US threatens Russia with ‘severe’ tariffs

Today’s agenda: Frozen Russian assets; EU budget plan’s eastward shift; Loro Piana case; UK tax reform; and the ‘cat bond’ market

Good morning. We begin in Washington where Donald Trump has threatened Russia with “severe” tariffs and other financial penalties if the war in Ukraine does not end soon.

What happened: During a meeting with Nato secretary-general Mark Rutte in the Oval Office yesterday, the US president said he was “very unhappy” with Moscow over the lack of progress towards a deal to end the conflict. “I’m disappointed in President [Vladimir] Putin, because I thought we would have had a deal two months ago,” Trump said.

“We’re going to be doing very severe tariffs if we don’t have a deal in 50 days, tariffs at about 100 per cent, you’d call them secondary tariffs,” he added.

Secondary tariffs: A White House official later said the US was prepared to use “severe sanctions and tariffs” against Russia. Washington can leverage its role at the heart of global finance to cut people and countries off from the international economy through its sanctions programme.

Secondary tariffs or sanctions would ratchet up the pressure on Moscow by punishing third-party entities, industries or countries that do business with Russia. Read the full report.

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

• Economic data: Spain, Canada and the US publish consumer price indices for June.

• UK: Bank of England governor Andrew Bailey and chancellor Rachel Reeves are scheduled to speak at Mansion House.

• US: Arizona holds a special primary election to fill a vacant US House seat; Trump is expected to speak at a Pennsylvania energy summit.

• Wall Street: JPMorgan Chase and Citigroup report second-quarter earnings. Traders are due to come to the rescue of their investment banking colleagues, who are on course to extend a record streak of underperformance.

Five more top stories

1. EU plans to raise more money for Ukraine by putting frozen Russian state funds into riskier investments would amount to “expropriation”, the institution holding the bulk of the assets has warned. Euroclear chief executive Valérie Urbain told the Financial Times that plans to reinvest cash generated by the assets to yield higher profits could risk further retaliation from Moscow.

• EU common budget: Brussels is to unveil a new way to allocate more than €750bn of EU farming and development funds, favouring newer member states.

2. One of Hungary’s richest men is pushing back against accusations that political connections helped him make his fortune, as the country’s leader Viktor Orbán faces public anger over cronyism and falling living standards. Read Marton Dunai’s interview with the prime minister’s son-in-law István Tiborcz.

3. City grandees have warned that further tax increases could prompt more wealthy people to leave Britain and deter many from saving for retirement, calling on Rachel Reeves to provide “stability”. The comments come ahead of the UK chancellor’s Mansion House speech today, in which she is expected to outline her vision for the country’s financial services.

• Overhaul: A clean sweep on tax reform is the easiest option for the UK government, writes Martin Sandbu. Such a move could deliver three big wins.

• More UK news: Starling Bank is examining the case for listing in New York, as the digital bank presses ahead with an expansion into the US.

4. A Milan court placed Loro Piana under judicial administration for subcontracting production to suppliers that allegedly exploited workers, making the LVMH-owned cashmere brand the latest fashion house to be caught up in a series of investigations into labour rights violations. Silvia Sciorilli Borrelli has details of the case.

5. Measles cases in Europe and Central Asia have climbed to their highest level for more than a quarter of a century, according to the World Health Organization. Outbreaks of the viral disease have killed children in the US and UK, stoking fears that vaccine hesitancy in high-income countries is threatening hard-won gains from mass immunisation programmes.

The Big Read

China’s BYD is catching up with Tesla and is poised to overtake its US rival in electric vehicle sales for the first time. In the past three years, the Chinese auto group has narrowed the technology gap between the two carmakers, including in autonomous driving. Read what is powering BYD’s headway in the EV market.

​​We’re also reading . . . 

• Instant delivery wars: Chinese online retail groups JD.com and Alibaba are luring shoppers with discounts in push to grab market share from rival Meituan.

• Artificial intelligence: Instead of retraining those who lose work, politicians could help people take matters into their own hands, writes Sarah O’Connor.

• Rare earths: A small mining company won Pentagon backing as Trump sought to counter China and take a new approach to national defence.

• ​China GDP: The world’s second-largest economy grew 5.2 per cent year on year in the second quarter as resilience in exports helped to offset sluggish domestic demand.

Chart of the day

Insurers are selling so-called catastrophe bonds at a record rate as they seek to offload the growing risk from climate change on to investors eager for high returns. Issuance of the instruments, which transfer part of the risk for events such as wildfires, hurricanes and earthquakes to bondholders, has surged to $18.1bn this year. Read more on the “cat bond” market.

Take a break from the news

Would you trust an algorithm to make you a suit? Swedish brand Blugiallo, using clients’ measurements, created a data set of 1,000-plus unique sizes that could be turned into an algorithm to calculate a perfect fit for each customer — starting from £650. Is there a catch?