Manufacturing

The United Kingdom has announced a major investment in defence in response to a “new era of threats” driven by “growing Russian aggression”.

The UK’s Strategic Defence Review (SDR), unveiled on Monday, includes new investments in nuclear warheads, a fleet of new submarines and new munitions factories. Prime Minister Keir Starmer said the SDR would bring the country to “war-fighting readiness”.

“The threat we now face is more serious, more immediate and more unpredictable than at any time since the Cold War,” Starmer said as he delivered the review in Glasgow, Scotland.

The SDR described Russia as an “immediate and pressing” threat, and referred to China as a “sophisticated and persistent challenge”.

European nations have rushed to strengthen their armed forces in recent months, following Trump’s repeated demands that Europe must shoulder more responsibility for its security.

What are the key features of the UK’s Strategic Defence Review?

The defence review, the UK’s first since 2021, was led by former NATO Secretary-General George Robertson. Among the 62 recommendations in the SDR, all have been accepted by the government.

Starmer said the measures recommended in the review would bring “fundamental changes” to the armed forces, including “moving to war-fighting readiness”, re-centring a “NATO first” defence posture and accelerating innovation.

“Every part of society, every citizen of this country, has a role to play because we have to recognise that things have changed in the world of today,” he said. “The front line, if you like, is here.”

Boosting weapons production and stockpiles

Based on the recommendations in the review, the government said it would boost stockpiles and weapons production capacity, which could be scaled up if needed.

A total of 1.5 billion pounds ($2bn) will be dedicated to building “at least six munitions and energetics factories”, with plans to produce 7,000 long-range weapons.

In turn, UK ammunitions spending – just one component of overall military spending – is expected to hit 6 billion pounds ($8.1bn) over the current parliamentary term, which ends in 2029.

New attack submarines

There are also plans to build up to 12 new attack submarines by the late 2030s as part of the AUKUS military alliance with Australia and the United States – equivalent to a new submarine every 18 months.

This accounts for nearly half the projected spending outlined in the SDR.

Meanwhile, the Ministry of Defence (MoD) also said it would invest 15 billion pounds ($20.3bn) in its own nuclear warhead programme.

New F-35 fighter jets

The SDR recommended procuring new F-35 fighter jets and the Global Combat Aircraft Programme, a sixth-generation fighter produced jointly with Japan and Italy.

Use of technology to improve the army

The target size of the army will remain roughly the same, but the SDR recommended a slight increase in the number of regular soldiers “if funding allows”. There are currently about 71,000.

Instead of a dramatic increase in troop numbers, the SDR recommends using technology, drones and software to “increase lethality tenfold”.

To do this, the MoD plans to deliver a 1 billion pound ($1.35bn) “digital targeting web”, an AI-driven software tool designed to collect battlefield data and use it to enable faster decision making.

Investment in defence companies

More details about the SDR will be provided in the upcoming Defence Industrial Strategy, expected in the coming weeks, but UK defence companies will be among the big winners from the new SDR.

Though supposedly a 10-year review, past SDRs suggest its shelf life might be more limited.

The last SDR was published in 2021 and recommended “a strategic pivot towards the Indo-Pacific region to counter China’s influence and deepen ties with allies like Australia, India, and Japan”, in line with strategic priorities of the time.

This SDR, undertaken in the wake of Russia’s full-scale invasion of Ukraine, has re-oriented the UK’s geographical priorities. In the coming years, those could change again.

Can the UK afford this defence expansion?

Proposals to prepare the UK’s armed forces to be “battle ready” will cost at least 67.6 billion pounds ($91.4bn) through to the late 2030s, according to costings and estimates provided in the SDR.

Before Monday’s announcement, the government had already pledged to increase spending on defence from 2.3 percent currently to 2.5 percent by 2027, an increase of about 6 billion pounds ($8.1bn) per year. This would raise 60 billion pounds over 10 years – a bit shy of the cost projected by the SDR.

The government has said it will cut overseas aid to fund that 0.2 percent of gross domestic product (GDP) rise in defence spending.

Critics say this will not be enough and that the measures outlined by the SDR will cost more like 3 percent of gross domestic product (GDP).

James Cartlidge, the shadow defence secretary, said the “authors of the strategic defence review were clear that 3 percent [not 2.5 percent] of GDP ‘established the affordability’ of the plan.”

In February, the Labour government said it had “an ambition” to raise defence spending to 3 percent in the next parliament (after 2029), but Cartlidge said: “That commitment cannot be guaranteed ahead of the next general election.”

According to researchers at the Institute for Fiscal Studies – an independent, London-based research organisation – raising defence spending to 3 percent of GDP by 2030 would require an extra 17 billion pounds between now and then, which the government has not yet accounted for.

But the UK could be required to raise spending even more than this. In discussions taking place in advance of the NATO summit in The Hague later this month, NATO Secretary General Mark Rutte is understood to be pushing for member nations to commit 5 percent of GDP towards defence-related spending.

Rutte has proposed that NATO’s 32 members commit to spending 3.5 percent on hard defence and 1.5 percent on broader security, such as cyber, by 2032.

“At this Ministerial, we are going to take a huge leap forward,” Rutte stated before a meeting of defence ministers in Brussels on Thursday this week. “We will strengthen our deterrence and defence by agreeing ambitious new capability targets.” He specified air and missile defence, long-range weapons, logistics, and large land manoeuvre formations as among the alliance’s top priorities, according to a briefing note from NATO on Wednesday.

“We need more resources, forces and capabilities so that we are prepared to face any threat, and to implement our collective defence plans in full,” he said, adding: “We will need significantly higher defence spending. That underpins everything.”

Will taxes have to rise in the UK?

On Monday, Starmer refused to rule out another raid on the aid budget to fund higher military spending, and signalled that he was hopeful the extra investment could be supported by a growing the economy and generating more taxes to pay for defence.

After the SDR’s announcement, Paul Johnson, director of the Institute for Fiscal Studies, warned that the prime minister will need to make “really quite chunky tax increases” to pay for the plans.

Alternatively, increased defence spending could be siphoned off from other parts of the budget – for instance, through reduced state spending on areas like transport and energy infrastructure.

Orders tumble by 3.7 percent after a rise in March when businesses increased purchases in anticipation of tariffs.

Orders from United States factories have tumbled in April after a surge in March when businesses had front-loaded purchases in anticipation of tariffs.

New orders for US manufactured goods dropped by 3.7 percent on a monthly basis, worse than economists had expected, according to Census Bureau data released on Tuesday.

Economists polled by the Reuters news agency expected a 3.1 percent drop. Dow Jones forecast a 3.3 percent drop. On an annual basis, however, factory orders rose by 2 percent.

April’s report is in sharp contrast to the 3.4 percent increase in March, which topped five straight months of increases.

Manufacturing, which accounts for 10.2 percent of the US economy, has been put under pressure by President Donald Trump’s aggressive tariffs. Trump sees the tariffs as a tool to raise revenue to offset his promised extension of tax cuts and to revive a long-declining industrial base, a feat that economists argued was impossible in the short term because of labour shortages and other structural issues.

Hardest hit sectors

Orders in the transportation sector fell 17.1 percent, led by a sharp drop in the commercial aircraft sector. Aircraft orders fell by 51.5 percent in April. Orders for motor vehicles, parts and trailers dropped 0.7 percent.

Electrical equipment, appliances and component manufacturing fell by 0.3 percent. But manufacturing for computers and other electronic products actually grew by 1 percent.

Machinery orders also rose 0.6 percent. Excluding transportation, which led the surge in March orders, orders fell 0.5 percent, matching March’s decline of non-transportation goods.

The government also reported that orders for nondefence capital goods excluding aircraft, a measure of business spending plans on equipment, decreased 1.5 percent in April rather than 1.3 percent as estimated last month.

Shipments of these so-called core capital goods fell by an unrevised 0.1 percent, or $1.8bn.

An Institute for Supply Management survey showed manufacturing contracted for a third straight month in May and suppliers took the longest time in nearly three years to deliver inputs to factories.

US Secretary of State Marco Rubio’s salvo against Chinese students, promising to “aggressively revoke” their visas, is the latest move in heightening tensions between the world’s two largest economies.

Despite a temporary tariff truce reached between them earlier this month, divisions between Washington and Beijing remain wide, with recent ruptures over higher education, artificial intelligence (AI) chips and rare earth minerals.

Here’s all we know about how relations between China and the United States are worsening despite diplomatic efforts.

What did the US and China agree on tariffs?

A US-China trade spat escalated after Trump’s administration raised tariffs on Chinese goods to 145 percent earlier this year, with cumulative US duties on some Chinese goods reaching a staggering 245 percent. China retaliated with 125 percent tariffs of its own on US goods.

Under an agreement reached on May 12 following two days of trade talks in Geneva, tariffs on both sides were dropped by 115 percentage points for 90 days, during which time negotiators hope to secure a longer-term agreement. For now, the US has maintained a 30 percent tariff on all Chinese goods while Beijing has a 10 percent levy on US products.

In the weeks since the temporary reprieve, however, Washington and Beijing appear to have had only limited discussions.

On Thursday, US Treasury secretary Scott Bessent told Fox News that trade talks between the US and China are “a bit stalled”, and may need to be reinvigorated by a call between US President Donald Trump and Chinese leader Xi Jinping.

In the meantime, the Trump administration has announced new, strict visa controls on Chinese university students and told US companies to stop selling their advanced chip software used to design semiconductors to Chinese groups.

Why is the US targeting Chinese students?

On Wednesday, Rubio announced that the US will “aggressively revoke” the visas of Chinese students studying in the country. He also pledged to ramp up scrutiny of new visa applicants from China and Hong Kong.

The Trump administration’s decision to carry out deportations and to revoke student visas is part of wide-ranging efforts to fulfil its hardline immigration agenda.

China is the second-largest country of origin for international students in the US, behind India. Chinese students made up roughly a quarter of all foreign students in the US during the 2023-2024 academic year – more than 270,000 in total.

China’s Ministry of Foreign Affairs criticised the decision to revoke visas, saying it “damaged” the rights of Chinese students. “The US has unreasonably cancelled Chinese students’ visas under the pretext of ideology and national rights,” Foreign Ministry spokesperson Mao Ning said.

The Trump administration also banned Harvard University from enrolling any foreign students on May 22, accusing the institution of “coordinating with the Chinese Communist Party”. That move has since been blocked by a US federal judge.

Still, the largest portion of foreign students at Harvard – almost 1,300 – are Chinese, and many top officials, including the current leader Xi Jinping, have sent their children to the Ivy League school.

How is the US taking aim at Chinese semiconductors?

On May 13, just after the end of trade talks in Geneva, the US Commerce Department issued guidance warning American firms against using Huawei’s Ascend AI semiconductor chips, stating that they “were likely developed or produced in violation of US export controls”. 

The move marked the latest in a series of efforts by the Trump administration to stymie China’s ability to develop cutting-edge AI chips. The tiny semiconductors, which power AI systems, have long been a source of tension between the US and China.

China’s Commerce Ministry spokesperson fired back against the guidance last week, accusing Washington of “undermining” the consensus reached in Geneva and describing the measures as “typical unilateral bullying and protectionism”.

Then, on May 28, the US government ramped up the row by ordering US companies which make software used to design semiconductors to stop selling their goods and services to Chinese groups, The Financial Times reported.

Design automation software makers, including Cadence, Synopsys and Siemens EDA, were told via letters from the US Commerce Department to stop supplying their technology to China.

Why is the US targeting Chinese semiconductors?

The US has been tightening its export controls on semiconductors for more than a decade, contending that China has used US computer chips to improve military hardware and software.

Chinese officials and industry executives deny this and contend that the US is trying to limit China’s economic and technological development.

In his first term as president, Trump banned China’s Huawei from using advanced US circuit boards.

Huawei is seen as a competitor to Nvidia, the US semiconductor giant which produces its own-brand of “Ascend” AI chips. In April, Washington restricted the export of Nvidia’s AI chips to China.

But Nvidia’s chief executive, Jensen Huang, recently warned that attempts to hamstring China’s AI technology through export controls had largely failed.

How could China be affected by US measures?

The suspension of semiconductor sales will limit supplies for aerospace equipment needed for China’s commercial aircraft, the C919, a signature project in China’s push towards economic and transport self-reliance.

Christopher Johnson, a former CIA China analyst, told The Financial Times that this week’s new export controls underscored the “innate fragility of the tariff truce reached in Geneva”.

“With both sides wanting to retain and continue demonstrating the potency of their respective chokehold capabilities, the risk the ceasefire could unravel even within the 90-day pause is omnipresent,” he added.

Will China ease restrictions on rare earth minerals exports?

US officials had expected the Geneva talks to result in China easing its export restrictions on rare earth elements. So far, there have been few signs of that, however.

Rare earth minerals are a group of precious minerals required to manufacture a wide range of goods in the defence, healthcare and technology sectors.

Rare earth metals, which include scandium and yttrium, are also key for producing components in capacitors – electrical parts which help power AI servers and smartphones.

China processes some 90 percent of the world’s rare earth minerals and instituted export controls in April to counter Trump’s “Liberation Day” tariffs in April, triggering alarm among US companies.

Last week, for instance, Ford temporarily closed a factory in Chicago which makes utility vehicles after one of its suppliers ran out of a specialised rare earth magnet.

In most new cars, especially elevate vehicles (cars with robotic technology allowing them to “climb” over obstacles), these high-tech magnets are used in parts which operate brake and steering systems, and power seats and fuel injectors.

The restrictions on the supply of rare earth minerals provide Beijing with a strategic advantage in future negotiations, as it can limit supplies of crucial technologies for US industry.

US electronic design automation software makers were told via letters to stop supplies to China, the FT reported.

United States President Donald Trump’s administration has ordered US firms that offer software used to design semiconductors to stop selling their services to Chinese groups, the Financial Times has reported, citing people familiar with the move.

Electronic design automation software makers, which include Cadence, Synopsys and Siemens EDA, were told via letters from the US Commerce Department to stop supplying their tech, the report, which was published on Wednesday, said.

A spokesperson for the Commerce Department declined to comment on the letters but said it is reviewing exports of strategic significance to China, while noting that, “in some cases, Commerce has suspended existing export licenses or imposed additional license requirements while the review is pending”.

Shares of Cadence, which declined to comment, closed down by 10.7 percent, while shares of Synopsys fell by 9.6 percent.

Synopsys CEO Sassine Ghazi said in a call with analysts that the company had not received a letter, nor had it heard from the Commerce Department’s Bureau of Industry (BIS) and Security, which enforces export controls.

“We are aware of the reporting and speculations, but Synopsys has not received a notice from BIS. So, our guidance that we are reiterating for the full year, reflects our current understanding of BIS export restrictions as well as our expectations for year-over-year decline in China. We have not received a letter,” Ghazi said.

After the market closed, Synopsys reaffirmed its revenue forecast for 2025. Its shares and those of Cadence bounced back 3.5 percent in trading after the close.

Siemens EDA did not immediately respond to a request for comment.

The software of these firms is used to design both high-end processors as well as simpler products.

While the scope of the policy change described in the report was not immediately clear, any move to strip the software makers of their Chinese customers could deal a blow to their bottom line and to their Chinese chip design customers, which heavily rely on top-of-the-line US software.

“They are the true choke point,” said a former Commerce Department official, who added that rules restricting the export of EDA tools to China have been under consideration since the first Trump administration, but were ruled out as too aggressive.

Synopsys relies on China for about 16 percent of its annual revenue, while China accounts for about 12 percent of annual revenue for Cadence.

Synopsys, which partners with chip companies such as Nvidia, Qualcomm and Intel, provides software and hardware used for designing advanced processors.

WASHINGTON — A federal judge suggested the Trump administration was “manufacturing” chaos and said he hoped that “reason can get the better of rhetoric” in a scathing order in a case about government efforts to deport a handful of migrants from various countries to South Sudan.

In the order published Monday evening, Judge Brian Murphy wrote that he had given the Trump administration “remarkable flexibility with minimal oversight” in the case and emphasized the numerous times he attempted to work with the government.

“From the course of conduct, it is hard to come to any conclusion other than that Defendants invite a lack of clarity as a means of evasion,” the Boston-based Murphy wrote in the 17-page order.

Murphy oversees a case in which immigration advocates are attempting to prevent the Trump administration from sending migrants they’re trying to deport from the U.S. to countries that they’re not from without giving them a meaningful chance to protest their removal.

The judge said the men couldn’t advocate for themselves

In a hearing last week called to address reports that eight immigrants had been sent to South Sudan, Murphy said the men hadn’t been able to argue that the deportation could put them in danger.

But instead of ordering the government to return the men to the U.S. for hearings — as the plaintiffs wanted — he gave the government the option of holding the hearings in Djibouti where the plane had flown on its way to South Sudan as long as the men remained in U.S. government custody. Days later, the Trump administration filed another motion saying that Murphy was requiring them to hold “dangerous criminals in a sensitive location.”

But in his order Monday he emphasized repeatedly that it was the government’s “own suggestion” that they be allowed to process the men’s claims while they were still abroad.

“It turns out that having immigration proceedings on another continent is harder and more logistically cumbersome than Defendants anticipated,” Murphy wrote.

The government has argued that the men had a history with the immigration system, giving them prior opportunities to express a fear of being deported to a country outside their homeland. And the Trump administration has said that the men’s home — Cuba, Laos, Mexico, Myanmar, Vietnam and South Sudan — would not take them back.

The administration has also repeatedly emphasized the men’s criminal histories in the U.S. and portrayed them as national security threats.

The administration is relying on third countries

The Trump administration has increasingly relied on third countries to take immigrants who cannot be sent to their home countries for various reasons. Some countries simply refuse to take back their citizens being deported while others take back some but not all of their citizens. And some cannot be sent to their home countries because of concerns they’ll be tortured or harmed.

Historically that has meant that immigration enforcement officials have had to release people into the U.S. that it wants to deport but can’t.

But the Trump administration has leaned on other countries to take them. In the Western Hemisphere, El Salvador, Costa Rica and Panama have all agreed to take some people being removed from the U.S., with El Salvador being the most controversial example because it is holding people deported from the U.S. in a notorious prison.

The Trump administration has said it’s exploring other third countries for deportations.

Murphy said in his order that the eight men were initially told May 19 they’d be going to South Africa and then later that same day were told they were going to South Sudan. He noted that the U.S. government “has issued stark warnings regarding South Sudan.”

He said the men had fewer than 16 hours between being told they were going to be removed and going to the airport “most of which were non-waking hours” and “limited, if any” ability to talk to family or a lawyer. “Given the totality of the circumstances, it is hard to take seriously the idea that Defendants intended these individuals to have any real opportunity to make a valid claim,” the judge wrote.

Santana writes for the Associated Press.

Investors interpreted Trump’s comments to mean Nippon Steel had received his approval for its takeover of US Steel.

United States President Donald Trump has expressed support for Nippon Steel’s $14.9bn bid for US Steel, saying their “planned partnership” would create jobs and help the US economy.

Shares of US Steel soared 21 percent on Friday after Trump’s comments as investors interpreted the president’s post on Truth Social to mean Nippon Steel had received his approval for its long-planned takeover, the last major hurdle for the deal.

“This will be a planned partnership between United States Steel and Nippon Steel, which will create at least 70,000 jobs, and add $14 Billion Dollars to the US Economy,” Trump said in a post on Truth Social on Friday.

This week, the Reuters news agency reported that Nippon Steel has said if the merger is approved, it would invest $14bn into US Steel’s operations, including up to $4bn in a new steel mill.

Trump added that the bulk of that investment would occur in the next 14 months and said he would hold a rally at US Steel in Pittsburgh next Friday.

Nippon Steel said it applauded Trump’s decision to approve the “partnership”. The White House did not immediately reply to questions about the announcement.

US Steel share price kept rising after hours and reached $54, just shy of Nippon Steel’s $55-per-share offer price made in late 2023. While no details were released, investors expressed confidence that terms will be similar to those agreed in 2023. Investors said that eventually US Steel will no longer be publicly traded and they will receive a cash payout for their shares.

Politically controversial

The deal has been one of the most highly anticipated on Wall Street after it morphed into the political arena with fears that foreign ownership would mean job losses in Pennsylvania, where US Steel is based. It factored into last year’s election that saw Trump return to the White House.

Pennsylvania Senator Dave McCormick, who also called the deal a “partnership”, on Friday said it was a “huge victory for America and the US Steel Corporation”, that will protect more than 11,000 Pennsylvania jobs and support the creation of at least 14,000 more.

The last pieces of the deal came together surprisingly fast. The Committee on Foreign Investment in the US (CFIUS), which reviews deals for national security risks, told the White House this week that the security risks can be addressed, Reuters reported, moving the final decision to Trump’s desk.

Following an earlier CFIUS-led review, former President Joe Biden blocked the deal in January on national security grounds.

The companies sued, arguing they did not receive a fair review process. The Biden White House rejected that view.

The companies argued Biden opposed the deal when he was running for re-election to win support from the United Steelworkers union in the battleground state of Pennsylvania. The Biden administration had defended the review as essential to protecting security, infrastructure and supply chains.

Trump also initially opposed the deal, arguing the company must be owned and operated in the US.

The United Steelworkers were against the deal as recently as Thursday when they urged Trump to block the deal despite the $14bn investment pledge from Trump.

For investors, including prominent hedge funds, the news spells relief after more than a year of waiting for a resolution. “There were huge high-fives all around today,” one recent investor said, adding, “We understood Donald Trump’s psyche and we played it to our advantage here.”

Investors said Trump appears to have won ground after the pledge for new investments was increased.

“This deal ensures that steelmaking will live on in Pittsburgh for generations,” another investor said.

Days earlier, Novo Nordisk cut its sales and profit forecast for first time since the launch of Wegovy four years ago.

Wegovy-maker Novo Nordisk has pushed out CEO Lars Fruergaard Jorgensen over concerns the company is losing its first-mover advantage in the highly competitive obesity drug market.

Novo Nordisk announced the decision on Friday.

Days earlier, Novo Nordisk cut its sales and profit forecast for the first time since the launch of Wegovy four years ago, though Jorgensen had predicted a return to growth in its biggest market in the second half of this year.

Novo’s chairman, Helge Lund, tried to reassure analysts and investors on a call that the company’s strategy was intact and the plan for executing it had not changed.

He told the Reuters news agency that discussions to replace Jorgensen had occurred over the past few weeks. Novo said earlier that Jorgensen will remain in his role until a successor is found.

Under Jorgensen’s leadership, Novo Nordisk became a world leader in the weight-loss drug market, with skyrocketing sales of its Wegovy and Ozempic treatments.

Analysts and investors were unconvinced of the need to replace him.

“He was leading the company for eight years and was, in my opinion, extremely successful,” Lukas Leu, a portfolio manager at Bellevue Asset Management, told Reuters.

Danske Bank analyst Carsten Lonborg Madsen was similarly caught off guard.

“The way we know Novo Nordisk is that normally you have patience when you’re on the right track, and then you let things move in the right direction once you have the strategy right,” he said.

“It just feels like there’s something that has gone pretty wrong here,” he said on the call.

Novo’s shares have plunged since hitting a record high in June last year as competition, particularly from US rival Eli Lilly, makes inroads into its market share and as its pipeline of new drugs has failed to impress investors.

“The changes are made in light of the recent market challenges Novo Nordisk has been facing, and the development of the company’s share price since mid-2024,” Novo said in its statement.

Shares down

Jorgensen, at 58, has been CEO since 2017. He said in an interview with Danish broadcaster TV2 that he did not see the decision coming, and was only informed very recently.

Booming sales of Wegovy helped make Novo the most valuable listed company in Europe, worth $615bn at its peak in June last year, but its market value has halved to about $310bn.

Novo Nordisk’s share price fell on the news, trading 0.8 percent lower by 14:01 GMT after being 4 percent higher earlier in the day.

The shares are down 32 percent year-to-date and 59 percent from their all-time high.

Eli Lilly has seen US prescriptions for its Zepbound obesity shot surpass Wegovy since mid-March in its biggest market. Eli Lilly shares were up 2.6 percent after the news.

Camilla Sylvest, Novo’s head of commercial strategy and corporate affairs and a consistent presence alongside CEO Jorgensen, stepped down last month without citing a reason.

Former CEO of Novo Nordisk for 16 years and current chair of the Novo Nordisk Foundation, Lars Rebien Sorensen, will join the board as an observer with immediate effect with the aim of taking a seat at the next annual general meeting, Novo said.

The company is controlled by the Novo Nordisk Foundation through its investment arm, which owns 77 percent of the voting shares.