1. Shang Jin-Wei makes some important suggestions on how countries can mitigate the Trump trade shock.
First, they must devise effective retaliation strategies. The European Union’s (EU’s) Anti-Coercion Instrument provides a useful model for applying economic pressure without directly harming domestic industries. For example, these measures could allow the bloc to suspend intellectual-property protections for US software and streaming services or restrict US banks and financial-service providers from operating within EU markets. Developing countries might find such measures especially attractive, because the US tends to run large trade surpluses in intellectual property and financial services.China’s mineral-export restrictions offer another example... A number of other countries have market power in some key products they export, and might explore a similar approach. Governments must also consider the indirect yet significant impact of interest-rate and exchange-rate fluctuations from Mr Trump’s tariffs. For emerging markets and developing economies, this means keeping short-term foreign debt at sustainable levels. Globally, companies must prepare for the possibility that interest rates will remain elevated for longer than anticipated... Strengthening regional economic integration by removing trade and investment barriers within existing trade blocs would be much more productive than raising tariffs on US goods.
2. Important emerging threat, the security of undersea cables and pipelines.
In October 2023, the Chinese-owned container ship Newnew Polar Bear performed a mysterious trip during which several undersea installations in the Baltic Sea were damaged. First, the Balticconnector gas pipeline connecting Finland and Estonia lost pressure, then a cable sustained mysterious damage. Authorities discovered that another cable had been damaged hours earlier.A few months after that, the Joint Expeditionary Force — a regional military grouping comprising the UK, the Nordic nations, the Baltic nations and the Netherlands — announced a new initiative to track precisely such threats to Baltic Sea infrastructure. Last month, after a further string of suspicious cut cables, the group announced it was activating the initiative, called Nordic Warden. Just a week later, Nato unveiled Baltic Sentry, an operation with naval vessels patrolling the waters above undersea cables and pipelines. Although Baltic Sentry is a Nato operation, it was conceived by Baltic Sea leaders at a meeting in Helsinki. Like Nordic Warden, it is an entirely European undertaking.
This has an important implication at a time when the US has been actively disassociating itself from European security
The Baltic Sea countries have cobbled together a Baltic Sea maritime presence that — while not yet large enough — doesn’t depend on America... on a daily basis, the nations look after their waters. Making America redundant was never their intention; they just knew that constabulary services in their region were not a top US Navy priority. If Trump were to announce tomorrow that America is pulling out of the Baltic Sea, little would change. One might even ask whether anyone would notice. This approach is likely to extend elsewhere as allies assemble enough resources (and some form of nuclear umbrella extended by Britain or France) to render the US good-to-have rather than need-to-have.
3. BYD is upending the extant business models in the global car market by providing advanced driver assistance systems a standard feature across most of its models at no additional cost.
For years, carmakers have looked to driver assistance software as the key to offsetting declining hardware margins. This held promise as a cash cow, much like tech companies monetise cloud services, a high-margin add-on that would generate billions in new revenue. Tesla, for example, charges $8,000 for its driver assistance software in the US as of April. Mercedes-Benz and GM are among many carmakers banking on monetising assisted driving technology. There are inherent risks to self-driving software, from technology failures to potential cyber security threats. But unlike fully autonomous vehicles, which remain controversial and unproven at scale, advanced driver assistance systems — which enhance rather than replace human control — have already demonstrated their value.Studies suggest that these systems, which include highway and traffic assist systems, automatic emergency braking and forward collision warnings, could significantly improve road safety. Research from the Insurance Institute for Highway Safety has shown that cars with these features can reduce rear-end collision involvement rates by up to 50 per cent. Wider adoption could reduce accident frequency by around a quarter, according to research in the UK, while the most common types of accidents would be reduced by 29 per cent with full deployment. Assuming a conservative 30 per cent adoption rate and a $5,000 fee per vehicle, a carmaker selling 10mn cars annually could potentially generate $15bn in revenue a year from self-driving features alone. Some carmakers have introduced subscription models: Tesla, for example, charges $99 a month, which helps generate recurring revenue long after a car is sold. Scale that adoption further — as technology advances and consumer scepticism declines — and the financial potential becomes even more compelling. That explains why automakers have been so eager to monetise the technology. Safety sells.The question now is: can it still be sold? BYD is making that question harder to answer. By including advanced driver assistance systems as standard across its line-up — even on its $9,500 Seagull EV — BYD is challenging the pricing strategy that rivals have relied on. Automakers will find it increasingly difficult to justify charging for software in markets where BYD is offering it as standard. The longer-term consequences could be even more disruptive. If BYD’s move forces rivals to slash software prices — or abandon paid models entirely — the industry’s vision of AI-powered, high-margin profits may never fully materialise... Now, with each new market it enters, BYD won’t just be selling more cars, it could start to redefine industry expectations. History suggests that once a technology becomes indispensable, the premium disappears. Power windows, anti-lock brakes, rear-view cameras — all were once luxury features that have become standard. Once consumers get used to something as standard, there is no turning back. Just like seatbelts.
4. Meanwhile, amidst increased competition from Chinese EV makers and delays in the mainstreaming of EV's, European car makers are returning focus on ICE vehicles.
Global new model launches of ICE and hybrid vehicles are expected to rise 9 per cent this year from 2024, according to S&P Global Mobility. Carmakers are expected to introduce 205 petrol models, down 4 per cent from 2024, while hybrid launches are predicted to rise 43 per cent to 116 models.
5. Germany faces an erosion in manufacturing, especially pronounced among car makers, industrials, and chemicals.
The contraction of Germany’s industry is evident in the fall of market value in the sector. Together, Dax constituents Volkswagen, Thyssenkrupp and BASF have lost €50bn, or 34 per cent, in market capitalisation over the past five years. From 2010 to 2014, carmakers on the Dax index were more valuable on average than their peers in any other sector, but valuations have slipped as demand has started to falter. VW’s deliveries to customers last year slumped by nearly a fifth compared with the pre-pandemic year of 2019. In other industrials, steelmaker Thyssenkrupp has announced plans to reduce its production capacity by up to a quarter and cut 40 per cent of jobs. BASF is looking to cut costs at its Ludwigshafen headquarters, the world’s largest chemical site, by €2bn a year.
An important contributor is the high electricity prices, higher than in competitors.
Production in energy-intensive industries is 20% below pandemic levels, with the country's world-leading chemicals industry being among the worst hit..
According to Destatis data, roughly 40 per cent of jobs and more than half of revenues in Germany’s chemical industry are tied to so-called base chemicals, most of which are derived from gas and crude oil. Producers of the materials, used in plastics, fertilisers and coatings, rely on cheap energy to maintain narrow margins in a highly competitive market... And the sector, which supplies other industries, has long been a bellwether for industrial demand.
6. Good graphical summary of the problems facing Germany's railways. Deutsche Bahn's intercity service is now less punctual than the continent's worst operator in Britain.
About 72 per cent of Deutsche Bahn’s intercity trains arrived within 10 minutes of their scheduled arrival time in the year to January 2025, compared with 78 per cent of British long-distance trains, according to the FT analysis. Any interaction with the German rail network is also one of the biggest factors affecting the punctuality of long-distance rail travel in central Europe. Services from Germany to Amsterdam, for instance, are delayed by an average of almost 13 minutes, while trains coming to the city from elsewhere are typically within two minutes of their scheduled arrival time... The analysis is based on more than 1.9bn train arrivals at stations that were tracked by the websites from February 2024 until the end of January 2025, amounting to more than 5mn a day... The performances of the rail networks in both the UK and Germany lag far behind some of their European peers. In Austria, Switzerland and the Netherlands, punctuality consistently exceeds 90 per cent. Germany’s neighbours also suffer from Deutsche Bahn’s patchy performance, as its delayed trains have knock-on effects for timetables across central Europe.
In Basel’s central station, trains originating in Germany arrive with an average delay of more than 12 minutes — 12 times higher than those coming from elsewhere. The Swiss network, renowned for its punctuality, has resorted to stopping some late-arriving German services at the border to prevent them disrupting local operations. Deutsche Bahn told the FT that infrastructure was “the key to more punctual railways”, adding that 80 per cent of all delays were caused by the poor state of its network. The company described its infrastructure as “too crowded, too old and too prone to disruptions”... For decades, Germany skimped on maintenance and infrastructure upgrades as successive governments put a higher priority on fixing roads and balancing budgets. According to data by Pro-Rail Alliance, a German railways lobby group, the German government in 2023 spent just €115 per citizen on railway infrastructure, compared with three times that amount in Austria and four times in Switzerland. Andreas Geissler, a transport policy expert at Pro-Rail Alliance, told the FT that investment surged to €190-€210 per citizen in 2024. Over the past 15 years on average the investment stood at just €73 per citizen.
Deutsche Bahn has labelled 16 per cent of all German railways infrastructure as “poor”, “deficient” or worse. The investment backlog that needs to be dealt with grew by €2bn in 2023 to €92bn, according to Deutsche Bahn estimates.
Elon Musk's cutting of the traditional consulting firm contracts may well result in their replacement by those like Palantir.
Palantir, an analytics firm chaired by Peter Thiel, who worked with Mr Musk at PayPal, has gained a foothold in the Department of Defence and is spreading quickly across the federal government. Among other things, it helps organisations feed their data into artificial-intelligence (ai) tools. In the final quarter of 2024 its revenue from America’s government grew by 45% year on year. Its share price has been on a remarkable ride, more than doubling since Mr Trump’s election in November. Booz Allen Hamilton’s has fallen by a third. Unlike most other software providers, Palantir embeds teams of engineers with its clients to help them make use of its technology. For now, it works on many projects alongside firms such as Accenture and Deloitte. But some also view it as a potential competitor to the big consultancies, particularly when it comes to ai. Mr Thiel has described conventional consulting as a “total racket”.
8. Impact of US aid freeze on Kenya is severe.
Business at hotels, car rentals and shops — even a nail bar — in aid-dependent areas of Kenya has fallen in the weeks since Donald Trump suspended funding to USAID... Hotels were refusing bookings for NGO workers, fearing they wouldn’t be able to settle their bills... Staff working on US-funded projects had begun pulling children from school, abandoning rental properties and heading elsewhere, she added... Hundreds of expatriate aid workers, either directly or indirectly employed by USAID, are languishing without pay, uncertain about schooling for their children, and in some cases poised to leave the country. Estate agents are anticipating a dip in rental markets in leafy neighbourhoods of Nairobi, while financial analysts predicted a slight softening in the value of the shilling. In 2023, the last year for which official data is complete, Kenya received $850mn in US aid, backing more than 230 projects to varying degrees. Projects in higher education, hospitality training for orphans, drought mitigation and water sanitation, all stalled at the stroke of Trump’s pen. Banks are declining to provide emergency loans, uncertain if the tap will ever be turned back on. The agency subcontracted a growing proportion of its work to Kenyan organisations, many of which are not equipped to survive three months without core funding. Please use the sharing tools found via the share button at the top or side of articles. Hardest hit has been healthcare, which at $402mn received nearly half of the US funding.
9. India holds just 0.23% of the world's AI patents.
India ranks 13th globally in AI talent concentration, with 0.42 per cent of LinkedIn members saying they have skills in the technology. The rank positions it behind smaller but technologically advanced nations of Israel, Singapore and South Korea. Despite its vast population and network of science and engineering colleges, India's AI talent pool is not as deep as one might expect... India is experiencing the biggest AI talent exodus in the world, with a net migration rate of -0.76 per 10,000 LinkedIn members who have AI skills, according to the Stanford report.
10. Thanks to shale oil and Canadian imports, US oil imports from Saudi Arabia has been on continuous decline and has now hit its lowest since 1985.
11. US Treasury Secretary Scott Bessent makes an economic partnership proposal to Ukraine.
Ukraine is endowed with natural resources and other national assets that can drive its postwar economic growth, but only if its government and people are armed with sufficient capital, expertise and the right incentives. The terms of our partnership propose that revenue received by the government of Ukraine from natural resources, infrastructure and other assets is allocated to a fund focused on the long-term reconstruction and development of Ukraine where the US will have economic and governance rights in those future investments... The terms of this partnership will mobilise American talent, capital, and high standards and governance to accelerate Ukraine’s recovery and sends a clear message to Russia that the US is invested in a free and prosperous Ukraine over the long term... The proceeds from future revenue streams would be reinvested back into key sectors focused on unlocking more of Ukraine’s growth assets. The terms of this agreement would also ensure that countries that did not contribute to the defence of Ukraine’s sovereignty will not be able to benefit from its reconstruction or these investments... The US would not be taking ownership of physical assets in Ukraine. Nor would it be saddling Ukraine with more debt. This type of economic pressure, while deployed by other global actors, would advance neither American nor Ukrainian interests. In order to create more value over the long term, the US must be invested alongside the people of Ukraine, so that both sides are incentivised to gain as much as possible.
12. Signatures of reversing consensus on climate change forged at the Paris Agreement 2015
Friedrich Merz... warned that German economic policies had been “almost exclusively geared towards climate protection”, and that “we will and must change that”. Decommissioning coal and nuclear power plants without an adequate replacement in place would “massively jeopardise Germany as an industrial location”, and thus was “out of the question”... the US may abandon climate action at the federal level altogether... (in China) the construction of new coal-fired thermal power plants on the mainland reached a 10-year high in 2024, with almost 100 gigawatts of additional capacity being added to the pipeline. Fewer plants are being shut down as well; about 13 gigawatts of capacity went offline in 2020, as compared to 2.5 gigawatts in 2024... The premium for green bonds — which represents how much extra investors are willing to pay for environmentally-sustainable investments — almost vanished in 2024. Meanwhile, issuances of green bonds from US-based sources are half of what they used to be, and dollar-denominated green bonds now represent only 14 per cent of the global green bond market.
13. Janan Ganesh writes that the pendulum on the anti-woke movement may have swung too far.
Until recently, conservatives put forward a case that had lots of voters nodding: that woke-ism is illiberal dogma; that liberals themselves are too weak to stand up to it. Now, having prevailed, this argument is sliding into free speech absolutism, scolding of the insufficiently patriotic and a general obsession with culture for which the public appetite is smaller... Having rejected woke, voters will be increasingly protective of other liberal gains. Misreading this, and high on themselves, conservatives will end up weirding people out in a major way. We can’t predict the exact form of the over-reach — the right’s equivalent of Defund the Police — but some fatal gilding of the lily is coming. These people don’t know how to take Yes for an answer. It is a wonder that such enthusiasts for western culture should ignore one dictum of it, inscribed on the Temple of Apollo as an eternal warning. “Nothing in excess.”
14. More on the K-shaped recovery facing the Indian economy. On SUV sales
SUV sales grew 14 per cent in 2024, more than double the overall passenger vehicle market’s 5 per cent, according to GlobalData. They accounted for 56 per cent of the car market, up from 51 per cent the previous year.
15. Rana Faroohar has an important point about the Trump administration.
There is a notable silence on these topics from Republican senators and business leaders alike. Plenty of people will say privately that they are worried about Doge’s slash-and-burn techniques. But no one wants to run afoul of Musk or Trump in public for fear of retribution (indeed, I will say that in my 33 years of journalism, I’ve never had as many sources want to speak only on background as they do now).
Max Hastings echoes
The fear — and it is indeed fear — that suffuses much of the world after these first weeks of the Trump presidency derives from a belief that the great engines of American democracy are being shut down. A supine Congressional majority and a partisan Supreme Court decline to check Trump’s absolutism, and he marches roughshod over the law. He aspires to be a Sun King — contemporaries’ name for France’s Louis XIV (1638-1715) — making all those around him captives of his rays, and doomed if his warmth is withheld.
16. Germany presents a fascinating political experiment in so far as it contains two parts which were in opposing ideological and political factions before the Berlin Wall collapsed. The FT has a good graphic that captures the divide.
This also shows that if this were a first-past-the post voting system, the CDU/CSU would have swept the West and Afd the East. As Times writes, in the recent elections, the two parts voted as different countries.
If East Germany were still its own country, the hard-right Alternative for Germany, or AfD... would have scored a convincing win in the elections on Sunday, with nearly one in three voters there casting ballots for it. Only two of 48 voting districts outside of Berlin in the former East Germany were not won by the AfD. In a handful of districts in the east, the AfD got nearly 50 percent of the vote... The vote tally in the east mirrored state elections in three eastern races in September... That division... has become a persistent feature of Germans’ voting habits... only 42 percent of Germans in the east voted for traditional West German parties... In the former East, the AfD is increasingly visible. Many members are active in civil society — including several mayors — which means even people who do not vote for the party come in regular contact with it.
And this may owe to the persisting differences between the two parts even after nearly 35 years of reunification.
The vote also signalled the sharply contrasting fortunes of AfD and SPD (which did its worst performance since 1887).
