicated that it was looking at including integrating AI search engines with its Safari browser, potentially undermining Google’s place in the industry.
The suggestion hit the tech-heavy Nasdaq, which is down 0.2pc. But the Dow Jones is up 0.7pc and the S&P 500 is up 0.2pc.
European shares closed lower, pausing after weeks of strong gains.
The pan-European Stoxx 600 index closed 0.5pc down, while a selection of national indexes also ended their day in the red.
European markets fell after data showed a higher-than-expected decline in eurozone retail sales in March.
Investors were also worried about the health of European pharmaceutical profits after the US drug regulator appointed a critic, Vinay Prasad, as its top vaccine official.
06:24 PM BST
Fed’s desire to look independent could keep rates ‘restrictive for too long’
The need for the Fed to be seen as independent could perversely cause US interest rates to stay too high for too long, an analyst has claimed.
Lale Akoner, an analyst at eToro, said: “The Fed’s credibility is central to its decision-making framework, especially after recent political tension with the administration. There’s an institutional desire to appear independent and grounded in data, but this could also lead to policy staying restrictive for too long, with heavy reliance on backward-looking indicators delaying any move to ease.
“While the labour market still looks relatively strong on the surface with low jobless claims, minor cracks are showing. Fewer lay-offs, but also fewer new hires, suggests late-cycle labour hoarding, and it’s worth watching.”
06:10 PM BST
Traders fully pricing in rate cut for UK for not US
Traders are betting on an interest rate cut in the UK tomorrow, and at least three by the end of the year. Indeed, there is reasonable confidence of four 0.25 percentage point cuts by the second half of December.
But expectations are rather different in the US. Wall Street is confident that there will be no rate change tonight - although traders think cuts will come later on in the year.
The Fed’s likely failure to cut rates tonight comes despite Donald Trump’s criticism of Jerome Powell, the Fed chairman, for being “too late” on rates.
05:34 PM BST
FTSE 100 ends record run of gains as interest rate decisions loom
The FTSE 100 has ended a record run of gains, sinking lower today ahead of key interest rate decisions at home and across the pond.
The stock market index had been on a winning streak for more than two weeks - having reached its longest-ever run of consecutive gains on Friday.
This continued into the new week. But fortunes reversed today with it losing 0.4pc, to close at 8,559.33.
It signals an end to the period of recovery for the index which experienced a heavy sell-off in the aftermath of US president Donald Trump’s tariff announcements last month.
Traders were in a cautious mood ahead of important monetary policy decisions - with the US’s Federal Reserve expected to keep interest rates unchanged when it announces its decision at 7pm tonight.
This would mean the central bank does not bow to pressure from Mr Trump, who has been calling for rates to be cut to ease pressure on the nation’s borrowers.
On the other hand, the Bank of England is widely expected to cut interest rates by 0.25 percentage points tomorrow, in the face of falling inflation and the threat of tariffs slowing economic growth.
05:32 PM BST
Ford raises prices by up to $2,000 as Trump tariffs bite
Ford is hiking the US prices on three of its Mexico-produced models by as much as $2,000 (£1,500).
Earlier this week, the carmaker said Mr Trump’s trade war risked adding about $2.5bn to its costs for 2025, but it expects to push that down by around $1bn.
Rival General Motors said last week that tariffs were cost it between $4bn and $5bn, but it expected to offset that by at least 30pc.
A Ford spokesman said the price hikes will affect vehicles built after May 2, which would arrive at dealers in late June. The spokesman said the price hikes reflect “usual” mid-year pricing actions, “combined with some tariffs we are facing. We have not passed on the full cost of tariffs to our customers.”
05:09 PM BST
EU ‘accelerating’ trade talks with Asia
The European Union is accelerating free trade talks with Asia following hefty tariffs by Donald Trump, the bloc’s trade chief said Wednesday.
Maros Sefcovic, the EU trade commissioner, said negotiations with Washington remained a priority but such talks will not come “at any cost”.
He said: “I would like to underscore that in today’s geopolitical context, we are making sure that the EU is not putting all its eggs in one basket.
“Bilaterally, we are accelerating the negotiations with Indonesia, the Philippines, Thailand and Malaysia.”
All four countries are key members of the 10-member Association of Southeast Asian Nations (ASEAN), a region of more than 650 million people.
He added: “We are also stepping up engagement with India. We just had another round of negotiations just last week.”
He was speaking in Singapore after signing a digital trade agreement between the EU and the city-state on Wednesday.
The commissioner said the EU is also looking at “potential enhanced cooperation” with members of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
04:28 PM BST
Mexico to ‘defend’ free trade with US and Canada
Mexico will fight to maintain its free trade agreement with the US and Canada in the face of Donald Trump’s trade war, the Mexican president said.
The United States-Mexico-Canada Agreement, which came into force in 2020, is up for review in 2026.
Claudia Sheinbaum told her morning news conference: “We will defend the USMCA because it has been beneficial for the three countries.
“If President Trump takes a different approach, we will be prepared for any circumstance, but clearly we want the USMCA to remain.”
04:26 PM BST
Wall Street gives up gains on worries over Google
On Wall Street, the S&P 500 and Nasdaq dropped into negative territory after two major tech firms, led by Google owner Alphabet, pulled the indexes lower.
Alphabet plunged 5.1pc, while Apple lost 2.1pc.
The falls took place after Apple suggested it was looking at changing the search feature built into its Safari browser. It said that usage of the existing Google-based search facility had fallen in April for the first time.
Bloomberg reported that Apple could start using an AI search engine from Google rivals such as Perplexity or Anthropic.
The S&P 500 is currently flat, while the Nasdaq is down 0.3pc. The Dow Jones Industrial Average of 30 leading American companies, however, remains up 0.5pc.
04:01 PM BST
UK open to a ‘sensible’ EU youth mobility scheme
The Government has suggested it is willing to consider a youth mobility scheme as part of a “reset” of ties with the European Union.
Sir Keir Starmer’s spokesman told reporters that Britain would listen to “sensible” proposals from the bloc provided they do not breach the Government’s so-called red lines for negotiations with Brussels.
“We are always open to listening to sensible proposals from the EU, but they have to be within the framework we have set out,” said the spokesman.
“We’ve always been clear that that framework involves no return to free movement and no return to the single market or the customs union, no return to the EU,” he added.
The comments appear to signal a shift in position after Sir Keir’s administration spent months rejecting the idea, which was first proposed by the EU last year.
Sir Keir wants to improve on Boris Johnson’s “botched Brexit deal” to help boost flagging economic growth. However, he is also under increasing pressure to reduce migration after Reform UK’s gains in local elections last week.
03:57 PM BST
No secret talks have taken place with China, says Bessent
Scott Bessent, the US treasury secretary, has said talks with China on Saturday will be the first between the two nations.
Asked by the House Financial Services Committee whether trade negotiations with China were advanced, Mr Bessent said: “On Saturday we will begin, which I believe is the opposite of advanced.”
He added that Pete Navarro, the White House trade adviser, would not be present for the negotiations in Switzerland.
Pressed for details on other mooted trade deals, the treasury secretary said revealing such information would be “detrimental” to the US but claimed “some of them are quite advanced”.
He added that it was “time for China to graduate from developing country status” in the eyes of international financial institutions including the IMF and World Bank.
03:37 PM BST
Relations with Europe ‘got a bit off track’, admits Vance
JD Vance has said relations between the US and Europe “got a bit off track” after the US vice president ruffled feathers with a scathing address on free speech earlier this year.
In February, Mr Vance drew ire at the Munich Security Conference for announcing that there was “a new sheriff in town”, before lecturing European governments over free speech and mass migration.
Kaja Kallas, the EU’s top diplomat, denounced the speech as “trying to pick a fight” with Europe, while the German defence minister branded Mr Vance’s chiding as “unacceptable”.
Mr Vance, speaking at an event hosted by the Munich Security Conference in Washington today, said the Trump administration was pressing the EU to lower tariffs but encouraged parties to break down barriers and improve the trading relationship.
03:33 PM BST
Wall Street rises on hopes of ‘de-escalation’ with China
Wall Street has risen this afternoon on hopes of better relations between the US and China.
US Treasury secretary Scott Bessent and trade negotiator Jamieson Greer are set for talks on Saturday with Chinese officials in Switzerland. It is a move Mr Bessent has described as a “de-escalation” rather than a step towards an imminent trade deal.
Analysts said the market was encouraged by the talks after earlier tit-for-tat measures between the United States and China.
Steve Sosnick of Interactive Brokers said enthusiasm around the US-China talks was “understandable”, but that investors were adopting a wait and see attitude.
“It’s being taken as a very modest positive,” Mr Sosnick said.
The S&P 500 is up 0.5pc, while the Nasdaq and Dow Jones are up nearly 0.6pc.
03:28 PM BST
Vance urges Europe to lift trade barriers
JD Vance has urged Europe to lift trade barriers and accept American goods.
The US vice president said that the trade relations with Europe could improve if members of the bloc lifted restrictions on US products.
“We think that we can have a much better trading relationship with a lot of our European friends if they just drop some of those both tariff but also non-tariff trade barriers,” he told a Munich Security leaders conference in Washington DC, citing regulatory hurdles.
The vice president zoned in on restrictions around agricultural products, defence equipment and technology as key examples.
“Sometimes you have officials in Europe who will say, ‘well, we’re going to penalise American technology firms in a way that we would never penalise European technology firms,” he said. “We just want a little bit more fairness.”
03:10 PM BST
Bank of Mexico says room to lower rate further
Mexico’s central bank has insisted there is room to lower the benchmark interest rate further, after enacting a 50 basis points cut to 9pc last month.
Jonathan Heath, the central bank’s deputy governor, said in a podcast with lender Banorte that the monetary authority would likely continue lowering the rate, while maintaining caution amid an uncertain economic scenario.
Speaking about the current economic uncertainty linked to tariffs imposed by the US government, Mr Heath said: “In the face of all these risks, we are still underpinning a restrictive monetary stance, but less and less restrictive than we had previously anticipated.”
He added that all scenarios considered by the central bank expected a slowdown in Mexico’s economy, as well as in the US.
02:51 PM BST
Traders expect three Fed rate cuts this year
Stock markets have risen despite expectations that the US Federal Reserve will leave interest rates unchanged later today.
Money markets give just a 2pc chance of the Fed announcing a rate cut longed for by President Donald Trump to boost the US economy.
Traders are betting the first cut could come as later as September, although three reductions are priced in by the end of the year.
Wall Street’s main stock indexes were up in early trading amid optimism about a US-China trade meeting in Switzerland at the weekend.
Meanwhile, the Bank of England is expected tomorrow to cut interest rates from 4.5pc to 4.25pc following the meeting of its Monetary Policy Committee.
02:33 PM BST
Wall Street rises ahead of US-China talks
US stock markets rose at the opening bell after Washington and Beijing announced the world’s two largest economies would hold trade talks at the weekend.
The Dow Jones Industrial Average climbed 0.4pc to 40,994.34 while the benchmark S&P 500 gained 0.3pc to 5,622.31.
The tech-heavy Nasdaq Composite rose 0.2pc to 17,724.56.
02:03 PM BST
Britain and Turkey to hold trade talks
Britain and Turkey will hold talks aimed at expanding the free trade deal between the two countries, the Turkish trade minister has said.
A free trade agreement between the two nations was rolled over after Brexit in 2020 but a review by both sides in 2023 concluded there was room for improvement.
Bolat wrote on X that a meeting in London with business secretary Jonathan Reynolds, pictured in the post below, was productive and that the sides signed sections of the free trade agreement about motor vehicles and chemicals, taking an “important step in the modernisation process”.
He added: “Additionally, we agreed to hold the 8th session of the Türkiye–United Kingdom Joint Economic and Trade Committee (JETCO), where we will comprehensively assess our trade relations, in London later this year.”
01:45 PM BST
HSBC launches tariff loan for struggling companies
HSBC has launched a new loan product to American companies struggling to cover the costs that have risen from Donald Trump’s tariff war.
The bank said its TradePay platform was being extended to directly cover the cost of tariff payments.
The FTSE 100 lender said this would allow importers to meet the increased expenses caused by shipping products into the US since President Trump’s “liberation day” tariffs. Shares were down 0.6pc.
Vivek Ramachandran, head of global trade solutions at HSBC, said: “Clients’ working capital needs are evolving – and we’re responding swiftly with solutions that deliver the most value to them.
“By settling import duties directly and frictionlessly through HSBC TradePay, our US clients have more visibility and control over their working capital at the time they need it most.
“As the world’s leading trade bank, we’re committed to supporting global businesses as a strategic partner and innovative problem solver, helping our clients navigate the complexities of global trade.”
HSBC chairman Mark Tucker said last week that world trade was facing a “period of deep and profound change”.
01:30 PM BST
Trump’s fresh tariff onslaught threatens to hit Britain where it hurts
Hollywood actor Jon Voight is most familiar as the star of gruesome horror flick Deliverance, the villain in Mission: Impossible, and as Angelina Jolie’s father.
But the veteran star’s new role threatens to have a much greater global impact than any of his turns on the silver screen.
That’s because in an unlikely twist, the actor has been asked by the US president to work out how to save Hollywood’s ailing film industry – and in doing so appears to have moved the White House on to a new front in its trade war against services imports which threatens to imperil Britain.
01:09 PM BST
James Bond, Bridget Jones and Paddington Bear would ‘beat Trump in a fight’
Sir Ed Davey has criticised Donald Trump for threatening the British film industry with 100pc tariffs.
At Prime Minister’s Questions, the leader of the Liberal Democrat urged Sir Keir Starmer to stand up to Mr Trump on behalf of the industry.
Speaking in the Commons, Sir Ed said: “People also want a Government that will stand up for our country against Donald Trump.
“First, he came for our steel workers and our car-makers with his outrageous tariffs. Now, Donald Trump is coming for our world leading British film industry.
“So will the Prime Minister work with our allies, in Europe and in the Commonwealth, and make clear to President Trump that if he picks a fight with James Bond, Bridget Jones and Paddington Bear, he will lose?”
Sir Keir replied: “He really should listen to the sectors that he thinks he’s championing.
“They do not want us to abandon the work we’re doing to try and get an agreement with America. They want that agreement to reduce tariffs.
“That is the sensible, pragmatic way to protect our national interest. It is not sensible or pragmatic to choose between the US and the EU, to abandon the work we are doing on trade with the US and leave the tariffs exactly where they are.
“That is the most damaging thing that could possibly be done.”
01:02 PM BST
UK in talks with US over film tariffs, says minister
Britain is in “active discussions” with top US officials over Donald Trump’s mooted 100pc tariff on all films produced outside the US, creative industries minister Chris Bryant said on Wednesday.
The creative industries minister told Parliament: “We are already in active discussions with the top of the US administration on this subject.
“We are working hard to establish what might be proposed, if anything, and to make sure our world-beating creative industries are protected.”
Mr Bryant added that modern films are inherently “multinational”, citing Paddington in Peru being made in part by France’s Studio Canal and starring Spanish actors.
12:46 PM BST
Macron: We want to diversify our economic partners
Emmanuel Macron has said France intends to diversify its economic partners and is in favour of signing trade deals if they protect its producers and guarantee a level playing field.
The French president, who was speaking alongside new German Chancellor Friedrich Merz at the Elysee palace, also said there was a need for more public investments at a European Union level.
In a joint article for Le Figaro newspaper timed to coincide with the chancellor’s first overseas trip, the two leaders writes: “As we face war on our continent, fierce global competition, accelerating climate and technological change, and threats of a global trade war, we have agreed on a comprehensive agenda to relaunch our relationship.”
They added: “We will make the most of Franco-German coordination and instincts to make Europe more sovereign, with an emphasis on security, competitiveness, and convergence,”
The German chancellor is heading to Warsaw later on Wednesday for talks with his Polish counterpart, Donald Tusk.
12:19 PM BST
Ireland cuts growth forecast in face of tariffs
Ireland has cut its economic growth forecast in light of Donald Trump’s tariffs and warned that a transatlantic trade war would weaken its economy further.
The Irish government expects the economy to expand 2.5pc this year, down from its earlier forecast of 2.9pc, and warned that in the event of a tariff war between the EU and US its growth would be 2pc falling to 1.75pc next year.
Paschal Donohoe, the Irish finance minister, said: “The more contested and fragmented world that is now taking shape represents a serious headwind for the Irish economy which has benefited so much from the rules-based, multilateral trade system.
“Even in the absence of any further changes in tariffs, there is evidence that firms and households are adopting a ‘wait-and-see’ approach.
“In other words, they are holding off on big-ticket purchases; this is also a feature in other economies.”
Ireland exported goods to the US worth €73bn (£61bn) last year, almost a third of the country’s total exports and driven by pharmaceuticals.
Maros Sefcovic, the EU trade chief, has insisted that the bloc is prepared to enact a raft of countermeasures should talks with the US collapse.
He told the European Parliament: “We do not feel weak. We do not feel under undue pressure to accept a deal, which would not be fair for us.”
11:56 AM BST
Dollar rises ahead of Fed meeting
The dollar ticked up on Wednesday morning as investors factored in few surprises from today’s Federal Reserve meeting.
The greenback gained ground against European currencies with the euro and pound down 0.1pc at $1.1366 and 0.2pc at $1.3350 respectively.
Florian Ielpo at Lombard Odier said the Fed is widely expected to keep rates steady given looming inflationary pressure from tariffs, but a lurch to address inflation head-on could spook some markets.
“A dovish surprise looks extremely unlikely,” he said, adding: “Hawkish surprises could lead to a temporary decline in cyclical assets.”
11:28 AM BST
Pandora warns of tariff-induced price rises
The world’s largest jewellery company has said it would favour hiking prices over moving production to the US in response to Donald Trump’s tariffs.
Alexander Lacik, the chief executive of Danish jeweller Pandora, said that high labour costs and a lack of skilled workers ruled out US-based manufacturing as “an affordable proposition.”
He told Bloomberg: “There is not enough efficiency that I could generate in our production or value chain to cover tariffs of, let’s say, 40pc.
“It will be passed on to consumers in one way, shape or form.”
Pandora currently produces 95pc of its jewellery in Thailand, which Mr Trump has threatened with 36pc import tariffs, and hopes to open a plant in Vietnam next year - a country facing US tariffs of 46pc.
After the US president’s tariff announcement in early April, Pandora said it expected a hit of around $1.2bn kroner (£135m) annually.
11:07 AM BST
Oil prices rise on Switzerland talks hope
Oil prices have been buoyed by hopes that the sit down US-China trade talks could reignite demand.
Brent crude, the international benchmark, rose as much 1.35pc to nearly $63 a barrel, although it remains down around 16pc since the tariff announcements in early April.
Oil has trended lower of late on escalating trade frictions, coupled with OPEC’s plans to ramp up supply.
10:47 AM BST
Have your say…
The upcoming meeting between American and Chinese representatives in Switzerland is “otherworldly”, born out of tariff hysteria and doomed, according to Telegraph readers.
Here is a selection of views on the tariff war from our comments section below. You can join the debate here:
10:35 AM BST
‘Aussiewood’ pleads with Mel Gibson over Trump tariffs
Australia’s film industry has pinned its hopes on actor Mel Gibson to convince Donald Trump to abandon his 100pc tariffs on films produced outside the US.
Industry leaders have warned that film tariffs could devastate Australia’s A$1bn (£490m) Hollywood business and called on US-born Mr Gibson, who launched his career in Australia, to save the day.
The US president hired the Braveheart actor in January as a “special ambassador” to Hollywood.
Kate Carnell, chair of industry body Screen Producers Australia, expressed hope that Mr Gibson’s plans to shoot a film in Italy this year would bring home the impact of tariffs.
She said: “Hopefully Mel Gibson, as one of Trump’s advisers in this space, is telling the President that this is a dumb idea.
“For Mel Gibson to make his movie in Italy and then to have a 100% tariff for it to be shown in America is just nonsensical.”
The US president has mooted a 100pc tariff, saying Hollywood was dying a “very fast death” at the hand of incentives offered by foreign countries to lure filmmakers.
10:08 AM BST
BMW ‘assuming’ Trump will scrap tariffs
BMW has said it expects to largely ride out the impact of sweeping US tariffs, which the carmaker foresees being rolled back within months.
Oliver Zipse, the chief executive, said the German carmaker has been lobbying intensively for free trade and hopes its weight in the industry would move the dial.
“We are advocating this at various political levels in our markets,” he told reporters on a call, adding: “People listen to us attentively and our arguments are well received.”
Mr Zipse said he expected tariffs imposed by Donald Trump on Canada and Mexico to eventually be rolled back.
He said: “We assume that the North American free trade zone will be restored because these countries are far too interdependent. The costs for everyone are far too large.”
In a statement, BMW said it expects “some of the tariff increases to be temporary, with reductions from July 2025.”
BMW’s South Carolina plant exported vehicles worth over $10bn (£7.5bn) last year, but around half of its US sales are imports from Europe, Mexico and South Africa.
For the first quarter, BMW reported net profit of € 2.17bn and earnings before taxes of €3.11bn, around 25pc down on the previous year as BMW struggled in China.
Excluding China, where the company makes electric cars under its Mini brand, sales grew by 5.9pc.
09:45 AM BST
Construction activity shrinks for fourth month
Britain’s construction sector suffered a contraction in activity for a fourth month in a row, a closely watched survey showed.
However, the S&P Global UK Construction PMI indicated construction firms are optimistic on balance about their prospects for the next 12 months despite the global economic turmoil.
Tim Moore, economics director at S&P Global, said: “UK construction companies have endured a bumpy ride since the start of the year as domestic economic headwinds and hesitancy among clients led to a lack of new work to replace completed contracts.
“Output levels continued to slide in April, but the rate of decline eased to its slowest for three months. This was helped by slower reductions in residential building work and civil engineering activity.”
09:28 AM BST
Goldman Sachs pushes back forecasts for interest rate cuts
The US Federal Reserve will not cut interest rates until July, Goldman Sachs has predicted in a blow to Donald Trump.
The Wall Street bank pushed back its forecast for the first of three cuts it expects by the US central bank this year amid trade uncertainty.
Chief economist Jan Hatzius admitted the “mood music with China has improved” as representatives from Washington and Beijing prepare to meet in Switzerland later this week.
The bank expects the US tariff rate on China to drop from around 160pc to around 60pc “relatively soon”, with China likely to take similar action.
However, Mr Hatzius said the outlook for interest rates “remains very uncertain”.
He said: “Criticism from President Trump will not trigger a Fed policy response — neither an early cut without evidence of labour market deterioration nor a stubborn refusal to cut once the labour market does soften, provided long-term inflation expectations remain anchored.
“But we worry about more fundamental threats to the Fed’s monetary policy independence.
“If the White House gains the ability to remove the chair and other FOMC members without ‘cause’ — defined as inefficiency, neglect of duty, or malfeasance in office — this would make the Fed a negative outlier among developed market central banks in terms of removal protections.
“Academic studies and our own analysis show that reduced independence predicts worse inflation outcomes over time.”
09:06 AM BST
Vietnam hits trade records with US and China ahead of tariff shock
Vietnam’s imports from China and exports to the US both hit post-pandemic records in April after Donald Trump launched his trade war.
The Southeast Asian nation faces 46pc duties on its exports to the US if it is unable to reach an agreement with the White House at the end of a global 90-day tariff pause.
This could undermine Vietnam’s growth model and hit multinationals exporting from the country, including Samsung and Nike.
The Trump administration wants to reduce trade imbalances, but Vietnam’s surplus with the US – already one of the highest globally – expanded by nearly 25pc in the four months to April year on year, according to Vietnam’s statistics agency.
In March alone, it exceeded $13.5bn, the highest monthly figure ever, US data showed.
At the same time, Vietnam is ramping up imports from China, which also reached a post-pandemic record in April, exceeding $15bn, according to customs data.
08:46 AM BST
China insists trade talks are at US request
An upcoming meeting between China and the US in Geneva was requested by the Trump administration, Beijing’s foreign ministry said.
China announced earlier that Vice Premier He Lifeng will visit Switzerland from May 9 to 12 during which he will also have a meeting with a U.S. delegation led by treasury secretary Scott Bessent.
“Any dialogue must be based on equality, respect and mutual benefit,” foreign ministry spokesman Lin Jian said.
“Any form of pressure or coercion will not work on China.”
08:38 AM BST
FTSE 100 at risk of breaking record streak
The FTSE 100 was at risk of breaking its record streak of gains despite the US and China announcing they would hold their first talks on trade since Donald Trump launched his tariff war.
The UK’s blue-chip stock index was down 0.3pc in early trading as European shares slipped more broadly after weak corporate earnings and amid caution before the Federal Reserve’s rate decision later today.
The pan-European Stoxx 600 index fell 0.4pc, while the Cac 40 in Paris slipped 0.5pc. The Dax in Frankfurt was flat.
European healthcare shares led sector losses with a 1.8pc decline.
However, Wegovy maker Novo Nordisk rose 3.4pc after the company posted first-quarter operating profit above analyst forecasts.
08:18 AM BST
German factory orders jump ahead of tariff shock
Germany’s manufacturing demand rose by more than expected in March in a sign that Europe’s largest economy was recovering before Donald Trump’s tariff onslaught.
Factory orders increased by 3.6pc compared to February, which was higher than analysts forecasts for 1.3pc.
However, the figures will provide little solace for new chancellor Friedrich Merz as he prepares for the impact of US tariff policies.
Michael Herzum, a strategist at Union Investment, said: “Don’t read too much into this month’s increase.
“Unfortunately the recovery so far is nothing more than a flash in the pan.
“Unpredictable US economic policy will continue to be a burden for the time being and stands in the way of dynamic growth in 2025.”
08:04 AM BST
UK stocks fall despite US-China trade talks
The FTSE 100 opened lower despite impending talks between the US and China aimed at de-escalating the trade war between the world’s two largest economies.
The UK’s blue-chip stock index slipped 0.2pc at the open to 8,583.89 while the mid-cap FTSE 250 fell 0.3pc to 20,294.14.
On Tuesday, the FTSE 100 closed just a single point higher, extending its record run of 16 consecutive days of gains by the skin of its teeth.
07:55 AM BST
British cars and steel to be shielded from tariffs under US trade pact
British cars and steel are set to be shielded from the full force of Donald Trump’s tariffs as Sir Keir Starmer nears a trade pact with the US.
Trade negotiators from the UK and US are understood to be nearing an agreement to allow British car and steel exports to benefit from a lower tariffs up to an agreed quota.
The deal, which could come as soon as this week, would soften the US president’s plans for 25pc tariffs on UK vehicles imported into the US as well as cut the rate applied to steel and aluminium imports.
07:47 AM BST
China cuts interest rate as tariffs bite
China announced a raft of stimulus measures overnight in a bid to soften the economic damage caused by the trade war with the United States.
Beijing announced a cut to key interest rate cuts and a major liquidity injection in the run-up to talks between US and China officials on trade this weekend.
The talks are the first opportunity for the two sides to de-escalate tensions after a protracted cat-and-mouse game over tariffs in which neither wanted to be seen as backing down. The tensions have roiled global markets and upended supply chains.
“This would mark the first substantive talks between the world’s two largest economies since the prohibitive 125pc tariffs were introduced a month ago,” said Deutsche Bank analyst Jim Reid.
He added that China’s stimulus package signalled “a clear shift towards looser monetary policy in response to the trade shock”, which was similar to moves made last September in an effort to boost growth.
Citi analysts said in a note that “the tariff impact had started to surface,” and the stimulus measures could be “tactical” ahead of the trade talks.
07:40 AM BST
Xi to meet Putin in Moscow
The meeting between the US and China comes as Xi Jinping heads to Moscow for a three-day visit in a show of support for Vladimir Putin.
Moscow and Beijing declared a “no limits partnership” weeks before Putin ordered Russia’s Ukraine offensive in February 2022.
The latest visit comes after President Donald Trump made overtures to Russia’s leader in a bid to mediate the conflict.
In an article for Russia’s Rossiyskaya Gazeta newspaper published Wednesday, Xi hailed “resilient” China-Russia ties and called for other countries to stay out of their relationship.
“The two sides should jointly resist any attempt to interfere with and undermine the China-Russia friendship and mutual trust, not be confused by temporary events or disturbed by the rough seas and use the certainty and resilience of China-Russia strategic cooperation to jointly promote the process of world multipolarisation and the building of a community with a shared future for mankind,” he wrote.
The Kremlin had a day earlier praised Russia-China relations as a “genuine example” of cooperation and said they were “at their highest point”.
07:24 AM BST
Reynolds ‘working extremely hard’ on UK-US trade deal
Jonathan Reynolds said he would not give a “running commentary” on British efforts to secure a trade deal with the US.
The Business Secretary acknowledged there was “huge interest” in reports that a UK-US trade deal would be signed imminently, adding his department was working “extremely hard across the board”.
It came as he said the UK’s new trade deal with India would not undercut British workers, pointing to deals with other countries including one with Chile signed by the previous Conservative government.
Asked whether the agreement meant Indian workers paying less tax than British counterparts doing the same job, Jonathan Reynolds told the BBC Radio 4’s Today programme: “No.”
He added: “There is no situation where I would ever tolerate British workers being undercut through any trade agreement we would sign. That is not part of this deal.
“What the Conservatives are confused about, and Reform as well, is a situation where a business in India seconds someone for a short period of time to the UK, or a UK business seconds a worker to India for a short period of time, where you don’t pay in simultaneously now to both social security systems.”
He added: “This is exactly the sort of deal we have with 50 countries already, with the US, Canada, Japan, South Korea, New Zealand.
“The Conservatives recently, well a few years ago when they were in government, signed one with Chile for five years. So no, British workers are not being undercut.”
07:22 AM BST
US and China to hold first trade talks over Trump tariffs
The US and China will hold their first trade talks later this week since Donald Trump launched his tariff tirade.
US treasury secretary Scott Bessent and chief trade negotiator Jamieson Greer will meet China’s economic tsar He Lifeng in Switzerland in the first steps towards de-escalating the dispute between the world’s two largest economies.
Stock markets jumped in Asia and in after-hours trading in New York after Washington first announced the meeting that was later confirmed by Beijing.
“My sense is this will be about de-escalation,” Bessent told Fox News after the announcement.
“We’ve got to de-escalate before we can move forward.”
The negotiating teams convening in Geneva are expected to discuss reductions to the broader tariffs, according to Reuters.
Donald Trump’s administration has imposed 145pc tariffs on imported goods from China, with Beijing hitting back with 125pc duties on American products.
A China commerce ministry spokesman said: “The Chinese side carefully evaluated the information from the US side and decided to agree to have contact with the US side after fully considering global expectations, Chinese interests and calls from US businesses and consumers.”.
The spokesperson said China would not “sacrifice its principles or global equity or justice in seeking any agreement”.
07:06 AM BST
Good morning
Thanks for joining me. The US and China will hold their first talks on trade in a bid to de-escalate the tariff war launched by Donald Trump.
The two sides will meet in Switzerland later this week, with US treasury secretary Scott Bessent and chief trade negotiator Jamieson Greer to meet China’s economic tsar He Lifeng.
5 things to start your day
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British cars and steel to be shielded from tariffs under US trade pact | The Government has reportedly offered concessions over the UK’s digital services tax
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Whisky for frozen prawns – Britain’s £25bn trade deal with India unpacked | UK ministers face criticism for introducing National Insurance exemptions
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Trump tariffs ‘risk forcing Britons to delay retirement’ | Pension pots face up to 20pc hit amid trade war market turmoil, warn experts
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America ‘risks debt crisis if Trump cuts taxes’ | Tariffs risk fuelling an ‘alarming debt trajectory’, the Institute of International Finance warns
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Jeremy Warner: Reform’s economic agenda is an unworkable fantasy | The party’s tax and spend proposals risk another Liz Truss moment
What happened overnight
Asian stocks and the US dollar rose following news of an upcoming meeting between top US and Chinese trade officials.
Japan’s Nikkei 225 gained 0.1pc to 36,870.46 and Hong Kong’s Hang Seng rose 0.5pc to 22,767.94 as traders were cautious ahead of a Federal Reserve interest rates decision later today.
China blue chips rose 0.2pc to 3,816.80. A sizzling rally in Asian currencies slowed with Korea’s won down sharply and an interest rate cut in China pushing down the yuan.
On Wall Street, the Dow Jones Industrial Average fell 1pc, to 40,829.00, the S&P 500 0.8pc, to 5,606.91, and the Nasdaq Composite fell 0.9pc, to 17,689.66.
In the bond market, US Treasury prices rose as a well-received auction of the benchmark 10-year note suggested demand for US government bonds remained intact.
The yield on 10-year notes fell 4.31pc, from 4.34pc late on Monday.