US Economy Powers On As FIFA Spending & IRS Tax Rebates Fade

(…) The games are over. The fans are heading home, and an important economic tailwind is beginning to fade. According to Bank of America, the FIFA World Cup generated roughly $20 billion in economic activity across the United States, boosting spending in host cities and helping fuel the strongest surge in consumer spending in more than four years.

The stimulus from tax refunds is also fading. Thanks to the One Big Beautiful Bill Act, the total amount refunded to households rose 18.1% y/y to $324.8 billion, putting nearly $50 billion of additional cash into consumers’ pockets.

With both tailwinds now fading, the economic data are reflecting the slowdown. We aren’t concerned. Seven years into our Roaring 2020s scenario, the underlying pulse of the US economy and American consumer remains strong. (…)

ADP hiring growth continues to slow from stronger readings during the spring. US private employers added an average of 16,500 jobs per week in the four weeks ending July 4, down from 19,250 in the prior four-week period (chart). Nevertheless, the pace remains consistent with a monthly payroll gain of roughly 66,000, i.e., around the “breakeven” rate necessary to keep the unemployment rate down. (…)

The Q2-2026 earnings reports of the largest US banks were strong last week. Their CEOs delivered a consistently upbeat assessment of US consumers.

Bank of America’s Brian Moynihan called the economy “more durable than expected, supported by the strong consumer,” adding that while “affordability is a real issue,” consumers are “still spending money, and that’s good for the US economy in the broadest context.”

JPMorgan described consumers and small businesses as “resilient despite elevated gas prices and inflation.”

Citi’s Jane Fraser pointed to a “resilient customer base” fueling “loan growth, higher spend and better credit performance than expected,” while

Wells Fargo’s Charlie Scharf cited “broad-based economic strength.”

US Bancorp added that customers “are continuing to spend money” even as sentiment surveys look negative, with credit-card purchase volumes “accelerating across credit scores.”

The largest US banks see a consumer who continues to spend.

Yardeni adds this caveat:

The Conference Board’s Index of Leading Economic Indicators (LEI) fell 0.2% m/m in June, while the Index of Coincident Economic Indicators (CEI) rose 0.2% to a record high. The LEI has long been a favorite of recession alarmists. Yet no recession has materialized, and both the LEI and the alarmists have been wrong.

Indeed, the CEI’s correlation with real GDP has weakened recently. The former was up just 0.7% y/y in June, while the latter rose 2.7% y/y in Q1-2026.

Yesterday:

Preliminary weekly NER Pulse hiring report from ADP for the four weeks ending July 4th continued its softening since peaking the four weeks to May 2nd at +163k, coming in at +66k (+16.5k/wk). The 4-week moving average is now down to +91k, the least since March 21st. (@neilsethinew)

Indeed Job Postings keep weakening (through July 10):

War Risk to Oil Supplies Grows With Red and Black Sea Disruptions Tankers loaded with Saudi oil do a U-turn after Houthi blockade threats, while Ukrainian attacks snarl pipeline operations

Global oil supplies face a growing list of disruptions, as a threat by Yemen’s Houthi militants to blockade Saudi Arabia began to take shape and Ukrainian attacks on Russia’s Black Sea shipping disrupted operations of a key pipeline there.

Two oil tankers loaded with Saudi crude oil turned around Tuesday. A successful blockade would open another front in the U.S.-Iran conflict and compound the disruption caused by Iran’s stranglehold on the Strait of Hormuz. (…)

The [Ukrainian] attacks have disrupted flows through a pipeline that delivers Russian and Kazakh oil to the Black Sea. The pipeline is run by a consortium that includes Exxon and Chevron and carries almost 2% of the world’s oil. (…)

“Any disruption at Bab al-Mandeb would therefore threaten not only Saudi shipments but one of the few remaining routes capable of compensating for the severe reduction in Hormuz traffic,” said Jorge León, head of geopolitical analysis at consulting firm Rystad Energy. (…)

A Houthi military spokesperson had declared a maritime blockade of Saudi Arabia on Monday. (…)

Some 12% of global seaborne oil passed through Bab al-Mandeb before the war.

Loadings at Saudi Arabia’s Red Sea port at Yanbu have averaged around 4 million barrels a day since the war began, up from around 1 million barrels a day before the war, León said. Of those, roughly 2.5 million barrels a day go south through Bab al-Mandeb, heading toward Asian buyers, he said. If a ceasefire doesn’t materialize and both Hormuz and Bab al-Mandeb remain disrupted, the risk of a significant rebound in oil prices would be substantial, he said.

Trump brushed off concerns that a Red Sea blockade would spark a new Middle East conflict but said he would take action if the situation escalated. (…) “Might happen, but we take care of things.” (…)

Trump Takes Another Swing at Canada Round three of the senseless tariff war between North American neighbors.

The WSJ Editorial Board:

What do you know? President Trump is conceding that his blunderbuss border taxes are harming U.S. business as other countries retaliate. So now he’s whacking Canada harder for punching back. The trade brawl could leave both countries with more bruises than a hockey fight. (…)

He may also enjoy showing off his new tariff bazooka. Section 338 lets the President impose tariffs up to 50% on countries that discriminate against “commerce of the United States, directly or indirectly” in relation to foreign countries. No previous President has used this power, which hails from the disastrous Smoot-Hawley Act.

The provision was intended to let the President retaliate against countries that impose tariffs on the U.S. Mr. Trump is using the law to punish Canada for retaliating against his tariffs. His tariff order cites Canada’s 25% tariffs on U.S. cars that exceed certain quotas, which were a response to Mr. Trump’s 25% duties on motor vehicles and parts. According to the order, U.S. motor vehicle exports to Canada subsequently fell 22%, while Canadian imports from other countries increased. (…)

His announcement “deepens trade tensions and raises the risk of further retaliation at a time when many U.S. hospitality businesses continue to face financial hardships,” said the president of the Distilled Spirits Council.

Many hospitality businesses have also been harmed by a decline in Canadian tourism. A study in March found that the tourist dropoff has cost between 14,000 and 42,000 jobs in the U.S. markets most exposed to Canadian tourism. Northern border areas have also suffered from a decline in cross-border trade.

That may be why Mr. Trump is justifying his tariffs as retribution for Canada’s treatment of U.S. autos and dairy, which are key industries in the Midwest. But Canada is the second largest U.S. trade partner after Mexico, and Mr. Trump’s tariffs are complicating cross-border supply chains, raising costs and creating uncertainty for business.

The more Mr. Trump keeps swinging recklessly, the more Americans are likely to think there’s only madness in his tariff methods.

• Trump’s Tariffs Enter New Phase, Ending Months of Calm President Trump prepares new levies to replace the ones he put in place after the Supreme Court gutted his trade agenda

(…) The calm is ending. U.S. Trade Representative Jamieson Greer said on CNBC on Tuesday that he expects new tariff action soon, previewing replacement tariffs for the ones that expire Friday. And a day earlier, Trump said he would impose additional 50% tariffs on certain goods from Canada, a move that pressures America’s northern neighbor to renegotiate the U.S.-Mexico-Canada Agreement. The Canada tariffs were separate from the sweeping global levies Trump is trying to rebuild after the Supreme Court ruling.

(…) the president’s trade team is expected to impose duties under Section 301 of the Trade Act of 1974. Those are widely seen as more legally durable, but trade observers expect that overall U.S. tariff rates won’t change much in the short term under the new legal regime. In crafting the replacement tariffs, administration officials have said they would devise levies at similar levels to the expiring levies.

In March, Greer’s office opened a tariff investigation into 60 economies it accused of not prohibiting the use of forced labor in supply chains. Early this month, it issued a preliminary finding in the investigation, proposing 10% tariffs on more than a dozen U.S. trading partners including Canada, Mexico and the European Union, and 12.5% tariffs on over 40 nations, including China, India, Japan and South Korea. All told, Greer has said the tariffs would cover 99% of U.S. trade. (…)

Once in place, the totality of the Section 301 tariffs could return the U.S. to an average tariff level similar to before the Supreme Court decision, said DeLong, the former State official. That would mean an average U.S. tariff of about 17%, up from about 11% today under the temporary measures.

Greer’s office is also overseeing a high-stakes renegotiation of the USMCA, its largest trade deal.  (…)

But why the USMCA since Trump’s 50% duties override the protection offered by the USMCA? Why even bother, Trump does not respect his own signature?

• The World’s Dumbest Tariff Just Got a Lot Dumber

Earlier this year, my Bloomberg Opinion colleague Scott Lincicome made a convincing case for why the tariffs placed on aluminum imports to the US may be the dumbest of all the Trump administration’s duties. Things got a lot dumber this week.

The White House on Monday said companies that build, expand or refurbish aluminum plants in the US would see tariffs on the metal they ship into the country from abroad lowered to about 25% from 50%. That may appear reasonable on the surface, but in reality, the administration is just negotiating against itself without solving the problem it created: A drop in aluminum imports that has sent prices soaring for a critically important metal used in everything from housing and cars to cans. (…)

Imports constituted approximately 60% of domestic consumption last year, even with the tariffs, according to the US Geological Survey.

Recall that one of the key reasons the Trump administration gave for imposing broad tariffs last year was to make the cost of doing business with the US so expensive for foreign manufacturers that they would have no choice but to relocate operations to the US to avoid the levies.

That has not happened, especially with the aluminum industry. Taxes, regulations, permitting burdens, high construction costs and other complexities make bringing a modern smelter online very hard. (…)

A relatively new phenomenon has cropped up to make construction even less economical: rising power prices. Smelters use tremendous amounts of electricity and must now compete for it with artificial intelligence data centers, whose surging demand for power has driven costs higher. (…)

That makes the White House’s decision to apply tariffs to an input as critical as aluminum an even bigger headscratcher.

All the White House accomplished with its tariffs was to push up aluminum prices. The so-called US Midwest premium, or the amount added to global price benchmarks to deliver the metal to that region, rose to around $2,600 per ton in June from some $1,200 a year earlier and $420 two years ago. The premium — a proxy for the additional burden on American manufacturers of products such as appliances, beverage cans and automobiles — means US businesses have essentially been paying the highest raw material prices in the world, according to Bloomberg News. And that won’t likely change anytime soon. (…)

The US is not a very efficient producer of aluminum and may never be. What country is? Canada. As Lincicome pointed out, our neighbor to the north has long been America’s largest aluminum supplier, thanks to abundant hydroelectricity that gives its producers a big cost and environmental advantage. Pittsburgh-based Alcoa Corp. owns three Canadian smelters that collectively churn out almost 30% of the nation’s total output.

But rather than work with Canada to exploit its advantages in making aluminum to help ease prices, the Trump administration is more intent on damaging its relationship with America’s closest ally — or what was America’s closest ally. (…)

No wonder Canadian aluminum producers are sending US-bound shipments to Europe instead, according to Bloomberg News. Aluminerie Alouette — North America’s largest smelter — saw its European sales rise from 4% of production to 57% within a few months. Rio Tinto Plc largely stopped shipping Canadian aluminum to the US, and even Alcoa diverted around 100,000 metric tons to non-US destinations.

Trying to find logic in the White House’s trade policies has been a fool’s errand. (…)

• Trump’s 100% Generic Drug Duty Threatens US Low-Cost Supply

The White House always says that “President Donald Trump always acts in the best interests of the United States and the American people.”

Pete Hoekstra, the U.S. ambassador to Canada, speaking at a conference in Edmonton on Monday, said that, on Oct. 7, 2025, Carney proposed, as part of a preliminary trade agreement, that Canada would be willing to ship three to four million barrels of oil to the United States, additional barrels of oil to the United States.

U.S. Interior Secretary Doug Burgum and U.S. Energy Secretary Chris Wright wanted to take Mr. Carney’s offer, Mr. Hoekstra said.

“Doug Burgum and Secretary Wright had to be restrained by the President because they were so eager for getting more oil and getting it from Canada,” he said. Mr. Trump “had to advise them that crawling across the table and shaking Carney’s hand” was “not necessarily the best negotiating strategy,” Mr. Hoekstra added.

No deal was ever reached, as Mr. Trump walked away from talks later that month over an anti-tariff advertisement from the Ontario government.

The global oil supply has subsequently become one of the thorniest problems in Mr. Trump’s presidency. In response to his war on Iran, Tehran blockaded the Strait of Hormuz, reducing the flow of petroleum from the Persian Gulf and driving up prices for consumers in many countries, including Americans. (…)

The U.S.’s reliance on Canada’s oil is the main reason for Washington’s goods trade deficit with Ottawa, about which Mr. Trump has repeatedly complained. But Mr. Hoekstra said it would be a good idea for the U.S. to import more oil from Canada.

(Bloomberg)

“We want oil, we need oil,” he said. “Probably the region that can make the most compelling case for supplying more oil to the United States would be Saskatchewan and Alberta.”

Alberta Premier Danielle Smith has targeted a doubling of production in the province to as much as eight million barrels a day in the next decade, much of that predicated on building new pipelines to Canada’s coasts, where oil can be shipped overseas. (…)

At the Monday event, Mr. Hoekstra complained that anti-American sentiment from the Canadian public was making it more complicated to reach a trade agreement. He did not acknowledge that this sentiment arose in response to Mr. Trump’s tariffs and repeated threats of annexation.

“I have a problem,” he said. “Canadians don’t think very highly of the United States right now. It makes it harder for politicians to get to an agreement.” (…) (The Globa & Mail)

BTW, a senior administration official said the tariffs aren’t the wildfire tariffs that President Trump had earlier threatened. The official said those options remain under consideration. (Axios)

U.S. import prices up 0.3% in June on higher nonfuel prices

Prices for U.S. imports rose 0.3 percent in June following increases of 1.7 percent in May and 2.1 percent in April. U.S. import prices advanced 7.1 percent from June 2025 to June 2026, the largest over-the-year increase since the index rose 7.7 percent in August 2022.

Prices for nonfuel imports increased 0.4 percent in June following an advance of 0.7 percent in May. In June, higher prices for nonfuel industrial supplies and materials; capital goods; and consumer goods, excluding automotives, more than offset lower prices for automotive vehicles, parts, and 
engines as well as foods, feeds, and beverages. 

Nonfuel import prices rose 4.2 percent from June 2025 to June 2026, the largest 12-month increase since the index rose 4.6 percent for the year ended June 2022. 

Prices of non-fuel imports (which do not include tariffs) are up 7.0% annualized in the first 6 months of 2026. They had declined 0,2% a.r. in the second half of 2025.

Selected import prices (ex-tariffs):

• Industrial supplies & materials ex-petroleum: last 3 months: +5.0% a.r. and +13.3% YoY
• Finished metals related to durable goods: +23.6% a.r. and +13.8%.
• Capital goods: +9.7% and +5.7%.
• Consumer goods ex-automotive: +3.2% a.r. and +1.7% YoY

Cyclical and Acyclical Core PCE Inflation

Cyclical components include those categories where prices tend to be more sensitive to overall economic conditions. Acyclical components include those categories that are more sensitive to industry-specific factors.

This next chart shows how a weakening contribution to PCE inflation from cyclical components (reflecting weaker demand) is being more than compensated by acyclical, stickier, inflation:

Alibaba Shares Rise After Unveiling Upgraded Flagship AI Model

Alibaba Group Holding Ltd. shares rose as much as 5.4% on Monday after the company launched a preview version of its flagship Qwen3.8 Max model, describing it as second only to Anthropic PBC’s Fable 5.

The Sunday release came only days after startup Moonshot AI unveiled a powerful new offering that’s roiled markets and triggered concern in the US about China closing the gap on global leaders like Anthropic and OpenAI. Qwen3.8 Max has 2.4 trillion parameters, joining Moonshot’s Kimi K3 in the heavyweight class. With 2.8 trillion parameters, K3 rivals top offerings and Alibaba is setting similarly high expectations. (…)

Alibaba plans to make the model open-weight soon, expanding access beyond the preview release. Interest in these made-in-China artificial intelligence systems and models is so high that Moonshot was forced to pause taking on new subscriptions late on Sunday to manage overwhelming demand.

While optimism around Alibaba is growing, other contenders in China’s hotly contested AI race have suffered a drop in the wake of the new Kimi release. Rival Zhipu declined nearly 30% on Friday and added a further 14% to the losses on Monday, after being one of the star debut stocks in Hong Kong for much of this year.

Hangzhou-based Alibaba, China’s e-commerce leader and one of its biggest investors in AI, recently scored another victory after Beijing approved Apple Intelligence, the software suite for iPhones, iPads and other Apple Inc. gear, which will use Alibaba technology in the country.

Top American AI Execs Sound Alarm on Chinese Models White House is divided on how to respond to recent advances in Chinese AI, has weighed crackdown measures

Silicon Valley and Washington are debating a multibillion-dollar question: Should American companies be able to use Chinese artificial-intelligence models?

OpenAI and Anthropic executives are sounding the alarm about the rise of cheap AI, particularly powerful new models produced in China, suggesting they will lead to a “dystopian” AI future and present unacceptable security risks without regulation.

Some analysts who study the AI industry say the two companies, which are preparing for public listings in the next year, just want to eliminate the competition.

The emergence of highly capable, open autonomous AI systems—including Moonshot AI’s Kimi K3 model and Alibaba’s Qwen 3.8 Max, which were released in recent days and viewed favorably by investors and users—has turned the AI race on its head once again. (…)

The debate over the new models, which are “open weight,” allowing users to download and customize them with company data and for specific tasks, coincides with division in the Trump administration about whether to take steps to limit the use of the models in the U.S.

“One probable outcome of an open-weight-model-dominant world is full AI communism, which is precisely what China proposes: rather than a market product, AI is a ‘public good’ which will ultimately be provided by the state as a kind of ‘digital public infrastructure,’” Dean Ball, OpenAI’s head of strategic futures, said in an X post Friday. (…)

He also highlighted a central challenge with the AI race: Top-tier AI companies raise billions of dollars to pay for the vast computing resources needed to continue improving AI systems. If everyone uses AI systems that people largely don’t pay for, there would be no way to finance continued frontier AI development. (…)

Chief Executive Sam Altman has previously said OpenAI’s past approach of only developing closed tools was unwise.

Other top AI executives have warned that open models present huge risks, since developers and policymakers lack control over how they are used or modified.

Anthropic CEO Dario Amodei for years has warned about the risks of powerful and open AI systems, saying in a recent Bloomberg interview that having AI models with advanced cybersecurity capabilities that are free to download could be harmful. “It’s a serious concern,” he said in June.

Use of Chinese models, which are far cheaper than U.S. counterparts, is surging at U.S. companies, prompting some investors to question the staying power of top model-makers such as Anthropic and OpenAI.

The current U.S. open-source model frontier is starting to catch up with China’s. On Wednesday, Thinking Machines Lab—led by former OpenAI technology chief Mira Murati—released its first AI model as open weight. Nvidia’s Nemotron 3 Ultra is starting to see traction, and Reflection AI, an Nvidia-backed open-model developer, has close ties to the Trump administration and plans to release its first model later this year.

The market’s faith in Anthropic and OpenAI continuing to build more capable models that push the AI frontier has been at the heart of the boom, helping to justify trillions of dollars in spending on infrastructure in the coming years. The threat that new players will vastly undercut what they can charge for advanced AI pushed down some tech and AI company stock prices last week. (…)

Sacks and others have long seen calls for AI regulation by companies such as Anthropic as efforts to use new laws and policies to stymie competitors. (…)

The CEOs of OpenAI, Anthropic and Alphabet’s DeepMind have recently signaled they support increasing government oversight of AI as models become popular, fueling some criticism that the companies are trying to stifle their competition. Alphabet is the parent company of Google. Demis Hassabis, CEO of Google’s DeepMind lab, recently suggested developers of open models be included in discussions about AI regulation. (…)

Officials who have pushed for oversight of AI have worried that open models could pose cyber and biological-weapon risks if they continue advancing and don’t have to follow the same rules as top U.S. companies such as Anthropic and OpenAI, the people said.

The Trump administration is committed to promoting America’s open-source ecosystem and strengthening its security, a White House official said.

The new focus on the issue shows how the messy policies surrounding open models are challenging CEOs trying to cut their AI bills and policymakers who don’t want the technology used to harm the U.S.

“AI is increasingly synonymous with power and the dual-use concerns are real. But for American businesses and most of the world, being able to run cheap, high-quality models in a way they can control is going to matter a lot,” said Austin Carson, CEO of SeedAI, an AI-policy nonprofit. “If you know about open source, you’d know that you can’t win by exclusion.”

• Meet the Companies Shelling Out for Top AI Models

As some companies pump the brakes on AI spending by resorting to cheaper models, others are going all-in on the most advanced AI systems—even with their hefty price tags.

So-called frontier AI models, or the most capable systems made by companies like OpenAI and Anthropic, can be expensive to use partly because they require a lot of compute and process large numbers of tokens, AI’s basic unit of measurement. But these state-of-the-art models are considered the best because they can “reason” through complex, multistep problems and are capable of supporting a variety of tasks, including powering autonomous AI agents.

The calculus often is as much a business decision as an engineering decision. If paying a premium for a frontier model means a better product or an upper hand over rivals, many companies say it’s worth it. (…)

In other words, in the race to build the next, better product, you’ll get there faster with frontier models. (…)

The cost is probably not worth it for simple queries and tasks like summarization and editing, where the difference between frontier and cheaper models is negligible, tech leaders and analysts say. Indeed, there is an ongoing debate over whether AI models are becoming a widely-available commodity.

But for complex reasoning tasks like managing AI agents, advanced coding problems and multistep research, frontier models perform better—even if by a small percentage—and that can make all the difference in outpacing the competition. (…)

Other companies say they’re choosing frontier models because they need top-of-the-line capabilities. (…)

With the cost of AI rising, more companies are using smaller, cheaper models, and open-source or open-weight models. It has also become more popular to use cheaper models for less critical tasks—allowing companies to save on token costs.

At companies like Spotify, it’s an ongoing discussion whether frontier models are worth the cost. (…)

Developers tend to love using frontier models because “they simply work better,” said Philip Walsh, an analyst focused on software engineering at market research and IT consulting firm Gartner. But most companies are trying to find ways to make sure workers use more cost-efficient models or are building AI agents that can take advantage of frontier models for planning tasks, while relegating lower-tier tasks to cheaper models, he said. (…)

Boris Cherny, the head of Anthropic’s Claude Code, said the AI lab allows customers to put spending limits in place and opt for some of Anthropic’s lower-cost models. Customers can also “tune” how much thinking a model does—essentially asking a model for less intelligence, which uses fewer tokens, he said.

“It’s just keeping costs reasonable and predictable,” Cherny said. “But I think actually the far bigger opportunity is increasing return, and I think this is what customers are saying, too. The more tokens that they use in a useful way, the more return they get.”

It is a balancing act between capability, cost and data control. More powerful closed frontier models can be best for critical tasks but most users will lean towards lower cost open (customizable) models for less critical tasks or if data or model control is paramount.

As Global Semi Research explains

(…) what Kimi K3 really proves is not that model companies have no moat, but that the model itself is not the moat.

Raw model capability is becoming commoditized very quickly. A model can top the leaderboard today and be matched by competitors a few months later. Model capability still matters. It determines whether a company can sit at the table. But it is becoming harder for model capability alone to form a durable moat.

The real long-term value lies in the flywheel formed by the model, workflow, feedback data, customer relationships, and reinvested revenue. (…)

The more important questions are: how long can model capability leadership last? After open-source diffusion, who actually captures the revenue? Where do customer relationships and task feedback accumulate? And who can turn one model release into the starting point for the next iteration and the next stage of commercialization?

In many cases, the difference between the top model and the rest of the leading pack is no longer a generational gap. It is often a difference in benchmark design, task preference, and specific use case.

A single model lead is therefore more like an asset that depreciates quickly. (…)

Model capability is the ticket to the game. But a ticket is not a moat. What matters is whether a company can keep getting the next ticket, faster, cheaper, and more reliably than others.

The problem for Anthropic and OpenAi is that this discussion happens before their IPO which would have reduced their debt with a highly priced currency.

The problem for the US government is that this financial rebalancing has not happened. These two companies are currently too big and too critical for the US to fail.

• How Companies Are Managing AI Token Spend

(…) Chief information officers told The Wall Street Journal Leadership Institute they are deploying a number of strategies, including tried-and-true techniques sharpened during the rise of cloud computing—and the need to manage ballooning cloud costs—to keep their AI costs under control.

“With AI, you’re putting the credit card in the hands of the end user. If you have no control over that, or if the end user is not educated enough, they’re going to run up that tab,” said Chris Reed, a senior director of IT finance at online travel company Priceline.

Unlike in previous tech cycles, corporate adoption of AI rests on all employees—not just developers—picking up on the technology. AI is increasingly being billed by usage, and the price of tokens, the basic unit of AI computing, has been volatile. That all translates to higher costs for AI. (…)

Adding to the cost pressure is the shift from prompt-based chatbots to always-on autonomous AI agents, which consume vastly more tokens. And with larger, more sophisticated AI models, those costs are expected to climb sharply.

“It will be orders of magnitude higher than what we spend today,” said Greg Meyers, chief digital and technology officer of Bristol-Myers Squibb, adding that he expects “exponential” costs associated with AI agents as AI usage hits an inflection point. (…)

“If you factor in what we believe is the payoff here, we believe that it’s actually a pretty positive [return on investment],” he said. (…)

Enterprises already are using more AI than ever before, with many wrangling more AI agents than they can keep track of.

Compared with asking a chatbot a question, asking an agent to complete a task can require 50 times as much computing power, according to Jim Schneider, a senior equity research analyst at Goldman Sachs. Goldman predicts that AI agents will increase AI token consumption by 24 times over the next four years, and business AI agents will increase token consumption by 55 times by 2040.

Model providers OpenAI and Anthropic have said the costs of their tokens are going down, and both have considered drastic price cuts.

Even with less expensive tokens, however, agents are consuming more of them as they interact with other agents and work over long periods of time. While model prices fell roughly 50% from December 2024 to December 2025, tokens consumed grew 4.5 times in the same window, according to research from Bain and Co. (…)

“High AI usage isn’t necessarily a good or bad thing. It depends on the business outcome that’s attached—that’s the most difficult part to quantify,” said Priceline’s Reed.

That uncertainty is pushing companies toward another tactic: paying less per task. Rather than run everything on large, expensive models, some are swapping in smaller, older or open-source models. Running those models on Qualcomm’s own hardware saves the company even more, Tinic said.

Seemantini Godbole, chief digital and information officer of Lowe’s, said the company is putting guidelines and mechanisms in place to avoid “token wastage,” including using smaller and open-source models. (…)

China weighs tighter export controls on AI models and chips Beijing consults companies on ways to stop west acquiring its advanced technologies and star start-ups

(…) MofCom talked to AI companies including Alibaba, ByteDance and Zhipu on limiting the transfer of key data for the training of their models overseas, as well as allowing their model weights to be downloaded by foreign users, the people said. China would still let overseas customers access the models and services, however. (…)

MofCom has also sought views on possible restrictions that would prevent overseas chipmakers including Qualcomm and TSMC from producing advanced semiconductors based on designs developed by Chinese companies such as Huawei, Alibaba and ByteDance, according to the people.

Potential restrictions could also be imposed on the overseas acquisition of strategic technology groups in areas such as agentic AI, the people said. This is mainly to address a loophole that Beijing believes to have led to Meta’s $2bn acquisition of Manus, a deal that was subsequently ordered to be unwound by Chinese authorities.

The new measures could be incorporated into the next revision of China’s catalogue of technologies prohibited or restricted from export, the people said, reflecting Beijing’s growing confidence that it has established a global lead in some areas of AI. (…)

Trump Imposes Additional 50% Tariffs on Certain Canadian Goods Measure applies to products including wine, though energy and parts of other sectors are exempt

President Trump imposed an additional 50% tariff on certain goods from Canada, including wine, hockey sticks and cement, the White House announced Monday.

The White House said that the tariffs were a response to the country’s “discriminatory treatment of American products.” Some sectors and goods, including energy, potash and fish or critical minerals, will be exempt from the new tariffs, the White House said.

The White House said the tariffs were “designed to offset the burden and disadvantage” from what it described as Canada’s discrimination of U.S. goods, including autos. The White House said the U.S. opposed Canadian policies that require companies to invest in auto production in Canada, rather than the U.S., as well as bans some Canadian provinces have imposed on U.S. liquor products. (…)

The new tariffs, unlike earlier rounds of levies on Canada, will apply to goods that comply with the USMCA deal, the White House said. (…)

The new tariffs come after smoke from wildfires in Canada drifted into the U.S., blanketing cities including New York, Chicago and Washington. In a Truth Social post Friday, Trump threatened to impose steeper duties on America’s northern neighbor to compensate for the smoke’s impact.

“We are holding Canada responsible for the fact that they are not properly maintaining their Forests, and Brush therein, and the United States is being unnecessarily invaded by filthy, polluted, and unhealthy air, the quality of which is dangerous, and totally unacceptable!” Trump said. (…)

Trump told reporters that Canada needed to stop the wildfires.

“I told them, I mean, you got to stop these fires from coming in and you know poisoning our air,” Trump said. “Our air has been poisoned. Have a good relationship with Mark Carney, but you know we got to stop the fires up there. If we can help them, we’ll help them. But maybe they should pay us some damages or something, or we should do some tariffs.” (…)

• Canada issues air quality warnings over US wildfire smoke after Trump tariff threat Officials say smoke from US fires has crossed border

(…) Officials in the Canadian province of British Columbia warned in an alert on Saturday evening that smoke from US fires, spurred on by thousands of lightning strikes in the north-east, was creating smoky conditions as polluted air drifted north.

“Much of this smoke is originating from fires south of the Canada-US border in Washington and Oregon,” the provincial wildfire service said.

Twenty-two large fires are burning across Washington and Oregon, according to the Northwest Interagency Coordination Center, the fire coordination agency for both states. British Columbia has air quality warnings in place for two regions, Kootenay Lake and Cranbrook, located along the south-east border with the US. (…)

Embarrassing! Though some people just don’t care being embarrassed.