Trump: China tariffs should be 80%
Newsflash: Donald Trump has suggested that the US tariffs on Chinese goods should be 80%.
Posting on his Truth Social site, the US president says:
80% Tariff on China seems right! Up to Scott B.
Scott B is presumably Treasury secretary Bessent, who is due to meet with Chinese Vice Premier He Lifeng in Switzerland this weekend to discuss the trade war.
An 80% tariff would be a notable reduction on the 145% which Trump imposed last month, but would still make it significantly more expensive for US companies to import goods from China.
Trump has also urged Beijing to open up its markets, posting:
CHINA SHOULD OPEN UP ITS MARKET TO USA — WOULD BE SO GOOD FOR THEM!!! CLOSED MARKETS DON’T WORK ANYMORE!!!
Reminder: trade data from China earlier today showed a drop in shipments to, and from, the US.
Key events
European Commission President Ursula von der Leyen has suggested she could visit Washington to meet President Donald Trump to discuss trade negotiations – but, crucially, once a “concrete” trade package is on the table.
Speaking in Brussels today, von der Leyen said:
“If I go to the White House, I want to have a package we can discuss.
It has to be concrete, and I want to have a solution that we both can agree on. That is the work we are doing right now.”
An index of fear in European stock markets has dropped to its lowest level since just before Donald Trump’s ‘Liberation Day’ tariff announcement at the start of April.
The Euro Stoxx Volatility Index has fallen by 2% today to around 20 points, its lowest since 28 March.
In the days after Trump kicked off his trade war the index had hit a three-year high over 50 points, before falling back after the US president paused his global tariffs for 90 days.
Britain’s new trade deal with the US could lead to more foreign investment into the UK, explains Professor Costas Milas, of the University of Liverpool’s management school:
However “incomplete” the new US-UK deal might look and be, it signals smooth long-term business relationships between the U.S. and the UK. In fact, foreign car companies and those involved in production of steel and aluminum might be tempted to increase foreign direct investments (FDIs) in the UK to get indirect access to the U.S. market.
As I explained in a recent co-authored paper, additional FDIs will translate into higher wages and productivity in the UK. The US-UK deal is reasonably good news.
Goldman Sachs are sticking with their view that the Bank of England will cut interest rates sharply in the second half of this year, and in early 2026.
Following yesterday’s quarter-point rate cut to 4.25%, in a split decision, Goldman don’t expect another cut in June.
But it then expects cuts at every meeting from August until next March, which would mean six reductions, reducing rates by 1.5 percentage points.
Goldman says:
Given today’s signals towards a continued quarterly pace of cuts, we no longer expect the MPC to cut Bank Rate at the June meeting, as this would likely require material downside surprises in the near-term data. That said, we maintain our view that a weaker economy—including softer growth, pay gains and inflation—will push the MPC into faster rate cuts in H2.
We therefore now expect a pause in June but maintain our forecast for sequential 25bp rate cuts from August to an unchanged terminal rate of 2.75% in March 2026 (versus February before).
German manufacturer Siemens Energy (+2.7%) is leading the risers on the DAX this morning.
It’s followed by pharmaceuticals group Merck Group (+1.86%) and carmaker BMW (+1.8%), two companies exposed to the US trade war, who would benefit from an easing of tensions.
Back in Reykjavík, Bank of England governor Andrew Bailey has pointed out that the US-UK trade deal still leaves tariffs on most British exports to the US higher than before April.
Bailey also reiterated that the deal was good news, saying:
“It’s good news in a world where it will leave the effective tariff rate higher than it was before all of this started.”
Jochen Stanzl, chief market analyst at CMC Markets, has explained why Germany’s DAX share index has the potential to push higher, setting new record highs:
The framework established by Trump’s London pact is essentially a loosely defined intention that primarily provides the U.S. president with an exit strategy: it allows him to claim later that he does not need to reactivate the reciprocal tariffs. The markets celebrate this agreement not because it shines in every detail but because this rough framework might be sufficient to maintain the temporary suspension of countersanctions permanently. The DAX continues its upward trend, with the record high tantalizingly close.
With the Friedrich Merz government poised to unveil its Agenda 2030, it is a good moment to examine the current state of the DAX. Analysts anticipate an average earnings growth of six percent over the next twelve months, followed by almost thirteen percent in the subsequent year. The current price-to-earnings ratio (P/E ratio) of around 17 suggests that the index could rise to 24,700 points solely based on expected earnings growth over the next twelve months, eventually reaching 27,900 points in two years—assuming investors continue to accept a relatively high valuation level.
From a political and economic standpoint, this potential arises in two ways: Firstly, the prospect of expansive fiscal programs—such as increased spending on infrastructure, energy, and defense—will drive revenues and profits for DAX-listed companies. Secondly, the gradual normalization of monetary policy following the inflation surge in recent years is likely to lower interest rates, further supporting stock prices.
Andrew Bailey also warns that central bankers will continue to face a “challenging” and unpredictable environment, adding to the challenge of setting interest rates.
He tells his audience in Reykjavík:
We must learn the lessons from the difficulties we have faced as policymakers and forecasters over this period. Our models, infrastructure and analytical frameworks were challenged by the sheer scale and unpredictability of the shocks that hit us. Underlying issues were revealed under the stress of these big unforeseeable events. Forecasting became much more difficult, irrespective of the specific models and approaches used.
We need no reminder that the global economic environment is likely to continue to be challenging – and less predictable – than it was in the past. So we need to adapt and develop to ensure that our processes are nimble and robust, and that our monetary policy decisions are communicated effectively, while ensuring that we continue to act methodically in response to inflationary pressures.
BoE’s Bailey: These have been hard times for businesses and households
Over in Iceland, Bank of England governor Andrew Bailey has insisted that the BoE is fully committed to its inflation target.
Speaking to the Reykjavík Economic Conference, Bailey insists:
Our commitment to the 2% inflation target is unwavering.
Bailey is outlining the challenge of setting monetary policy in a world beset by major shocks, which drive up prices or hit demand.
He reminds his audience:
A sequence of unprecedented global shocks has created a very challenging environment for monetary policy. The largest pandemic in a century, the largest war in Europe since 1945, and now a trade war between the world’s two largest economies – these are not small and simple disturbances to aggregate demand, and they come against a backdrop of low productivity growth and ageing populations.
While it remains to be seen how recent changes to global trade policies will play out and what the effects on our economies will be, the effects of the pandemic and Russia’s brutal war on the Ukrainian people are fresh in our minds.
Our economies have suffered, inflation has surged. These have been hard times for businesses and households, not least those on lower incomes.
Shares in BP have jumped 2.4% towards the top of the FTSE 100 leaderboard this morning, as takeover speculation continues to swirl around the UK oil company.
The Financial Times has stirred the pot this morning, reporting that Shell, Chevron, ExxonMobil, TotalEnergies and Adnoc have all separately run the numbers on whether a bid would make sense.
As the FT explains, BP does appear undervalued:
A sum of the parts valuation suggests BP’s assets are worth in excess of £120bn, without including debt and liabilities, more than twice its current market capitalisation of £57bn, which follows a sharp slump in its shares over the past 12 months.
“The continued underperformance of BP makes it open to a takeover,” said a person close to the activist investor Elliott Management, which has built a leading stake in the company.
A week ago, Bloomberg reported that Shell had been eying up BP, a move that would create a major energy giant.
Germany’s DAX at record high after recovering trade war losses
Germany’s stock market has recovered all its losses following Donald Trump’s “Liberation Day” tariff shock five weeks ago.
The Dax, which tracks the largest companies listed in Frankfurt, has risen over its previous record high – set in March – this morning.
The rally comes amid a wider rise in European stocks this morning (see earlier post), due to hopes that the US-UK trade deal could be an encouraging signal for other negotiations.
Neil Wilson, UK Investor Strategist at Saxo Markets, reports:
Trade deal optimism seemed to be reflected in a positive move for equity markets, with European stock markets rising on Friday – the DAX hit a record high this morning at 23,500.
Bloomberg reports that hopes of increased government spending, under new chancellor Friedrich Merz, has also supported stocks in Germany:
The DAX, which had previously lost as much as 16% amid heightened market volatility due to Trump’s tariff announcements, has recovered as the new government commitment’s to significant fiscal stimulus is seen fueling economic growth.
The German index has become so popular among investors that it’s now relatively expensive, trading at the highest premium against its European peers since 2009.
Germany’s DAX Index became the first European gauge to surpass its March record high, recouping all declines sparked by US President Donald Trump’s trade war https://t.co/BJyjEU6W0u
— Bloomberg (@business) May 9, 2025
FTSE 100 rises too
Shares are rising in London in early trading as well.
The FTSE 100 index of blue-chip shares has gained 32 points, or 0.4%, to 8564 points.
Retailer JD Sports, whose US operations are vulnerable to US tariffs on goods made in China, are up 2%, among the top risers.
Officials from the US and China are due to hold talks in Switzerland this weekend, which may be the first step toward resolving their trade war.
The US-UK trade deal has also lifted sentiment in the City, reports Derren Nathan, head of equity research at Hargreaves Lansdown:
“The diplomatic offensive presented conjointly by President Trump and Keir Starmer from Washington and Solihull has ignited a feint spark of optimism in equity markets. The coincidence with VE day commemorations seemed designed to underline the special relationship between the two allies.
With details emerging late in the day it wasn’t enough to prevent a down day on the FTSE [yesterday] but sentiment has picked up this morning.
There may be some disappointment that the baseline 10% tariffs remain in place but for certain industries the picture on trade restrictions are looking up. While pharmaceuticals have escaped the US Presidents wrath for now, UK companies in the sector and other knowledge-intensive areas have been promised preferential treatment.
As yet, that’s not come at the expense of lifting the 2% Digital Services Tax Britain applied to the likes of YouTube and eBay, but with more talks to come on a separate digital services deal, it’s likely to form part of negotiations.
Trade deal optimism lifts European markets
European stock markets have opened higher, amid hopes of progress in the US trade wars.
Germany’s DAX has jumped by 0.6% at the start of trading, with France’s CAC up 0.5%, with suggestions that the US-UK trade deal is a sign that other countries will be able to reach agreement with Washington too.
GERMANY’S DAX RISES 0.6%, SURPASSES MARCH RECORD HIGH
— First Squawk (@FirstSquawk) May 9, 2025
Ipek Ozkardeskaya, senior analyst at Swissquote Bank, says news of yesterday’s US-UK deal resonated positively across global financial markets – even though Trump hasn’t lifted his baseline 10% tariff on UK goods.
Ozkardeskaya explains:
Not only do we have a new pope this week, but we also have the first deal in Trump’s global trade war – between the UK and the US. Trump’s enthusiastic announcement, complete with a lot of CAPITAL LETTERS, helped inflate sentiment, making this US-UK deal feel bigger than it actually is.
I mean, the fact that the two countries could agree on a few points is a good start, but the UK entered the negotiations with a tariff rate of 10% and left the table with… a tariff rate of 10%. Sure, the tariffs on cars were pulled lower from 27.5% to 10% — leading to an almost 14% jump in Aston Martin.
Rolls Royce’s plane engines are exempt from tariffs in exchange for a pledge from British Airways to buy $10bn worth of Boeing planes — Rolls Royce jumped by more than 3.5%. The tariff on UK steel will be cut to zero, while British farmers will benefit from tariff-free quotas — just like their US counterparts. The two countries also agreed to keep working on a digital agreement.
But again, the 10% tariffs remain. So yes, it’s a deal — but is it a big deal? One person at Axios even said that the UK was the “low-hanging fruit of trade deals” and that negotiations won’t be as simple with others. We’ll see.
Yesterday, Donald Trump teased us by revealing that an unnamed UK company had bought $10bn of planes from Boeing.
And this morning, British Airways’ parent company has revealed itself as the buyer.
International Airlines Group (IAG) stated, in its latest financial results, that it has ordered 53 aircraft for its medium-term long-haul fleet requirements.
The Group has ordered 21 Airbus A330-900neo aircraft and 32 Boeing 787-10 aircraft for delivery from 2028 to 2033.
The aircraft are mainly for replacement, with around one third for growth in IAG’s core markets.
Minister insist Trump won’t have veto of Chinese investment in UK
Reports that the US will have a veto over Chinese investment in Britain as a result of the UK-US trade deal are “complete nonsense”, Treasury minister Darren Jones has insisted this morning.
The Telegraph reported that such a veto is part the deal, but Treasury minister Mr Jones told Times Radio:
“This story on the front page of the Telegraph is complete nonsense. I mean, I’m at a bit of a loss as to know where it’s come from. I think it was a Conservative Party criticism.
“But as you said, we’ve not even published all of the documents yet, so I’m not quite sure how they were able to come up with that.
“I can be completely categorical with you there is no such thing as a veto on Chinese investment in this trade deal, this is not what this trade deal is about.
“It is a sectoral trade deal in relation to tariffs in key sectors, in the way that we’ve just been talking about. So I’d suggest the Conservative Party reads the documents and they maybe come back for a second go.”
Our First Edition newsletter has kicked the tires on the US-UK trade deal, showing that it is far from comprehensive, but will help crucial British industries such as car-making.
The broader economic impact may be limited, though. As our economics editor Heather Stewart put it:
“It’s very important to have this piece of good news to take to the public and now that the Bank of England has cut interest rates they’re going to have positive headlines about people’s mortgages going down and this deal being done and that will help boost consumer and business confidence,
But in terms of the broader economic impact this deal is really quite small.”
UK must ‘do everything’ to rebuild trade with EU, Bank of Engand boss says
The Governor of the Bank of England has called for Britain to “rebuild” its trade relationship with the European Union, as the UK celebrates yesterday’s trade deal with the US.
Andrew Bailey has told the BBC that reversing the post Brexit hit to UK-EU trade would be “beneficial”.
And while Bailey was keen not to take a view on Brexit, as a public official, he also argued that a closer relationship between the UK and the EU would help the economy and inflation.
Bailey says:
“It would be beneficial. Having a more open economy to trade with the European Union. Because there has been a fall-off in goods trade with the EU over recent years.
“It is important we do everything we can to ensure that whatever decisions are taken on the Brexit front do not damage the long-term trade position. So I hope that we can use this to start to rebuild that relationship.
That relationship could be improved later this month, when a crucial EU-UK summit is held.
As we covered in yesterday’s blog, Bailey was also pleased that the US and UK had reached a trade deal, telling the Beeb:
“It demonstrates that trade deals are important. Trade deals can be done, and the trade is important…honestly, it seems an unpromising landscape at times.
But I hope that we can use these deals to rebuild the world trading system.”
But while Donald Trump hailed that agreement yesterday, it still leaves the UK facing 10% tariffs on shipments to the US.
Introduction: Chinese exports to US slump
Good morning, and welcome to our rolling coverage of business, the financial markets, and the world economy.
Trade between the US and China cooled sharply last month, new data shows, as Donald Trump’s tariff war hit demand.
The latest trade data from China shows that shipments to the US fell 21%, year-on-year, in April. That indicates the tariffs imposed on China by Trump, which rose to 145% during April, hurt trade.
Shipments the other way fell too. China’s imports from the US fell by almost 14%, after Beijing’s tit-for-tat tariffing raised its tariffs on US goods to 125%.
But… the broader picture is that China’s overall exports jumped by 8.1% in April, year-on-year, beating forecasts for a 1.9% rise, while imports dipped by 0.2%.
Economists have suggested that countries around the world are scrambling to take advantage of Donald Trump’s 90-day pause to the tariffs he announced at the start of April (not including China, though). That is leading to stronger demand for China’s materials.
Stephen Innes, managing partner at SPI Asset Management, says:
The numbers just confirmed what markets already suspected: Trump’s tariff blitz is biting, and hard. Chinese exports to the U.S. cratered 21% in April, the sharpest drop in years, while exports to ASEAN, Africa, LatAm, and even the EU surged. The global supply chain is being rerouted in real time.
On the surface, China’s overall April export growth held up—rising 8.1% YoY. But strip out the spin, and it’s clear the headline resilience masks a fundamental shift. The U.S. is no longer China’s growth engine. The manufacturing juggernaut is diverting flow wherever the tariff pain isn’t.
Vietnam, Indonesia, and Thailand—still in the 90-day reciprocal tariff grace period—saw double-digit percentage surges in China-bound exports. These aren’t one-off distortions. This is structural repositioning.
The agenda
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9.40am BST: Bank of England governor Andrew Bailey to give keynote address at the Reykjavik economic conference 2025
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12.15pm BST: Bank of England chief economist Huw Pill gives the national Monetary Policy Committee agency briefing
