Weekend reading links

1. McKinsey is facing new challenges following the expansion of its digital practice.

In the 2010s, as many chief executives grew increasingly nervous that their companies would be the next victims of digital disruption, McKinsey invested to broaden its offerings. Between 2013 and 2023 it acquired at least 16 specialist technology consultancies, giving it the ability to assist clients not only with their digital strategies, but everything from developing prototypes of new products to building whizzy data-crunching tools. That points to the final source of the firm’s recent expansion, as it has pushed more widely into implementing its own advice. Having counselled a client to spruce up its technology, sharpen its operations or squeeze its suppliers, McKinsey will often now hold their hands through the process. That has meant muscling in on a segment of the consulting market traditionally dominated by Accenture and the “big four” professional-services giants, which charge considerably lower rates, notes Tom Rodenhauser of Kennedy Intelligence. To compete, McKinsey has had to rethink how it charges clients (fees are now often tied to the results of a project) and whom it hires (focusing less on generalists, more on geeks and grizzled executives).

And there's the threat from the newbies like Palantir.

As bosses look to AI to transform their businesses, they are asking McKinsey and other consultancies for help. But they are also turning to less conventional partners. Palantir, an analytics firm, offers tools to feed enterprise data into AI models, and embeds its so-called forward-deployed engineers with its clients to get them up and running. Its revenue is still small (just under $3bn in 2024) but is growing at a blistering pace (48%, year on year, in the second quarter of 2025). Although it began by serving governments, it now makes over two-fifths of its revenue from businesses. Its market value has septupled over the past year, to more than $400bn. Analysts at UBS, a bank, describe Palantir as “McKinsey meets Databricks”, alluding to a software firm whose tools also help enterprises connect their data with AI models. That sounds a lot like QuantumBlack, McKinsey’s own AI unit and the crown jewel of its digital practice. Other AI companies are taking inspiration from Palantir, too. OpenAI, maker of ChatGPT, has begun offering a consulting-like service to help businesses deploy its models.

2. Impact of Trump tariffs on India's $86.5 bn exports to the US.

3. Taiwanese public opinion on integration with China.

4. Naushad Forbes writes about India's corporate R&D landscape.

We invest 0.3 per cent of gross domestic product (GDP) in in-house R&D to a world average of 1.5 per cent. Our 10 most successful non-financial firms (highly profitable firms in refining, information technology services and consumer goods) invest 2 per cent of profit in R&D; whereas their 10 most successful peers in the United States, China, Japan and Germany invest between 29 and 55 per cent. And Indian firms are completely missing in five of the 10 most technology-intensive industrial sectors worldwide… Our hundredth largest spending firm invested about ₹97 crore in R&D in 2022–23; our two-hundredth largest, about ₹33 crore; and our three-hundredth largest, about ₹16 crore. These are small numbers relative to the world’s leading firms.

5. China seeks to consolidate its semiconductor chip making industry.

Consolidation in the chip equipment space would help boost China’s bid to build a self-sufficient semiconductor supply chain and replace equipment from US groups such as Applied Materials and Lam Research, said Edison Lee, semiconductor analyst at Jefferies. Currently, a Chinese fab buying local equipment has to use multiple vendors, whose technology is not well integrated. “In the equipment industry, it is difficult to be very successful as a single-product company. Fabs prefer to buy multiple machines from the same vendor, which makes it easier to use,” he added. By consolidating, Beijing also hopes to better direct funding to firms deemed strategically significant... Little progress has yet to be made in consolidating China’s sprawling network of foundries — a segment that remains highly fragmented and politically sensitive. The past decade saw a surge in foundry projects backed by local governments, many of which built capacity in parallel, resulting in a glut of supply of mature chips and steep price competition. Chip experts note that China could also benefit from streamlining its advanced fabrication market, to concentrate talent and the most advanced chip equipment machinery in one place instead of being spread across disparate projects.

6. Some details of where Apple will source its US components from

For example, Apple said that all of its cover glass for iPhones and Apple Watches would be made by Corning in Kentucky, and that it would spend $2.5 billion on that effort... Apple also highlighted its partnership with Coherent, a longtime supplier of lasers for Apple’s facial recognition hardware, which is made in Texas... The iPhone maker said it expanded a partnership with Texas Instruments to make chips in Texas and Utah. Texas Instruments has long supplied chips for the iPhone, such as circuits to control USB interfaces or power displays... Other partnerships are with Applied Materials, a tooling company, GlobalFoundries, a chip foundry, and GlobalWafers America, which is supplying Taiwan Semiconductor Manufacturing Co. and Texas Instruments with made-in-USA wafers, the starting point for a batch of chips. GlobalFoundries manufactures chips for Broadcom, which supplies wireless chips for iPhones. Both will work with Apple to develop and manufacture 5G components in the U.S. Meanwhile, Apple will buy millions of advanced chips made by TSMC in Arizona, where it will be the factory’s largest customer... Apple said it would invest in and become a customer at an Arizona Amkor facility, which packages and tests chips, the final stage before installation in a computer. Apple also said it would expand existing data centers for artificial intelligence in North Carolina, Iowa, Nevada and Oregon.

This is a break-up of Apple's spending a year

In Apple’s fiscal 2024, the company spent $210 billion globally on cost of goods sold, $57.5 billion on operating expenses and $9.45 billion in capital expenditures for nearly $275 billion in global spending during the period.

7. Global rice prices plunge to an eight year low on the back of record harvests and India's resumption of exports. 

8. More on India's Russian oil imports

Indian refiners had gained $16bn in extra profit from importing discounted Russian oil, with almost $6bn of that going to Reliance... Before Moscow’s full-scale invasion of Ukraine in February 2022, India imported a minimal amount of Russian seaborne crude. Indian government data shows it has since bought discounted Russian oil worth nearly $140bn, which Ambani’s Reliance and others have processed into petrol and diesel for sale in both domestic and international markets... the country’s refineries operate by the book and that oil from Russia, unlike Iran and Venezuela, has not been subject to direct sanctions. Washington previously made no objection to the trade, as long as purchases were priced below the $60-a-barrel G7 price cap intended to limit Russian revenues while keeping oil flowing into the global market... Energy Aspects estimates that since the start of the war in Ukraine, India has received an average discount of $11 for each barrel of Russian oil compared with the international price of crude, though the discount has fluctuated and is now about $2 before freight costs.

See also this. 

9. Fascinating discussion about towns in France and England.

Yet it is shocking to realise that the medieval feudal lords had more of a stake in ensuring their new towns were sustainable than most property developers today. “The private sector has no financial interest in the sort of heavyweight placemaking you need to build at scale,” argues Hugh Ellis, director of policy at TCPA. “Even mining companies in the 1920s cared more about providing a decent home for their workforce than modern property development does.” Thrift adds: “If you look at the private sector housebuilding model, their necessity is to get the highest possible price for that house on the day they sell it. If it all goes downhill afterwards, it really doesn’t matter, because they’ve gone somewhere else by then.”

By contrast, the postwar new towns had a strong stewardship model of “owning the shops in the town centre and the business premises in the industrial area, having that money coming back in and being able to reinvest it for the good of the town and its maintenance,” says Congreve. But Ellis adds that the model “was deliberately broken in the 1980s by an ideological decision to basically vandalise the programme by forcing a fire sale of most of their assets to the private sector”. One reason why Milton Keynes — often held up a model new town — still has such good green spaces is that when its development corporation was wound up in 1992, a trust was created with an endowment to continue to manage the parkland.

10. Turmoil in the Chinese military as Xi replaces officials accused of corruption.

Three of the seven seats on the Central Military Commission — the Communist Party council that controls the armed forces — appear to be vacant after members were arrested or simply disappeared... Mr. Xi has set a 2027 target for modernizing the People’s Liberation Army, or P.L.A... In the first years after Mr. Xi came to power in 2012, he launched an intense campaign to clean up corruption in the military and impose tighter control, culminating in a big reorganization... The most jarring absence in the military leadership is that of Gen. He Weidong. The second most-senior career officer on the Central Military Commission, General He has disappeared from official public events and mentions, an unexplained absence that suggests he, too, is in trouble and may be under investigation. Another top commander, Adm. Miao Hua, who oversaw political work in the military, was placed under investigation last year for unspecified “serious violations of discipline,” a phrase that often refers to corruption or disloyalty. He was among around two dozen, if not more, senior P.L.A. officers and executives in the armaments industry who have been investigated since 2023, according to a recent tally by the Jamestown Foundation. Both men had risen unusually quickly under Mr. Xi’s patronage...

Since Mao Zedong’s era, the military has served not only as a fighting force but also as a lever of political control for Chinese leaders, as their ultimate protection against potential rivals or popular uprisings... Mr. Xi is the only civilian party leader who sits on the Central Military Commission, which ensures his singular power over the military. That also means that he cannot turn to other civilian officials to help him... The purges are likely to disrupt coordination, weaken confidence in commanders and prompt Beijing to be more wary of considering an amphibious assault on Taiwan

11. Excellent NYT editorial video advocating a change in the air ticket tax to fund the Federal Aviation Authority (FAA) that ends up as a case of taxing the regular air travellers to subsidise private jets. 

12. How the surge in gold exports provoked Trump's 39% tariff on Switzerland.

America’s trade deficit in goods with Switzerland was just over $38 billion last year. In the first six months of this year, the deficit ballooned to nearly $48 billion... In recent months, two-thirds of Switzerland’s exports to the United States were accounted for by various forms of gold. These bars of gold are often sent from London, a trading hub, to Switzerland, a refining hub, where the metal is forged into bars sized for the standards required by U.S. warehouses and then shipped across the Atlantic. Surging demand for gold in the United States as Mr. Trump threatened to upend the global trading order fueled a spike in Swiss gold imports — and greatly expanded the U.S. trade deficit with Switzerland. Excluding gold, Switzerland’s mammoth pharmaceutical industry accounts for half the value of Swiss products shipped to America. In 2024, Swiss drug companies, which include the pharma giants Roche and Novartis, exported around $35 billion worth of medicines, cancer treatments, vaccines and other drugs.

13. Some facts and observations about GCCs.

There are over 1,000 global organisations that collectively operate over 1,700 GCCs across India. They employ over 2 million professionals. They generate over $40 billion in annual value, set to surpass $100 billion in another five years. So, what’s the problem? Well, most GCCs are technically doing work that could have been outsourced to Indian outsourcers like Infosys, TCS, Wipro, HCL, etc. In fact, GCCs are so successful a strategy that they’re growing much faster than Indian outsourcers. And as if taking away potential revenue from Indian outsourcers weren’t enough, GCCs are now also taking away talent. That’s right. They’re hiring experienced and talented professionals using higher salaries, better brands and the promise of better work.

It's time somebody analysed the nature of the work done by in-house GCCs and that done by outsourced service providers like the Indian software firms. Is it significantly a case of the multinational firm (a) vertically integrating its activities and bringing them in-house, or (b) identifying more outsourceable work and relocating them to India, or (c) doing non-outsourceable, higher-skilled work in India? 

14. Fascinating statistic from Ruchir Sharma on wealth-creating companies.

Since 2015, the world has generated a total of 444 companies with average annual returns in dollar terms of more than 15 per cent, and a market cap that today exceeds $10bn. A solid majority of these — 248 — emerged outside the US... Countries such as Japan, Canada, Taiwan, Switzerland and Germany have their fair shares but the big numbers are in China, with more than 30 such compounders and... India has produced 40 steady compounders in that time. Most of the compounders have arisen in manufacturing, tech or finance... More than 50 — and thus more than one in five — of the steady compounders are European. And after a long slumber, signs are emerging of an entrepreneurial awakening: the number of tech start-ups in Europe more than quadrupled in the last decade to 35,000... Since 2015, the global billionaire population grew by 1,200 to over 3,000, and seven out of 10 new ones surfaced outside the US. While the number of names on the Forbes list grew by 70 per cent in America, it grew by 90 per cent or more from India and China to Canada, Israel and even Italy... Another cloak obscuring wealth creation worldwide is the market for private equity, credit and other assets, also widely seen as a US preserve. Nearly half of the $13tn in these private assets, and more than half in categories such as venture capital and infrastructure projects, is held outside the US. Unicorns — private firms valued above $1bn — are not an exclusively American species either; roughly 40 of the top 100 are based in other countries.

15. In a remarkable arrangement, the first such one, Nvidia and AMD have agreed to pay 15% of the revenues from chip sales in China to the US government in return for export licenses for their chips.

The two chipmakers agreed to the financial arrangement as a condition for obtaining export licences for the Chinese market that were granted last week, according to people familiar with the situation, including a US official. The US official said Nvidia agreed to share 15 per cent of the revenues from H20 chip sales in China and AMD will provide the same percentage from MI308 chip revenues... According to export control experts, no US company has ever agreed to pay a portion of their revenues to obtain export licences... Nvidia tailored the H20 for the Chinese market after President Joe Biden imposed tough export controls on more advanced chips used for artificial intelligence.

Trump has basically converted the US into a country where the rule of law has been replaced with the rule by law (made by Trump himself personally)! Talk about institutions!

16. India's exports to the US and their share of the country's exports of those products.

17. Europe rearms.

EU defence commissioner Andrius Kubilius told the FT that since Moscow’s invasion, Europe’s annual capacity to produce ammunition had increased from 300,000 to reach about 2mn by the end of this year Rheinmetall’s expansion will account for a big part of this growth: the company said its annual production capacity for 155mm rounds was set to rise from 70,000 in 2022 to 1.1mn in 2027.

18. In order to overcome deflationary pressures and stimulate household spending, China announces an interest subsidy of 1 percentage point on consumer loans (typical consumer loan interest rates are 3%) for purchases up to Rmn 50,000 ($7000). The subsidy will be borne 90% by the central government and 10% by local governments. This shift away from investment subsidy to consumer subsidy comes on top of a "trade-in" scheme whereby buyers can receive subsidised prices when they upgrade old goods like smartphones, air conditioners, and rice cookers. 

Weekend reading links

1. India's airline industry

No-frills airlines, of which Indigo is one of the world’s best examples, accounted for half the total seat capacity in 2014. A decade later, their share had shot up to over two-thirds, helped in no small measure by full-service carrier Jet Airways’ collapse in 2019... China has seen a bigger decline in airfares since 2011—45%—than India. That’s partly a function of how competitive the market is. China has 146 operating airlines, including global ones, compared with 91 in India. The latter had over 100 pre-Covid. Go First, formerly Goair, was the last prominent airline to bite the dust when it declared bankruptcy in 2023. Over 15 Indian airlines have failed in the past two decades, according to IATA.

2. The Ken has a story on Indian automaker's rare earths dependence.

India imported about 2,270 tonnes of rare earth minerals in FY24, up 15% from the previous year. According to Volza, a platform that tracks import data, there were 42 Indian buyers in 2024, sourcing from 43 suppliers around the world.

Rare earths have a critical role in EV manufacturing

Rare earth elements (REEs) include 17 elements, mostly placed on one side of the periodic table. These are what make permanent magnet synchronous motors (or PMSMs) go. PMSMs are the de facto standard for EVs, especially in two- and three-wheelers. Other REEs like Yttrium and Lanthanum quietly show up in your battery cathodes and electrodes... Electric vehicles are powered by lithium batteries. But to actually move, they need magnets. Not just any magnets—rare-earth permanent magnets made from things like neodymium and praseodymium. They sit inside motors and quietly make everything spin... the rare-earth permanent magnet is the invisible hero of modern mobility—sitting inside motors, power steering systems, infotainment units, even automatic window mechanisms. Basically anything that makes EVs feel like tomorrow’s tech instead of just today’s transport.

3. Consulting firms have become the major sources of CEO recruitment in the US.

General Electric. Procter & Gamble. IBM. For years, those companies and a handful of others were held aloft as “CEO Factories,” admired for their ability to recruit and mold corporate chiefs. Over a 20-year span, just three dozen companies produced one-fifth of the chief executives in the entire S&P 1500 index... the dominance of the traditional CEO factories is fast becoming a thing of the past. The companies most notably taking their place: consulting firms. Alumni of Accenture, Deloitte, PwC, EY and even little-known Swiss staffing firm The Adecco Group have all grabbed a bigger share of global CEO roles over the past 15 years, according to an exclusive analysis of the career paths of the CEOs at more than 4,300 global public companies. Meanwhile, the influence of storied CEO factories like GE and IBM has diminished, according to the analysis by Live Data Technologies.

4. Oil prices and the Indian economy

According to the Reserve Bank of India’s (RBI’s) projections, a 10 per cent increase in oil prices from the baseline assumption can push up the inflation rate by 30 basis points and reduce the growth rate by 15 basis points. A substantially higher increase in oil prices would inevitably have a bigger impact. The RBI’s Monetary Policy Report in April had a baseline assumption for crude oil (Indian basket) at $70 per barrel for 2025-26.

5. India's use of anti-dumping duties (ADD) to combat "material injury" to domestic industries arising from dumping.

From 1995 to 2023, India initiated over 1,100 investigations — more than the US or European Union — targeting not only China but also the EU, Switzerland, South Korea, Japan, and others. In 2024 alone, India launched 47 trade remedy investigations — 37 aimed at Chinese products like aluminium foil, vacuum flasks, and steel... In the past five years, India has imposed 133 anti-dumping measures on 418 products, many in the chemicals sector. Firms that rely on these chemicals as inputs face a constant threat of sudden duties, resulting in price volatility and supply disruptions.

6. Indian economy facts

Private final consumption expenditure (PFCE), which makes up nearly 60 per cent of India’s GDP, fell from a growth rate of 6.8 per cent in the pre-Covid years to 4.1 per cent in 2019-20 (FY20). After a brief post-pandemic recovery, it fell again: To 5.6 per cent in FY24, according to the RBI, and an even weaker 4.4 per cent, according to the National Statistics Office... Since mid-2023, growth in personal loans has fallen off the cliff — from 22 per cent then or 10 per cent or so now — reducing consumption... merchandise exports, which fell 12.8 per cent in FY24 and are expected to grow by only 2 per cent in FY25... According to the Forward-Looking Survey of the Ministry of Statistics and Programme Implementation, actual intended private-sector capex will fall from ₹6.56 trillion in FY25 to ₹4.9 trillion in FY26, a fall of 26 per cent... According to the government data, net payroll addition under the Employee Provident Fund was -5.1 per cent in FY24 and -1.3 per cent in FY25. The Naukri Jobseek Index of white collar jobs has flattened since FY23.

7. Disturbing data on a surge in Chinese exports despite all the trade war restrictions.

This year so far, China’s trade surplus with the world is nearly $500 billion — a more than 40 percent increase from the same period last year... China has made 45 percent more electric vehicles this year, even as Chinese companies are engaged in a vicious price war at home because of flagging consumer appetite. Exports of electric vehicles have soared 64.6 percent this year, according to the Chinese Association of Automobile Manufacturers.

Public policy's gatekeeping problem

This post will examine the rise of an important but less-discussed trend in public policy, the emergence of a category of entities as gatekeepers in the form of agents who accredit, certify, validate, or authorise the quality or efficacy of specific tasks or entities. In short, gatekeepers signal compliance of a third party with some benchmark. 

Such gatekeepers are pervasive in the market economy. Their examples include credit rating agencies, process and financial audit firms, product certification entities, third-party authorisers for insurance claims, asset valuation entities, etc. In the context of public policy, such gatekeepers include institutional certification agencies, standards certification firms, infrastructure works quality certification, licensed professionals (like architects, town planners, surveyors, etc.), rankings, and so on. Each performs the roles of assessment/evaluation and/or certification/validation.

I’ll skip the role of gatekeepers who operate in well-established markets and whose problems are widely known. Instead, this post will focus on the role of these firms in public services and development sectors. Some observations:

1. Gatekeeping is a specific form of outsourcing, since it involves the parcelling and contracting out of a distinct activity hitherto done in-house. It has its basis in the private sector, where activities can be neatly parcelled out, quantification of performance is possible, accountability can be fixed, and contractual incentives are aligned. The same cannot be said about the public sector.

A critical difference between the use of gatekeeping in the private sector and the public sector is the absence of any market test in the latter. Specifically, since users don’t pay for these services (or pay only a small part of the cost), there’s no competitive pressure to ensure good quality. 

In this context, it would be useful to keep in mind the example of the Ease of Doing Business (EoDB) rankings. While the rankings have doubtless triggered policy measures to simplify procedures and reduce hassles for businesses, the absence of a complementary attitudinal and cultural change management focus has reduced it to a performative exercise. Now that it has played out, I’m not sure about its signalling value for prospective investors. 

2. In keeping with the theory of scaling in the private sector, it’s a widely held view that state capability constraints to rapid expansion can be overcome by the likes of standardisation, outcome-based financing, and targeting. Accordingly, enlisting gatekeepers has become a prop to skirt around state capability deficiencies and rapidly scale activities. 

A good example is cleanliness programs like the Open Defecation Free (ODF) scheme. Another example is the certification of various kinds of educational, vocational training, skilling, and healthcare institutions. Similarly, with the certification of self-help groups, farmer producer organisations, and co-operatives. The Government of India enlisted the services of the Quality Council of India to undertake many of these activities. 

Poor service or institutional quality exists due to fundamental constraints arising from personnel capabilities and resource deficiencies. No gatekeeper or ranking can help systems leapfrog these deficiencies and overcome those fundamental constraints. They require sustained accumulation of capabilities and allocation of resources. 

For this reason, the ISO certification that had become a fad in the 2000s among government offices in many states has since fallen out of favour. The ISO 9001 certified offices had the form of quality without its substance. It was classic isomorphic mimicry. A tickbox exercise of cosmetic infrastructure upgrades, procedural changes, and role clarifications cannot be a substitute for state capability improvement and good governance. 

3. Ironically, the very state capability deficiency that necessitated the reliance on gatekeepers is generally also the reason for the failure of the gatekeeping solution. In the absence of monitoring, gatekeepers are vulnerable to being captured by the same interests they are supposed to evaluate or certify. 

4. Certifications can add layers of costs to the total price of the product or service. Certification comes with additional compliance requirements. A green certification often comes with the need for solar panels, water harvesting structures, new lighting fixtures, and so on, which add significant incremental costs compared to business as usual. The value of at least some of these requirements, especially their universal application, can be questionable. For example, the requirement of backup power sources like a diesel generator and solar panels to meet certain standards adds considerable incremental costs.

These cost layers can become a problem in an emerging market. The higher cost shrinks affordability, reducing the market size needed for these nascent markets to emerge and grow. This is best seen in the affordable housing market, where the restrictive zoning regulations, when supplemented with desirable features like sustainability, add several layers of cost that make the struggling market even less likely to emerge. It’s the classic everything bagel liberalism. 

5. On a related note, there’s a possibility that gatekeeping, by differentiating the certified/validated products, results in a distortionary market evolution. Let’s take the example of a star rating, where a product or a building is rated from 1 to 5 stars. Since people are less likely to buy the 1 or 2-star rated products, the sellers are more likely to invest in the higher-rated products. This results in perverse incentives like cutting corners on compliance and distorting the market with the lemon problem. Further, the higher cost of the higher-rated products also shrinks the addressable market. 

It’s, therefore, important to weigh the pros and cons before embracing gatekeepers. One strategy would be to confine gatekeeping to the higher market segments where signalling is valuable and where affordability is not a concern. 

6. Finally, in weak disciplining environments, like in the case with public sector institutions, gatekeepers are amenable to being captured and becoming handmaidens of vested interests. This distorts the gatekeeping signals and offers misleading information. 

There are several examples of this. Independent engineers and third-party quality audit firms becoming captured by the work contractors is not an uncommon feature in engineering works, especially in lower and mid-value works. Perhaps the most common are the several examples of rankings (of individuals in functional roles, institutions, administrative units, etc.) that are supposed to convey quality and performance. They have unfortunately become captives of unhealthy quid pro quos between the ranking agencies and those ranked. 

The Insolvency and Bankruptcy Code (IBC) in India triggered a new market for insolvency resolution professionals (IRPs), one that grew at a pace faster than the supply side could keep up with. The result is a system with a surfeit of poor-quality IRPs who have contributed to the lowering of the credibility of the process itself. The recent Supreme Court judgment in the case of the IBC-intermediated takeover of Bhushan Steel by JSW is a case in point (it’s perhaps more about the incompetence of the IRP than capture). 

For this reason, policymakers must be cautious and gradual in the adoption of gatekeeping in any sector.

Weekend reading links

1. Globalised nature of supply chains is captured in the form of the supply chain of the Chevrolet Silverado.

The high-margin General Motors model, which costs roughly $40,000-$70,000, relies on one of the most complex, international and interconnected automotive supply chains, making it particularly vulnerable to the US president’s threat to impose 25 per cent tariffs on Canada and Mexico. Of the 673,000 Silverados produced last year, 31 per cent were built at GM’s factory in the Mexican city of Silao and 20 per cent at its plant in Oshawa, Canada. But even for the roughly half manufactured at three US plants in Michigan and Indiana, it is likely that the power steering and door trim panels were built in Mexico; the rear lighting in Canada; the airbag module in Germany; and the centre stack display in Japan, according to S&P Global Mobility data... Data compiled by Export Genius shows that key components in Silverados are heavily dependent on parts imported from Mexico. The country’s exports of parts for the vehicle were worth almost $30bn last year, with braking systems alone accounting for $4.3bn.

2. Russia was the biggest beneficiary of the increased natural gas price from its invasion of Ukraine. The other beneficiary was Norway!

In 2022 and 2023 (until European gas-importing countries were able to build LNG import terminals) Norway received excess natural gas export revenues of €109bn, according to estimates by the Norwegian Ministry of Finance. Norway’s 78 per cent marginal tax on profits in the oil and gas sector, along with returns on the government’s direct investments in oil and gasfields, and dividends from its ownership share in its parastatal oil company Equinor, ensured that the lion’s share of this windfall went into the country’s coffers while a much smaller share was retained by the companies that produced the gas. Oil and gas companies operating in Norway responded to the rise in prices by increasing production. Markets did their job of allocating scarce gas supplies to their most efficient use, in many cases mitigated by energy subsidies... But Norway’s government has not recognised its windfall as profits from the war. This year it allocated a measly €3bn to support Ukraine’s desperate war effort... The value of Norway’s war windfall is almost equivalent to all US military and civilian support for Ukraine to date... Any increase in Norway’s support for Ukraine, they argue, should be subject to the national spending rule that stipulates no more than 3 per cent of the value of its sovereign wealth fund can be spent each year.

3. Steve Bannon and Donald Trump are not being whimsical when seeking closer ties with Russia, but are merely following the attitudes of their electoral base. 

Similarly, a large share of Republican voters support ending aid to Ukraine.

4.  Excellent tribute by Tim Harford to the late Donald Shoup, the father of "parking" economics. Some insights

Shoup reckoned that in a small Los Angeles neighbourhood — just 15 blocks — drivers collectively drove an extra million miles a year in their hunt for a good spot. “Shoup concluded that nearly one-third of all the cars in parking-scarce neighbourhoods were looking for a place to park,” writes Grabar... An apartment parking lot would be vacant during the day, while the office and retail would be empty at night. Regulatory parking minimums did not allow for sensible ideas such as the idea that an apartment building might share parking with a neighbouring mall... given that each new parking space cost thousands of dollars to provide, and given that there were at least three spaces per vehicle, the value of all the parking spaces in the US exceeded the value of all the cars... Shoup suggested solutions: abolish regulatory parking minimums, introduce parking meters and set the prices sufficiently high that people don’t have to waste time looking for a space — although they may instead walk, cycle, switch to public transport or drive at a less busy time. But the game-changing idea was to propose that parking revenue from kerbside meters should be invested in local improvements to the streetscape such as litter collection, tree-planting or pleasantly paved sidewalks. This, says M Nolan Gray, one of Shoup’s many acolytes, was his “greatest contribution”. Locals stopped opposing parking meters, and started demanding them.

5. Stanley Druckenmiller, founder of Duquesne Capital Management hedge fund and formerly George Soros's right hand man, may be the most influential Wall Street personality in the Trump administration through his two proteges - Scott Bessant, Treasury Secretary, and Kevin Warsh, the most likely successor to Jay Powell.

7. Amidst the extreme polarisation in US politics, the one area where the Republicans and Democrats may be converging is in anti-trust. This is borne out by the bipartisan consensus on the nomination of Oxford-educated and business concentration wary Gail Slater to succeed Jonathan Kanter and head the Justice Department's anti-trust division. 

Slater embodies the unlikely alignment of progressives who support tough antitrust enforcement and a new generation of populist conservatives helmed by vice-president JD Vance, who has called for the break-up of Google. While the motivation of the two groups differ — progressives look to curb anti-competitive behaviour and corporate power while Maga populists also aim to clamp down on platforms and companies they accuse of censoring conservative voices — the unlikely bipartisanship has spooked Wall Street.

6. As tariffs rise, here's a summary of the trade-weighted tariffs of major countries.

The trade-weighted US tariff of 2.2 per cent is lower than that of any of its trading partners, except Japan at 1.7 per cent. The European Union’s stands at 2.7 per cent, China at 3 per cent, Canada at 3.4 per cent, Mexico at 3.9 per cent, Vietnam at 5 per cent, Brazil at 6.7 per cent, South Korea at 8.4 per cent, and India—labelled by Trump as the “tariff king”—at 12 per cent.

7. Maurice Obstfeld makes some important points.

The trade balance equals what an economy produces minus total spending on consumption and investment. It is therefore linked to manufacturing output and employment. This is not because importing more lowers GDP. Rather, when demand rises beyond output in an economy close to full employment, as in the US today, part of that higher demand is for non-tradeable goods. As supply expands to meet demand, production inputs including labour are drawn away from tradeable sectors like manufacturing. Demand for tradeable goods is thus satisfied by imports — the trade deficit grows and manufacturing shrinks. Tariffs do not necessarily push the balance between income and spending in one direction or the other, which is why they don’t improve the trade balance or manufacturing employment. Tariffs will cause the currency to strengthen... This both raises imports and harms exports. Tariffs also hurt exports by raising the prices of critical intermediate goods... Tariff talk distracts us from the appropriate economic policies to help America. Better targeted policies could include a more redistributive tax system, limits to corporate market power, further healthcare reform, and workforce development. The Trump administration is offering none of these.

8. American corruption fact of the day  

Mr. Trump’s post-election fund-raising... inaugural committee, which is a separate entity, brought in more than $170 million in private donations as of early January, a record... Among them are the technology companies Amazon, Meta, Google and Microsoft, each of which donated $1 million. Kraken, a cryptocurrency exchange that was sued by the Securities and Exchange Commission in 2023, put in $1 million as well. On Monday, the S.E.C. said it was dropping the case voluntarily. Last week, it dismissed a suit against another cryptocurrency exchange, Coinbase, which also donated $1 million to Mr. Trump’s inauguration.

9. DOGE takes the chainsaw to consulting firms working with US federal government agencies. 

10. Indonesia's middle class is shrinking, even as the new President, Probowo Subianto, seeks to turn Indonesia to a developed country by 2045 with an annual growth rate of 8%.

The number of Indonesians in the middle class had fallen to 47.9mn by March 2024, down from a peak of about 60mn in 2018, according to the most recent government data. Indonesia defines its middle class as those who spend Rp2mn-Rp9.9mn ($122-$605) a month. In the four years to 2018, the middle class grew by 21mn. The middle class accounted for 17 per cent of the population last year, down from as much as 23 per cent in 2018. Indonesia has also seen an increase in the number of people in the “aspiring middle class” and “vulnerable” categories, indicating a reversal in economic progress, said analysts. At the same time, employment in the informal sector — typically poorly paid and insecure — has risen to 59 per cent in 2023 from 57 per cent in 2018, according to government data...

“The culprit for this is the inability to produce jobs in the formal sector,” said Chatib Basri, a former finance minister who is now advising the government on the economy. “From 2019, most of the jobs created were basically in the informal sector.” Such growth results in weaker consumer spending and lowers tax collection, said Eko Listiyanto, vice-director of the Institute for Development of Economics and Finance. Manufacturing, a mainstay of middle-class jobs, as a contributor to GDP has dropped steadily over the past two decades. Instead, resource-rich Indonesia has focused on developing its commodities sector.

11. FT reports that Chinese competition and high electricity prices annihilated the US aluminium industry. President Trump has raised tariffs on aluminium imports from 10% to 25%.

The downturn in the US industry is being driven above all by high energy costs. And they show no sign of abating... “For aluminium, everything comes down to electricity,” said Annie Sartor of Industrious Labs, a non-profit focused on the decarbonisation of heavy industry. “There’s a phrase that aluminium is electricity in solid form.” New Madrid is no exception. “This smelter uses more electricity in 24 hours than the whole city of Springfield, Missouri,” said Lester. That is why the recent rise in power prices has been so painful for producers. The average cost of electricity for US smelters is expected to rise to $36 per megawatt hour in 2025, up from $33/MWh in 2024, according to CRU Group, a commodity data company. An industry veteran, Lester has had a ringside seat at the decline of American aluminium. When he started out, the US had 34 smelters — now it has four. It produced 30 per cent of the world’s aluminium in 1980 — now it accounts for just 1 per cent.

12. Aid facts of the day.

Rich countries spent $256bn (or 0.4% of GDP) on foreign aid last year—enough to provide sub-Saharan African governments with a sum as large as their total tax revenues. Only a sliver of the spending will have gone to cultural causes, funding the sort of pro-democracy charities and independent newspapers that maga types despise. Around a quarter will have been humanitarian aid (covering disaster relief and refugees) and health funding (such as hiv treatment, vaccines and so on)... Development spending accounts for almost three-quarters of all aid. It most often subsidises favoured industries, frequently funds infrastructure construction and sometimes pays the salaries of teachers. The average Malawian has had more money spent on them by international agencies than by their own government every year since the country gained independence from Britain in 1964... 

In 2004 William Easterly of New York University and co-authors found that, from 1970 to 1997, aid was just as likely to shrink the world’s poorest economies as to help them grow. A year later the World Bank produced a post mortem on two decades of development aid, poring over the history of its recipients. The researchers concluded that its grants and loans did not move the needle on growth. In 2019 the IMF reached a similar conclusion. As Charles Kenny of the Centre for Global Development, a think-tank, notes: “There is no country that has really grown from aid.”... In 2005 David Dollar and Jakob Svensson, both then of the World Bank, and Dani Rodrik of Harvard University, looked at disbursals tied to political reforms—and could not find a country where they had produced better policy... In 2015 Axel Dreher of Heidelberg University and Steffen Lohmann, then at the University of Göttingen, looked at local economic activity after the building of schools, social housing and other projects in a range of locations, and found no increase in the amount of electric light, their proxy for economic growth... And instead of strengthening recipient countries’ ability to provide public services, aid often weakens it. The IMF has found that more development spending tends to result in lower taxes. Last year Avi Ahuja of New York University concluded that it produces less competitive political systems, as incumbents wield the cash to win votes.

And more here

In 2023, the latest year for which there are comparable data, rich Western countries spent $60bn on aid in Africa, which is 27% of global aid spending by these countries. For the median African country aid accounts for about 4% of gross national income (gni), though it ranges from less than 0.5% in fairly rich countries like South Africa to 27% in very poor ones such as Central African Republic (see map).

A study published in 2023 by academics at Lund University in Sweden found that aid led to weaker fiscal capacity in African democracies, suggesting it got in the way of social contracts between the taxed and the taxer. “In effect, aid-dependent democracies become more autocratic,” say the authors.

Also Martin Wolf on aid.  

13. Livemint points to the differences between tariffs imposed by India and US. At the aggregate level, weighted average tariff gap has declined sharply from 22.9 percentage points in 2000 to just 2.5 percentage points in 2022.

At the broad sectoral level.

And at the product level.

14. Fascinating long read about the complex financial structure of the Canadian PE firm Brookfield Corporation, especially on its related party transactions where it's both the buyer and seller. The article describes the sale of One Liberty Plaza in Manhattan. 

A rare transaction in a moribund market for office towers, it received little publicity because the building’s ultimate owner, Canada’s Brookfield Corporation, was both the buyer and the seller. One of the world’s largest and most complex financial conglomerates, Brookfield sold property to itself like this dozens of times in 2024, using $1.4bn from its insurance arm to finance transactions that supported its “distributable earnings” — a non-standard measure of profit that underpins the corporation’s $90bn stock market valuation. These earnings were then recycled back into the portfolio in a circular flow of cash that is attracting scrutiny of both the relative opacity of Brookfield’s accounting practices and how it juggles its vast global portfolio of real estate...

Such trades support an expansive but lossmaking portfolio of more than 200 malls and offices dotting skylines around the world, including London’s Canary Wharf, One Manhattan West and the Las Vegas Fashion Show mall. The transactions pose questions about the quality of Brookfield Corporation’s earnings, and the valuation of assets held to pay annuity policies at the Brookfield-owned insurance businesses that trade with other parts of the conglomerate. They also raise the question of whether Brookfield and chief executive Bruce Flatt are presenting a sufficiently transparent picture of the organisation — a labyrinth containing thousands of entities, the interconnected funds, partnerships, trusts and companies that control $1tn of assets. Flatt, an accountant by training, owns a third of the Bermuda trust that appoints half the board of Brookfield Corporation in Toronto, the topmost of six listed companies operating in real estate, private equity, infrastructure, green energy, insurance and asset management. Brookfield also exercises control over a wide range of businesses and investment funds even though it often owns only a small part of them... Brookfield is a fiduciary that manages assets and money for public sector and union pension funds, annuity holders and investment funds. It runs critical infrastructure, is responsible for huge sums in long-term liabilities, and operates regulated businesses in many jurisdictions.

15. The size of the US Treasury market has doubled in the last decade!

16. High multiplier of government R&D spending.

In a comprehensive study, Andrew Fieldhouse and Karel Mertens classify major changes in non-defence R&D funding by the DoE, Nasa, NIH and NSF over the postwar period. They estimate implied returns of as much as 200 per cent — raising US economic output by $2 per dollar of funding. This is substantially higher than recent estimates of returns to private R&D. According to the Congressional Budget Office, the high returns to public funding are more than 10 times that on public investment in infrastructure. With the higher tax revenue generated from additional GDP, an increase in R&D funding more than pays for itself. In aggregate, productivity gains from federal R&D funding are substantial. Indeed, Fieldhouse and Mertens estimate that government-funded R&D amounts to about one-fifth of productivity growth (measured as output growth less all input growth) in the US since the second world war.

17. Business Standard points to a new study by ICAR-National Institute of Agricultural Economics and Policy Research which finds limited outreach of MSP operations. 

The findings indicate that only 15 per cent of paddy and 9.6 per cent of wheat farmers engage with the procurement system. Moreover, it remains confined to mostly large farmers. Small and marginal farmers, despite producing 53.6 per cent of paddy and 45 per cent of wheat, have low participation in public procurement. The direct relationship between participation in the MSP-backed procurement system and farm size arises because small and marginal farmers are likely to have low awareness about the procurement system, and are often constrained by their limited scale of production.

Weekend reading links

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.

7. The US federal government paid $18 bn to consulting firms in 2024. 

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).

The youngest voters shifted sharply to the Left and AfD.