Give Credit where Credit is due. Cooler heads prevailed. It was in both the U.S. and China’s interests to end what was effectively a trade embargo between the world’s two rival superpowers. Surely tough to swallow, President Trump, Secretary Bessent, and U.S. Trade Representative Jamieson Greer did what had to be done.
May 13 – Bloomberg (Chris Anstey): “Former Treasury Secretary Lawrence Summers applauded the Trump administration’s walk-back from what he characterized as overly aggressive trade protection measures, singling out Scott Bessent in particular for his weekend work with China. ‘Many of the biggest failures in US history come from an unwillingness to pull back in the face of a mistake and to double down on the infeasible — that’s what Vietnam was about,’ as well as US conflicts in Iraq and Afghanistan, Summers said… ‘When you make a mistake, when you’ve done something imprudent, it’s a good idea to salvage what pride you can and to retreat.’ Summers highlighted three elements of retreat since April 2… First came the 90-day pause on duties above 10% on all nations but China, then the ‘fig leaf of some kind of deal with Britain’ last week. Most recent was the removal of most of the punitive tariffs on China.”
Bloomberg: “Xi Jinping’s decision to stand his ground against Donald Trump could hardly have gone any better for the Chinese leader… The deal ended up meeting nearly all of Beijing’s core demands.”
WSJ: “A U.S.-China agreement to pause bruising tariffs was cheered in Beijing as vindication for leader Xi Jinping and his defiant response to President Trump’s trade war…”
CNBC: “Chinese officials, influencers and state-run media… were casting the initial trade agreement and 90-day tariff pause with the U.S. as a victory and a vindication of Beijing’s negotiating strategy.”
May 12 – Financial Times (Demetri Sevastopulo, Joe Leahy and Peter Foster): “One overriding question has significant implications for the negotiations to come: did Beijing or Washington flinch first? Trump… claimed victory, saying he had engineered a ‘total reset’ with China. Meanwhile, Hu Xijin, former editor of national Communist party tabloid the Global Times, said on… the deal was ‘a great victory for China’. ‘The US has chickened out,’ said one popular Chinese social media post… Economists agreed that the US might have overplayed its hand by raising the tariffs too quickly and too high. ‘The US blinked first,’ said Alicia García-Herrero, chief Asia-Pacific economist at French investment bank Natixis. ‘It thought it could raise tariffs almost infinitely without being hurt, but that hasn’t been proven right.’”
Markets couldn’t care less who flinched, blinked or backed down. It was a deal that slashed untenably high tariffs, ensuring cargo ships would be quickly loaded and set sail across the Pacific. The President certainly stoked market exuberance: “Yesterday, we achieved a total reset with China.” “China will also suspend and remove all of its non-monetary barriers. They’ve agreed to do that.” He also stated his intention to speak directly with Xi Jingping, “maybe at the end of the week.”
De-escalation is indeed encouraging news, though high tariffs remain an issue. The stock market is certainly in a celebratory mood. After the shock and horror of seemingly losing sway over White House economic policy, equities rejoiced in the President’s hasty retreat on tariffs and the China trade war. It was a bit harrowing, but markets did what they always do: they won. “Trump put” lives.
But it’s much too early for “mission accomplished.” The Geneva agreement was more a temporary truce than a trade deal. In the grand scheme of things, it was a slam dunk to significantly reduce tariffs and curb the vitriol. The first round was simply about egos. It’s unclear why the administration thought Trump (“trade wars are good and easy to win”) hardball tactics would work with China. Going forward, so many tough issues and fraught relations will require time and intense negotiations.
It’s worth noting that Beijing has so far been noncommittal for a Trump/Xi call. There has also been nothing out of China to corroborate the President’s, “China will also suspend and remove all of its non-monetary barriers.” The “Joint Statement” included much more specific language, stating that China will “adopt all necessary administrative measures to suspend or remove the non-tariff countermeasures taken against the United States since April 2, 2025.” Beijing is certainly not proclaiming “reset.”
May 16 – Reuters (Joe Cash): “The 90-day tariff truce agreed by the United States and China during trade talks… last weekend is too short, China’s state-backed Global Times said…, as envoys from the world’s two biggest economies regrouped in Korea… The U.S. agreed to cut the extra tariffs it imposed on Chinese imports last month to 30% from 145% for the next three months, while China committed to cutting duties on U.S. imports to 10% from 125%… Beijing also agreed to pause or remove the non-tariff countermeasures it has imposed against the U.S. since April 2, although China so far has only paused its decision to add around 50 U.S. firms to various lists restricting their ability to trade and invest. In addition to easing the curbs, China agreed to lift export countermeasures issued after April 2, raising prospects for the lifting of restrictions on rare earth minerals, on which Beijing has not yet clarified its position.”
May 16 – CNBC (Anniek Bao): “Chinese trade envoy Li Chenggang described talks with the U.S. as ‘good’ after their first high-level engagement… led to a thawing in trade tensions. However, both sides have continued to trade thinly veiled swipes. When asked… whether the dialogues were constructive, Li… answered, ‘definitely,’ without giving further details or clues on forthcoming meetings… Li told reporters that he had no information on whether there would be a meeting or a call between… Donald Trump and… Xi Jinping. On the same day, He Yongqian, spokesperson for China’s Ministry of Commerce, struck a similar restrained tone, offering no new details on the trade talks during a daily press briefing… Trump had touted earlier this week that he might speak to Xi at the end of this week, while Beijing appeared tight-lipped on that prospect… The U.S. Commerce Department… Tuesday warned companies not to use Huawei’s Ascent AI chips, drawing criticism from Beijing, calling it an act of ‘abusing export control measures.’ China’s foreign ministry on Friday toughened its tone a notch, decrying the U.S.’s ‘long-arm jurisdiction,’ saying China will ‘never accept it.’ Meanwhile, China is keeping a firm grip on its export controls on critical minerals.”
It’s worth noting that Xi Jinping spoke Tuesday before the 33-member Community of Latin American and Caribbean States (CELAC) forum: “There are no winners in tariff wars or trade wars… Bullying or hegemonism only leads to self-isolation.” And the following day with Chilean President Gabriel Boric: “The international situation is in turmoil. Unilateralism and protectionism are… dealing serious blows to the international trade order. Against this backdrop, strengthened cooperation between China and Chile is all the more exemplary.”
Curiously, in his celebratory Monday press conference, President Trump was primed for tough talk. The “European Union is, in many ways, nastier than China,” and the U.S. holds “all the cards.” Made me think of a competitive athlete after suffering a tough loss: “Wouldn’t want to be the next team that has to play us.”
Joachim Nagel, Bundesbank President and member of the ECB Governing Council, offered insightful comments Wednesday at the New Economy Forum in Spain. Below is an excerpt.
“We are strong countries in Europe. And, so, we should go into such negotiations with the Trump administration as strong partners. There should be a level playing field, and we should make this crystal clear to American colleagues when they would like to have such tariffs – and going into such tariff direction – then I believe there will be more to lose on the American side compared to the European side. I’ll give you one example: all what I know from inflation and how tariffs might affect inflation, I think the country that is imposing tariffs is much more affected by inflation than those countries that have to pay the tariffs. There is not one element that I can see [to] make the policy a win for the American side. And I hope that there’s a learning curve on the American side over the next couple of weeks and the upcoming months. Because if that is not the case, this uncertainty will remain. All what we know from economics is that uncertainty is not good. It’s not good for investment. It’s not good for consumption. It’s not good for financial markets. And this example – or maybe the episode that we have on April 2nd, was a perfect example of how things can go really into a very, very complicated day. I will not say it was luck. But we were close to, let me say, a ‘tipping point’ where I believe financial markets after the second of April were really close to very, let me say – ‘disruptive’ is a nice description of what I had in mind after the second of April. It was close to a meltdown – this was my understanding and was my perception. We should be very cautious about all these things. And it’s definitely not time for complacency. But we as Europeans – we are strong economies. We should signal this.”
Remarkable candor from one of the world’s preeminent central bankers: “It was close to a meltdown.” And there should be no doubt that this near meltdown instilled the fear of God into the Trump administration, forcing a retreat on tariffs and its foolhardy game of chicken with Beijing. Inquisitive minds want to know: Was it tactical or strategic? Using Dr. Nagel’s language, has there been a “learning curve on the American side?” Did acute market instability fundamentally change the President tariff strategy, or might the markets’ speedy recovery only embolden a renewed focus?
The analysis could not be more important – or fascinating. In the eyes of his opponents, has a chastened President Trump been weakened by tariff and China trade war fiascos? With trade negotiators around the world watching with keen focus, Xi Jinping played hardball with Trump and walked away with a decisive win. China’s global message of resistance and “strengthened cooperation” against “unilateralism”, “protectionism”, “bullying”, and “hegemonism” likely now resonates loudly and clearly. Did the administration decide to fold after it became clear that its plan for a united front against China was dead on arrival?
Meanwhile, markets have turned sanguine, excited by a humbled administration – eager to assume the President will now move forward rationally with market-pleasing trade deals.
The stock market deserves a bit of Bubble analysis. Equities are a historic speculative Bubble – an important component of the overarching global Bubble. Especially after the post-pandemic speculative melt-up, there are serious market structure issues. Typical of major Bubbles, today’s stock market is incapable of orderly adjustment.
The fundamental backdrop is deteriorating. Acute fragilities have been revealed. Yet the major indices have lurched back to near record highs. In today’s world, huge amounts of risk are hastily transferred in myriad “hedging” strategies whenever instability begins to materialize. Derivatives play prominently in this dynamic. As we witnessed last month, equities are vulnerable to rapid declines, as derivatives-related “dynamic hedging” programs short stocks/ETFs on weakness to hedge market “insurance” exposures. At the same time, this risk transfer creates latent market rally rocket fuel.
This market structure is prone to instability and dislocation, the type of dynamic that provokes policy responses – in this case the administration’s 90-day tariff pause and China trade war retreat. The resulting short squeeze and unwind of hedges triggers a powerful rally, which ensures aggressive speculation and FOMO buying. During the speculative cycle’s late-stage terminal phase, with such broad-based and impassioned participation, it can regress somewhat into “that which does not destroy the Bubble, only makes it stronger.” The widening chasm between inflating market prices and diminishing fundamental prospects turns only more perilous.
The pierced Bubble thesis is premised on several key analytical points: First, global leveraged speculation passed an important inflection point. Two, a most protracted U.S. Credit cycle has reached a critical juncture. And three, the Trump administration has unleashed crisis of confidence dynamics for U.S. policymaking, the dollar and Treasuries, and U.S. prospects more generally. Radical Trump administration policies, pronouncements, and behavior compounded already extraordinary global risks, .
Corroborating the high-risk thesis, last month’s near meltdown confirmed the backdrop had turned inhospitable for leveraged speculation. Markets were at the precipice of a very disorderly deleveraging crisis. The current bout of “risk on” doesn’t alter the thesis. It is instead fundamental to the process of acute instability, policy responses, disorderly market recoveries, disappointment, and the reemergence of greater instability. I’ve argued that the post-subprime eruption policy-induced market rally, to October 2007 record highs, only exacerbated systemic fragilities.
The U.S./China “trade deal” certainly did the trick for the stock market. I doubt it will meaningfully reverse the unfolding crisis of confidence in many things America (i.e., policymaking, the dollar, Treasuries and markets, and economic prospects). Despite another big “risk on” week, the dollar index has mustered only a moderate rally.
Friday’s preliminary May confidence readings from the University of Michigan survey argue for caution. Consumer Sentiment declined 1.4 to 50.8, less than a point away from the June 2022 multi-decade low (down from December’s 74). Expectations slipped to 46.5 (down from November’s 76.9), the low all the way back to May 1980. While still early, it’s notable that the administration’s tariff retreat and resulting stock market recovery have not reversed the collapse in household confidence. I expect at least half the country to remain locked in a deep funk. It’s worth noting that consumer sentiment was pressured by a 7% decline among Republicans.
Hopefully, reduced Chinese tariffs will at least somewhat take off the boil the highest one-year inflation expectations (7.2%!) since 1981. Treasury market vulnerability (i.e., debt, deficits, inflation, waning international demand, risk of speculative deleveraging, etc.) is central to the faltering Bubble thesis. And it was another curious week in Treasury market dynamics. At early-Thursday intraday highs, 10-year yields were up 17 bps w-t-d to a three-month high of 4.55% – before reversing sharply lower to end the session at 4.43%. Treasuries were relatively quiet throughout Friday’s session, ahead of a jarring late-day Moody’s debt downgrade.
May 16 – Bloomberg (Michael Mackenzie): “The US was stripped of its last top-tier credit rating on Friday after Moody’s Ratings downgraded the nation on an increase in government debt and a higher interest burden. Moody’s lowered the US credit score to Aa1 from Aaa…, joining Fitch Ratings and S&P Global Ratings in grading the world’s biggest economy below the top, triple-A position. The one-notch cut comes more than a year after Moody’s changed its outlook on the US rating to negative. The credit assessor now has a stable outlook. ‘While we recognize the US’ significant economic and financial strengths, we believe these no longer fully counterbalance the decline in fiscal metrics,’ Moody’s wrote…”
From Moody’s: “If the 2017 Tax Cuts and Jobs Act is extended, which is our base case, it will add around $4 trillion to the federal fiscal primary (excluding interest payments) deficit over the next decade. As a result, we expect federal deficits to widen, reaching nearly 9% of GDP by 2035, up from 6.4% in 2024, driven mainly by increased interest payments on debt, rising entitlement spending and relatively low revenue generation. We anticipate that the federal debt burden will rise to about 134% of GDP by 2035, compared to 98% in 2024.”
A FT article quoted Vanderbilt professor Yesha Yadav, who referred to the “latest reality check on an increasingly bleak prognosis for US government debt management”. Debt “mismanagement” is more apt.
The House’s “big, beautiful bill” is in some trouble.
May 16 – The Hill (Mike Lillis, Mychael Schnell and Emily Brooks): “President Trump’s legislative agenda is hanging by a thread as House Republican leaders scramble to make last-minute changes to their ‘big, beautiful bill’ and cut deals to appease warring factions of the party. The latest setback came Friday, when four spending hawks tanked a key vote in the House Budget Committee to advance the legislation as they dug in on demands for further cuts. The failed vote came despite Trump urging GOP lawmakers to ‘STOP GRANDSTANDING’ and unify, and it forced the committee into an extended recess.”
The loss of the last AAA rating comes at a tenuous period for the Treasury market. Treasuries are suffering a nascent crisis of confidence. Unless there are some major changes (i.e., big cuts to Medicaid), the “big, beautiful bill” will be long on tax breaks and short of spending cuts. A bond vigilantes Liz Truss dynamic remains a possibility. Despite this week’s encouraging inflation data, tariff price hikes loom large. And this stock rally and “risk on” have loosened financial conditions, ensuring a huge supply of corporate debt issuance to help underpin the economy and price pressures.
Meanwhile, sticky market yields will pressure increasingly vulnerable real estate markets and the consumer sector more generally.
May 13 – Bloomberg (Maria Eloisa Capurro and Jonnelle Marte): “The share of outstanding US consumer debt that’s in delinquency rose in the first quarter to the highest in five years, reflecting an end to the pandemic-era pause on reporting delinquent student loan payments on credit reports. Some 4.3% of debt was delinquent in the first three months of this year, the most since 2020 and up from 3.6% in the prior quarter, the New York Fed said… in its Quarterly Report on Household Debt and Credit.”
May 14 – Financial Times (Stephanie Stacey): “Millions of borrowers of US student loans who are behind on their payments face collections for the first time since 2020, creating a potential drag on consumer spending at a time when the American economy is stumbling. Nearly one in four borrowers with payments due were behind on their student loans in the three months to March… The Trump administration has restarted involuntary collections on defaulted federal student loans, and has said it will begin garnishing [or deducting] wages and confiscating tax refunds and social security benefits ‘later this summer’. Resuming collections of student loans could pose a challenge for US growth…”
It has been virtual clockwork in the past: stock market rallies drive a reflexive surge in confidence, spending and output. That the Trump administration has wrecked this dynamic is an important element in the pierced Bubble thesis. A Friday afternoon NBC headline: “Trump Administration Working on Plan to Move 1 million Palestinians to Libya.” Trump: “I had a little problem with Tim Cook yesterday. I said to him, ‘Tim, you’re my friend. I’ve treated you very good. I don’t want you building in India.” Perhaps we’ve passed peak tariff madness, but I doubt the President and his administration have any desire to tone down “disruption” absurdity.
There’s still tremendous tariff and trade work to grind through. It will be fascinating to see if President Trump’s power – domestically and internationally – has waned. Even more fascinating will be how he might now respond to recalcitrants – albeit Republican lawmakers, judges, or foreign officials, including our newfound pals in Beijing. More importantly, are the bond vigilantes preparing for round two. Things got a “little bit yippy” not many weeks ago.
May 16 – Bloomberg (Jennifer A. Dlouhy): “President Donald Trump said he would set tariff rates for US trading partners ‘over the next two to three weeks,’ saying his administration lacks the capacity to negotiate deals with all of its trading partners. Trump said Friday that Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick ‘will be sending letters out essentially telling people’ what ‘they’ll be paying to do business in the United States.’ ‘I think we’re going to be very fair. But it’s not possible to meet the number of people that want to see us,’ the president said… The US president asserted there are ‘150 countries that want to make a deal.’ He didn’t say how many, or which, nations would receive letters. The countries that get them ‘could appeal it,’ Trump added, without explaining how that process would work.”
With hedging strategies again proving futile, the next stock market downdraft will find a less hedged and more vulnerable marketplace. Masked during rallies, festering liquidity issues will be revealed during the next downturn. I expect Treasury and bond market deleveraging to continue over the coming months, exacerbating systemic vulnerability to market illiquidity and dislocations. If luck is on our side, successful budget and trade negotiations will hold crisis of confidence dynamics at bay. As Bundesbank President Nagel stated, “it’s definitely not time for complacency.”
For the Week:
The S&P500 surged 5.3% (up 1.3% y-t-d), and the Dow rose 3.4% (up 0.3%). The Utilities increased 1.1% (up 8.7%). The Banks spiked 6.5% higher (up 2.8%), and the Broker/Dealers jumped 5.7% (up 15.1%). The Transports advanced 8.0% (down 4.6%). The S&P 400 Midcaps rose 4.8% (down 1.0%), and the small cap Russell 2000 jumped 4.5% (down 5.2%). The Nasdaq100 surged 6.8% (up 2.0%). The Semiconductors spiked 10.2% higher (down 1.2%). The Biotechs rallied 4.9% (down 3.2%). With bullion down $121, the HUI gold index sank 8.6% (up 32.8%).
Three-month Treasury bill rates ended the week at 4.2325%. Two-year government yields jumped 11 bps to 4.0% (down 24bps y-t-d). Five-year T-note yields gained nine bps to 4.09% (down 29bps). Ten-year Treasury yields rose 10 bps to 4.48% (down 9bps). Long bond yields jumped 11 bps to 4.95% (up 16bps). Benchmark Fannie Mae MBS yields increased six bps to 5.77% (down 8bps).
Italian 10-year yields slipped a basis point to 3.60% (up 7bps y-t-d). Greek 10-year yields slipped two bps to 3.34% (up 13bps). Spain’s 10-year yields added a basis point to 3.21% (up 15bps). German bund yields increased three bps 2.59% (up 22bps). French yields were unchanged at 3.26% (up 7bps). The French to German 10-year bond spread narrowed three to 67 bps. U.K. 10-year gilt yields jumped eight bps to 4.65% (up 8bps). U.K.’s FTSE equities index gained 1.5% (up 6.3% y-t-d).
Japan’s Nikkei 225 Equities Index increased 0.7% (down 5.4% y-t-d). Japanese 10-year “JGB” yields jumped nine bps to 1.46% (up 36bps y-t-d). France’s CAC40 gained 1.8% (up 6.9%). The German DAX equities index increased 1.1% (up 19.4%). Spain’s IBEX 35 equities index surged 3.8% (up 21.3%). Italy’s FTSE MIB index jumped 3.3% (up 18.9%). EM equities traded higher. Brazil’s Bovespa index rose 2.0% (up 15.7%), and Mexico’s Bolsa index gained 2.5% (up 17.1%). South Korea’s Kospi advanced 1.9% (up 9.5%). India’s Sensex equities index jumped 3.6% (up 4.9%). China’s Shanghai Exchange Index increased 0.8% (up 0.5%). Turkey’s Borsa Istanbul National 100 index rose 3.0% (down 1.6%).
Federal Reserve Credit increased $2.6 billion last week to $6.665 TN. Fed Credit was down $2.236 TN from the June 22, 2022, peak. Over the past 296 weeks, Fed Credit expanded $2.939 TN, or 79%. Fed Credit inflated $3.854 TN, or 137%, over the past 653 weeks. Elsewhere, Fed holdings for foreign owners of Treasury, Agency Debt declined $1.7 billion last week to a three-month low $3.266 TN. “Custody holdings” were down $71.4 billion y-o-y, or 2.1%.
Total money market fund assets dipped $5.0 billion to $6.941 TN. Money funds were up $807 billion over 42 weeks (16.3% annualized) and $909 billion y-o-y (15.1%).
Total Commercial Paper jumped $1.6 billion to a new 16-year high $1.419 TN. CP has expanded $331 billion y-t-d and $124 billion, or 9.6%, y-o-y.
Freddie Mac 30-year fixed mortgage rates rose five bps this week to 6.81% (down 21bps y-o-y). Fifteen-year rates added three bps to 5.92% (down 36bps). Bankrate’s survey of jumbo mortgage borrowing costs had 30-year fixed rates up three bps to 6.95% (down 38bps).
Currency Watch:
May 13 – Bloomberg (Anya Andrianova and Ye Xie): “As the founder of Exante Data, a bespoke Wall Street research firm tracking global money flows, Jens Nordvig regularly talks to the world’s largest investors, from hedge fund managers and corporate treasurers to pensions and sovereign wealth funds. What he’s hearing lately has him convinced that the dollar’s rebound following the de-escalation of US-China trade tensions in recent days is little more than a blip. A multiyear bear market has only just begun, he says, fueled by the Trump administration’s chaotic efforts to reshape the US economy and, in the process, upend global trade. Haphazard, on again-off again tariffs have caused so much tumult already that investor confidence in the greenback has been irrevocably shaken, adds Nordvig…”
For the week, the U.S. Dollar Index gained 0.8% to 101.092 (down 6.8% y-t-d). For the week on the upside, the South African rand increased 0.9%. On the downside, the euro declined 0.8%, the Swiss franc 0.8%, the Swedish krona 0.6%, the New Zealand dollar 0.5%, the South Korean won 0.3%, the Canadian dollar 0.2%, the Japanese yen 0.2%, the Brazilian real 0.2%, the Singapore dollar 0.2%, the British pound 0.2%, the Australian dollar 0.1%, and the Mexican peso 0.1%. The Chinese (onshore) renminbi increased 0.34% versus the dollar (up 1.19 y-t-d).
Commodities Watch:
The Bloomberg Commodities Index dropped 1.8% (up 2.2% y-t-d). Spot Gold fell 3.6% to $3,204 (up 22.1%). Silver declined 1.3% to $32.2948 (up 11.7%). WTI crude recovered $1.47, or 2.4%, to $62.49 (down 12.9%). Gasoline gained 1.6% (up 6%), while Natural Gas sank 12.1% to $3.334 (down 8%). Copper declined 1.3% (up 14%). Wheat jumped 3.9% (down 5%), and Corn increased 0.5% (down 3%). Bitcoin added $300, or 0.3%, to $103,477 (up 10.4%).
Market Instability Watch:
May 15 – Bloomberg (Mark Schroers and Alexander Weber): “European Central Bank Vice President Luis de Guindos cautioned that the recent trade turmoil could still upend the region’s financial system… Describing financial stability in the euro zone as ‘sound,’ Guindos highlighted that the 20-nation bloc remains at particular risk from tariffs due to its deep integration into global supply chains. He listed deregulation and reduced international cooperation as other dangers. ‘Despite broad resilience in both the financial and non-financial sectors, there is no room for complacency,’ he told a conference… ‘In this highly uncertain and volatile environment, the likelihood of tail events remains high.’”
May 15 – Financial Times (Costas Mourselas): “Donald Trump’s trade war risks sparking capital flight from the US as the president’s unpredictable tariff policies cause ‘enormous’ damage, hedge fund Elliott Management has warned. The activist firm, founded and co-led by Republican megadonor Paul Singer, said in a letter to investors… the Trump administration’s economic programme could tarnish the appeal of the dollar and of doing business in the US. That would risk ‘capital flight’ and a ‘significant’ fall in value of the currency and US assets, Elliott said in a section of the late April letter titled ‘Bonfire of the American era?’”
May 14 – Bloomberg (Liz Capo McCormick): “After the November election, there were few people in the bond market more optimistic about how President Donald Trump, and his band of DOGE cost-cutters, would rein in ballooning budget deficits than Stephen Jen. Six months later, Jen, a long-time market veteran who runs Eurizon SLJ Capital, is backing away from that call. In fact, he’s become so discouraged by the fiscal largesse he’s seen from the new administration that he’s started to wonder if the US needs a bond-market blowup akin to the one that did in UK Prime Minister Liz Truss’s government to force it to change course. ‘I’m not giving up completely,’ Jen said. ‘But I’m conceding that we don’t seem to be moving in the right direction and I’m fearful of what may happen. It may be necessary to have a repeat of what happened to Liz Truss with the US bond market forcing them, actually sending yields close to or breaching 5%, to force everyone to do the right thing.’”
May 15 – Bloomberg (Vassilis Karamanis): “The dollar’s descent is elevating the price of hedging currency trades around the world, breaking up a long-standing market conviction that costs tend to come down when the greenback weakens. The correlation between the dollar and a widely-watched gauge of volatility in Group-of-10 currencies fell to the lowest level in seven years this week. For most of the past 15 years that correlation was positive. The structural shift shows traders are preparing for wilder swings in markets as opposed to the usual stability that comes with a softer dollar. Options trading has surged this year, with daily average volumes since January exceeding the 12-month average… ‘This is just the beginning so buckle up,’ Andrew Ng, head of global financial markets at DBS Bankm said at the International Swaps and Derivatives Association conference… ‘Long volatility is probably the key trade.’”
May 16 – CNBC (Lee Ying Shan): “Japan saw record foreign inflows into its equities and long-term bonds in April as investors fled U.S. markets following President Donald Trump’s trade salvo against friends and foes alike. Overseas investors bought 8.21 trillion yen ($56.6bn) worth of equities and long-term bonds in April… The net inflows were the largest for a calendar month since Japan’s finance ministry started collecting data in 1996… ‘Trump tariff shocks likely changed global investors’ outlook on the U.S. economy and asset performance, which likely led to diversification away from the U.S. to other major markets including Japan,’ said Yujiro Goto, Nomura’s head of FX strategy in Japan.”
May 15 – Bloomberg (Bei Hu, Echo Wong, and Nao Sano): “Life insurers in Japan and Taiwan are staring down billions of dollars in paper losses from market turmoil triggered by reactions to Donald Trump’s policies. In Taiwan, a surging local currency piled pressure on more than NT$23 trillion ($762bn) of foreign assets held by insurers. Across Japan, insurance firms were hit as long-term government bond yields spiked to the highest level in decades. ‘Japan and Taiwan insurers have always needed to weather two components of market risks that their peers have less burden on — FX and yield,’ said Steven Lam, an analyst at Bloomberg Intelligence. Those challenges have been laid bare as the playbooks of insurers are disrupted. Analysts warn of massive risks faced by the insurance industry, with Goldman Sachs… estimating that Taiwan insurers alone could be sitting on about $18 billion in paper losses.”
May 12 – Bloomberg (Miaojung Lin): “Taiwan’s biggest insurers posted a total loss of almost NT$19 billion ($620 million) in April due to currency volatility after US President Donald Trump warned of a wave of global trade tariffs. The insurers suffered the worst shortfall in a single month in 1 1/2 years… Among the six biggest, Nanshan Life Insurance Co. posted the largest loss at more than NT$9 billion… The big shortfalls came even before the Taiwan dollar’s spike in early May against the greenback, which raised concerns about the industry’s hedging and investment strategies.”
May 16 – Reuters (Gaurav Dogra and Patturaja Murugaboopathy): “Global equity funds attracted the largest weekly inflow in seven weeks in the week through May 14… According to LSEG Lipper data, global equity funds bagged a net $19.57 billion in inflows during the week, the largest amount for a week since March 26.”
Global Credit and Financial Bubble Watch:
May 16 – Wall Street Journal (Miriam Gottfried): “Tom and Laurie Hegna bought annuities as part of their retirement planning. Robert Plowright took out a loan for a home-renovation project. They didn’t know it, but they were on opposite ends of a multitrillion-dollar financial machine that has become the hottest thing on Wall Street, transforming who lends money in the global economy and where the capital comes from. At the center of this system, known as ‘private credit,’ are titans of private equity such as Blackstone, Apollo Global Management and KKR, firms best known for buying and selling companies. They have emerged as major lenders to businesses and are competing head-on with traditional banks, while operating mostly outside the reach of regulators. Tie-ups with insurance companies are helping private-credit firms bring in the huge pools of money needed to make this business work.”
May 11 – Bloomberg (Mia Glass): “Japan’s 30-year government bond yield climbed to its highest level in almost 25 years as investors continue to shun the nation’s super-long bonds. The five bps jump on Monday to 2.955% puts the 30-year maturity within reach of an all time high and underscores the turmoil that’s rocked the debt market… Investors in JGBs are grappling with an increasingly complex set of risks. On the one hand, tariffs are a threat to the economy that have reduced the prospect of near-term interest rate hikes from the Bank of Japan, making shorter-term debt more attractive. On the other, tariffs are elevating inflationary risks, denting the appeal of super-long bonds.”
Trump Administration Watch:
May 12 – Wall Street Journal (Editorial Board): “Rarely has an economic policy been repudiated as soundly, and as quickly, as President Trump’s Liberation Day tariffs—and by Mr. Trump’s own hand. Witness the agreement… to scale back his punitive tariffs on China—his second major retreat in less than a week. This is a win for economic reality, and for American prosperity… As with last week’s modest British agreement, the China deal is more surrender than Trump victory. Apart from the tariff rollback, neither side announced any broader concessions on the substantive trade issues that weigh on the U.S.-China relationship. Those include China’s barriers to American firms, especially in services such as digital and financial, and its chronic intellectual-property theft. Many of these bad Chinese practices have become worse under President Xi Jinping’s strong-arm economic management. One tragedy of Mr. Trump’s shoot-America-in-the-foot-first approach is that he’s hurt his chances of rallying a united front of countries against Beijing’s mercantilism.”
May 12 – Bloomberg (Akayla Gardner): “US President Donald Trump said China had agreed to remove non-tariff barriers to US imports as he announced a deescalation of his trade war with Beijing, suggesting even greater concessions could be in store if talks progress. ‘China will also suspend and remove all of its non-monetary barriers. They’ve agreed to do that,’ Trump said… Trump’s comments suggested a possible willingness by Beijing to roll back the myriad regulations, export restrictions and ownership rules that complicate foreign investment in the country — though the US president has made hyperbolic claims about the progress on trade negotiations in the past.”
May 16 – Bloomberg (Kate Sullivan and Patrick Sykes): “President Donald Trump said the US had presented Iran with a proposal over Tehran’s nuclear ambitions and that the country’s negotiators needed to move soon on the offer as talks intensify. ‘They have a proposal, more importantly they know they have to move quickly or something bad — something bad’s going to happen,’ Trump told reporters…”
May 14 – Financial Times (Martin Arnold, Kate Duguid and Claire Jones): “US authorities are preparing to announce one of the biggest cuts in banks’ capital requirements for more than a decade, marking the latest sign of the deregulation agenda of the Trump administration. Regulators are in the next few months poised to reduce the supplementary leverage ratio, according to several people familiar… The rule requires big banks to have a preset amount of high-quality capital against their total leverage, which includes assets such as loans and off-balance sheet exposures such as derivatives. It was established in 2014 as part of sweeping reforms in the wake of the 2008-09 financial crisis. Bank lobbyists have been campaigning against the rule for years…”
May 15 – Axios (Ben Berkowitz): “President Trump… said he told Apple not to expand iPhone production in India, while also indicating the possibility of a sweeping new trade deal with the country. Apple was reportedly planning to massively expand phone manufacturing for the U.S. market in India, as a workaround for the ongoing trade war with China. ‘I had a little problem with Tim Cook yesterday, I said to him ‘Tim you’re my friend, I’ve treated you very good,’ Trump told a news conference… ‘I don’t want you building in India,’ Trump said he told Cook. ‘I said to Tim, I said, ‘Tim we’ve treated you really good, we put up with all the plants that you built in China for years… we’re not interested in you building in India, India can take care of themselves,’ Trump said.”
May 12 – Associated Press (Amanda Seitz and Seung Min Kim): “President Donald Trump… signed a sweeping executive order setting a 30-day deadline for drugmakers to electively lower the cost of prescription drugs in the U.S. or face new limits down the road over what the government will pay. The order calls on the health department, led by Robert F. Kennedy Jr., to broker new price tags for drugs over the next month. If deals are not reached, Kennedy will be tasked with developing a new rule that ties the price the U.S. pays for medications to lower prices paid by other countries.”
May 14 – Associated Press (Zeke Miller, Jon Gambrell and Aamer Madhani): “President Donald Trump said… he urgently wants ‘to make a deal’ with Iran to wind down its nuclear program but Tehran must end its support of proxy groups throughout the Mideast as part of any potential agreement. Trump… also discussed Iran’s rapidly advancing nuclear program in one-on-one talks with Qatar’s emir, Sheikh Tamim bin Hamad Al Thani… Trump made clear he expected Tehran to end its role as the chief financial backer of the militant groups. Iran ‘must stop sponsoring terror, halt its bloody proxy wars and permanently and verifiably cease pursuit of nuclear weapons,’ Trump told the GCC leaders. ‘They cannot have a nuclear weapon.’”
May 15 – Wall Street Journal (Scott Patterson, Tarini Parti and Josh Dawsey): “The newly appointed head of the Federal Emergency Management Agency acknowledged in private meetings that with two weeks to go until hurricane season, the agency doesn’t yet have a fully formed disaster-response plan. David Richardson, who previously served as a senior official at the Department of Homeland Security and doesn’t have a background in emergency management, told staff he would share a hurricane plan with Homeland Security Secretary Kristi Noem after he completes it late next week. He said… he’s 80% to 85% done with the plan. The agency is already months behind schedule in its preparations for the hurricane season starting June 1…”
May 15 – CBS News (Jacob Rosen): “Attorney General Pam Bondi sold at least $1 million worth of shares in the company that owns Truth Social on the same day that President Trump announced his sweeping tariff measures, a government ethics transaction report shows. Bondi’s stake in the company, Trump Media, was worth somewhere between $1 million and $5.5 million at the time of the sale, which occurred on April 2, the day Mr. Trump dubbed ‘Liberation Day’… The day after the sale, the stock’s value dropped more than 10% before recovering… In a December financial disclosure, Bondi said that she held stock in Trump Media that was worth over $3.9 million at the time, shares that she received as compensation for consulting services for the company.”
May 15 – Wall Street Journal (Stephen Kalin, Eliot Brown and Joel Schectman): “Qatar’s potential plan to provide a $400 million jumbo jet to the U.S. to use as Air Force One underscores how the tiny Gulf state has managed to diplomatically punch above its weight for years: It has a lot of money and is willing to spend it. The country’s ruling monarchy has showered billions of dollars derived from its vast natural-gas reserves on U.S. institutions, mainly the military and universities, while ramping up spending on lobbyists to tilt policy in its favor.”
China Trade War Watch:
May 12 – Bloomberg: “Xi Jinping’s decision to stand his ground against Donald Trump could hardly have gone any better for the Chinese leader. After two days of high-stakes talks in Switzerland, trade negotiators from the world’s biggest economies announced… a massive de-escalation in tariffs. In a carefully coordinated joint statement, the US slashed duties on Chinese products to 30% from 145% for a 90-day period, while Beijing dropped its levy on most goods to 10%… The deal ended up meeting nearly all of Beijing’s core demands. The elevated ‘reciprocal’ tariff for China, which Trump set at 34% on April 2, has been suspended — leaving America’s top rival with the same 10% rate that applies to all countries including the UK, a longtime ally that reached a deal with the US last week.”
May 13 – Axios (Rebecca Falconer): “China’s leader Xi Jinping took an apparent swipe Tuesday at President Trump’s tariff policies. Xi’s first remarks since China and the U.S. agreed to cut tariffs on each other for 90 days… in the U.S.-China joint statement that spoke of recognizing the importance of a ‘mutually beneficial economic and trade relationship.’ ‘There are no winners in tariff wars or trade wars,’ Xi said at the China-CELAC Forum… ‘Bullying or hegemonism only leads to self-isolation,’ he added. The big picture: Xi last addressed the forum of over 30 countries that’s designed to foster political, economic, cultural and other kinds of cooperation between China and the Community of Latin American and Caribbean States during the inaugural event in 2015.”
May 12 – Financial Times (Demetri Sevastopulo, Joe Leahy and Peter Foster): “One overriding question has significant implications for the negotiations to come: did Beijing or Washington flinch first? Trump… claimed victory, saying he had engineered a ‘total reset’ with China. Meanwhile, Hu Xijin, former editor of national Communist party tabloid the Global Times, said on… the deal was ‘a great victory for China’. ‘The US has chickened out,’ said one popular Chinese social media post of the deal. Economists agreed that the US might have overplayed its hand by raising the tariffs too quickly and too high. ‘The US blinked first,’ said Alicia García-Herrero, chief Asia-Pacific economist at French investment bank Natixis. ‘It thought it could raise tariffs almost infinitely without being hurt, but that hasn’t been proven right.’”
May 13 – Wall Street Journal (Chun Han Wong and Jason Douglas): “A U.S.-China agreement to pause bruising tariffs was cheered in Beijing as vindication for leader Xi Jinping and his defiant response to President Trump’s trade war… On Chinese social media, opinion leaders portrayed the tariff truce as a resounding victory for Xi. ‘China fought a very beautiful ‘counterattack in self-defense,’’ said Ren Yi, a commentator… in an online post. Beijing showed the world that Trump is irrational and America is a paper tiger, while China offers stability and certainty, he wrote… Xi has made a show of defying U.S. pressure and leaned into his self-styled image as a staunch steward of Chinese sovereignty. He has repeatedly expressed his belief that China will usher out the era of American dominance, a process aided by Western capitalist excess.”
May 12 – CNBC (Eunice Yoon and Erin Doherty): “Chinese officials, influencers and state-run media… were casting the initial trade agreement and 90-day tariff pause with the U.S. as a victory and a vindication of Beijing’s negotiating strategy. They are arguing that their defiant public posture worked and was a major reason they were able to strike a deal with U.S. officials in Switzerland with relatively few concessions. ‘China’s firm countermeasures and resolute stance have been highly effective,’ said a social media account linked to China’s national broadcaster CCTV.”
Trade War Watch:
May 9 – Axios (Neil Irwin): “The United States is ripping up longstanding trade arrangements, developing more hostile relationships with allies, and undermining independent institutions, all while rapidly running up more debt. That’s a recipe for the role of the U.S. dollar as global reserve currency — unquestioned since the end of World War II and at a high-water mark just a decade ago — to fade. So argues Ken Rogoff, the Harvard economist and former chief economist at the International Monetary Fund, in a conversation with Axios and in his new book ‘Our Dollar, Your Problem.’ President Trump’s policies have accelerated that process, Rogoff argues, but it was already set in motion.”
May 14 – Bloomberg (Saleha Mohsin): “US officials seeking to negotiate trade deals around the world are not working to include currency policy pledges in the agreements, according to a person familiar… Foreign-exchange markets are on edge over concerns President Donald Trump’s administration is seeking a weaker greenback and might use trade bargaining to achieve that goal. South Korea’s won climbed nearly 2% against the dollar on Wednesday, while the Japanese yen also gained. Earlier this month Taiwan’s currency posted the biggest jump in decades.”
May 15 – Wall Street Journal (Paul Hannon): “The European Union wants a trade deal with the U.S. that sees a larger reduction in tariffs than negotiations with the U.K. and China have so far yielded, officials from the bloc said… President Trump imposed a series of tariffs that affect Europe’s makers of automobiles, steel and aluminum… Last week, the U.S. and the U.K. announced an agreement that left 10% ‘baseline’ tariffs in place on a wide range of British exports to the world’s largest economy… ‘I don’t think that’s the level of ambition Europe would be happy with,’ said Michal Baranowski, Poland’s deputy economy minister, who is chairing a meeting of EU trade officials in Brussels.”
May 11 – Bloomberg (Yoshiaki Nohara): “Japan won’t accept any initial trade agreement with the US that excludes an accord on autos, according to Prime Minister Shigeru Ishiba. Ishiba… made his stance clear when asked in parliament about the possibility that Washington might urge Tokyo to strike a provisional agreement that doesn’t address US tariffs on car imports. In the same parliamentary session, top trade negotiator Ryosei Akazawa said that Japan will continue to seek a reprieve from all the tariff measures imposed by the US. The trade negotiations between the US and Japan are expected to accelerate later this month, with Akazawa having said he hopes for some manner of agreement in June.”
May 12 – Bloomberg (Shruti Srivastava): “India has proposed levies on some US goods in response to Washington’s duties on steel and aluminum, marking its first retaliation against President Donald Trump’s tariff regime, even as the two countries move closer to finalizing a trade deal. The South Asian nation has informed the World Trade Organization that the US tariffs on these metals are ‘safeguard measures’ — trade restrictions — that will adversely impact India’s trade… New Delhi reserves its right to ‘suspend concessions or other obligations’ as a counter measure to the US duties, the notification said, citing WTO rules.”
Budget Watch:
May 14 – Bloomberg (Erik Wasson, Chris Cioffi and Zach C. Cohen): “President Donald Trump’s signature economic package took a major step toward becoming law when the House Ways and Means Committee approved trillions in new tax cuts for corporations, households and small businesses on a party-line vote. The bill, once it clears procedural steps, will head to the House floor for passage. But crucial issues — including an unresolved battle over the state and local tax deduction — threaten to delay or imperil Republicans’ legislative agenda. Lawmakers are continuing to meet behind closed doors to negotiate the SALT write-off and spending cuts in the bill as they aim to pass the legislation in the House by the end of the month. ‘The one big beautiful bill is the key to making America great again,’ Ways and Means Chair Jason Smith said… The bill would permanently extend the lower individual tax rates enacted under Trump in 2017 including a lower 37% rate for the highest earners, after Republicans debated the possibility of raising levies on millionaires. The legislation also brings to life many of the promises Trump floated as a presidential candidate: eliminating taxes on tips and overtime pay and creating new deductions for seniors and car buyers.”
May 12 – Wall Street Journal (Ron Johnson): “The ‘One Big Beautiful Bill’ that Congress is working on is certainly big, but beauty is in the eye of the beholder. Too often the reality of these budget debates gets obscured in details, politically charged issues and demagoguery. Let me attempt to clarify the current discussion by focusing on the most important facts and numbers. In fiscal 2019, federal outlays totaled $4.45 trillion, or 20.6% of gross domestic product. This year, according to the Congressional Budget Office’s January 2025 projection, total outlays will be $7.03 trillion, or 23.3% of GDP. That’s a 58% increase over six years. The CBO projects federal outlays will total $89.3 trillion across fiscal 2026-35.”
May 10 – Axios (Benjamin Guggenheim): “An early version of the House GOP’s tax plan would cost nearly $5 trillion, according to a new estimate from Congress’s nonpartisan tax scorekeeper. The cost far exceeds what is permitted by the budget resolution Republicans adopted earlier this year, which set the parameters for the massive package of tax cuts and extensions, energy policy and border security investments the party wants to pass in the coming weeks. The estimate, released… by the Joint Committee on Taxation, also underscores how much hinges on the final details of the plan… The House Republican-approved budget allows for $4.5 trillion in tax cuts — contingent on the GOP being able to find $2 trillion in spending cuts. Speaker Mike Johnson indicated last week that House Republicans are looking at a skinnier, $4 trillion tax plan, paired with $1.5 trillion in spending cuts.”
May 14 – The Hill (Mychael Schnell): “Fiscal hawks are lashing out over what they say are the lack of Medicaid reforms in President Trump’s legislative package, which could thwart the House GOP’s goal of passing the legislation next week. The gripes from conservatives are centered on the House Energy and Commerce Committee’s portion of the sprawling package, which beefs up work requirements for Medicaid and imposes more frequent eligibility checks but stops short of more substantial changes — such as siphoning federal funding away from states. ‘In my opinion they don’t go far enough,’ said Rep. Eric Burlison (R-Mo.), a member of the House Freedom Caucus… The Congressional Budget Office (CBO) found the panel’s work would reduce deficits by more than $880 billion by 2034, exceeding the instructions laid out in the budget resolution. But hard-liners such as Burlison are unconvinced by the CBO’s ‘funny math.’”
May 14 – Wall Street Journal (Patricia Cohen): “As Speaker Mike Johnson (R., La.) sprints to pass the tax and spending bill in the next two weeks to fund President Trump’s priorities, some House Republicans say they don’t know if they can trust their leader’s word. The relationship between Johnson and rank-and-file lawmakers will be crucial as Republicans look to pass extensions to expiring tax cuts as well as new breaks such as ‘no taxes on tips’ while also pushing through cuts to Medicaid and food aid. Johnson has a razor-thin 220-213 majority in the chamber, and he will have to pass the party-line measure with no help from Democrats. He also will need to persuade House colleagues to get on board even as Senate Republicans could make major changes to the bill. The tensions, which started in the restive conservative wing of the party last year, have now spread more broadly, according to more than 20 House Republicans…”
May 14 – The Hill (Alexander Bolton): “An ambitious House bill to cut taxes by hundreds of billions of dollars and pay for part of it by slashing Medicaid spending faces a rocky path in the Senate, where Republican lawmakers warn the changes to the safety net program could hurt rural hospitals and reduce benefits for their constituents. Republican senators are also raising red flags about the House plan’s phaseout of renewable energy tax credits and what they’re calling an inadequate attempt to reduce the ballooning federal deficit.”
May 14 – Yahoo Finance (Ben Werschkul): “House Republicans earlier this week confirmed plans to triple the federal government’s state and local tax (SALT) deduction from $10,000 to $30,000 for all but the highest earners, part of their efforts to push through President Trump’s ‘big beautiful’ tax bill. But it was immediately rejected by a small but determined GOP ‘SALT caucus’ that wants a higher level. It has led to a days-long standoff and underlined a key hurdle to Trump’s bill, with tense closed-door meetings and sniping online as the lawmakers try to find a deal while opposite sides of the Republican caucus pull in different directions.”
May 12 – CNBC (Jeff Cox): “Receipts from U.S. tariffs hit a record level in April as revenue from President Donald Trump’s trade war started kicking in. Customs duties totaled $16.3 billion for the month, some 86% above the $8.75 billion collected during March and more than double the $7.1 billion a year ago… That brought the year-to-date total for the duties up to $63.3 billion and more than 18% ahead of the same period in 2024.”
May 14 – Axios (Colin Demarest): “It’s going to cost nearly $1 trillion to operate, maintain and upgrade America’s nuclear arsenal over the next decade — more per year ($95bn) than what’s spent on many federal agencies. That eye-popping estimate from the Congressional Budget Office is catnip for critics, who argue Washington is spending blindly or that portions of the triad are vestigial. The combined 2025-34 nuke plans of the Defense and Energy departments amount to $946 billion.”
New World Order Watch:
May 13 – Associated Press (Simina Misteanu): “China is moving to strengthen its alliances with other countries as a counterweight to President Donald Trump’s trade war, presenting a united front with Latin American leaders a day after China and the U.S. agreed to a 90-day truce in their tariffs stalemate. China’s leaders have positioned the world’s second-largest economy as a reliable trade and development partner, in contrast to the uncertainty and instability from Trump’s tariff hikes and other policies. On Monday, Beijing and Washington announced their breakthrough on tariffs after weekend talks… Still, Beijing’s ire over the trade war remains apparent.”
May 12 – Financial Times (Ryan McMorrow and Joe Leahy): “Chinese companies are accelerating a purge of foreign components from their supply chains, as trade tensions with the US threaten to hasten the decoupling between the world’s two largest economies. In the weeks… more than two dozen companies listed in Shanghai and Shenzhen have told investors that they were increasing efforts to source domestic inputs to replace foreign products… The financial filings… were issued by companies spanning the semiconductor, chemicals and medical devices sectors. They demonstrate the potential lasting impact of Trump’s trade war by effecting a permanent reordering of supply chains.”
May 16 – Reuters (Amanda Stephenson and Arathy Somasekhar): “China has emerged as the top customer for Canadian oil shipped on the expanded Trans Mountain pipeline…, as a U.S. trade war has shifted crude flows in the year since the pipeline started operating. China’s new interest in Canadian oil comes as U.S. President Donald Trump’s trade war has strained relations between longtime allies Washington and Ottawa.”
May 14 – New York Times (Patricia Cohen): “Help Wanted. Looking for American researchers. As President Trump cuts billions of federal dollars from science institutes and universities, restricts what can be studied and pushes out immigrants, rival nations are hoping to pick up talent that has been cast aside or become disenchanted… ‘This is a once-in-a-century brain gain opportunity,’ the Australian Strategic Policy Institute declared, as it encouraged its government to act. Last week, at the urging of more than a dozen members, the European Union announced it would spend an additional 500 million euros, or $556 million, over the next two years to ‘make Europe a magnet for researchers.’”
May 11 – Bloomberg: “China’s weaponization of rare earths in its trade war with the US will spark a much greater focus on American supply security for critical minerals, according to MP Materials Corp., the only US miner of the key materials used in smartphones and defense applications. ‘Regardless of how trade negotiations evolve from here, the system as it existed is broken, and the rare-earth Humpty Dumpty, so to speak, is not getting put back together,’ the miner’s Chief Executive Officer, Jim Litinsky, said…”
May 12 – Wall Street Journal (Samantha Pearson): “China has reassured its citizens they would have enough to eat without U.S. crops. It will have to unclog Latin America’s largest port first. The decrepit port in this Atlantic coast city is the main gateway for South American exports of soybeans and other agricultural goods that represent China’s only viable alternative supply to U.S. exports… China’s state-owned agricultural conglomerate, Cofco, is building its biggest export terminal outside China at the port to manage shipments of corn, sugar and soybeans. It would increase the company’s annual export capacity to 14 million tons from 4.5 million, but isn’t expected to reach full capacity until next year. The Santos port fits into China’s wider plan to secure access to South America’s agricultural bounty amid shortages of water and arable land at home.”
U.S./Russia/China/Europe/Iran Watch:
May 13 – Financial Times (Joe Leahy): “Xi Jinping has pledged support for Panama against US pressure over ownership of its ports and promised greater co-operation with countries across Latin America, as Beijing courts a region that Washington has traditionally considered its backyard. Addressing a summit of leaders of 33 Latin American and Caribbean states in Beijing…, the Chinese president offered law enforcement training and equipment alongside other measures including visa-free travel and a $10bn development credit line for the region. Xi’s meeting with the Latin American leaders signalled Beijing’s determination to challenge Washington for global influence, and came one day after US President Donald Trump agreed a truce in his tariff war with China.”
May 14 – Wall Street Journal (Bertrand Benoit): “German police detained three men suspected of planning to mail packages laden with explosives in a Russian-sponsored act of sabotage reminiscent of recent attacks on DHL logistics hubs, prosecutors said… The arrests could shed light on last year’s explosions at DHL hubs in Germany and the U.K., which Western security officials alleged were part of one of the most audacious acts of sabotage ordered by the Kremlin and whose target included flights to the U.S. and Canada. The suspected plot, if confirmed, would also show that the Kremlin has continued to design and conduct increasingly daring attacks on the West since President Trump arrived in the White House. Trump has initiated a rapprochement with Russian President Vladimir Putin with the aim of negotiating an end to the war in Ukraine. European officials suspect Russia was behind a string of incidents in the region in recent years…”
Canada Friend and Ally Watch:
May 13 – Wall Street Journal (Paul Vieira): “Canadian Prime Minister Mark Carney said… he’s willing to amend federal rules that may pose headwinds toward getting energy projects built and capitalize on the country’s abundance of natural resources. Carney reiterated his commitment to help build a west-to-east crude-carrying pipeline—so long as there is a nationwide consensus—and he’s looking to position the country as an energy superpower that includes, but isn’t limited to, oil and gas production. ‘The test is, Canadians deserve results — not rhetoric and not talking past each other,’ Carney said… ‘I think, from both being in the private sector and working across government over the years, is that you can’t get results unless you work across partners.’”
Ukraine War Watch:
May 16 – Associated Press (Hanna Arhirova and Andrew Wilks): “The first direct peace talks between Russia and Ukraine since the early weeks of Moscow’s 2022 invasion ended Friday after less than two hours, and a senior Ukrainian official said the Russian side introduced new ‘unacceptable demands’… During the talks, a senior Ukrainian official said Russia introduced new ‘unacceptable demands’ to withdraw Ukrainian forces from huge swaths of territory.”
May 15 – Reuters (Tom Balmforth and Vladimir Soldatkin): “Russia’s Vladimir Putin spurned a challenge to meet face-to-face with Volodymyr Zelenskiy in Turkey…, instead sending a second-tier delegation to planned peace talks… They will be the first direct talks between the sides since March 2022, but hopes of a major breakthrough were further dented by U.S. President Donald Trump who said there would be no movement without a meeting between himself and Putin… ‘We can’t be running around the world looking for Putin,’ Zelenskiy said… ‘I feel disrespect from Russia. No meeting time, no agenda, no high-level delegation – this is personal disrespect. To Erdogan, to Trump,’ Zelenskiy told reporters.”
Taiwan Watch:
May 13 – Bloomberg (Josh Xiao and Yian Lee): “The recent conflict between India and Pakistan is prompting a reassessment of Chinese weapons, challenging long-held perceptions of their inferiority to Western arms and sparking concern in places wary of Beijing. Pakistan hailed the use of its Chinese J-10Cs to shoot down five Indian fighters, including French-made Rafale aircraft, last week in response to Indian military strikes… Hu Xijin, the ex-editor-in-chief of China’s nationalist tabloid Global Times, warned on social media that if Pakistan’s successful strikes were true, Taiwan should feel ‘even more scared.’”
May 10 – Wall Street Journal (Joyu Wang): “Taiwan’s leaders have embarked on an urgent overhaul of the island’s defenses to prepare for what they see as the possibility of a Chinese invasion by 2027. The purpose: be able to hold on long enough for the U.S. to come to the rescue. But many doubt the self-governing island… can be ready in just two years… Taiwan wants to scrap a longtime focus on equipping the island for a conventional war. Instead, it is racing to build up new, asymmetric defenses aimed at making China’s much more powerful military think twice before attacking. Failing that, it aims to inflict enough pain to slow China while it seeks help from Washington… ‘They are improving their military readiness in all three areas: policy, procurement and personnel,’ said Mark Montgomery, a retired rear admiral who is now a senior director at the Foundation for Defense of Democracies… ‘But this is a five- or six-year-to-go process, and they need to get to work on each one of those as fast as they can.’”
Bubble and Mania Watch:
May 12 – Wall Street Journal (Kate King): “Shopping-center owner Sandy Sigal groaned when he found out that the bankrupt home-goods retailer Big Lots was closing its location at his Whittier, Calif., strip center. He knew it wouldn’t be easy to replace Big Lots… ‘In today’s slowdown, as good of a location as this is, it’s taking longer,’ said Sigal, who is chief executive of shopping-center owner and developer NewMark Merrill Companies. ‘People are saying, ‘I’m on pause.’’ The retail-property market’s multiyear rebound is fizzling, buffeted by large retailer bankruptcies, shoppers pulling back and tariff turmoil that is slowing demand for store space. Retailers vacated nearly 6 million more square feet than they occupied during the first three months of the year, according to… Cushman & Wakefield. That marked the weakest quarter for shopping-center leasing since the onset of the pandemic in 2020.”
AI Bubble Watch:
May 12 – New York Times (Ana Swanson and Tripp Mickle): “As President Trump tours the Middle East this week, governments that are flush with oil wealth will be focused on a different treasure, found in America’s Silicon Valley. Artificial intelligence chips… are highly coveted by governments across the Middle East. Leaders of Saudi Arabia, Qatar and the United Arab Emirates want to pour billions of dollars into the construction of data centers to put their countries at the forefront of a new technology heralded for its power to disrupt businesses and create trillions of dollars in economic value. The Gulf States have plenty of energy and cash to build data centers… But they need U.S. government approval to buy the American-designed chips to power them.”
Inflation Watch:
May 15 – Associated Press (Anne D’Innocenzio): “Walmart, which became the nation’s largest retailer by making low prices a priority, has found itself in a place it’s rarely been: Warning customers that prices will rise for goods ranging from bananas to car seats. Executives… told industry analysts… they are doing everything in their power to absorb the higher costs from tariffs ordered by President Donald Trump. Given the magnitude of the duties, however, the highest since the 1930s, higher prices are unavoidable and they will hurt Walmart customers already buffeted by inflation over the past three years.”
May 13 – CNBC (Jeff Cox): “Inflation was slightly lower than expected in April… The consumer price index… rose a seasonally adjusted 0.2% for the month, putting the 12-month inflation rate at 2.3%, its lowest since February 2021… The monthly reading was in line with the… consensus estimate while the 12-month was a bit below the forecast for 2.4%. Excluding volatile food and energy prices, the core CPI also increased 0.2% for the month, while the year-over-year level was 2.8%. The forecast was for 0.3% and 2.8%, respectively.”
May 15 – Associated Press (Paul Wiseman): “U.S. wholesale prices dropped unexpectedly in April for the first time in more than a year… The producer price index… fell 0.5% last month from March, the first drop since October 2023 and the biggest in five years. Compared to a year earlier, producer prices rose 2.4% last month, decelerating from a 3.4% year-over-year gain in March… Excluding volatile food and energy prices, so-called core wholesale prices dipped 0.4% from March and rose 3.1% from a year earlier.”
May 13 – Yahoo Finance (Claire Boston): “Inflation may be broadly cooling, but housing continues to be one of the most stubborn rising costs consumers face. April’s Consumer Price Index data showed that shelter costs rose 0.3% last month, accelerating slightly from March and accounting for over half of the 0.2% month-over-month price increase across all goods and services. Compared with a year earlier, shelter costs are up 4%. Owner’s equivalent rent — an estimate of how much a homeowner would pay to rent an equivalent property — rose 0.4% in April, while rent jumped 0.3% from a month earlier.”
May 13 – Bloomberg (Alicia Clanton and Eliyahu Kamisher): “State Farm has been approved for an emergency 17% rate increase on homeowner insurance policies in California, part of an effort to shore up the state’s largest insurer after the devastating wildfires in the Los Angeles area. The hike… also allows a 15% boost for condo coverage, according to Insurance Commissioner Ricardo Lara. It follows a three-day hearing in April, where an administrative law judge found that the adjustment balanced consumer protections with the company’s financial stability… ‘Let me be clear: We are in a statewide insurance crisis affecting millions of Californians. Taking this on requires tough decisions,’ Lara said in a statement.”
May 11 – Financial Times (Taylor Nicole Rogers): “US beef prices are soaring to record highs as the country’s cattle inventory reaches its lowest level in more than 70 years… The average price of a pound of ground beef rose to $5.79 in US cities in March, a 12.8% increase in the past year and the most on record… The price of uncooked beef steaks also reached record highs at $10.98 per pound. A years-long drought in the American west has dried up grazing lands and US ranchers have been steadily shrinking their herds… Labour and insurance costs have also risen and even though cattle are reaching heavier weights than ever, it is not enough to offset plummeting headcounts. ‘Beef is experiencing the most challenging market conditions we’ve ever seen,’ Donnie King, chief executive of Tyson Foods… told analysts…”
May 15 – Bloomberg (Jennifer Epstein): “Manhattan’s apartment market is heading into its most competitive months of the year with rents already at record highs. They’re only likely to continue rising through the summer. The $4,500 median monthly rate for April’s new leases ties the level first reached in February and missed by just $5 in March, according to appraiser Miller Samuel Inc. and brokerage Douglas Elliman. The prices many apartment hunters agreed to pay last month were even higher than what landlords were asking.”
Federal Reserve Watch:
May 14 – Bloomberg (Bill Dudley): “The agreement between the US and China to roll back their respective tariffs for 90 days has led to renewed optimism that the worst of America’s trade wars is over. I’m not seeing the ‘breakthrough’: There’s still plenty of scope for economic damage that the Federal Reserve will struggle to contain. First, the rollback might not last and doesn’t change the broad contours of the story. Tariffs will still be high, fueling inflation and stunting growth. The Yale Budget Lab estimates that the average effective tariff rate will be 17.8%, up from about 2.5% when President Trump started his second term. That’s enough to increase the price level and the unemployment rate by about 1.7 and 0.35 percentage points, respectively. Second, the 90-day pause merely extends the corrosive uncertainty surrounding the US administration’s policies. This will lead businesses to delay purchase, investment and hiring decisions. Third, the Fed will still face the difficult choice between fighting inflation and supporting economic growth.”
May 14 – Bloomberg (Chris Anstey): “Federal Reserve Bank of Chicago President Austan Goolsbee said that it’s important for central bankers not to respond to day-to-day volatility in equities and economic policy pronouncements… ‘It’s important to remember that the Fed – our job is to be the steady hand, not respond to the daily gyrations either of the stock market or of policy pronouncements,’ Goolsbee said… ‘And we’ve continued to get these numbers that at least suggest that it’s going OK.’”
May 14 – Bloomberg (Jonnelle Marte): “Federal Reserve Vice Chair Philip Jefferson said tariffs and related uncertainty could slow growth and boost inflation this year, but monetary policy is well positioned to respond as needed. Jefferson stressed heightened uncertainty about government policies, and said it is not yet clear if tariffs will have a short-lived or more persistent effect on price growth… ‘If the increases in tariffs announced so far are sustained, they are likely to interrupt progress on disinflation and generate at least a temporary rise in inflation,’ Jefferson said… ‘With the increased risks to both sides of our mandate, I believe that the current stance of monetary policy is well positioned to respond in a timely way to potential economic developments,’ he added.”
May 12 – Yahoo Finance (Jennifer Schonberger): “Federal Reserve governor Adriana Kugler said… steeper tariffs will drive prices higher, acting to push down incomes and lower economic growth. ‘Although higher tariffs on US imported goods may affect our macroeconomy through many channels… I think they will primarily act as a negative supply shock, raising prices and decreasing economic activity,’ Kugler said…”
May 16 – Bloomberg (Catarina Saraiva): “Federal Reserve Bank of Atlanta President Raphael Bostic said he expects the US economy to slow this year but not fall into recession, and reiterated that he sees one interest-rate cut in 2025… ‘I have one cut for the year,’ Bostic said… ‘In part, it’s because I think the uncertainty is unlikely to resolve itself quickly.’”
May 14 – Bloomberg (Maria Eloisa Capurro): “Federal Reserve Bank of San Francisco President Mary Daly said the strength of the US economy allows policymakers to be patient as they wait for more evidence of how the Trump administration’s policies will affect businesses and households. ‘When you step back from the uncertainty and you look at where we are, we’ve got solid growth, solid labor market and declining inflation,’ Daly said… ‘That’s exactly where we want to be if we’re going to deliver a sustainable growth path.’”
U.S. Economic Bubble Watch:
May 13 – Reuters (Lucia Mutikani): “U.S. small-business confidence fell for a fourth straight month in April, with the share of owners reporting job openings declining to the lowest level in more than four years… The National Federation of Independent Business said… its Small Business Optimism Index dropped 1.6 points to 95.8 last month, making the second consecutive month of a reading below the 51-year average of 98. The index peaked at 105.10 in December… It has been declining since then as Trump’s chaotic trade policy cast a pall over the economy. The NFIB’s Uncertainty Index eased 4 points to 92 last month.”
May 14 – Bloomberg (Enda Curran): “President Donald Trump’s sudden move to lower tariffs on goods from China to 30% from 145% has thrown a lifeline to America’s small businesses who were running low on inventory — and cash. But owners warn the reprieve will be limited. Their caution goes like this: tariff rates remain sky high by historical levels and will keep pressuring profits. The 90-day window for a pause while negotiations continue offers little clarity on where the levies will ultimately settle, and Trump has warned they could soar again. The time frame doesn’t offer much help, either. While existing inventory can be shipped from China within that window, it’s not enough time to place and receive new orders for some products — let alone to line up warehousing, customs clearance and delivery. None of which is giving executives the confidence that it’s a return to business as usual.”
May 13 – Reuters (Michael S. Derby): “U.S. student loan borrowers ran into trouble during the first quarter after the government lifted a long-running moratorium on debt repayment implemented during the COVID-19 pandemic, a report from the Federal Reserve Bank of New York said… The bank said that total level credit that had fallen into delinquency rose to 4.2% of outstanding loans, from 3.6% in the fourth quarter of last year, as part of an ongoing return to pre-pandemic trends. Some 7.7% of student loans in the first three months of the year were 90 or more days delinquent versus just under 1% in the fourth quarter of 2024… In a blog posting, bank economists wrote that the rise in delinquency rates tied to return of required student loan payments is a return to the pre-pandemic trend, and they noted the ramifications of troubled student debt levels is ‘severe.’”
May 15 – Associated Press (Christopher Rugaber and Anne D’Innocenzio): “U.S. consumers spent slightly more at retail stores last month after ramping up their shopping in March to get ahead of tariffs. Sales at retail stores and restaurants rose just 0.1% in April from March… That is much lower than the previous month’s 1.7% gain, which reflected a surge in car sales as consumers accelerated purchases ahead of President Trump’s 25% duty on auto imports… In April, sales were flat or down for many retailers, the government said: They plunged 2.5% at sporting goods stores… Sales dropped 0.4% at clothing stores, while they ticked down 0.2% at health and personal care stores and slipped 0.1% at auto dealers. Gas station sales dropped 0.5%, even as prices declined 0.1%.”
May 15 – Associated Press (Matt Ott): “U.S. applications for jobless benefits held steady last week… The number of Americans applying for unemployment aid was unchanged at 229,000 for the week ending May 10… The total number of Americans receiving unemployment benefits for the week of May 3 rose by 9,000 to 1.88 million.”
May 16 – Reuters (Lucia Mutikani): “U.S. single-family homebuilding dropped to a nine-month low in April as tariffs on imported materials combined with higher mortgage rates raised construction costs, which could hamper the housing market recovery this year. The report… also showed permits for future home construction fell sharply last month. ‘Builders are hitting the brakes this year in response to high uncertainty for costs and future demand,’ said Ben Ayers, a senior economist at Nationwide. ‘In addition to still-elevated mortgage rates, the building inventory within the existing home market may weigh on homebuyer interest in new builds. This environment makes it risky for home builders to start new projects, especially for time-consuming multi-family structures. We expect starts to fade further over the summer as conditions remain challenging for builder profitability.’ Single-family housing starts… dropped 2.1% to a seasonally adjusted annual rate of 927,000 units last month, the lowest level since July 2024… Permits for future construction of single-family housing declined 5.1% to a rate of 922,000 units in April.”
May 14 – Bloomberg (Diana Olick): “Mortgage demand from homebuyers rose for the second straight week, suggesting that potential buyers are now more enticed by the increasing supply of houses for sale than they are dissuaded by recent economic uncertainty and concern over tariffs… Applications for a mortgage to purchase a home rose 2% for the week and were 18% higher than they were the year before. That was the second straight weekly gain after demand fell sharply for most of April.”
May 14 – Bloomberg (Prashant Gopal): “The crucial spring home-sales season in the US, barely off the runway, is already sputtering. April is normally when transactions kick into overdrive… But this year, the number of signed contracts was the lowest for the month since the Covid lockdown in 2020, according to… Redfin Corp. Deals were down 3% from last April, already seen as a low mark. Active listings for April also ballooned to the highest level since 2019, suggesting homes are piling up on the market. And annual median price growth, measured by completed purchases, was just 1.4%, compared with the almost 6% gain recorded in April 2024.”
May 10 – Wall Street Journal (Nicole Friedman): “The troubled housing market can’t seem to get back on track. Inventory of homes for sale is steadily rising, but demand is still tepid. Home prices in parts of the country are falling. But with prices not much below record highs, many would-be buyers are still squeezed out. Mortgage rates are hovering around 6.75%, more than double the level of only a few years ago… ‘It definitely feels like a disappointment,’ said Selma Hepp, chief economist at Cotality, a real-estate data provider. The recent deterioration in the economic backdrop and consumer sentiment is making matters worse, cooling buyer appetite for big purchases like a new home. Even in markets where there is a glut of inventory and sellers are offering concessions, it isn’t enough to get the market moving nationally.”
May 15 – CBS News (Bloomberg): “Confidence among US homebuilders slumped in May to the lowest level since late 2023… An index of overall market conditions from the National Association of Home Builders and Wells Fargo (WFC) slipped 6 points to 34 this month. That trailed all estimates… All three components that make up the index fell, with a measure of expected sales in the next six months sliding to an 18-month low. A gauge of present sales dropped to the lowest since late 2022, while traffic of prospective buyers was the weakest in 1 1/2 years. ‘The spring home buying season has gotten off to a slow start as persistent elevated interest rates, policy uncertainty and building material cost factors hurt builder sentiment in May,’ NAHB Chairman Buddy Hughes…”
May 14 – Associated Press (Tran Nguyen): “California is facing a $12 billion deficit that Gov. Gavin Newsom wants to help close by freezing enrollment in a state-funded health care program for immigrants living in California without legal status. Newsom announced the deficit and his plans to cover it… as he outlined his nearly $322 billion state spending plan for the upcoming fiscal year. Beyond higher-than-expected Medicaid spending, Newsom blamed broad economic uncertainty, including federal tariff policies and a volatile stock market. California relies heavily on revenue from a tax on capital gains.”
May 13 – New York Times (Ceylan Yeğinsu): “The U.S. welcome mat is rolling up — at least that’s how some international travelers see it, according to the World Travel & Tourism Council… And the cost for that hospitality lapse will be high. The United States is on track to lose $12.5 billion in international travel spending this year, falling to less than $169 billion from $181 billion in 2024, according to the latest Economic Impact Research… That’s a 22.5% decline from the U.S. international spending peak of $217.4 billion in 2019…”
China Watch:
May 15 – Bloomberg (Qianwei Zhang): “US has abused export control measures and stepped up chip restrictions based on trumped-up charges, He Yongqian, a spokesperson for China’s Ministry of Commerce says… He says in response to US guidance that claim using Huawei Technologies Co.’s Ascend AI chips violates US export controls. The US move seriously damages the legitimate rights and interests of Chinese companies and poses a serious threat to the stability of the global semiconductor production and supply chain… China vows to ‘resolutely’ defend the interest of Chinese cos.”
Central Bank Watch:
May 15 – Reuters (Brendan O’Boyle): “The Bank of Mexico lowered its benchmark interest rate by 50 bps for the third consecutive meeting… The unanimous decision by the bank’s governing board… brings Mexico’s benchmark rate to 8.50%, the lowest since August 2022.”
Europe Watch:
May 14 – Politico (Nette Nostlinger): “Germany will take more responsibility for Europe’s defense by building the strongest army in the EU, conservative Chancellor Friedrich Merz said… ‘The federal government will provide all the financial resources that the Bundeswehr needs to become the strongest conventional army in Europe,’ Merz said. ‘This is more than appropriate for the most populous and economically strongest country in Europe. Our friends and partners also expect this from us, and what’s more, they are actually demanding it.’”
Japan Watch:
May 12 – Reuters (Leika Kihara): “The Bank of Japan expects wages and prices to keep rising even as the uncertainty over U.S. tariff policy weighs on the economy, its deputy governor Shinichi Uchida said…, signalling the bank’s resolve to maintain its rate-hike stance. While U.S. tariffs are likely to hurt Japan’s economic growth, the BOJ will continue to raise interest rates if the economy and prices improve after a period of stagnation, as the board projects, Uchida told parliament. ‘Japan’s underlying inflation, and medium- to long-term inflation expectations, are likely to temporarily stagnate. But even during that period, wages are expected to continue rising as Japan’s job market is very tight,’ Uchida said. ‘Companies are also expected to keep passing on rising labour and transportation costs by increasing prices,’ he said.”
May 15 – Reuters (Leika Kihara): “Japan’s economy shrank for the first time in a year and at a faster pace than expected… The data highlights the challenge policymakers face as steep U.S. tariffs cloud the outlook for the export-heavy economy, particularly for the mainstay automobiles sector. Real gross domestic product (GDP) contracted an annualised 0.7% in January-March…”
Emerging Market Watch:
May 14 – Bloomberg: “Brazil’s President Luiz Inacio Lula da Silva brushed off concern that the Trump administration would punish his country for building closer ties with China, after a state visit to Beijing that saw him sign more than 30 agreements… Lula said Brazil isn’t afraid of any retaliation, adding he’s always wanted to improve relations with China as well as other countries and blocs. ‘There is no concern on Brazil’s side with the US posture,’ he said in Beijing. Lula struck an unapologetic note as he rounded off his trip, saying China and Brazil are united in defending multinationalism and fighting protectionism. Brazil’s president has sought to further expand the ties, betting on Chinese investment and support for a development strategy meant to move his nation up the global value chain.”
Social, Political, Environmental, Cybersecurity Instability Watch:
May 14 – Bloomberg (Naureen S Malik): “Millions of Americans from the upper Midwest to the Gulf Coast are facing the biggest threat of power supply shortfalls in the US this summer. About 89 million people access three grids spanning parts of the central US now deemed an elevated risk zone. The shutdown of older power plants, possible forced outages and high demand are contributing to potential deficits, the North American Electric Reliability Corp. said… ‘Going in the summer, the grid operators need to be prepared for the potential conditions to be stressful once again,’ Mark Olson, NERC’s manager of reliability assessments, said… America’s aging electric grids are being strained by extreme weather and mounting demand from data centers. They’re also increasingly dependent on wind and solar power, which rely on the whims of the air and sun.”
May 15 – Bloomberg (Mark Gongloff): “Not to get all middle-school essay on you, but the US heartland — from Texas up to North Dakota and out to the Great Lakes — will be a study this week in the contradictions of climate policy in the Trump 2.0 era: An increasingly hostile nature argues for urgent attention and action while politicians serving the fossil-fuel industry argue the opposite. Nature has the stronger case. Texas is roasting in a record-breaking heat wave this week. The temperature in Laredo, near the Mexico border, was forecast to hit 110 degrees Fahrenheit on Wednesday, making it hotter than Death Valley or the Sahara desert. For cities like Austin and San Antonio, these will be the hottest May days and the earliest string of triple-digit-temperature days on record.”
May 11 – Financial Times (Attracta Mooney): “Nepal will mark the rapid melting of a crucial glacier with a ‘funeral’ next week as scientists warn that climate change threatens thousands of other masses of ice across the world. Buddhist monks, scientists, government officials and community figures will take part in a ceremony… at the Yala glacier, one of the most studied and measured ice bodies in the Hindu Kush Himalaya region, which is now considered critically endangered. So-called glacier funerals have been held in Iceland, Mexico and Switzerland in recent years, but Monday’s service is the first in the Hindu Kush Himalayan region, which holds the third largest volume of ice on Earth after the two polar geographic zones.”
Geopolitical Watch:
May 11 – New York Times (Mujib Mashal): “India and Pakistan have seemingly pulled back from the brink again. But so much was new about the nuclear-armed enemies’ chaotic four-day clash, and so many of the underlying accelerants remain volatile, that there’s little to suggest that the truce represents any return to old patterns of restraint. A new generation of military technology fueled a dizzying aerial escalation. Waves of airstrikes and antiaircraft volleys with modern weapons set the stage. Soon they were joined by weaponized drones en masse for the first time both along the two countries’ extensive boundaries and deep into their territory — hundreds of them in the sky, probing each nation’s defenses and striking without risk to any pilot. Then the missiles and drones were streaking past the border areas and deep into India’s and Pakistan’s territories, directly hitting air and defense bases, prompting dire threats and the highest level of military alert.”
