Car stocks surge as Trump agrees trade deal with Japan
Good morning
Thanks for joining me. Shares of car makers have surged higher after Donald Trump announced the US has agreed a trade deal with Japan. Here is what you need to know.
5 things to start your day
Donald Trump announces 'massive' trade deal with Japan | Tokyo will invest $550 billion in the US in exchange for lower tariffs
Labour's great rail revival has already hit the buffers | The decision to relaunch just one defunct train line has sparked anger and frustration across Britain
Laws to allow UAE stake in The Telegraph approved by Lords | Peers vote to let foreign states take passive shareholdings in British newspapers of up to 15pc
Mike Lynch's estate faces bankruptcy over £700m fraud ruling | Judge orders late tech tycoon's estate to compensate HP over 2011 sale of his software company
Nuclear fusion start-up claims to have cracked alchemy | Silicon Valley company says discovery marks 'beginning of a new golden age'
What happened overnight
Japanese shares surged to a one-year high as the country struck a trade deal with the United States that lowers tariffs on its cars.
President Donald Trump on Tuesday said a trade deal with Tokyo will include Japan paying a lower-than-threatened 15pc tariff on shipments to the US.
It followed an agreement with the Philippines that will see the US collect a 19pc tariff rate on imports from there.
Mr Trump also said representatives from the European Union were coming for trade negotiations on Wednesday. That stirred hopes for a deal with Europe, even as the EU was reportedly refining countermeasures in case of a deadlock before the August 1 deadline.
Japan's Nikkei bolted 3.9pc higher as shares of carmakers surged on news the deal would cut the US car tariff to 15pc, from a proposed 25pc. Mazda Motor rallied 17pc, while Toyota Motor jumped 13.6pc.
South Korean carmakers also rallied as the Japan deal fuelled optimism over potential progress in tariff negotiations between South Korea and the United States.
Wall Street inched to another record on Tuesday following some mixed profit reports, as General Motors and other big US companies gave updates on how much Mr Trump's tariffs are hurting or helping them.
The S&P 500 added 0.1pc to the all-time high it had set the day before, closing at 6,309.62. The Dow Jones Industrial Average rose 0.4pc to 44,502.44. The Nasdaq Composite slipped 0.4pc from its own record, to 20,892.68.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
The Independent
2 minutes ago
- The Independent
US-China trade talks: Can China reduce its export dependence?
China's high dependence on exports will likely be a key focus of a new round of U.S.- China trade talks this coming week in Stockholm, but a trade deal would not necessarily help Beijing to rebalance its economy. U.S. Treasury Secretary Scott Bessent has said he hopes the negotiations can take up this issue, along with China's purchases of oil from Russia and Iran, which undercut American sanctions on those two countries. Hopes rose for a breakthrough in talks after U.S. President Donald Trump announced deals with Japan, Indonesia and the Philippines this week. The U.S. wants China to do two things: Reduce what both the U.S. and the European Union see as excess production capacity in many industries, including steel and electric vehicles. And secondly, to take steps to increase spending by Chinese consumers so the economy relies more on domestic demand and less on exports. 'We could also discuss the elephant in the room, which is this great rebalancing that the Chinese need to do,' Bessent told financial news network CNBC. He said China's share of global manufacturing exports at nearly 30%, 'can't get any bigger, and it should probably shrink.' China is tackling the same issues — for domestic reasons The issues are not new, and China has been working to address them for years, more for domestic reasons than to reduce its trade surpluses with the U.S. and other countries. Bessent's predecessor as treasury secretary, Janet Yellen, made industrial policy a focus of a trip to China last year. She blamed government subsidies for flooding the global market with 'artificially cheap Chinese products.' The European Union, whose top leaders met their Chinese counterparts in Beijing on Thursday, has cited subsidies to justify EU tariffs on electric vehicles made in China. In the 1980s, the U.S. pressured Japan to boost consumer spending when American manufacturing was overwhelmed by exports from the likes of Toyota and Sony. Economists have long argued that China likewise needs to transform into a more consumer-driven economy. Consumer spending accounts for less than 40% of China's economy, versus close to 70% in the United States and about 54% in Japan. Chinese leaders have spoken about both factory overcapacity and weak consumer spending as long-term problems and have sought over the past 20 years to find ways to rebalance the economy away from export manufacturing and massive investments in dams, roads, railways and other infrastructure. Fierce price wars have prompted critical reports in official media saying that companies are 'racing to the bottom,' skimping on quality and even safety to reduce costs. With strong government support, they've also expanded overseas, where they can charge higher prices but still undercut local competitors, creating a political backlash. Economists say China needs a consumer-driven economy All that competition and price cutting has left China battling deflation, or falling prices. When companies receive less for their products, they tend to invest less. That can lead to job cuts and lower wages, sapping business activity and spending power — contrary to the long-term goal of increasing the share of consumer spending in driving overall growth. To counter that, the government is spending billions on rebates and subsidies for people who trade in their cars or appliances for new ones. But acknowledging a problem and solving it are two different things. Economists say more fundamental changes are needed to boost consumption and rein in overcapacity. Such changes can only come incrementally over time. Private Chinese companies and foreign-invested companies create the most jobs, but they've suffered from swings in policy and pressures from the trade war, especially since the pandemic. Demographic changes are another challenge as China's population shrinks and ages. Many experts advocate expanding China's social safety net, health insurance, pensions and other support systems, so that people would feel freer to spend rather than save for a medical emergency or retirement. Yan Se, an economist at Peking University's Guanghua School of Management, warned at a recent forum that deflation will become a long-term issue if China doesn't step up its welfare benefits. 'Chinese people deserve a better life," he said. Facing external threats, China wants to be more self-reliant One possibility, put forward at the same forum by Liu Qiao, the dean of the business school, would be to change incentives for local government officials, rewarding them for raising consumption or household incomes instead of meeting an economic growth target. He doesn't see that happening nationwide but said it could be tested in a province. 'That would send out a message that China needs a different approach,' he said. Chinese leader Xi Jinping has made transforming the country into a technology superpower a top priority. It's a goal that has gained urgency as the U.S. has tightened restrictions on China's access to high-end semiconductors and other advanced knowhow. Output in high-tech manufacturing is growing quickly, adding to potential overcapacity, just as what happened with the government's encouragement of 'green' technologies such as solar panels and wind turbines. Various industries, including EV makers, have pledged to address the issue, but some local governments are striving to keep money-losing enterprises afloat, reluctant to lose tax revenues and jobs, or to fail to meet economic growth targets. Going forward, the government is calling for more coordination of economic development polices in fields such as artificial intelligence so that not every province champions the same industry. But government moves to counter the impact of higher tariffs tend to support sectors already in overcapacity, and the share of consumption in the economy has fallen in recent years. 'A sustained improvement in household consumption will require greater reform ambition,' the World Bank said in its most recent update on China's economy." ___
The Independent
2 minutes ago
- The Independent
There is a way to boost economic growth without spending money
Repeatedly, we hear Keir Starmer and Rachel Reeves are putting pressure on ministers and departments to generate ideas for economic growth. So, here is one: the third sector. Start using the civil society, as it's also called, to its full potential, to drive the economy. A new report from the Gradel Institute of Charity at Oxford University, A Third Way of Doing Growth, makes a persuasive case for a fresh look at this frequently ignored national resource. Research by Pro Bono Economics for the study suggests the third sector creates at least £39.5bn of economic value a year if volunteer hours are factored in – and well over £100bn if the full economic contribution by the sector is assessed. Adds the report: 'Statistical evidence also shows that there are many persistent societal challenges that the third sector can often tackle more effectively (and therefore more cost-efficiently) than the public or private sector alone.' So, a win-win. Stephen Bubb, executive director of the Gradel Institute and a former head of the charity leaders' representative body, Association of Chief Executives of Voluntary Organisations, argues that a huge opportunity is being missed. 'The government should think about the third sector and how they can harness its energy and strength,' he says. Bubb said similar to Tony Blair in his third term as prime minister. The result was the appointment of Ed Miliband as the first third sector minister and a white paper. As with many such initiatives, it was promptly forgotten as the government changed. It was resurrected, of sorts, under David Cameron with his 'big society' push. 'Cameron got the point about how civil society could be used more,' says Bubb, 'but he tried to implement it at the same time as the austerity programme.' As a result, it never took off. What is different this time is that Labour are desperate for something new that does not involve the spending of vast sums of public money. The report makes a few key recommendations. Firstly, deliver better social business models for social care. Currently, the market is dominated by private firms, which are mostly extractive, putting little back, taking out their profits. New businesses mean new jobs, new tax revenues, and significant net gains for local economies. Secondly, focus on prevention to reduce crisis management. A lot of the focus in the third sector is on assisting people once they are in crisis. 'The prisons are full,' says Bubb. 'The state is hopeless at rehabilitation. Charities are good at it, they know what they are doing. Prisoners leaving and going into jobs is seeing them making a positive contribution to society, to the economy. Charites are better at helping them in securing work than the state. It's the same with mental health – the charities' record in this area is also much better.' Rebuild social connection to drive social mobility. A decline in investment in public social infrastructure, combined with Covid and the rise of social media, has led to 'a crisis of social connection in the UK – one of the most important factors in social mobility and economic inclusion,' the report says. The problem is especially acute among the nearly 1 million young adults not in employment, education, or training (Neets). 'The most effective means to engage this cohort is through charitable and voluntary institutions which – through community-based approaches and one-to-one engagement – have a proven ability to connect with those most distant from society.' Help government rewire delivery of public services. Starmer has talked about his ambition for a 'complete rewiring of the British state' to better serve the needs of the people. 'By involving the third sector in this endeavour, government has enormous potential to move away from for-profit commissioning to innovating services built around people's real-life needs and a far greater focus on rewarding organisations based on the outcomes achieved.' To that end, they suggest creating a 'Civil Society Satellite Account' in the national accounts, so there is clarity as to the third sector's full value (similar to how tourism and other sectors are treated). Sixteen countries already do this, but not the UK. They also recommend opening up public sector procurement to the third sector to transform service delivery. Of the £350bn a year that the government spends on procurement, only £21bn is administered by the third sector, meaning their skills, abilities and perspectives are simply not being efficiently deployed. Other suggestions include: building a national programme of volunteering, aimed particularly at those 18-25 Neets; and creating innovative partnerships to rebuild the social infrastructure critical for inclusive growth. As Bubb says: 'It is not so much a policy shift but the better, more focused use of an enormous resource.' It also plays to Labour ideology. Put like that, you do wonder what Starmer and Reeves are waiting for.
The Independent
2 minutes ago
- The Independent
There won't be a wealth tax – but Rachel Reeves can't afford to rule it out just yet
Normally, when politicians decline to rule something out, a sceptical media and public believe they are about to do it. But there should be one exception to this rule. Keir Starmer, Rachel Reeves and other ministers are refusing to rule out introducing a wealth tax in this autumn's Budget, when the chancellor is likely to raise taxes by at least £20bn to stick within her fiscal rules. I'm told Starmer and Reeves will not bring in a new wealth tax, such as the 2 per cent levy on assets of more than £10m advocated by a growing number of Labour MPs and Neil Kinnock, the party's former leader, to raise £10bn. A wealth tax is an easy slogan and fits on to a banner. It would do nicely for the Starmer allies hoping to nudge him in a more progressive direction as he seeks a long overdue 'story' for his government. But Reeves and Starmer are not convinced. The chancellor thinks wealth taxes don't work. Twelve developed nations had them in 1990s but only three remain; only one, in Switzerland, brings in lots of money. Reeves burnt her own fingers by targeting non-doms – a process begun by Jeremy Hunt, the outgoing Tory chancellor. I'm told Reeves privately dismissed fears the rich would respond by leaving the UK, saying: "They always say that, but it never happens." It is happening, and she is now considering changing her plan to make worldwide assets, including those in foreign trusts, liable to inheritance tax. One government insider told me: 'People can choose where to pay their taxes. It's very easy to move countries and they are doing it.' A new wealth tax would be complex, take years to introduce and probably not be worth the candle. Dan Neidle, founder of Tax Policy Associates, said its study found such a tax would 'lower long-run growth and employment, thanks to a decline in foreign and domestic investment. It would make UK businesses more fragile and less competitive, and create strong incentives for capital reallocation and migration.' Why not just say no to a wealth tax now? Reeves offered one explanation to her Tory predecessor Norman Lamont at a Lords committee hearing this week. He told her he found it 'a bit strange' the government has not ruled out the move. Reeves replied that if she ruled out one tax rise, the media would move on to the next option, and assume that one was going to happen if she failed to rule it out. A fair point – but not her only reason. Reeves and Starmer need to build bridges with the parliamentary Labour Party after it filleted their welfare legislation, so rejecting a wealth tax now would inflame tensions. I suspect that when the Budget comes, Reeves and her allies will whisper to Labour MPs they are introducing a form of wealth tax through other measures, while avoiding headlines about implementing a specific one. Another reason not to rule out a wealth tax is to help message discipline. Labour certainly needs more of that: ministers unwittingly fuelled speculation about tax rises in media interviews by giving different definitions of "working people'. Far easier to say taxes are a matter for the Budget and we don't comment in advance. Some senior Labour figures think Reeves's reticence is because she is considering proposals that are close to being a wealth tax – for example, increasing property-based taxes. I think she should bring in higher council tax bands for the most expensive properties. It's ludicrous that this tax is based on 1991 property values, and that in England, people in homes valued at more than £320,000 pay the same amount in their local authority. Reform could be sold as a genuine levelling up measure the Tories flunked as it would cut bills in the north and Midlands while raising them in the south. Alternatively, Reeves could increase capital gains tax for the second Budget running, perhaps by bringing it into line with income tax rates, which are higher. Some in government favour a rise in income tax with the money earmarked for defence, as I have suggested. Another option is to raise the top rate of income tax from 45 per cent to 50 per cent. But both ideas would leave Labour open to the charge of breaching its manifesto pledge not to increase income tax, national insurance or VAT. Reeves could argue that circumstances had changed in a more dangerous world. But breaking its promise might be a step too far for an already deeply unpopular PM and party. I don't think there will be a wealth tax. However, the rich shouldn't celebrate. The Budget will increase existing taxes on the wealthy, in line with the government's mantra of protecting "working people", while ensuring 'those with the broadest shoulders carry the greatest burden'. Health warning: creating losers is not pain-free for them or the government, as Reeves discovered when she brought in the ' family farms tax '. But reforming some taxes under a better banner – 'fair tax' – is her best shot.
