Starbucks and Chinese rival Luckin Coffee battle in New York

Good morning and welcome back to FirstFT Asia. In today’s newsletter:

• Starbucks vs Luckin Coffee

• How US-India ties deteriorated

• The geopolitical tussle over Australia’s Darwin Port

Stories about US-China rivalry often centre on artificial intelligence, trade or defence, but we start today with a different area of competition — that between American and Chinese coffee chains.

Luckin vs Starbucks: Chinese chain Luckin Coffee recently opened two stores in New York as part of its push into the US market, and the reaction from its American rival shows how seriously it is taking the threat. Starbucks greeted the opening of a Luckin outlet in Manhattan by plastering the windows of a vacant store across the street with advertising, while a Starbucks advert flashes on video screens above a nearby subway train exit. Luckin will open more locations this month, a store employee told the FT’s Gregory Meyer.

Competing styles: Luckin, which has already surpassed Starbucks as China’s largest coffee chain, is now seeking to repeat its success on its American rivals’ home turf — with a very different operating model. The Xiamen-based company requires customers to order drinks through its app, while Starbucks last week announced it would “sunset” between 80-90 mobile stores that were designed solely for picking up mobile orders.

“The market is segmenting itself into two separate parts,” said Thomas Paulson, head of market insights at Advan Research. “There’s the highly transactional, app-based, don’t linger, grab-and-go segment. And there’s the other, where you are visiting the place to experience . . . the atmosphere. You’re choosing to linger in that space.” 

Read more about the Manhattan coffee showdown — and what New Yorkers are saying about Luckin.

Here’s what else we’re keeping tabs on today:

• Results: Mitsubishi and Palantir report earnings

• Tariff shock: Switzerland’s stock market is bracing itself for losses when trading resumes today, after the US announced an unexpected 39 per cent tariff rate on the Alpine country last Friday, its national day.

Five more top stories

1. America’s lowest-paid workers are suffering a sharper slowdown in wage growth than their richer peers, according to new data from the Federal Reserve Bank of Atlanta. The trend adds to pressure on President Donald Trump over inequality as he threatens to undermine the reliability of US economic data.

2. The farmers’ bank known to global markets as one of Japan’s most aggressive investors will be more cautious and correct its “imbalances” after it lost $12bn following a big bet on US Treasury bonds, its new chief executive said. Taro Kitabayashi, who took over as chief executive of Norinchukin in April, said the bank would move away from overly concentrated bets. Read the full interview.

3. Several thousand Boeing defence workers are set to strike today after rejecting the company’s latest contract offer, spelling new trouble for the aerospace giant. The roughly 3,200 members of the International Association of Machinists and Aerospace Workers work at Boeing defence manufacturing facilities that build F-15 Eagle and F/A-18 Super Hornet fighter jets, as well as various missiles and munitions.

4. The Opec+ oil cartel said yesterday it would raise production by a further 547,000 barrels a day from September. The decision marks a reversal of its nearly two-year-long strategy of propping up prices by holding huge quantities of crude off the market. 

5. Canada said it was hopeful it can still strike a deal with the US to bring down its tariff rate even as the Trump administration denied that the high levies it set on America’s trading partners were up for negotiation. Dominic LeBlanc, Canada’s minister responsible for trade with the US, told CBS yesterday that he was “encouraged by the conversations” his government has had with Washington.

News in-depth

Just six months after Trump hailed Indian Prime Minister Narendra Modi “a great friend”, relations between the leaders have deteriorated, culminating in the US president imposing a 25 per cent tariff on Indian goods last week and unleashing a blunt denunciation of the world’s fifth-largest economy. Read how Modi’s government is responding to Trump’s tariff invective.

We’re also reading . . . 

• Car chaos: The global auto industry has emerged as one of the biggest victims of Trump’s trade war — with American companies among the worst hit.

• Bangladesh art: For decades, thousands of important artworks have languished in humid storerooms because of government neglect — now they are beginning to see the light.

• Global trade: Hector Torres, a former executive director at the IMF, explains why we can’t blame all global trade chaos on Trump.

Map of the day

Before has he was re-elected in May, Australian Prime Minister Anthony Albanese vowed to reclaim ownership of Darwin Port from Chinese shipping company Landbridge, which gained control of the port in 2015 under a A$504mn ($333mn), 99-year lease deal. His pledge reflects the widespread concern in Australia and Washington about China’s growing military presence in the Pacific, but it sparked objections from Beijing and criticism from the Northern Territory.

Take a break from the news . . . 

Duncan Fyfe writes for FT Magazine about the curse of Disco Elysium — the “greatest role-playing video game ever made” — and how its success led to crises for almost all its creators.