How Trump's tariffs ripped up the global trade order

0:00Good morning from the Financial Times. Today is Monday, March 30th, and this is your FT News Briefing. America's president says the U.S. could take Iran's oil, will tell you how all the uncertainty about what happens next in the war is weighing on global markets. Plus, it's been a year since America's so-called Liberation Day, in a special series this week, we're asking, has U.S. President Donald Trump actually reshaped global trade? I think he has tried to remake the world trading system with them. He has failed. I'm Victoria Craig, and here's the news you need to start your day. President Trump spoke to the FT late Sunday about the war in Iran. When asked about his objectives, he said his, quote, preference would be to take the oil, though he acknowledged he faces resistance at home.

1:01He compared the possible move to Venezuela, where the U.S. plans to control the oil industry indefinitely. A decision like that in Iran would involve seizing the country's oil export hub, Carg Island. On that matter, the president said he has, quote, a lot of options, and that taking it would mean being there, quote, for a while. The president stressed that talks between the U.S. and Iran view what he called Pakistani emissaries were progressing well, and set a ceasefire deal to reopen the vital straight of war moves could be reached, quote, fairly quickly. He noted 13,000 targets have been hit in Iran and 3,000 remain, but he did not elaborate on what or where those targets are. The interview with the president comes as oil prices started the week trading near the highs of the conflict so far. A month of war in Iran has left investors with nowhere to hide. That is because global safe haven bonds and by comparison, riskier stocks have suffered

2:02their biggest combined sell-off since 2022, with no end in sight to the conflict, what's in store for the markets as we head into the second quarter this week. FT Market's columnist, Katie Martin, joins me now to parse this out. Hi, Katie. Hey, hi, Dave. I'm good. Thanks for being here. So before we get to our look ahead, let's sort of recap the month so far, because the energy shock that the war in Iran has caused has really been brutal. So what does it tell us looking at the market, that basically everything is falling. We've got stock, bonds, all in decline. Yeah, this is a bit of a nightmare scenario for investors for a number of reasons. The first reason is we don't really know what we're dealing with here. We know is that there's an energy shock, but a lot depends on how much higher energy prices go. And so the longer this goes on for, the more damaging this gets for investors portfolios, which we all know are not the most important things in this conflict, but they are important

3:03nonetheless. The second reason is that it's really bad for bond markets. So government bond markets are supposed to be the safe bit of a portfolio, but bonds hate inflation, and what we could be looking at here from the energy price shock and potential food price shock is another run-up in inflation. And so for investors, nothing is working. One of our colleagues wrote last week about how it's become slightly harder to trade in the $30 trillion US Treasury market. You're talking about bonds, Katie, how worrying is that for the market now? The US government bond market, which is the biggest and most important of all of them and really underpins global markets and asset markets of all kinds, that has started to become quite unstable. We're having periods where it can be a little bit difficult for investors to get a hold of prices and to get deals done. These are the early signs that we are seeing quite disjointed markets and the concern among

4:04investors is that when markets get like that, accidents can happen. You can have blow-ups. We've already had a situation where a whole bunch of hedge funds have had a really horrible time in UK and European government bonds. None of them were betting that anything like this would happen. In fact, they had the opposite bet on. So when that hit a wall, they really took a lot of pain very, very quickly. So that's why people are paying attention to trading conditions, particularly in US government bond markets, because it is very easy for stuff to go wrong when markets are as fragile as this. There's also a growing concern of seeing global stagflation as a phrase that re-entered the lexicon that's this mix of faltering growth and rising prices. How big of a risk do you think that is to the global economy at this point? It's really hard to know how to deal with that because central banks can't raise interest rates to control inflation that comes from energy prices very easily.

5:05So it can become a very unpleasant experience from investors, the consumers, and it's just difficult to see at this point what puts a stop to it. There is still a hope out there among investors that I speak to that somehow we can pick a narrow path that kind of gets us to a point where we can model through this situation, particularly investors have their eyes on the fact that the US has midterm elections coming up in November. There's an assumption that Trump won't want energy prices to get too high in the run up to that. So there is a hope that at some point someone will be forced into a solution, but until that happens, this concern that's still hanging over people is that what we already have, which is an unpleasant market environment, could become a really unpleasant market environment on a completely unpredictable basis. It's becoming much more apparent to investors that it's not up to Trump. He can't just flip a switch and make this go away. There has to be some sort of agreement with Iran and it has an existential battle on its hands, as far as it's concerned, but yet Trump's ability to talk this down and

6:06to turn this around is clearly troubled. Yeah, well, plenty for us to keep our eyes on Katie Martin, our market's columnist. Thanks so much for your time. Thanks for having me. A lot has happened in the first year of US President Donald Trump's second term, new global conflicts, fresh rifts with allies, new tariff regimes. For the next week, we're zooming in on that last one, because this week marks one year since the president's so-called Liberation Day announcement. April 2, 2025, will forever be remembered as the day American industry was reborn. The day America's destiny was reclaimed and the day that we began to make America wealthy again. That rose garden speech last April was the official unveiling of a set of tariffs that would be enacted on countries around the world based on something called IEPA, the International

7:08Emergency Economic Powers Act. It was a big deal, but it was an even bigger deal when the Supreme Court this year ruled all of those tariffs illegal. So here on the news briefing, we're taking a deep dive into how global trade has changed with Trump's whims. And for the first installment today, we're bringing in Alan Beatty. He's a senior trade writer for the FT who pens are weekly trade secrets newsletter. Hi, Alan. Hi. So, whipsod, I think, is the word that comes to my mind when I think of US tariff policy over the last year. So, how do America's trading partners feel? I think also whipsod, possibly traumatized. I think one of the problems is that they thought there's a lot more logic to them than they actually is. So, who will announce all of these things and they say, what do you want? And then because it turns out he wants about 10 different things which are all contradicts each other, they find it hard to grasp that. And the European Union in particular, which is a ruthlessly logical mechanism, finds it difficult to negotiate with somebody whose objectives keep changing and who can't

8:10really be relied to keep a promise anyway. Yeah. And I think on that note, I mean, does that mean that Trump's various tariff programs have really upended, re-rooted, or changed global trade in a meaningful way on a permanent basis, or is this all sort of just temporary until things settle out or even until another administration comes in? So, the two things that, you know, during his first term, what we saw was China continuing to export to the US just via third countries. And then Trump was extremely keen that that wouldn't happen again. As far as we can tell, he hasn't really succeeded because Chinese exports are still roaring away. It's still running a huge surplus with the rest of the world. But the bilateral deficit with the US, or US's bilateral deficit with China, rather, has fallen. So as far as we can tell, the same pattern is there. China is such an incredibly competitive exporter in so many ways. And increasingly, in high tech goods and things that other countries actually can't do, that the sort of the logic of market forces means it will continue to export.

9:14And those things will find their way to the US somehow. Now, in terms of the trading system, one thing that's really striking is that we have not had a sort of worldwide surge to protectionism that just hasn't been a lot of other countries cutting off trade between themselves. If fact, if anything, somewhat the opposite countries have continued to sign trade deals, I think it's a bit like Brexit in the UK that the UK left the open union and everyone wondered, would other countries follow it out? That's the same with Trump. He's pulling the US to some extent out of the trading system. Everyone else has looked it and said, oh my goodness, whatever we do, we're not going to do that. When it comes to how the US behaves, the Supreme Court struck down the IEP-abased tariffs, and that was seen as a huge blow to the president's tariff strategy, but has it done anything to actually derail the administration's ultimate goals? I don't think we'll change the way they've responded. I mean, they signaled very clearly in advance of the decision what they were going to do, which is recreate the tariff war using a bunch of other legal authorizations, specifically

10:17one which is supposed to deal with balance of payments crises, one which is supposed to deal with national security, and one which is supposed to deal with unfair trade. They are areas in which the Supreme Court has traditionally deferred more to the president, so it seems fairly likely that they will be able to rebuild that tariff war to more or less what it was before the Supreme Court ruling. Finally, for America's trading partners over the next two and a half years that we have President Trump in office, is there any certainty about what trade will look like given he can really change on a whim? He can, but I think one of the things that the governments have discovered, Trump puts tariffs on and trade finds its way around. The US is quite a close economy, it's probably only 15 or 17 percent of global import. If the US wants to remove itself from trade, to some extent it can do so. Everyone else will be looking for a source of final demand, but it's not immediately catastrophic. I personally think we have reached peak tariff. I think he has tried to remake the world trading system with them.

11:22He has failed. He has tried to close the US trade deficit with them. He has failed unless he goes completely insane and tries to cut off the US from the rest of the world altogether. I think there's a limited amount that he could do that he hasn't already done, and which is actually feasible for him to do. Well, peak tariff, you heard it here first, folks. Alan Beatty, our senior trade writer and author of the Trade Secrets newsletter. Thanks so much for your time. Thank you very much. Our trade series rolls on tomorrow with a closer look at how the Supreme Court is reshaping the Trump administration's global tariff policy. So be sure to catch that one right here in the podcast feed. And one more thing before we go, you are listening to the 2000th episode of the FT News Briefing. I know somewhere Mark Filipino has dug out his celebratory Y2K glasses just for this occasion. As for me, it's been a pleasure to bring you the latest business and economics news from

12:25all around the world each and every Monday morning. So from all of us here, thanks so much for listening. And as always, you can read more on all of the stories in today's podcast 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. A ring of spies working for China's Ministry of State Security, one of the most mysterious intelligence agencies in the world. The 6th Bureau podcast is a story of the inner workings of the MSS, and how one man's ambition and mistakes opened its vault of secrets. Listen to the 6th Bureau on the I Heart Radio app, Apple Podcasts, or wherever you get your podcasts.