Category: Nation & World

Londoners are facing historic levels of subsidence risk after five successive heat waves dried out the clay soil on which much of the city is built.

Insurance claims tied to subsidence — a phenomenon associated with bouts of hot, dry weather that shrink the soil and destabilize the foundations on which buildings stand — hit a record last quarter, according to data provided by the Association of British Insurers. On average, households claimed £20,000 ($27,200) for the risk, more than in any previous quarter and a 15% jump from the same period in 2025, the ABI said.

Laura Hughes, head of general insurance at the ABI, says the upward trend is likely to continue. “We expect to see more subsidence cases because of the hot weather,” she said in an interview.

Londoners have taken to social media to express their dismay. On Reddit, people offered personal accounts telling of “horrendous cracking” in their homes, and “doors sticking” due to subsidence. One said it was “genuinely scary” to discover that their kitchen had moved as the foundations of the home shifted.

Another Reddit user described the response of a structural engineer they contacted for help. “Before I could finish explaining he laughed and said, ‘You and 20,000 other people in southeast London’,” the person wrote.

“It’s crazy, what’s happening now,” said Otso Lahtinen, chief executive of Geobear, an engineering firm that’s regularly called in to repair damage caused by subsidence. “It’s the new norm, and it seems it will happen more often in the next 20-30 years.”

Data provided by Aviva Plc show that the areas of London that are most at risk are some of the U.K. capital’s most sought after, namely the boroughs of Westminster, as well as Kensington and Chelsea. While subsidence has been affecting homes in the British capital for decades, climate change is making it worse. London clay is especially sensitive to fluctuations in moisture, expanding when wet and contracting when dry.

The threat of subsidence in the U.K. is concentrated in and around London as well as in parts of the southeast. In the four years through 2025, insurance payouts for subsidence damage soared roughly 90% to reach a record £297 million, according to data provided by the ABI.

The most vulnerable properties are Victorian or Edwardian homes that were built directly onto the upper layers of London clay. By contrast, modern office buildings in the City of London and Canary Wharf have much deeper foundations and are therefore less exposed to such risks.

Subsidence is part of a long list of heat-related challenges to which the U.K. is now struggling to adapt. Over the past months, extreme heat has forced schools to close, led bus drivers to go on strike, and seen banks relax in-office work requirements to protect staff from unbearably hot commutes. Most of England has been gripped by drought and the country’s hospitals have shown signs of buckling under the strain.

London Mayor Sadiq Khan has warned that the city will need to turn to private investors to help fund the cost of dealing with the impact of rising temperatures. His office estimates that London now faces an annual bill as high as £36 billion into the 2050s in order to prepare the city for what climate change has in store.

“The impact that climate change is having is undeniable,” said Hughes of the ABI.

Subsidence can devalue a property by an average of 20%-25%, according to the Federation of Master Builders. In some cases, homeowners prefer to cover the cost themselves rather than wade through complicated claims processes. The traditional engineering fix for subsidence damage, known as underpinning, can cost anywhere from £20,000 to more than £100,000.

The development represents a particular risk to insurers, with subsidence claims making up an ever larger chunk of the payouts they need to make to customers.

The phenomenon poses “a significant challenge for U.K. home insurers,” says Cherry Chan, a partner at Deloitte. The consultancy has warned that UK home insurers risk losses in 2026 due in part to the trend.

Along with flash floods and wildfires, subsidence is becoming “an increasingly material climate-related risk,” Chan said. It requires that insurers display “careful consideration in long-term exposure and risk management strategies.”

Extreme weather patterns in 2026 “will not only impact more new claims in this year, but could cause claims deteriorations for unsettled subsidence claims reported in the past,” she added. That includes 2025, which was a so-called surge year for subsidence impacts.

Fresh estimates from the British Geological Survey indicate that under what is known as the RCP 4.5 emissions scenario — reflecting a trajectory that closely aligns with current climate policies — 1.8 million properties, or about 5% of the U.K. total, are “highly likely or extremely likely” to be susceptible to shrink-swell subsidence by 2070. Under a higher emissions scenario, the figure rises to 4.2 million, or 11%, of British properties. Areas most at risk are densely-populated parts of London, Kent, and southeast of England.

The development has the potential to lead to “increased insurance premiums, depressed house prices and, in some cases, engineering works to stabilize land or property, replacement of utility pipeworks and unstable transport infrastructure,” according to the BGS.

Geobear, which tackles subsidence by injecting resin under buildings, says it’s received more homeowner inquiries this summer than ever before. It says insurance clients have confirmed a similar trend, with one telling Geobear it had received 180 claims on a single day, which is significantly more than normal.

“It’s a pretty severe situation,” said Lahtinen, the CEO. “If you’re looking to trade, sell, or buy property, this is a trend you can’t ignore.”

Year after year, the federal government has spent more than it collected in taxes. Each annual shortfall increased the national debt, slowly at first and then by leaps, defying warnings of an inevitable reckoning.

Now, the reckoning may be at hand.

This week’s bond market sell-off brought government borrowing costs to their highest level in almost two decades and prompted an extraordinary Treasury Department intervention.

On Friday, the yield on the 30-year Treasury bond topped 5.27%, up slightly from one day earlier, a sign that Treasury Secretary Scott Bessent’s plan to calm markets is not working. After decades of free spending, Washington may soon be compelled to make some long-deferred, and politically unpalatable, choices that will leave few Americans unscathed.

“This is what the bond market is trying to signal: We’re going to have to make choices that hurt growth,” said Adam Abbas, who manages $4 billion in bonds for the Oakmark Funds. “We have two levers to do that: raise taxes or cut spending. Either option is not politically popular, and it will never be popular, but at some point we have to address the problem.”

The problem is a $40 trillion national debt, along with crisis-level annual budget deficits that require significant new borrowing.

When the Treasury Department woos investors for its bonds, it competes with other governments and corporations — notably the hyperscalers building the nation’s artificial intelligence infrastructure. All that competition for capital means investors can demand higher returns, or yields, from those that want their money.

Fiscal watchdogs have warned for decades that rising U.S. debt will eventually trigger a crisis. As borrowing costs rise, debt becomes more expensive in what can become a vicious cycle, said Marc Goldwein, senior policy director for the nonpartisan Committee for a Responsible Federal Budget.

“What I worry about is we’re on the verge of sort of a real debt spiral, which happens when your interest [bill] is growing faster than your economy,” Goldwein said.

Fast-rising bond yields or interest rates often reverberate through the financial system in unexpected ways, exposing costly vulnerabilities. In 2023, for example, Silicon Valley Bank failed after rising bond yields blew a hole in its balance sheet.

Today, potential weak spots in the financial system include some of the nation’s largest hedge funds, where borrowed money used for investments, or leverage, is “near all-time highs,” according to the minutes of the Fed’s July 28-29 meeting. Likewise, traditionally staid life insurers are holding riskier assets that would be difficult to unload quickly if they needed to raise cash during a crisis.

Financial setbacks also could occur overseas in places like France or Japan, said Rebecca Patterson, former chief investment strategist for Bridgewater Associates and now a senior fellow at the Council on Foreign Relations.

“When we’re thinking about what could cause a crisis in the U.S., don’t just think about what’s happening in the U.S. Think about other markets that could be vulnerable,” she said.

Today’s fiscal pressures began building a quarter century ago after former President Bill Clinton and a Republican-controlled Congress balanced the budget four years in a row. The federal government actually began paying off its debt.

That prompted Federal Reserve Chairman Alan Greenspan to give a speech in 2001 warning that eliminating the debt, and thus Treasury securities themselves, could disrupt financial markets. Even so, he expected it to happen.

“Current forecasts suggest that under a reasonably wide variety of possible tax and spending policies, the resulting surpluses will allow the Treasury debt held by the public to be paid off,” Greenspan said.

Instead, a series of policy choices and unforeseen crises swamped the nation’s fiscal progress beneath a tide of red ink.

The problem has grown especially acute over the past decade. Between 1789 and 2016, the U.S. government borrowed a bit more than $19 trillion. Over the past 10 years, President Donald Trump and former president Joe Biden added an additional $20 trillion, doubling the national debt, and making debt service payments one of taxpayers’ largest annual burdens.

The U.S. now spends more than $1 trillion each year paying interest on the national credit card, more than it devotes to Medicare, according to the nonpartisan Congressional Budget Office. As recently as 2010, the interest bill was less than one-fifth that amount.

The rising U.S. debt load is part of a broader phenomenon. Global debt of all types hit a record $353 trillion earlier this year, more than three times the size of global output.

Unlike the risky mortgage borrowing that triggered the 2008 financial crisis, recent years have featured governments as the biggest borrowers. Here and abroad, governments borrowed to repair their economies after the 2008 meltdown and borrowed again to get through the 2020 pandemic. Poorer nations in Africa and Asia have gone deeper into debt to finance higher energy and food bills following the wars in Ukraine and Iran.

“The debt has transferred to governments. I don’t think this is only a U.S. story, by any means,” said Patterson.

This week’s bond market drama returned long-term yields to the level they occupied for most of the 1990s. But there are important differences between that period and today. Debt was lower and growth was faster.

In 1997, for example, when the yield on the 30-year bond was around 6%, the economy still managed to post growth that topped out at 6.8%, more than four times faster than the most recent quarter. Relative to the size of the economy, the national debt that year was less than half as big as today.

“Demographics. Labor force growth is down because of aging, the recent departure of older workers, and diminished immigration. And Trump keeps throwing in supply-side shocks — tariffs, Iran wars. The supply-side is completely different now,” Douglas Holtz-Eakin, president of the conservative American Action Forum and a former director of the CBO, said via email.

The only surefire way to restore order to bond markets would be credible action to reduce the nation’s yawning budget deficit, which the CBO estimates will hit a record $2.1 trillion this year.

In a Thursday interview with CNBC, Bessent promised the Trump administration would soon announce “an increased” focus on the government’s finances, including an examination of potential changes on “both the revenue and the cost side.”

But there is ample reason for skepticism. The administration’s initial attempt at overhauling government spending produced Elon Musk’s Department of Government Efficiency, which upended large swaths of the civil service while failing to back up exaggerated claims of savings.

Despite that experience, Bessent said he expected “several hundred billion dollars” in savings from an anti-fraud task force led by Vice President JD Vance.

The administration’s economic assumptions are also more optimistic than those of outside forecasters. Before the president’s signature tax legislation passed last year, the White House Council of Economic Advisers projected that this year’s deficit would be about $1.7 trillion.

The CEA also assumes that the U.S. economy will grow at an average annual rate of 2.8%, notably faster than the CBO’s 2% forecast.

Independent experts say some combination of higher taxes and cuts in popular entitlements such as Social Security and Medicare are unavoidable. But less than three months before November’s congressional elections, the administration’s promised fiscal consolidation “seems unlikely to be realized,” economists at Barclays told clients this week.

Indeed, on Capitol Hill the debt issue so far has spurred little more than dutiful public statements.

“Our reckless spending problem in Washington is immoral — it unfairly leaves our children and grandchildren to foot the bill — but it also is making our economic stability extremely fragile,” Sen. John Curtis (R., Utah) wrote Thursday on X. “The more we add to our debt, the greater the threat of disaster in the event of an economic shock.”

Curtis is lead sponsor of a bipartisan bill to create a commission to propose ways to shrink the national debt to less than 100% of GDP by 2039. He also voted last year for the president’s tax legislation, which the CBO estimates will add $4.7 trillion to deficits over the next decade.

Curtis’s office did not immediately respond to messages on Friday.

Other lawmakers have proposed creating a commission to rescue Social Security, which is expected to run short of money to pay full benefits in 2032. If that happens, benefits are legally mandated to be slashed by 22%.

Few expect early action. And Sen. Bill Cassidy (R., La.), a lead sponsor of one of the commission bills, said no one should expect such a commission to tackle problems beyond Social Security.

“It’s easy to say, ‘fix everything at once,’ but we know that is not possible,” Cassidy said in an email. “Once we do this, it will prove that other areas of the debt can be addressed, but we should crawl before we walk.”

As Congress tries to crawl and the Social Security trust fund’s depletion approaches, the bond market’s anxiety will grow, said Jason Fichtner, executive director of the LIMRA Retirement Income Institute and a former chief economist of the Social Security Administration.

“I don’t see that meaning that the government defaults or goes bankrupt,” he said. “But I do think it means higher costs of living for everybody.”

The shocking collapse of U.S.-Canada trade talks is the latest sign that President Donald Trump’s bulldozer approach to remaking the nation’s trade relationships may be reaching its limits.

The president tried in recent days to use an untested legal power to force Canada to swallow trade concessions. Instead, Canadian Prime Minister Mark Carney quit the negotiations rather than accept a lengthening list of U.S. demands.

As a result, 50% U.S. tariffs took effect early Saturday on an array of Canadian products, including hockey sticks and Crown Royal whisky.

As Carney prepared to walk away — a rare example of a foreign leader telling the president “enough” — Trump was retreating on another trade front. On Friday, after insisting for more than a year that tariffs do not affect consumer prices, he lifted tariffs on beef imports, saying the move would lead to lower grocery prices.

The two developments, coupled with legal challenges to Trump’s tariffs, leave the president’s signature economic policy in a state of flux.

“It’s a big setback for Trump’s trade policy. We’re at a juncture where other countries may be very closely watching how this plays out as they also are becoming increasingly frustrated with the demands the U.S. is placing on them in these largely one-sided trade agreements,” said Wendy Cutler, a former U.S. trade negotiator who is now senior vice president at the Asia Society Policy Institute.

Indeed, the United States has negotiated 10 reciprocal trade agreements over the past year with nations such as Malaysia, Cambodia, and Argentina, along with other trade frameworks with the European Union, the United Kingdom, and Japan.

Hearing of the concessions that the U.S. offered Canada, including reductions in tariffs on industrial metals, some trading partners may demand revisions to their deals, Cutler said.

Administration officials have approached each bargaining round convinced of two things: Decades of U.S. trade policy hollowed out the nation’s manufacturing communities. And a muscular new approach, leveraging the appeal of the $32 trillion U.S. economy, can force other nations to give way and encourage the reindustrialization of the U.S.

For the administration, trade negotiations are not a contest of equals. The talks start from the premise that U.S. negotiating partners must make concessions, opening their markets and in some cases promising to invest in the United States, simply to win a reprieve from unilateral U.S. trade barriers.

Both Jamieson Greer, the president’s chief trade negotiator, and Treasury Secretary Scott Bessent have publicly complained that Canada and China are the only nations that retaliated for the tariffs that Trump imposed last year.

The administration sees its actions as restoring fairness to an imbalanced global trade system, making such retaliation unjustified. But China’s tough stance last year, which included a temporary interruption of essential rare earth minerals, paid off. The president lowered his triple-digit tax on imports from China and reached a trade truce in an October meeting with Chinese leader Xi Jinping, who is due in Washington on Sept. 24 for more talks.

The Canada negotiations were aimed at averting the new 50% tariffs, which Trump had threatened in July unless Carney dropped retaliatory measures imposed in response to earlier U.S. tariffs.

On Tuesday, Trump delayed his initial deadline, posting on Truth Social that the two sides had reached “a DEAL” and needed three days to finalize the documents.

The subsequent breakdown spotlighted tensions in the president’s strategy, including questions over the durability of any deal reached with the U.S. administration.

After all, the U.S. and Canada, along with Mexico, already have a trade deal: the United States-Mexico-Canada Agreement (USMCA) of 2020, which Trump hailed at the time as “the largest, fairest, most balanced, and modern trade agreement ever achieved.”

But this year, the president threatened to quit the deal and demanded sweeping changes to it, aimed at promoting more U.S. manufacturing. He also imposed tariffs on Canadian goods starting last year, a breach of the accord.

On Saturday, speaking in Ottawa, Carney alluded to the difficulty of negotiating with a mercurial president.

“We’ve recognized from the start that America has changed,” Carney said. “We recognize that sometimes, its signature is written in pencil.”

Negotiating with the U.S. is also complicated by divisions within the administration. All top officials share Trump’s goal of spurring domestic manufacturing. But as Greer haggled with the Canadians this week, a split emerged over the U.S. trade representative’s willingness to reduce an existing 50% tariff on aluminum derivatives to 25% in return for Canadian concessions.

At a White House meeting, White House trade adviser Peter Navarro and Commerce Secretary Howard Lutnick, whose department administers the national security tariffs, clashed with Greer, representing industry views that the higher aluminum tariffs were needed to encourage domestic manufacturing.

“Navarro and Lutnick were both yelling at Greer saying: ‘What are you doing? This is stupid. You know, we’re not giving these things away,’” said one industry representative, who spoke on the condition of anonymity to describe the confidential talks.

Late in the talks, the U.S. sought to exclude from tariff reductions heavy trucks produced in Ontario, such as the Ford F-350 and F-450, and the GM Silverado. Over time, that would have made it “more uneconomic” for the automakers to keep making the vehicles in Canada, Carney said. The administration also sought to restrict Canada’s right to sign trade deals with other countries, a key part of Carney’s strategy to reduce dependence on its increasingly unreliable southern neighbor.

Trump’s undiplomatic style — including saying that Canada should surrender its sovereignty to become the 51st U.S. state — made it harder politically for the Canadian leader to accept a deal. Public opinion in Canada has turned fiercely anti-American.

“A 160-year trading relationship has found its red line,” said Flavio Volpe, president of the Automotive Parts Manufacturers’ Association in Toronto. “Demanding that your closest trading partner mirror your trade policy with third countries is akin to asking them to surrender agency over foreign policy. This episode shows that doesn’t work, no matter the disproportionate market leverage of the USA.”

Trump also has a general disregard for the $3.4 trillion worth of merchandise that the U.S. imports annually. Speaking in June about his North American neighbors, the president told reporters in the Oval Office: “We don’t need anything that Canada has, we don’t need anything that Mexico has, but they need everything that we have. … We don’t need their cars, we don’t need their lumber, we don’t need their energy, we don’t need anything that they have.”

In fact, U.S. farmers rely on Canadian sources for nearly 80% of the potash fertilizer they use each year, according to the U.S. Geological Survey. Northern border states, including New York, Michigan, Vermont, Minnesota, and Maine, run on electricity produced by Canadian hydropower. And Midwestern refineries are optimized to process heavy sour crude oil from Canada, helping keep gas prices lower than they otherwise would be, according to the Federal Reserve Bank of Kansas City.

Total U.S.-Canada trade each year exceeds $700 billion.

The talks’ failure leaves businesses on both sides of the border burdened by a sudden jump in costs. Small businesses in the U.S. will face an especially sharp cash crunch, as they must pay tariffs before their customers pay them 30 or 60 days later, said Jason Miller, a professor of supply chain management at Michigan State University.

“I expect a significant drop in a lot of these different import categories because importers simply can’t afford to bring them in. That may mean certain products not on the store shelves,” said Miller.

In other cases, companies will struggle to find a domestic alternative to Canadian goods, especially for intermediate products such as packaging materials. So they will continue importing and pass along some of the 50% cost shock to their customers.

On Saturday, Carney said Canada will retaliate on Sept. 8 for the new tariffs with its own trade measures. By delaying his response, he is leaving time for cooler heads to prevail, analysts said.

“Then the parties come back to the table. North America is too integrated for it to unravel on the basis of a deal that was put together over 14 days,” said Dan Ujczo, a trade lawyer in Columbus, Ohio.

If a deal had been reached this weekend, it would have paved the way for the official start of negotiations between the two nations over the proposed USMCA changes.

Instead, the administration now must manage a cycle of retaliation and counterretaliation while perhaps facing a new courtroom fight over the legality of Trump’s 50% tariffs, which were imposed under a never-before-used 1930 trade law.

Meanwhile, Trump’s 50% tariffs on goods ranging from hockey sticks to alcohol are expected to raise prices for American consumers less than three months before the Nov. 3 midterm elections, which have the potential to give Democrats control of Congress.

Those elections, polls show, are expected to turn on voters’ frustration with the rising cost of living.