TheChek News Flow

DAX:

MDAX:

SDAX:

French group ‘absolutely certain’ to be world’s biggest ad company by revenue last year, says Arthur Sadoun

France’s Publicis overtook rival WPP to become the world’s biggest advertising company last year after a series of acquisitions helped it grow in the US and push ahead in digital marketing, according to its chief executive.

“We had a very strong Q4, which now makes us absolutely certain to be the largest advertising company in 2024,” Arthur Sadoun told the Financial Times in an interview. “Everyone knows we’re winning more than others in new business, but we’re also losing less.”

He also said the “acquisitions we’ve made for more than $12bn in the past decade have been growing by 40 per cent”.

The Paris-listed group grew 6.3 per cent on an organic basis in the fourth quarter, ahead of company-provided consensus estimates, in order to deliver net annual revenues of €14bn in 2024.

WPP is expected to deliver £11.4bn in sales when it reports results this month, according to Visible Alpha estimates. London-listed WPP has been hampered by weak revenue growth after a period of upheaval that followed the departure of its founder Sir Martin Sorrell.

Publicis’s operating income grew by more than a quarter year on year to €2.2bn.

However, its moment in the top spot may prove shortlived once Omnicom’s $13bn takeover of rival Interpublic, announced in December, closes, creating a group with more than $25bn in revenues.

Sadoun said the industry consolidation would provide opportunities for Publicis as the new group went through several years of restructuring and integration.

Publicis was struggling with low growth and falling shares when Sadoun took over as chief executive in 2017 as the industry’s traditional agency model was disrupted by online platforms such as Facebook and Google.

Deals such as the $3.9bn acquisition of Epsilon, a US digital agency that allows advertisers to target consumers using data, have helped transform the business. Its shares used to trade at a discount to WPP and Omnicom, but have gained on them since 2020 and now outpace them.

The group benefited from the rebound in US tech client spending this year and has been growing three times faster than its peers there in the past four years, according to Sadoun. “We’re the largest media buyer — we’re buying every one dollar out of three” in the US advertising space, he said.

Sadoun said it was too early to assess the impact of recent changes to content moderation policies on Facebook announced by Mark Zuckerberg, chief executive of parent company Meta.

A big change in the moderation and content policies at X, formerly Twitter, after the platform was bought by Elon Musk in 2022 resulted in a marked decline in advertising spending by clients, though that has now stabilised.

“We’ll be looking very closely at brand safety on Facebook in the future,” Sadoun said.

Meta CEO Mark Zuckerberg has pledged to make artificial general intelligence (AGI) — which is roughly defined as AI that can accomplish any task a human can — openly available one day. But in a new policy document, Meta suggests that there are certain scenarios in which it may not release a highly capable AI system it developed internally.

The document, which Meta is calling its Frontier AI Framework, identifies two types of AI systems the company considers too risky to release: “high risk” and “critical risk” systems.

As Meta defines them, both “high-risk” and “critical-risk” systems are capable of aiding in cybersecurity, chemical, and biological attacks, the difference being that “critical-risk” systems could result in a “catastrophic outcome [that] cannot be mitigated in [a] proposed deployment context.” High-risk systems, by contrast, might make an attack easier to carry out but not as reliably or dependably as a critical risk system.

Which sort of attacks are we talking about here? Meta gives a few examples, like the “automated end-to-end compromise of a best-practice-protected corporate-scale environment” and the “proliferation of high-impact biological weapons.” The list of possible catastrophes in Meta’s document is far from exhaustive, the company acknowledges, but includes those that Meta believes to be “the most urgent” and plausible to arise as a direct result of releasing a powerful AI system.

Somewhat surprising is that, according to the document, Meta classifies system risk not based on any one empirical test but informed by the input of internal and external researchers who are subject to review by “senior-level decision-makers.” Why? Meta says that it doesn’t believe the science of evaluation is “sufficiently robust as to provide definitive quantitative metrics” for deciding a system’s riskiness.

If Meta determines a system is high-risk, the company says it will limit access to the system internally and won’t release it until it implements mitigations to “reduce risk to moderate levels.” If, on the other hand, a system is deemed critical-risk, Meta says it will implement unspecified security protections to prevent the system from being exfiltrated and stop development until the system can be made less dangerous.

Meta’s Frontier AI Framework, which the company says will evolve with the changing AI landscape, and which Meta earlier committed to publishing ahead of the France AI Action Summit this month, appears to be a response to criticism of the company’s “open” approach to system development. Meta has embraced a strategy of making its AI technology openly available — albeit not open source by the commonly understood definition — in contrast to companies like OpenAI that opt to gate their systems behind an API.

For Meta, the open release approach has proven to be a blessing and a curse. The company’s family of AI models, called Llama, has racked up hundreds of millions of downloads. But Llama has also reportedly been used by at least one U.S. adversary to develop a defense chatbot.

In publishing its Frontier AI Framework, Meta may also be aiming to contrast its open AI strategy with Chinese AI firm DeepSeek’s. DeepSeek also makes its systems openly available. But the company’s AI has few safeguards and can be easily steered to generate toxic and harmful outputs.

“[W]e believe that by considering both benefits and risks in making decisions about how to develop and deploy advanced AI,” Meta writes in the document, “it is possible to deliver that technology to society in a way that preserves the benefits of that technology to society while also maintaining an appropriate level of risk.”

The president said Musk won’t have the unfettered ability to dismantle the government, but for now their relationship is holding firm

WASHINGTON—President Trump on Monday said there were curbs in place to prevent Elon Musk from doing anything in the government without the White House’s blessing, responding to growing confusion about who was overseeing Musk’s push to dismantle multiple agencies.

Trump described Musk’s role as advisory. “Elon can’t do—and won’t do—anything without our approval and we’ll give him the approval where appropriate. Where not appropriate, we won’t,” Trump said.

Trump’s comments, made to reporters in the Oval Office, came just hours after a Musk-led team effectively shut down the U.S. Agency for International Development. Musk, over the weekend, called USAID “evil,” “a criminal organization” and said it is “time for it to die.” Secretary of State Marco Rubio was made acting head of the agency on Monday and said he would work with Congress regarding the agency’s future.

Musk leads X, SpaceX and Tesla and helped funnel more than $250 million into a political campaign effort aimed at getting Trump and Republicans elected last November. Trump initially said Musk would co-chair a new entity called the Department of Government Efficiency, but some people involved—including the other co-chair—have already departed, leaving Musk with broad powers. DOGE, as it is known, is now a repurposed part of the White House, though its exact remit and staff remain murky and undefined.

For example, Musk initially sought volunteers to work with him on DOGE who he said wouldn’t be paid, but now because the entity is part of the government, it is unclear whether the staff is paid or whether they are allowed to have other jobs outside the government that might pose a conflict.

Musk has been designated as a “special government employee,” a temporary status, which enables him to work at the White House for 130 days without filing financial disclosure forms required for regular White House employees. Both political parties have used this mechanism to bring in top advisers who have complicated finances.

Trump, speaking of Musk and potential conflicts on Monday, said, “If there’s a conflict, then we won’t let him get near it.” Trump didn’t specify who would block Musk when necessary or whether he has been barred from any parts of the government so far.

Congressional Democrats have expressed growing fury about Musk’s role and the way he is moving to either shut down agencies or slash government employment.

“We don’t have a fourth branch of government called Elon Musk and that’s going to become real clear,” said Rep. Jamie Raskin (D., Md.) during a protest outside USAID on Monday. “This illegal, unconstitutional interference with congressional power is threatening lives all over the world.”

On Tuesday several progressive groups plan a protest they are calling the “Nobody Elected Elon rally” outside the Treasury Department. The groups, which include Move On Civic Action, the Working Families Party and Indivisible, are demanding that Democratic lawmakers “use every tool available to stop Elon Musk’s hostile takeover.”

As Musk and his team face growing scrutiny, some members of the Trump administration are rallying to his defense. Edward R. Martin Jr., the interim U.S. Attorney in Washington, D.C., sent Musk a letter on Monday vowing to help protect DOGE and its staff.

“I recognize that some of the staff at DOGE has been targeted publicly,” he wrote. “At this time, I ask that you utilize me and my staff to assist in protecting the DOGE work and the DOGE workers. Any threats, confrontations or other actions in any way that impact their work may break numerous laws.”

Musk and his White House team appear to be moving with Silicon Valley velocity to shake up the U.S. government. They have already accessed payment system information inside the Treasury Department and staffing records at the Office of Personnel Management, among other things. On its social-media account, DOGE claimed to have played a role in changing the way water is pumped in California. It also says it has canceled numerous contracts and leases on underused buildings, saving taxpayers millions of dollars.

A coalition of labor unions sued the Treasury Department on Monday, alleging that handing over information to DOGE was illegal and violated federal privacy protections for millions of Americans.

The abrupt decision by the White House to try to close and reorganize the USAID prompted waves of protest and is serving as a test case for how quickly Trump can reduce the size and scope of the federal bureaucracy and which guardrails he must respect.

The Education Department is another imminent target, according to people familiar with the discussions. Officials at smaller agencies, like the Development Finance Corporation, a federal agency that helps finance projects in developing nations, are also hearing that their duties could be reduced or redistributed, according to people who work there.

These changes are coming as Musk and his team comb through the federal budget and bureaucracy to identify areas where spending can be slashed. Musk’s team is developing artificial intelligence tools they want to install into government technologies in order to root out what they deem as wasteful government spending, according to people familiar with the matter. And they are aiming to acquire office space in every agency, according to people familiar with how the operation is working.

At the Education Department, for instance, DOGE officials want executive orders that would start to gut the agency with the ultimate goal of severely curbing it, according to a person familiar with the Musk-led department’s plans. Trump during last year’s campaign vowed to eliminate the Education Department entirely.

One question is the legal hurdles that Trump and Musk might confront. Many federal workers are unionized and have protections against being dismissed abruptly. Congressional approval is required to create a federal agency, making it very hard to eliminate one by edict.

At the Development Finance Corporation, employees were told that if they can’t begin working in the office five days a week by mid-April, they need to resign by this Thursday, according to a current employee who requested anonymity out of fear of retribution.

The rapid speed of the changes has sparked confusion among employees across the government. Some at the Development Finance Corporation believe their jobs could morph into the sovereign-wealth fund Trump took actions on Monday to create.

Trump nominated investor Ben Black—the son of Apollo Global Management co-founder Leon Black—to lead the agency on Friday. One employee said that with the number of officials expected to resign this week, the agency could be decimated by the time Black arrives.

Musk has emerged in Trump’s inner circle as far more effective than his close aides initially anticipated. Musk has targeted agencies the Republican Party has scrutinized for decades, said a senior administration official, who added that Musk gives them some cover from the fallout from the major disruptions they are planning.

A person close to Musk compared the Tesla CEO to Dick Cheney’s time as vice president during the George W. Bush administration. Cheney was considered the most powerful person to hold the post because of his access to the president and his deep knowledge of how the federal government operated.

Musk’s approach in his DOGE role mirrors, to an extent, the way he took over Twitter in 2022. At the time, Musk urged those at Twitter who couldn’t commit to working at a high intensity to resign voluntarily. Musk later changed the company’s name to X. After slashing staff, which many speculated would decimate the company, X continued operating and appeared to have stabilized, proving to be a popular platform for many during the 2024 election. More recently, the company’s financials have been improving, people familiar with the company have said.

Inside the Education Department, civilian employees have watched the developments at USAID with trepidation, fearful that their agency could be next, said a department employee who was placed on administrative leave Friday.

There were some signs that the White House’s bold edicts to reshape the federal government were already facing turbulence.

The Office of Personnel Management sent an email Sunday clarifying terms of its previous offer for some two million government employees to resign and continue to get a paycheck through September. The email acknowledged that the government hasn’t appropriated the funds for the offer, since the current funding bill for the government expires mid-March.

If Congress doesn’t cobble together a spending bill before the deadline, the government could shut down, freezing payments to federal employees. The memo said any employee who accepts the so-called deferred resignation offer would be entitled to backpay in the event of a shutdown.

On Monday, federal workers received more details about the offer in a form labeled “Deferred Resignation Agreement.” Employees who resign are expected to continue to work through Feb. 28 to “ensure a smooth transition,” according to a copy of the agreement reviewed by The Wall Street Journal. The form also stipulates that employees who resign waive their rights to take action “through any judicial, administrative or other process” related to the resignation offer.

Expectations are low among federal workers that a large number of employees will accept the deferred resignation offer from the federal government.

“I don’t think we’re going to have a lot of people who take it…because it appears to be a scam,” said Sheria Smith, president of the American Federation of Government Employees Local 252, which represents about 2,400 employees at the Education Department.

Jared Kushner’s global empire in the era of Trump

During Donald Trump’s first presidency his son-in-law Jared Kushner was involved in the renegotiation of the North American Free Trade Agreement, the response to the coronavirus pandemic, a blockade in the Middle East, and the normalisation of relations between Israel and Gulf countries.

It propelled Kushner’s profile from a property developer best known for his years-long effort to salvage a $1.8bn investment in a Manhattan office tower and into a global power broker with deep access to the key players in the Middle East and the highest rungs of finance.

On his way out of the White House, Kushner translated his Rolodex into a multibillion-dollar business, a private equity firm called Affinity Partners that mostly invests cash for the state-backed investment vehicles of Saudi Arabia, the United Arab Emirates and Qatar.

In a Big Read, the FT examined the ambitions Kushner has for this nascent but lucrative private investment empire and the potential conflicts of interest that could arise in Trump’s second term.

Affinity has gained attention from those on Wall Street to Washington since it was launched in January 2021.

Democrats have viewed the vehicle suspiciously and called for investigations into the fund. The fledgling firm’s initial $2bn fundraising mostly from Saudi Crown Prince Mohammed bin Salman, whom Kushner befriended, took many by surprise.

Now, Kushner is poised to seize the moment.

He will not take a formal role in the Trump White House this time around, freeing him to focus on his family and investments. Those investments range from high-profile property deals in the Balkans, to companies benefiting from artificial intelligence to bets on new trade dynamics in a deglobalising world.

Some deals, such as an ongoing negotiation for a waste management company in Mexico, may be derailed by Trump’s trade policies.

In an interview, Kushner laid out his vision for Affinity and his response to lawmakers who have characterised his outfit as a pay-to-play operation for foreign governments to gain influence with Trump.

In its first few years, Affinity invested sparingly, deploying less than half of its capital, moderate activity that Kushner says was a result of fears over corporate valuations.

The firm, which employs about 30 people and has seen staff churn, avoids buying companies outright, preferring minority equity stakes. Kushner views it as a more nimble investment operation that minimises administrative burdens. It is also lucrative for Kushner, the majority owner of Affinity.

So far, Affinity’s results are inconclusive. While some deals have gained in value, others like a stake in an Amazon aggregator backed by Adam Neumann have a cloudy outlook.

Kushner is now planning billions in new investments and recently struck two prominent deals, building stakes in Israeli insurer Phoenix Financial and billionaire Brad Jacobs’ acquisition vehicle QXO.

Notably, Kushner views the Phoenix deal as helping to build regional ties among potential adversaries. In it, he is ploughing cash from Saudi, Qatari and the UAE directly into Israel’s markets. A UAE fund had tried to invest in Phoenix in 2023, but was blocked by Israeli regulators.

Kushner says to his critics: “A lot of these people will say everything is a conflict. I am not going to let that stop me.”

He adds: “These guys won’t acknowledge [that] I have an incredible track record of success in the Middle East . . . I have those great relationships because of the success that I achieved, which was something that I was criticised for trying to do at every step along the way.”

Elon Musk’s attacks on equality laws trigger dispute over Starlink in South Africa

Ruling coalition is divided over whether to exempt US satellite company from post-apartheid Black empowerment rules

Elon Musk’s hopes of launching Starlink in South Africa are being delayed by fierce infighting within the country’s ruling coalition over Black economic empowerment laws the US entrepreneur has characterised as “racist”.

Foreign investors in South Africa’s telecommunications sector are required to provide 30 per cent of the equity in a project to Black-owned businesses to qualify for a licence, a policy championed by the African National Congress to redress racial inequalities created under apartheid.

But Musk, who was born in South Africa, on Monday described the country’s policies as “openly racist”. US President Donald Trump also weighed in this weekend, saying South Africa’s government was “treating certain classes of people very badly”, a reference to a land expropriation bill also intended to address unequal ownership.

South African officials say Musk has expressed strong interest in launching Starlink’s broadband-by-satellite service in the country. The billionaire in September said he was “still waiting for regulatory approval” from Pretoria after launching in neighbouring nations including Botswana, Mozambique and Zimbabwe.

Starlink could become a test case of how far the ANC is prepared to dilute equality laws to attract investment and whether the pro-business Democratic Alliance — a key member of South Africa’s fragile government of national unity — is prepared to risk the stability of the coalition by pushing its opposition to Black empowerment.

Solly Malatsi, minister of communications and digital technology and deputy chair of the DA, has raised the possibility of giving Starlink, operated by Musk’s SpaceX, a carve-out from empowerment rules.

Malatsi told the Financial Times it might be possible to extend to the telecoms sector exceptions to ownership rules — known as “equity equivalent programmes” — offered to other sectors, including automobiles.

“I recognise the opportunity that equity equivalence programmes in the [telecoms] sector can help in expanding broadband connectivity to the quarter of our population which does not have access to the internet, while grappling with the reality that the current legislation doesn’t cover for that,” he said.

But ANC stalwarts are likely to oppose any attempt to water down Black empowerment rules. One person in government told the FT on Monday the party is divided on the Starlink issue — even more so after Musk’s latest intervention.

“The reformists would agree that an exception for Starlink is necessary, while the hardliners see any dilution of the rules as an attack on its quest for racial empowerment,” the person said. “But this is complicated because Musk’s posture towards South Africa this week also makes many in the ANC very uncomfortable.”

Malatsi’s predecessor as minister, the ANC’s Mondli Gungubele, was explicit two years ago that, if Starlink were to operate in South Africa, it would need to comply with the “prevailing legislation” on Black empowerment. 

Parks Tau, minister of trade, industry and competition and an ANC member, in January appeared to double down on Black-empowerment rules by proposing a new R100bn ($5.3bn) “transformation fund” to invest exclusively in Black-owned businesses. Foreign investors would have to pay up to 25 per cent of the value of their operations into the fund.

Tau called the fund a “catalyst for change”, but the DA condemned the proposal, saying it would “not support this madness”. The DA’s chair, Helen Zille, has called the policies “a figleaf for corruption”.

President Cyril Ramaphosa, who met Musk to discuss possible investments by SpaceX and Tesla on the fringes of the UN general assembly meetings in New York last September, said he had told the US entrepreneur: “I want you to come home and invest here.”

One person familiar with the tug of war within the ruling coalition noted Ramaphosa invited the ANC’s Tau to the September meeting, but not the DA’s Malatsi. “Nobody knows what was discussed in that meeting,” the person said. “There was no internal brief, no steer from the president that any commitment was made.”

The BEE Chamber, a South African consultancy normally supportive of Black empowerment initiatives, described Tau’s R100bn transformation fund as being “to investment what mosquito repellent is to mosquitoes”.

One senior DA official told the FT: “The ANC appears intent on doubling down on what they refer to as the third wave of black empowerment, even at the cost of growth.” South Africa’s economy has not grown at all in per capita terms in 15 years.

“This is one of the most perverse effects of broad-based Black economic empowerment, which is not broad based and which doesn’t empower a lot of people,” he said.

Starlink, which is the main revenue driver for Musk’s SpaceX, has also faced a political backlash in Canada, where the premier of Ontario on Monday said he would rip up a $100mn contract with the company in retaliation against US tariffs.

SpaceX did not respond to a request for comment.

Industry braces for tit-for-tat trade war that could spark wave of bankruptcies among parts makers

Car companies are bracing for what could be an even bigger shock to the global automotive supply chain than the Covid pandemic amid uncertainty over the duration and extent of Donald Trump’s global tariff war. 

Just two days after the US president issued an executive order applying tariffs of 25 per cent to all imports from Canada and Mexico, as well as 10 per cent on goods imported from China, Trump put levies on Mexican imports on hold for a month following a “very friendly” conversation with Mexican President Claudia Sheinbaum. Shortly afterwards, Canadian Prime Minister Justin Trudeau also reached an eleventh-hour deal with the US for a 30-day pause on tariffs.

Carmakers have been cautious about making significant and costly strategic changes without more clarity on the longer-term direction of US trade and energy policy, although executives at General Motors, Stellantis and Tesla have signalled they will increase manufacturing in the US to offset any impact of tariffs. 

“If you start overreacting, it’s a bit dangerous now,” Michael Lohscheller, chief executive of Polestar, the electric-car maker backed by China’s Geely, said in a recent interview. 

Many car executives had turned to the experience of Trump’s first presidency in playing down the risk of an international tariff war, saying the US president had not carried through on threats of additional levies against its trading partners. 

Supply chain experts say the worst-case scenario, in which both US and retaliatory tariffs are implemented, would be likely to lead to a chain of bankruptcies among weaker car parts suppliers. 

The global automotive supply chain is so complex and interconnected that a component made in Mexico could end up at an American plant before going back to Mexico for final assembly and then being sold to the US market — which could result in “a tariff-on-tariff” situation. 

“The mechanics of it are almost as bad, if not worse than the actual amounts because the accounting and book-keeping and paperwork requirements involved to ensure compliance are massive,” said Ian Henry, an automotive production expert who runs the AutoAnalysis consultancy. 

Henry warned that the supply chain disruption could be worse than during the pandemic if a tariff war endured and carmakers were not able to provide enough financial support to keep their suppliers afloat.

Mikael Bratt, chief executive of Swedish seatbelt and airbag maker Autoliv, said it would immediately begin discussions to pass on the cost of higher tariffs to customers if they were implemented against Mexico.

“There is no reason at all why we . . . absorb any cost like that,” Bratt said at an earnings briefing last week. “Ultimately, it will be higher cost for vehicles sold in the US.”

The traditional “Big Three” carmakers, which have spread their footprint across the continent since the 1994 signing of the North American Free Trade Agreement, are the most vulnerable to a hit to profits. GM was the most exposed, analysts said, with Chrysler owner Stellantis not much better off. Ford is the least exposed because it imports the smallest share of vehicles from outside the US.

GM makes its popular, high-margin Chevrolet Silverado at its Silao plant in Mexico and Oshawa in Canada, which increases its exposure. BNP Paribas analyst James Picariello said that while the carmaker could probably shift production to the US for about 300,000 of the 350,000 trucks it currently imports, such a switch would take 12-18 months as it adjusted supplier shipments and hired workers.

That would add about $1bn in labour costs, he said, as workers earned more in the US than in Mexico. GM’s operating earnings would take a 7 per cent hit, but that looked favourable compared with a possible 50 per cent reduction that could come from a 25 per cent tariff.

“A billion dollar headwind seems like a manageable scenario right now,” Picariello said.

Investors and analysts were assuming that any tariff on goods from Canada and Mexico would ultimately be negotiated down, he added, because otherwise “the numbers get too large for the industry to properly survive.”

Even before any tariffs against the EU, European carmakers are exposed. Volkswagen is in the worst position, with 45 per cent of its US sales coming from cars made in Mexico and Canada, although the American market accounts for a small share of the group’s total revenue.

With all US-sold vehicles from its luxury Audi and Porsche brands manufactured outside the country, Moody’s estimates that a 25 per cent Mexican tariff will reduce Volkswagen group’s global earnings before interest and taxes by more than 15 per cent.

“We have a factory in Mexico and, independently of which administration is at work, our plan is to become stronger in the US,” Audi chief executive Gernot Döllner said last month. But he added: “We think that tariffs are wrong and we believe in free trade.” 

Fellow German carmaker BMW is less exposed, as 65 per cent of its cars in the US are built locally while it is also a net exporter from the US. 

“There might be volatile situations that could be less predictable, but I’m really optimistic” about the US, said Jochen Goller, BMW’s board member in charge of customer, brands and sales. “I think it will be one of the growth markets for us in the next year.” 

Investors have pinned hopes that Elon Musk’s close ties to Trump will shield Tesla from the fallout from the president’s policies, but the world’s largest electric vehicle maker is still exposed. 

Tesla assembles all its vehicles sold in the US locally but it sources 20 to 25 per cent of its components for the Model 3, Model Y and the Cybertruck from Mexico, according to Barclays. 

“Over the years, we’ve tried to localise our supply chain in every market, but we are still very reliant on parts from across the world for all our businesses,” chief financial officer Vaibhav Taneja said at an earnings briefing last week, warning of a hit to its profitability from Trump’s tariffs.

The company could also be a target of retaliatory tariffs by Canada. Former finance minister Chrystia Freeland, who is running to replace Trudeau as prime minister, has said Ottawa should retaliate against US tariffs by adding huge levies on Tesla vehicles to punish Musk. 

The tariff war also comes as Tesla grapples with declining sales in Europe due to slowing demand for electric vehicles, heightened competition and a consumer backlash against Musk’s political activism. 

According to French industry association La Plateforme Automobile, Tesla’s January sales in France were 63 per cent lower than a year earlier.

Smaller Japanese automakers, such as Mitsubishi Motors and Subaru, could benefit from a lack of production in Mexico and Canada. Honda is also comparatively well placed, since two-thirds of its US sales are assembled locally, according to Barclays.

Takao Kato, chief executive of Mitsubishi Motors, told reporters on Monday that tariffs would have little impact on the company and that it could even receive a slight “tailwind” from increased exports to the US if tariffs were not extended to the rest of Asia.

However, he subsequently retracted his comment, saying that “on balance, it looks like there are more headwinds”, and clarified that Japan could benefit if it managed to wriggle out of being the target of heavy tariffs.

Renault is also unlikely to be hard hit as it has no sales in the US or Canada. The French carmaker’s shares dropped just 0.6 per cent on Monday, far below the falls suffered by other European carmakers with greater US exposure.

Renault, one of the few European brands not to issue a profit warning last year, was “doing very well” in Europe,” said Stephen Reitman, an analyst at Bernstein. The company’s exposure to tariffs is through its stake in Nissan, which is currently pursuing a merger with Honda. 

But while the company is less exposed than rivals, Reitman added: “There’s not many winners in all of this . . . it’s reducing wealth, which reduces GDP, which reduces car sales.”

Flexing

Brussels is open to increasing the “flexibility” of the EU’s rules governing national debt and fiscal deficits to allow capitals to spend more on defence, in what would be a significant shift from the European Commission, following a summit of EU leaders to “brainstorm” ways to increase the continent’s security.

Context: The EU’s spending rules limit deficits to 3 per cent of GDP and debt to 60 per cent. The rules were recently reformed to give countries more wriggle room, but several member states have been asking the EU to exempt military spending from the thresholds altogether.

Making this a reality took centre stage at yesterday’s meeting, where trade with the US and UK-EU relations were also discussed.

António Costa, the EU Council president who chaired the meeting, said afterwards that EU leaders expected the commission to propose ways “to create more fiscal space . . . for more defence spending”.

“I am willing to explore and will use the full range of flexibility in the new stability and growth pact to allow for a significant increase in defence spending,” said commission president Ursula von der Leyen, referencing the new EU fiscal rules.

“It’s obvious that we need more resources to build up and strengthen our common defence. It’s a fact. At the national level but also at European level,” Finnish Prime Minister Petteri Orpo told the FT after the summit. “At the national level, the flexibility of fiscal rules is one tool, and I hope that we can use that, it’s [the] fastest way to boost spending to defence.”

Orpo also said that while his government had previously been against common funding, the “existential question” of Russian aggression meant that he was now “open to different kinds of solutions”.

German Chancellor Olaf Scholz endorsed the fiscal flexibility demands, but stopped short of endorsing common EU debt to finance them.

“We see a big fragmentation between many defence projects . . . this has to change,” Scholz said. During the summit he also proposed reforming the EU’s competition rules on defence, for countries to co-operate on the same tenders.

Scholz said that some countries faced greater hurdles than others in raising their military spending. “And that is why it is a very common view that there needs to be more flexibility . . . also for example through borrowing,” Scholz said.

But he specified that the EU “does not have the prospect of taking on joint debt. It is about creating more flexibility for the individual countries” — including for Germany, where he called for a reform of the strict debt brake.

But Scholz’s colleagues noticed a change in tone: “The approach of the German chancellor is today now much more positive [than in previous discussions],” said Polish Prime Minister Donald Tusk.

Prices in the Eurozone unexpectedly rose by 2.5 per cent in January, although the increase in inflation is not expected to alter policymakers’ plan to continue lowering interest rates.