Trump’s $50bn tariff haul

0:03Good morning from the Financial Times. Today is Monday, July 21st and this is your FT News Briefing. Japan's ruling party suffered yet another electoral setback. And Europe is looking for ways to boost its tech industry. Plus, the U.S. is winning the trade war, at least for now. Unilateralism is threatening the entire global trade system, and it's really unclear whether the rest of the system has the spine to stand up to it. I'm Sonia Hudson, and here's the news you need to start your day.

0:44Japan's ruling coalition had a tough election day yesterday. The Liberal Democratic Party and its smaller coalition partner lost their combined majority in the country's upper house of parliament. The election was largely dominated by cost of living concerns. Japanese voters have been dissatisfied with the LDP for a while now. Last October, the party lost its majority in Japan's lower house for the first time since 2009.

1:18European leaders are worried about their country's dependence on U.S. technology infrastructure, and it's something they're hoping to change with a boost to EU-based companies. The bloc's new tech commissioner has set tech sovereignty as one of her goals. Barbara Moons is the FT's EU correspondent in Brussels. She's here to talk about why this has become such a big issue. Hi, Barbara. Hi, Sonia. Thanks for having me. Thanks for being on the show. So why are European leaders so worried about dependence on American tech right now? Trump is the answer to that question, like a lot of those questions right now.

1:57This debate has been going on for quite a while, but it wasn't really a big political concern until we have the Trump administration and a lot of uncertainty about the U.S. administration's commitment to transatlantic security, the economic alliance, obviously, given the trade issues, and then also the tech over-dependence from the European side. And why is Europe worried about this sector in particular? The concern is mostly about privacy and data access. There are concerns that the U.S. could suspend or block operations of U.S. tech companies in Europe altogether. This could pose certain risks for European governments, European businesses, European consumers.

2:42A lot of the conversations right now are about cloud computing and AI, because those are sectors that the EU feels it can still change the current dependence. And to make it a bit more concrete, you see that Amazon, Microsoft, Google, obviously U.S. tech companies control about two-thirds of the European cloud computing market. And that is, for example, something that Europe hopes to change in the coming years. Well, what are some things that European leaders are doing right now to get more infrastructure in place at home? I think the first step that you have seen over the last couple of months has really been the awareness raising, right?

3:23And that is now starting to translate into discussion about what can actually be done. One thing that the European Commission has already decided on is that if governments or other public authorities procure certain services, such as cloud computing, that you would have a bi-European clause. So that you would favor certain companies that at least have a link with the continent. But it is still at a relatively vague and theoretical level at this moment. So what do European tech companies themselves have to say about this over-reliance on American tech? I think two things. The first is, well, we've been saying this for so long.

4:07Why was no one listening? We've been here all along and we really want to make it work. But linked to that is the second, that they face challenges that they feel their American counterparts do not face. So a lot of fragmentation of different rules within the European Union because it has 27 countries and sometimes very different rules. A lot of uncertainty about the regulation and especially also lack of financing options to help them grow. The European Commission is saying that it wants to tackle all these challenges. It has presented several initiatives to address them. But that will obviously take a while before it actually materialize and before some of these companies can profit from those changes.

4:49So given that these companies are saying that this will take a bit of time, what will it take for Europe to ease its dependence on American tech? It will take a lot of political will. Some fear that because of the current Trump administration, once we have a different U.S. administration, this whole debate will kind of disappear again because it's just easier and cheaper very often to rely on these U.S. tech companies. So it's definitely not a given yet that this is the direction that Europe is going now, but we're trying to capture the debate that is now happening. That's the FT's EU correspondent, Barbara Moons.

5:42The London Stock Exchange Group may start offering round-the-clock trading. That's according to people familiar with the group's thinking. The exchange has one key demographic in mind, younger investors. They tend to buy and sell equities on their smartphones at all hours. It also wants to match cryptocurrency platforms, which already offer 24-hour service. But there are obstacles to London's plan. Regulation is one of them. Plus, it'll have to develop new technology to support nighttime operations. London isn't alone in this. U.S. groups like the New York Stock Exchange and NASDAQ are also trying to extend trading hours.

6:30U.S. President Donald Trump's push to raise tariffs came with a stern warning from critics. They said this is going to hurt the U.S. economy. Now, inflation did rise in June, but Trump's tariffs also seem to have netted the Treasury nearly$50 billion in extra revenue. And so far, most countries are absorbing the pain from tariffs and avoiding retaliation. The FT's Peter Foster is here to explain why. Hey, Peter. Hey. So real quick, where does this$50 billion figure come from? So the$50 billion figure is the additional revenue from tariffs that the U.S. government got in the second quarter of this year compared to the same period last year.

7:18Now, you have to remember that those extra revenues are also a tax on consumers, right? Because American importers have to pay more to get their goods through the borders. The risk is that they pass those costs on to consumer. Nonetheless, if you're in Donald Trump's camp, you can point to that extra$50 billion and say, as he often does, that the revenues are rolling in. Now, Peter, a couple of countries have retaliated, namely just China and Canada. is that having any impact on the U.S. economy? The really annoying answer to that question is it's just too early to say because a lot of people front-loaded products because they could see the tariffs coming.

7:58So you don't see a huge increase in prices yet because there was a shipload or shiploads of inventory sitting there. I think it's pretty clear that in time we will see upward price pressures and you can see some very early signs of that in products where the U.S. doesn't have a lot of instant inventory. Things like bananas, for example. You can't stockpile bananas because they go off. And there's also a pressure on inflation data. But to what extent? There's just too many moving parts for that because we don't know where the tariff rates are going to settle and we don't know how companies are going to respond.

8:32And all of those factors make it difficult to predict what impact it will immediately have on consumers. So, Peter, why are most countries choosing to hold their fire then? The simple reason is that America is bigger than them. And they learned in 2018, 2019, that an America run by Donald Trump is an aggressive adversary. And if you retaliate, he tends to redouble his retaliation. And so even those countries that have retaliated, like Canada, are in a difficult position. And so countries are cautious. And therefore, you could say they're cowardly, but they're also exercising economic common sense, at least in the short term, because they don't want to get in a fight with a hundred pound gorilla because they'll come off worse.

9:17Well, in the longer term, though, how is this all going to affect global trade, do you think? What we've seen so far is countries looking to do sweetheart deals with America rather than club together. And so whilst in the short term, it makes sense not to pick a fight with Donald Trump, the danger is that then the U.S. collects all this tariff revenue. But US companies don't pay tariffs in the opposite direction. And therefore, the US gets penalty free access to global supply chains. And so we will have to see longer term whether Europe and its other allies can really find the unity to stand up to Trump and defend the rules based trading order, which is being written up by Trump, whose might is right unilateralism is threatening the entire global trade system.

10:04And it's really unclear whether the rest of the system has the spine to stand up to it. Peter Foster is the FT's World Trade Editor. Thanks, Peter. Pleasure.

10:17You 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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