The AI digital divide

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0:12John Burn-Murdoch: Published by Capital Client Group, Inc.

0:17John Burn-Murdoch: Good morning from the Financial Times. Today is Thursday, April 23rd, and this is your FT News Briefing. Tesla has good news for investors, and China's new trading rules have businesses walking on eggshells. Plus, the FT's John Byrne Murdoch explains how artificial intelligence is dividing the workplace. Although it might be true that within particular workplaces, AI can kind of level the playing field, across the whole economy, it seems to have the opposite effect. I'm Mark Filippino, and here's the news you need to start your day.

0:58John Burn-Murdoch: Tesla looks like it's rebounding. Profits for the electric vehicle maker rose 17 % in the first quarter of this year compared to the same period last year. It's an improvement from a couple of months ago, but it's still below what analysts expected. It's also the company's second weakest quarterly profit figure in five years. This time last year, Tesla sales really suffered. The company's CEO, Elon Musk, alienated many customers with his involvement in the early days of the second Trump administration.

1:33China is introducing new supply chain rules. These are designed to protect the country against sanctions and from supply chain disruption caused by events like the war in Iran. But the rules announced this month are raising alarm among foreign companies operating in China. DFT's Joe Lei has been looking at the rules and he joins me now. Hi, Joe. Hi, Mark. So why is China doing this? What's the motivating factor here? There's a range of motivations here. For quite a few years, China has been doing informal sanctions against countries. But now increasingly, it's been introducing legislation and regulations that are really formalizing these forms of economic sanctions.

2:13And in the past two weeks, it came out with some of the broadest and more sweeping rules that we've seen to date.

2:20John Burn-Murdoch: Now, is there anything in particular that may have prompted these new rules? I think these new rules were probably coming for a long time and probably they had them up their sleeve. But recently there was a posting on social media, an official sort of Communist Party mouthpiece, which essentially linked these rules to the Iran war and also the Panama ports dispute in which a Hong Kong company, CK Hutchison, has had its ports concessions in Panama annulled. And China says this is the result of US pressure. So China has put these rules into that context. Joe, tell me a little bit more about what these rules do in practice.

3:00So these most recent rules, there's, as you mentioned, a supply chain rule, and then there's extraterritorial rule, which is aimed at basically retaliating or responding to countries when they do something that China perceives as stopping its companies from doing business overseas. In the case of the supply chain rules, they mentioned something like 15 ministries that can identify a supply chain blockage overseas or an action by a foreign company or country or even individual that is prejudicing China's supply chains. And they can investigate that and then take action. And some of the actions that they can take are quite concerning for foreign companies.

3:40There's a thing in China called the exit ban where if you're under investigation, they can prevent you from leaving. So let's say that you're a t-shirt company and you source some of your cotton out of China, and you need to do supply chain compliance to prove that this cotton doesn't come from a place where there's forced labor. Under these rules, you could be investigated, subject to sanctions, and your executives detained in China during the investigation. Obviously really concerning. How are businesses operating in China reacting to these rules? Foreign companies generally will wait for more guidelines or to see how they're implemented in practice.

4:19But we have seen the chambers of commerce express strong concern about these, saying that they seem to be counterproductive and that they could raise the risk and the cost of doing business in China. I think it's probably not at the stage where it will force them to flee. They'll be waiting for more details, but it will increase the motivation for companies to diversify their supply chains. And if you are in an area that is deemed high risk, it will force you to look very closely at your supply chain compliance and to work out whether or not you do need to move your production out of China. Joe, how are China's trading partners reacting to this?

4:59I know that President Xi Jinping and US President Donald Trump are set to meet next month, ostensibly to talk about trade as one of the main subjects. Do you think this will have any impact on that meeting? I think these sorts of regulations, they really don't help with the atmosphere ahead of meetings like that of Xi and Trump. The two of them have agreed to a trade truce and they were supposed to not be introducing more export controls. So this really escalates the tension ahead of that summit. And it's going to be up to the two leaders to try to overcome these escalating tensions and to see whether they can extend the trade truce, which expires in October.

5:41Joe Lay is the FT's Beijing bureau chief. Thanks, Joe. Thanks very much, Mike.

5:51John Burn-Murdoch: Oil's three-week stay below$100 a barrel is over. Brancrude jumped into triple-digit territory after Iran's navy said it seized two commercial ships in the Strait of Hormuz. Iranian media reported that a third one was targeted by the country's military. This comes a day after U.S. President Donald Trump indefinitely extended a ceasefire between Washington and Tehran as they try to continue peace talks. But Iran says the ongoing U.S. naval blockade of the Strait is a huge obstacle to any, quote, genuine negotiations. Meanwhile, the war is hitting economies across the globe. U.S. Treasury Secretary Scott Bessent addressed that yesterday.

6:29Many of our Gulf allies have requested swap lines.

6:32John Burn-Murdoch: He's speaking to senators at a budget hearing. And as I said, numerous other countries, including some of our Asian allies, have also requested them. Swap lines are temporary emergency agreements between two countries and their central banks to exchange currencies. They're a financial tool to guarantee a country's access to dollars and maintain economic stability.

6:59The highest earning and most experienced workers are adopting AI far faster than others. As according to a recent FT poll, it was done in partnership with the research company Focal Data. The findings raise concerns of a widening digital divide as AI becomes more commonplace. Here to discuss the findings is the FT's chief data reporter, John Byrne Murdoch. Hey, John. Hey, Mark. So tell me a little bit more about how you conducted this poll. Sure. So we worked with Focal Data on this. We went out and surveyed about 4 ,000 people across the UK and US, about 2 ,000 in each country. And we asked dozens of questions about how people are using AI at work, whether they're using it at all, what they're doing specifically with AI in their jobs, as well as various characteristics of their jobs, including what they do, what industry they're in, how much they're paid, that kind of thing.

7:53And I had mentioned that top knowledge workers who use AI get paid more. Tell me a little bit more about that. Yeah. So this is just a fairly straight finding that workers on the highest salaries in the economy are much heavier users of AI than workers lower down the salary distribution. So among the people who are in the top 10 % by income, about two thirds of them are using AI in their jobs. Whereas for those in the bottom 10%, it's only about 15%. So we see this consistent gradient where the highest earners, the most highly educated workers, people who've been in their jobs a bit longer are all using AI in their jobs more than those who are at the other end of things.

8:35Now, if we had to take a stab at why this might be the case, what are some working theories? So one way of unpicking this is we looked at whether that gradient of sort of pay and economic status, as it were, and AI usage, whether that applied within particular sectors and jobs as well as across the whole economy. And within, say, the tech sector or the white-collar sector in general, that was still true. The most highly paid white-collar workers are using AI more than the least highly paid white-collar workers. But when we drilled right down to look at, say, accountants, management consultants, lawyers, there, there was actually less of a relationship.

9:16So what it looks like we're seeing is that it's people who are in higher-paying, more high-status jobs use AI more than those who are in lower-paying and low-status jobs. So it's not that you've got two people sitting on desks next to each other and one of them's paid more than the other and uses AI more. It's that different occupations have different pay patterns and AI usage patterns. Now, John, aside from the demographic usage, what else did this study look at? So various things came out of this. So one was the fact that American workers are using AI more than British workers. Now, some of that is because of differences in the nature of those economies.

9:56So, for example, the tech sector where more people use AI is bigger in the US. But even when you look within particular sectors, American workers seem to be more enthusiastic about taking on these tools and more positive about the impact it's having on their work. John, if we could take away one thing from these findings, what would it be? I think the main takeaway is that although it might be true that within particular jobs or workplaces, AI can kind of level the playing field and bring up some of the less skilled workers to a higher level, across the whole economy it seems to have the opposite effect with these people in high status high pay knowledge jobs getting a lot of benefits from their ai use whereas people in blue collar jobs or your sort of back office jobs are using these tools less and presumably getting less benefit so we have these two stories going on at the same time but if ai usage continues to have that pattern and does boost the productivity and perhaps earnings of people who use it more than those who don't, it could increase wage inequality.

11:02John Bird Murdoch is the FT's chief data reporter. These AI surveys are actually part of a monthly series that he and his team are working on. We'll put a link to that in the show notes. Thanks, John. Thank you, Mark.

11:19John Burn-Murdoch: The Swiss government wants its banking giant, UBS, to hold an extra$20 billion in capital. Switzerland's federal council proposed the plan yesterday, and it wants it because UBS's balance sheet is massive. It absorbed the collapsed Credit Suisse three years ago in a state-orchestrated takeover. And now UBS has a balance sheet bigger than the entire economy of Switzerland. The partial compromise comes after months of pushback from UBS. They thought any higher capital restrictions would burden the bank. UBS is still pretty unhappy about the measures. The lender said yesterday's proposal is, quote, extreme.

11:55John Burn-Murdoch: You can read more on all these stories for free when you click the links in our show notes. This has been your daily FT News Briefing. Check back tomorrow for the latest business news.

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