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Today’s agenda: Canada scraps tech tax; China’s rare earth curbs; European port congestion; Iran’s existential moment; and Russia’s teen spies
Good morning. We start the week on Capitol Hill, where Donald Trump’s “big, beautiful bill” is being debated. Here’s what we know.
Current situation: Republican lawmakers are struggling to find the votes to pass the US president’s landmark tax and spending bill after barely gathering enough support to begin the debate on the legislation in the Senate. Democrats have demanded that the 940-page bill be read out in full on the Senate floor, with voting set to follow.
Why it matters: Independent estimates, including by the Congressional Budget Office, indicate the bill would push the US federal debt past its previous post-second world war high this decade. Economists polled by the Financial Times and the University of Chicago’s Booth School have warned that “breathtaking fiscal policy excess” and Trump’s attack on the Federal Reserve’s independence risk diminishing the US’s status as the ultimate haven for foreign investors. We have more from the survey here.
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Financial repression: An economic policy war fuelled by state activism in shaping capital flows has begun, writes Martin Sandbu.
And here’s what else we’re keeping tabs on today:
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Economic data: Germany and Italy have their consumer price indices.
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UK politics: The government will lay out its planned changes to controversial welfare reforms ahead of a crunch vote tomorrow.
Five more top stories
1. Canada has scrapped a digital services tax that targeted US technology companies, in an effort to smooth trade negotiations with its neighbour after Trump described the levy as a “direct and blatant” attack. The decision to abandon the 3 per cent charge came hours before the levy was due to come into effect today.
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TikTok: Trump says he has found a “group of very wealthy people” to buy the app’s US operations as part of efforts to separate its ownership from China.
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Nvidia: Insiders have sold more than $1bn of the company’s stock over the past 12 months.
2. Exclusive: China’s export controls are spilling over into products beyond rare earths and magnets officially identified by Beijing, threatening broader supply chain disruptions and undermining US claims that a new trade deal had resolved delays to shipments. Edward White has more details from Shanghai.
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More on rare earths: European industrial groups are turning to France as they attempt to cut dependence on China for the critical minerals.
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Chinese economy: Beijing has not been able to overcome dozens of “choke points” that are the essential building blocks of modern manufacturing.
3. Trump’s tariffs are causing Europe’s worst supply chain congestion since Covid, shipping and logistics companies warn. Barges have been left waiting days to pick up goods and container ships have faced long waits, with the problems — worst at the ports of Rotterdam, Antwerp and Hamburg — expected to persist for at least several months.
4. Wall Street’s record high is confounding bets that Trump’s tariff chaos would spark a lasting rotation into other markets, in particular Europe. The continent’s spending splurge on defence and infrastructure had buoyed shares early this year, but investors have now flooded back to tech stocks.
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Trump shock? The real surprise is that, despite his policies and Middle East turmoil, US stocks are still rising, writes Ruchir Sharma.
5. Big hedge funds are pushing into private credit as they seek to establish themselves as diversified financial institutions, with Millennium Management, Point72 and Third Point all looking to launch new funds and strategies. Read the full story.
News in-depth
As enemies closed in, a secret nuclear programme was built deep underground, shielded from American eyes. At least one rudimentary nuclear device was hastily built. This was Israel in 1967, when it faced an existential threat. But the story is not so different for Iran today, which has to confront the same question: to create a measure of final deterrence by sprinting to a nuclear weapon, or step back from the brink?
We’re also reading . . .
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Russia’s teen spies: Moscow’s operatives have been offering Ukrainian minors cash on messaging apps to photograph targets and plant bombs.
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Cocoa: A global boom is not reaching the industry’s West Africa heartlands, where regulated pricing has starved farmers of big gains.
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UK Labour: One year in, the FT looks at the government’s record on the economy, healthcare, infrastructure and immigration.
This Thursday, join Stephen Bush, Miranda Green and Robert Shrimsley for a live Q&A on Labour’s next moves after a turbulent 12 months. Submit your questions here.
Chart of the day
Europe’s tourist hotspots are braced for a record number of visitors this summer as holidaymakers spurn the US and the Middle East, adding to growing concerns about overtourism on the continent.
Take a break from the news
London’s best-kept secret? Living afloat. For one writer, living on a boat became the ultimate blend of affordability, peace, and community.