Introduction: China ‘considering exempting some goods from US tariffs’
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Hope is swirling this morning that China might relax some of the tariffs it has imposed on US goods as part of Donald Trump’s trade wars.
With the economic costs of the tit-for-tat trade war hurting Chinese companies, Beijing appears to be seeking to mitigate the economic fallout from the conflict.
According to Bloomberg, this means China’s government is considering suspending its 125% tariff on some US imports – a sign that policymakers are worried about the damage caused by its trade war with Washington.
Bloomberg say:
Authorities are considering removing the additional levies for medical equipment and some industrial chemicals like ethane, the people said, asking not to be identified discussing private deliberations.
Officials are also discussing waiving the tariff for plane leases, the people said. Like many airlines, Chinese carriers don’t own all of their aircraft and pay leasing fees to third-party companies to use some jets — payments that would have become financially ruinous with the additional tariff.
China is considering suspending its 125% tariff on some US imports including medical equipment, ethane and plane leasing, sources say https://t.co/Uf9NNQnLAz
— Bloomberg (@business) April 25, 2025
This potential easing in the US-China trade conflict comes after Donald Trump revealed yesterday that the world’s two largest economies had held talks to help resolve the trade war.
The US president told reporters:
“We may reveal it later, but they had meetings this morning, and we’ve been meeting with China.”
Reuters is also reporting that China is considering exempting some U.S. imports from its 125% tariffs and is asking businesses to identify goods that could be eligible.
A Ministry of Commerce taskforce is collecting lists of items that could be exempted from tariffs and is asking companies to submit their own requests, Reuters adds, citing a source.
Signs of de-escalation in the trade war will cheer investors, after a bruising few weeks since Trump announced his tariffs on trading partners.
It could also reassure politicians and central bankers around the world, who fear the consequences of a slowdown in world trade.
As the Bank of England’s governor, Andrew Bailey, warned on Thursday, the UK economy faces a “growth shock” as a result of Trump’s trade policies.
The agenda
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7am BST: UK retail sales report for March
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9.30am BST: UK trade data for Q4 2024
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3pm BST: University of Michigan’s survey of US consumer confidence
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3pm BST: IMF holds press conference on the economic outlook for Europe
Key events
Trump: I didn’t get the yips over market mayhem
Just in: Donald Trump has denied that panic in the bond market forced him to temporarily lift his reciprocal tariffs for 90 days.
He’s given a big interview to Time Magazine, to mark 100 days of the second Trump presidency, in which he insists that tariffs are necessary.
Speaking about the 90-day pause to the ‘Liberation Day’ tariffs, Trump says:
“The bond market was getting the yips, but I wasn’t.”
Trump added that he would consider it a “total victory” if the U.S. still has tariffs as high as 50% on foreign imports a year from now.
[Reminder, Trump announced the 90-day pause on 9 April, a week after announcing a swathe of new tariffs, following wild turbulence in the bond and stock markets]
Trump also told Time that China’s President Xi Jinping has called him, and that his Administration is in active talks with the Chinese to strike a deal.
He adds:
“There’s a number at which they will feel comfortable. But you can’t let them make a trillion dollars on us.”
❗️Highlights of Donald Trump’s interview with TIME magazine
🔴 ”I think what caused the war to start was when they [Ukraine] started talking about joining NATO”
🔴 Crimea will stay with Russia” and Zelensky understands this
🔴 ”I do not think Ukraine will ever join NATO”
— Ignorance, the root and stem of all evil (@ivan_8848) April 25, 2025
Russia’s central bank warns of tariff impact on inflation, after holding rates at 21%
Russia’s central bank has warned that trade conflict could push up domestic inflation, as it voted to leave interest rates on hold.
The Bank of Russia fears that the rouble could weaken if oil price fall, or the global economy slows, which would make inports more expensive.
After voting to leave interest rates on hold at 21%, the Bank said that the balance of inflation risks is still tilted to the upside in the medium term.
It explained:
The key proinflationary risks are associated with a longer upward deviation of the Russian economy from a balanced growth path and high inflation expectations, as well as with the deterioration in the terms of external trade.
A further decrease in the growth rate of the global economy and oil prices in case of escalating trade tensions may have proinflationary effects through the ruble exchange rate dynamics.
This chart from Cornwall Insight shows how its forecast for the price cap change in July has dropped in recent weeks, as wholesale energy prices have weakened.
Dr Craig Lowrey , Principal Consultant at Cornwall Insight, strikes a cautious note, though:
“While a fall in bills will always be welcomed by households, we mustn’t get ahead of ourselves. We have all seen markets go up as fast as they go down, and the very fact the market dropped so quickly shows how vulnerable it to geopolitical and market shifts.
“It would be easy to conclude the fall in the market was due to the United States tariffs, but the reality is that the interactions within and across the energy market are complex – from energy storage requirements in Europe, to warmer weather, to global trade issues – and contribute to the volatility we have seen in recent weeks.
“There is unfortunately no guarantee that any fall in prices will be sustained, and there is always the risk of the market rebounding. The only real way to protect households from this constant cycle of instability and insecurity is to reduce our dependence on international wholesale markets. That means continuing to focus on growing low carbon energy generation here in Great Britain and building a more secure, more sustainable energy future.”
British energy price cap tipped to fall in July
Energy bills across Great Britian are set to fall this summer, partly thanks to the disruption caused by Donald Trump’s trade war.
Consultancy Cornwall Insight has predicted that the quarterly price cap set by regulator Ofgem will fall by almost 9% in July, due to a recent fall in wholesale energy prices.
That would cut an average bill by £166 per year, bringing a typical household bill down to £1,683 from July, from £1,849 in April.
Cornwall Insight explain:
The recent decline in wholesale prices has been driven by a mix of geopolitical and market developments, including the United States’ decision to introduce tariffs – and the broader impact of these – and the impact of above average temperatures, which has reduced demand expectations and eased pressure on short-term prices.
While falling prices may appear to be good news, they are also a sign of how volatile the market remains. There are many moving parts, and with the July cap still a month away from being finalised, it is too early to say whether these reductions will hold.
The trick in the markets in recent weeks has been to “sell hubris, buy humiliation”, say analysts at Bank of America.
They told clients this morning there has been a remarkable flip from “US exceptionalism” hubris to “US repudiation”, with 304 stocks in the S&P 500, and 58 in Nasdaq 100 now trading below their 2021-22 highs.
They also point out that while many US stocks are now oversold, Spanish stocks are up 25% year to date in US dollar terms.
That shows tht a “reallocation of global capital from US” has begun, “e.g. Latin American capital now heading to Madrid not Miami”.
UK exported £59.3bn of goods to US last year
Richard Partington
The US was becoming an increasingly important export market for the UK before Donald Trump’s tariffs, according to official figures.
Highlighting the stakes in the escalating trade war, the latest snapshot for 2024 from the Office for National Statistics shows the UK exported £59.3bn of goods to the US market last year.
Accounting for 16.2% of all of the UK’s goods exports worldwide, the ONS said the US had been growing in importance for British companies as a market to sell cars, pharmaceuticals and other manufactured goods.
This is because the proportion of total goods exported to the US has been steadily rising in recent years, up from 13.8% of global exports in 2022. The ONS says this is “indicating that the US may be becoming a relatively more important export partner for the UK.”
Machinery and transport equipment is the main export to the US, with shipments worth £29.1bn in 2024 – a £1.8bn (6.7%) increase on the previous year. This was followed by chemicals, worth £10.8bn – accounting for almost a fifth of the UK’s global chemicals exports.
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The data also show that the UK ran a small trade in goods surplus with the US, as it imported £57.1bn of goods from the United States last year.
The details come as the chancellor, Rachel Reeves, is in Washington for the spring meetings of the International Monetary Fund and the World Bank, where she is also aiming to make progress towards a trade deal with US officials to exempt Britain from Trump’s blanket 10% tariff on imports.
Cars – subject to 25% US tariffs – were the biggest single category of export, worth £9bn – accounting for 27.4% of all global car exports. This made the US the UK’s number one export partner for cars, with sales worth more than double the second-largest market – China.
Exports of iron and steel – also subject to 25% US tariffs – were worth a relatively limited £400m, accounting for 8.4% of total global exports.
The UK’s trade in services with the US was worth significantly more than the value of goods. In 2024, the UK imported £61.2bn of services and sold £137bn of services exports to the US – led by areas including research and development, professional and management consulting.
American Chamber of Commerce in China president Michael Hart said companies in the pharmaceutical sector had reported that they had been able to import drugs to China in the past week with tariff exemptions, Reuters reports.
He said he believed that the exemptions granted by China were drug-specific, not industry wide in nature.
China’s Politburo pledges to support firms and workers hit by US tariffs
Back in China, top policymakers have pledged to support firms and workers most affected by the impact of new US tariffs.
The ruling Communist Party’s Politburo held a top-level meeting today, and state media report that officials also reiterated plans to accelerate debt issuance and ease monetary policy.
The state media Xinhua reports that president Xi Jinping presided over the meeting.
Xinhua says:
It was noted at the meeting that the country has seen its economy improve this year, with public confidence continuously boosted and solid progress made in high-quality development.
However, the foundation for the country’s sustained economic recovery needs to be further consolidated, and the country faces increasing impact from external shocks, the meeting said.
The meeting urged preparing for worst-case scenarios with sufficient planning, and taking concrete steps to do a good job in economic work.
FTSE 100 on track for best winning streak since 2019
The UK stock market is on track to extend its longest winning run since the aftermath of Boris Johnson’s election victory over five years ago.
The FTSE 100 has already risen for the last nine trading sessions, as trade war tensions have cooled, which is the best run since December 2019. A 10th rise today would match the “Boris Bounce” rally.
Before that, I think you’ve got to look back to December 2016/January 2017, when the FTSE 100 posted a 14-day rally.
European stock markets are rising this morning, amid hopes that China is relaxing some of its tariffs.
In London, the FTSE 100 index is up 12 points or 0.13%, at 8417 points. Engineering companies are among the top risers, with aerospare manufacturers Melrose up 3.6%, and Rolls-Royce up 2%, after Safran reported that tariffs on aircraft parts have been lifted.
Across Europe, Germany’s DAX is up 0.36% while France’s CAC is 0.6% higher.
Safran says China grants tariff exemptions for jet engines and parts
Now this is interesting…
The head of French engine maker Safran has said that China has granted exemptions from import tariffs for some aircraft parts including engines.
That’s a sign that, as rumoured earlier today, China is taking steps to remove tariffs from some imports.
CEO Olivier Andries told reporters on first-quarter results call (via Reuters):
“We learned last night that China has taken the decision not to tax engines or landing gear or nacelles – in other words a certain number of aerospace equipment parts.”
“It demonstrates that the situation is very fluid.”
WPP: Tariffs will hit clients, and broader economy
Advertising group WPP has reported that its clients are waiting to see how the trade conflict unfolds.
Mark Read, chief executive officer of WPP, told investors this morning:
“While WPP is not itself directly affected by tariffs, they will impact a number of our clients as well as the broader economy. At this point we have not seen any significant change in client spending and we reiterate our full-year guidance which already reflected a challenging environment.”
WPP also reported a 0.7% drop in like-for-like revenues in the first quarter of this year, which it says reflects “macroeconomic challenges”.
Reeves warns of many challenges from globalisation
Heather Stewart
Rachel Reeves used a brief speech to US investors at the British ambassador’s lavish residence in Washington last night, to acknowledge some of the downsides of globalisation, in a nod to Donald Trump’s stance.
As she prepares to meet Treasury secretary Scott Bessent today, Reeves said China’s entry into the global trading system 25 years ago had created “huge benefits in terms of cheaper goods, more innovation and more opportunities to trade”.
But she said there had also been “many more challenges”, reports our economics editor Heather Stewart.
Drawing parallel between the frustrations that drove British voters to back Keir Starmer last July, and those of Trump’s supporters, she said, “in this country, but also back home in my country last year, people voted for change”.
She added:
“They voted for change because they didn’t think that the economy worked well enough for them and their families. They saw the erosion of good jobs that paid a decent wage. They saw industries that once powered their towns disappear. And as elected politicians we have to respond to that”.
Reeves’s host, current British ambassador Lord Peter Mandelson, also highlighted the strong transatlantic relationship in his introductory remarks, with a typically colourful metaphor.
Mandelson said:
“Some may say that under this very consequential president we have at the moment, this is a rollercoaster period and therefore a challenge to us all. But we would say that a rollercoaster is fine, as long as we are rolling in the right direction.”
UK retail sales: what the experts say
City economists are encouraged that UK retail sales rose last month.
Kris Hamer, director of insight at the British Retail Consortium, credits the warmer weather, which boosted demand for clothing and DIY equipment:
“Sales continued to grow in March as the sunshine and warm weather encouraged people to spend more. Clothing and footwear performed well as consumers sought to take advantage of the good weather and prepare for summer.
The sunny weather also gave a boost to garden supplies and DIY, as people spent more time outside.
Sagar Shah, associate partner at McKinsey & Company, says consumers appear resilient:
“Mother’s Day and the spring sunshine saw retail sales rise by 0.4% in March. A positive surprise given that Easter hopped over into April this year – meaning March didn’t benefit from the holiday lift. It also marks the largest three-month rise in sales volumes since July 2021 – a sign there is some underlying resilience in shopper behaviour and the big discounts in the early part of the quarter brought back consumers.
Food sales saw a decline of 1.3%, likely due to people eating out and Easter not falling in March. But, we’d expect this to bounce back in April. Conversely, sales volumes in textiles, clothing, and shoes jumped by 3.7%, as people started getting ready for the spring.”
However…..there is a wrinkle, as these retail sales are seasonally adjusted to smooth out one-off factors, such as the timing of Easter.
Jacqueline Windsor, head of retail at PwC UK, explains:
“March’s retail sales should be read with care as the ONS adjusts for the impact of Easter and school holidays falling in April this year. Continuing February’s improving trend, seasonally-adjusted retail sales rose again month-on-month, for the third consecutive month in volume terms.
Excluding petrol, retail sales volumes rose by a respectable 3.3%, which translated into 3.8% more pounds in the till compared with this time last year.
In the event, the sunniest March since records began particularly helped seasonal fashion retailers, which grew sales volumes on an annual basis for the first time in six months. In fact, all product categories showed positive sales growth, with only grocery retail showing a slight decline in volume terms, no doubt due to the later Easter holidays.
The oil price is inching higher today, amid hopes of a de-escalation in US-China trade conflicts.
Brent crude, the international benchmark, has risen by 0.5% to $66.86 per barrel.
UK retailers post largest three-monthly rise in sales volumes since July 2021
Back in Britain, retail sales grew faster than expected last month – in an encouraging sign for growth this year.
Retail sales volumes across Great Britain rose by 0.4% in March, the Office for National Statistics reports, surprising economists who had expected a 0.4% fall.
Clothing and outdoor retailers reported that good weather boosted sales, the ONS reports. However, that was partly offset by falls in supermarket sales.
The recent good weather helped to boost sales across a variety of sectors, with garden centres reporting robust trading, the sunshine also helped to improved sales of DIY goods and clothing.
However, it was another poor month for food sales, particularly within supermarkets. pic.twitter.com/0DMtMtpkvU
— Office for National Statistics (ONS) (@ONS) April 25, 2025
March’s growth follows a rise of 0.7% in February (revised down from a first estimate of 1.0%).
The broader picture is that retail sales volumes grew by 1.6% rise in the first three months of 2025, comped with October-December 2024.
That’s the largest three-monthly rise since July 2021, suggesting consumer spending is holding up quite well this year.
FT: Apple aims to source all US iPhones from India in pivot away from China
The US-China trade conflict is forcing companies to rethink their supply chains.
Apple, for example, is reportedly pivoting away from China, which would be a major change to its supply chain.
The Financial Times reports this morning that Apple plans to shift the assembly of all US-sold iPhones to India by as soon as the end of 2026. That would mean doubling the iPhone output in India.
The FT explains:
Apple has in recent years been steadily building capacity in India with contract manufacturers Tata Electronics and Foxconn, though it still assembles most of its smartphones in China.
iPhone assembly is the last step in the production process, bringing together hundreds of components for which Apple is still heavily reliant on Chinese suppliers.
Markets cheered by hopes of US-China de-escalation
Stock markets across the Asia-Pacific region are higher today, following those reports that China is considering suspending its 125% tariff on some US imports,
Hong Kong’s Hang Seng index has rallied by 1%, as has South Korea’s KOSPI.
Japan’s Nikkei index has jumped by 1.8%, while China’s CSI 300 share index is up a more modest 0.2%.
Ipek Ozkardeskaya, senior analyst at Swissquote Bank, reports that signs of de-escalation of trade tensions are lifting optimism.
Yesterday allowed global risk investors to take a deeper breath. Dovish comments from Federal Reserve (Fed) members, and de-escalation of trade tensions between the US and China allowed a further recovery in global equities.
Optimism was backed today by the Chinese announcement that it is considering easing tariffs on some US imports, further signalling de-escalation of trade tensions and supporting earlier comments from the Trump administration that triple-digit tariffs could come ‘substantially’ down.
Introduction: China ‘considering exempting some goods from US tariffs’
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Hope is swirling this morning that China might relax some of the tariffs it has imposed on US goods as part of Donald Trump’s trade wars.
With the economic costs of the tit-for-tat trade war hurting Chinese companies, Beijing appears to be seeking to mitigate the economic fallout from the conflict.
According to Bloomberg, this means China’s government is considering suspending its 125% tariff on some US imports – a sign that policymakers are worried about the damage caused by its trade war with Washington.
Bloomberg say:
Authorities are considering removing the additional levies for medical equipment and some industrial chemicals like ethane, the people said, asking not to be identified discussing private deliberations.
Officials are also discussing waiving the tariff for plane leases, the people said. Like many airlines, Chinese carriers don’t own all of their aircraft and pay leasing fees to third-party companies to use some jets — payments that would have become financially ruinous with the additional tariff.
China is considering suspending its 125% tariff on some US imports including medical equipment, ethane and plane leasing, sources say https://t.co/Uf9NNQnLAz
— Bloomberg (@business) April 25, 2025
This potential easing in the US-China trade conflict comes after Donald Trump revealed yesterday that the world’s two largest economies had held talks to help resolve the trade war.
The US president told reporters:
“We may reveal it later, but they had meetings this morning, and we’ve been meeting with China.”
Reuters is also reporting that China is considering exempting some U.S. imports from its 125% tariffs and is asking businesses to identify goods that could be eligible.
A Ministry of Commerce taskforce is collecting lists of items that could be exempted from tariffs and is asking companies to submit their own requests, Reuters adds, citing a source.
Signs of de-escalation in the trade war will cheer investors, after a bruising few weeks since Trump announced his tariffs on trading partners.
It could also reassure politicians and central bankers around the world, who fear the consequences of a slowdown in world trade.
As the Bank of England’s governor, Andrew Bailey, warned on Thursday, the UK economy faces a “growth shock” as a result of Trump’s trade policies.
The agenda
-
7am BST: UK retail sales report for March
-
9.30am BST: UK trade data for Q4 2024
-
3pm BST: University of Michigan’s survey of US consumer confidence
-
3pm BST: IMF holds press conference on the economic outlook for Europe
