China’s tariffs on $14bn worth of US goods take effect

Good morning and welcome back to FirstFT Asia. In today’s newsletter:

• Chinese tariffs on the US take effect

• Trump vows to slash the Pentagon’s budget

• Why Busan is ‘at risk of extinction’

China’s retaliatory tariffs on the US have gone into effect, hitting about $14bn worth of goods and dashing hopes that a trade war between the world’s two largest economies could be avoided.

Beijing announced the tariffs last week in response to a US decision to impose an additional 10 per cent levy on Chinese products, which US President Donald Trump called an “opening salvo” in a renewed trade offensive against China.

Compared with the blanket US tariffs, China’s measures — which target US exports of liquefied natural gas, coal, crude oil and farm equipment as well as some automotive goods with levies of 10 per cent to 15 per cent — were seen as creating space for negotiations to avert a wide trade conflict.

But by the Sunday deadline there was no news of a deal and China’s embassy in Washington said the tariffs came into effect today at 12.01am Beijing time. (11.01am on Sunday in Washington DC).

Here’s why analysts said China may be better prepared this time for renewed trade conflict with Trump than during his first term.

• Developing story: Trump said he would impose 25 per cent tariffs on steel and aluminium imports, expanding his trade conflicts to the metals sector. Read more.

• Go deeper: Trump’s shock tactics may have pushed Beijing away from negotiating table.

• Trump’s FBI nominee under fire over Shein stake: Kash Patel, the president’s pick for FBI director, disclosed that he holds stock in a group that owns the Chinese fast-fashion retailer, which has been accused of using forced labour.

• Chinese economy: Consumer prices rose at the fastest pace in five months in January, as a bump in spending over the lunar new year holiday period breathed life into an economy that has been fighting outright deflation.

Here’s what else I’m keeping tabs on today:

• Economic data: Japan reports January bank lending and December balance of payments data. Malaysia publishes the latest labour force statistics.

• Companies: Foxconn reports January revenue and Taiwan Semiconductor Manufacturing Company reports last month’s sales.

Five more top stories

1. Donald Trump said he would seek to cut billions of dollars from US defence spending as the next big target in the effort led by Elon Musk to slash spending by US government agencies. Musk’s potential role in scouring the Pentagon for savings has already raised concerns about potential conflicts of interest.

2. Narendra Modi’s party has claimed victory in state polls in Delhi, regaining control of the capital’s regional government for the first time in almost three decades. The Bharatiya Janata party’s emphatic win boosts the prime minister ahead of a meeting with Trump this week.

3. Japan’s borrowing costs have soared to a 14-year high as rising interest rates, sustained inflation and a potential wave of wage increases this spring fuel a relentless sell-off in its government debt. Investors are betting on faster rate rises, saying inflation is “for real this time”.

4. Italy’s business elite has been roiled by a scam that used an artificial intelligence-generated voice mimicking Italian defence minister Guido Crosetto to ask tycoons to wire millions to overseas bank accounts to help pay ransoms to free Italian journalists kidnapped overseas. At least one victim was persuaded to transfer €1mn to overseas bank accounts.

5. JPMorgan Chase and investment banking boutique Evercore have displaced Morgan Stanley as the chief rivals to Goldman Sachs in the core Wall Street business of dealmaking advice. The changing of the Wall Street guard has unfolded as Morgan Stanley has focused resources on building up the wealth management business.

News in-depth

China’s urban villages were once a source of cheap accommodation and employment for the migrants who moved from rural areas to cities and powered the country’s manufacturing boom. Now, the government hopes these settlements can again provide the engine to re-energise economic growth, pushing ahead with plans to convert them into high-tech hubs. But many residents are sceptical of Beijing’s plan, William Langley reports from Guangzhou.

We’re also reading . . . 

• The baffling WFH puzzle: Businesses are tightening hybrid work rules but homeworking levels have so far barely budged, writes Pilita Clark

• Indian economy: Modi’s government will need to make unpopular decisions if he is serious about unlocking the country’s vast potential, writes the FT editorial board.

• The battle for the Arctic: Rana Foroohar spent 10 days on board a US Coast Guard icebreaker in a region that is fast becoming one of the most hotly contested places on earth.

Chart of the day

For most of the 20th century, Busan was a thriving hub of trade and industry. But South Korea’s second city is now in the throes of a youth exodus that has left it ageing faster than any other metropolitan area in a country that already has the lowest fertility rate in the world.

Take a break from the news . . . 

Do we prematurely dismiss people on the grounds that they are too old? Composer Leoš Janáček wrote his two most significant pieces of music when he was 74 and Vincent van Gogh at 28 was told “You are no artist . . . You started too late.” Tim Harford makes the case for “late bloomers”.