Month: October 2025

Powell Keeps Fed on Track to Lower Rates Again The central-bank leader also suggested the Fed could be close to ending a three-year campaign to passively reduce its $6.6 trillion asset holdings

(…) “There really isn’t a risk-free path now, since [inflation] appears to be continuing to increase quite gradually…but now the labor market has demonstrated pretty significant downside risks,” Powell said. “Both the supply and demand for labor has declined quite sharply.” (…)

He said the economic outlook hadn’t changed much since the Fed agreed to cut rates at its meeting last month.

Since a lapse in federal funding on Oct. 1, the Fed has been operating without access to the first-tier government statistics that it uses to refine its economic outlook, which in turn guides decisions on where to set rates. “We’ll start to miss that data,” Powell said. If the shutdown persists, evaluating how the economy is performing “could become more challenging.” 

Data available before the government shutdown suggested economic activity might be “on a somewhat firmer trajectory than expected,” he said. (…)

Private data suggest that labor demand keeps declining:

“You’re at a place where further declines in job openings might very well show up in unemployment,” Powell said during a question-and-answer session following his prepared remarks. “You’ve had this amazing time where you came straight down, but I just think you’re going to reach a point where unemployment starts to go up.”

• Goldman Tells Staff It Will Cut More Jobs as AI Saves Costs

(…) In the note to staff, which announced the launch of the bank’s “OneGS 3.0” strategy, top executives touted the efficiency gains produced by AI as a path to more growth. They added that it would be a “multiyear effort” to implement AI in areas such as client on-boarding, lending processes, regulatory reporting and vendor management.

“While we are still in the early innings in terms of assessing where AI solutions can best be deployed, it’s become increasingly clear that our operational efficiency goals need to reflect the gains that will come from these transformational technologies,” Chief Executive Officer David Solomon, President John Waldron and Chief Financial Officer Denis Coleman said in the memo. (…)

A statement that will likely be widely used.

• Salesforce Says AI Customer Service Saves $100 Million Annually

(…) The company said more than 12,000 customers are using Agentforce. For example, Reddit Inc. was able to cut customer support resolution time by 84%, Salesforce said. (…)

AI allows Salesforce to give attention to customers who weren’t getting called back by human employees, Benioff said. Over $60 million in potential business has been identified since the company rolled out the technology internally, he said.

During a podcast appearance in August, Benioff said Salesforce has reduced its customer support workforce by thousands of people.

Meanwhile:

The US is now collecting tariffs on imported timber, lumber, kitchen cabinets, bathroom vanities and upholstered furniture, duties that threaten to raise the cost of renovations and deter new home purchases.

The import taxes — initially set at 25% for cabinets, vanities and upholstered wooden furniture — officially took effect on Tuesday at 12:01 a.m. New York time. Imports of softwood timber and lumber, meanwhile, are newly subject to 10% fees.

At President Donald Trump’s direction, most of the lumber and furniture tariffs are set to snap even higher in the new year — with upholstered wooden products subject to a 30% rate and kitchen cabinets and vanities at 50% as of Jan. 1. (…)

Roughly 7% of all goods used in new residential construction come from foreign suppliers, according to the National Association of Home Builders, which cited 2024 data. Even without new import taxes, the group has said the cost of building materials has risen by 34% since Dec. 2020. (…)

Trump also ordered administration officials to vigilantly monitor the price of imports and impose “specific, compound or mixed tariffs” when necessary to counter goods deemed to have unfairly low costs.

Unlike typical tariffs — expressed as a percentage and applied to invoiced prices — specific tariffs could be set in US dollars and applied against a select weight or other unit of measurement. (Bloomberg)

Chinese Deflation Eases Again Even as Pressure on Prices Lingers

Prices at the factory gate fell 2.3% from a year earlier after slipping 2.9% in August, the 36th straight month of declines that was in line with forecasts. Producer deflation moderated for a second month, though it remained unchanged at zero in month-on-month terms.

Under pressure from falling food costs, consumer prices dropped 0.3%, the National Bureau of Statistics said Wednesday, below the median estimate of minus 0.2% in a Bloomberg survey of economists. The core consumer price index, which excludes volatile items such as food and energy, rose to an 19-month high of 1%.

Morgan Stanley expects the comparison base for core CPI and producer prices to shift “from tailwind to headwind” in the fourth quarter, after they benefited from favorable statistical effects.

“An improvement in demand and supply has stabilized prices in some industries, such as coal mining and solar equipment,” Dong Lijuan, chief statistician at the NBS, said in a statement. (…)

A strong showing in the first two quarters likely means China will reach the official growth target of around 5%, with fresh stimulus probably not on the agenda for a meeting of the ruling Communist Party later this month.

Goldman Sachs chart is more telling: inflation on core goods and services is rising likely reflecting improving domestic demand. Core goods prices rose 0.5% MoM in September.

China, Betting It Can Win a Trade War, Is Playing Hardball With Trump Chinese leader Xi Jinping thinks the president will fold before launching new tariffs that would roil markets

In its trade standoff with Washington, Beijing thinks it has found America’s Achilles’ heel: President Trump’s fixation on the stock market.

China’s leader, Xi Jinping, is betting that the U.S. economy can’t absorb a prolonged trade conflict with the world’s second-largest economy, according to people close to Beijing’s decision-making. China is holding a firm line because of its conviction, the people said, that an escalating trade war will tank markets, as it did in April after Trump announced his so-called Liberation Day tariffs, prompting Beijing to hit back.

China expects that the prospect of another market meltdown ultimately will force Trump to negotiate at an expected summit with Xi late this month, the people said.

Beijing continued playing hardball this week, escalating the trade fight Monday by sanctioning the U.S. units of South Korean shipping company Hanwha Ocean. The move whipsawed U.S. markets on Tuesday, triggering a sharp early selloff as hopes for easing tensions faded, before major indexes partially rebounded and steadied in the afternoon. (…)

On his Truth Social platform, Trump said the U.S. is considering “terminating business” with China on cooking oil and other “elements of Trade,” because of China’s refusal to buy U.S. soybeans—a decision Beijing has said is retaliation for Trump’s own tariffs. (…)

“I have a great relationship with Xi,” Trump said, before quickly adding: “But sometimes he gets testy.”

Acknowledging the severity of recent Chinese actions ranging from its new rare-earth export controls to the latest shipping-related sanctions, Trump said, “We have a lot of punches being thrown.”

He then pivoted to defend his economic strategy against fears of a market downturn, portraying the U.S. as impervious to pressure. “We are the most successful we have ever been as a country,” Trump said. (…)

U.S. Trade Representative Jamieson Greer told CNBC on Tuesday that senior officials in Washington and Beijing held discussions about the latest trade tensions on Monday, saying both sides “will be able to work through it.”

People familiar with the matter said the U.S. ambassador to China, David Perdue, has been trying to arrange a phone call between Treasury Secretary Scott Bessent, who leads the U.S. negotiation team, and his Chinese counterpart, Vice Premier He Lifeng. (…)

• Trump Says Argentina Bailout Depends on Milei’s Party Winning Upcoming Elections

President Trump directly tied the $20 billion lifeline the U.S. is extending to Argentina to President Javier Milei’s success in the upcoming midterm elections.

“If he loses, we are not going to be generous with Argentina,” Trump said, sitting across a table at the White House from the visiting South American leader, who he also endorsed for re-election in 2027. “If he doesn’t win, we’re gone.” (…)

Trump didn’t specify what he would consider a “win” for Milei’s party in the legislative elections. (…)

Former IMF executive director Hector Torres called Trump’s blunt statement in support of Milei “a life preserver made out of lead.”

Trump praised Milei as “MAGA all the way” and said the bailout was “really meant to help a good financial philosophy where Argentina can be successful again.” (…)

Officials from both countries emphasized that the deal isn’t only an economic one, but a broader effort to bolster ideological allies in the region and counter China. (…)

Treasury Secretary Scott Bessent said that it is “much better to form an economic bridge with our allies” and “end up with people who want to do the right thing” than have to be “shooting narco gunboats,” an apparent reference to the boats that the U.S. has targeted off the coast of Venezuela. As the two leaders met, the White House announced that the U.S. military had struck a fifth alleged drug-smuggling vessel, killing six. (…)

Milei frequently cited Trump during his unlikely rise, adopting the American leader’s slogan and lavishing him with praise. For his part, Trump has taken credit for Milei’s electoral success. “He ran as Trump,” he said in 2023. “Make Argentina Great Again. It was perfect.” (…)

Ahead of the meeting, Milei had hailed the U.S. deal as a turning point that would bring “an avalanche of dollars,” promising “we will have dollars pouring out of our ears.”

Why do I link Argentina with the trade war?

Because China bought a lot of soybeans this year but none from the US. Argentina cut its export taxes on grains, including soybeans, prompting China’s increased purchases while the peso was tanking.

The Trump administration is going out of its way to justify this unusual bailout. Scott Bessent, the architect of the bailout, said that American business leaders have told him that they want to deepen ties with Argentina.

The United States is Argentina’s third-largest trading partner, behind Brazil and China. The trade balance remains chronically in deficit for Argentina, which averaged USD 3.666 billion annually between 2014 and 2023.

Some media found another angle. Here and there:

• Major hedge funds, including those led by friends of Mr. Bessent, stand to benefit financially from an Argentina economic lifeline. Funds at investment firms including BlackRock, Fidelity and Pimco are heavily invested in Argentina, as are investors such as Stanley Druckenmiller and Robert Citrone, both of whom worked with Mr. Bessent when he was an investor for George Soros.
• The bailout would deliver a major windfall to Rob Citrone, a billionaire hedge fund manager with significant investments in Argentina. “Bessent’s personal and professional relationship with Citrone has spanned decades,” according to independent journalist Judd Legum.
• Mr. Druckenmiller was a mentor to Mr. Bessent at Soros Fund Management. A government filing in June of this year indicated that the Duquesne family office, which he runs, was the second largest investor in Argentina’s principal exchange-traded fund, a pool of Argentine stocks.

Mr. Citrone, the founder of Discovery Capital Management, has made Latin America his biggest bet in the world, and Argentina is the fund’s biggest investment in the region. Mr. Citrone has said that when he worked with Mr. Bessent under Mr. Soros in 2013, he convinced them to make their now famous bet against the Japanese yen and that he was responsible for most of the bonus that Mr. Bessent earned.

Two people familiar with the deal said Mr. Citrone was in close contact with Mr. Bessent in the lead-up to the Treasury announcement last month, arguing that if Argentina’s currency crashed, so too would the political fortunes of Mr. Milei.

Mr. Citrone told Mr. Bessent that if Mr. Milei were to lose the upcoming elections, Argentina would pivot to China for more economic assistance, according to one of the people familiar with the contacts. Mr. Citrone also apparently told Mr. Bessent that such an outcome would mean the United States could lose one of its most steadfast Latin American allies.

Hence: Bessent this week: “What we’re doing is maintaining a U.S. strategic interest in the Western Hemisphere.”

Maintaining (???) a strategic (???) interest. Really?

In negotiations over the terms of a support package, U.S. officials have been pushing for Argentina to scale back ties with China and have been seeking access to its uranium and lithium supplies, according to a person familiar with the matter.

But in Argentina, legislators and governors have more say in those contracts than Mr. Milei does, and the U.S. Treasury’s support for the Argentine president may not translate into more American companies securing mining rights.

Also this from Bloomberg:

“You can do some trade, but you certainly shouldn’t be doing beyond that,” said Trump, seated in front of Milei, referring to Argentina’s ties to the Asian giant. “Certainly shouldn’t be doing anything having to do with the military with China and if that’s what’s happening, I’d be very upset about that.”

Trump’s comments about Chinese activity in Argentina happened during the same meeting where he insisted Milei will need to perform well in the nationwide Oct. 26 vote in order to receive a $20 billion currency swap line, something US Treasury Secretary Scott Bessent had already said was finalized last week.

The remarks all but point to China’s space observation center in Argentina’s Patagonia region, and they build on previous comments that Milei is “committed to getting China out” of Argentina. Last weekend, China’s embassy in Argentina fired back at Bessent for “bullying” Latin American nations while pushing a “Cold War-era mentality.”

In 2012, Argentina’s then-leftist government granted China the rights for 50 years to build a 494-acre space station in the Patagonian province of Neuquen. Milei’s predecessor, Alberto Fernandez, renewed a joint venture agreement with China to collaborate on space exploration.

Past US administrations have speculated that China’s Patagonia space station is covertly conducting military activities. The administration of former US President Joe Biden called on Milei to inspect the site, but it’s unclear to what degree local authorities did so last year.

What Does China Want? It’s Too Soon to Tell Whether playing from a position of strength or weakness, Beijing’s timing is excellent.

(…) Robin Brooks of the Brookings Institution argues that China is dealing from weakness. It’s managed to replace exports lost to the US by increasing the products it sells to everyone else, but can only have done this by price-cutting, or “dumping.” He said:

Margins are getting hit, which means there’s a big negative shock lurking beneath the surface of these data… China is an export-dependent economy that’s on borrowed time. It’s hardball tactics on rare earths stems from weakness, not strength.

These export tactics risk a coordinated response from China’s trading partners. Speaking in Washington, former EU Trade Commissioner Cecilia Malmstrom warned that anti-dumping measures against China would increase further, “as China is trying to dump its goods on markets and diversify.”

An alternative take comes from Peter Tchir of Academy Securities, who notes that this episode of the trade war, unlike its predecessors under Trump, was initiated by Beijing. He argues that China believes that its rare-earths dominance will never be greater, and that it might be well served by reducing its own dependence on US chips (arguably the single greatest US point of leverage, which Trump has threatened to deploy):

China’s bargaining chip is declining in value and they think they can actually benefit from restricted access to chips. That would support an argument that China has analyzed the situation and is prepared for a full-on trade war.

This argument is possibly strengthened if China believes, as Brooks contends, that its position is weak. Developments over the last few days, with the US making threats, backpedalling somewhat, and then watching as China ups the ante by restricting shipping, tends to support this interpretation. (…)

Perhaps, yesterday’s threat from Trump to ban cooking oil illustrates the hand each side has:

The US is just seventh in the pecking order, with about 1.9 million tons of reserves. It also has little capacity to refine them. In fact, the few countries that can mine rare earths often still need to send them to be refined in China.

The US relies on China for 70% of its rare-earth imports. It’s a dependency that leaves the American military-industrial complex vulnerable, as the F-35 fighter jet requires more than 900 pounds (408 kilograms) of rare earths, according to the US Department of Defense.

Trump wants to increase domestic supply of rare earths. In March, he signed an executive order invoking wartime emergency powers to expand American production and processing of critical minerals and rare earths. The aim is to provide more financing, loans and other investment support, and accelerate the permitting process for new projects.

The president then launched a probe into the US critical minerals supply chain in April, ordering Commerce Secretary Howard Lutnick to determine whether the country’s reliance on imports poses a threat to national security and if tariffs need to be applied. The results of the investigation must be delivered within 270 days.

Import taxes wouldn’t translate to an immediate surge in US supply. There’s only one operational rare-earths mine in the country at present: MP Materials Corp.’s Mountain Pass mine, reopened in 2018, in California’s Mojave Desert. Getting other projects up and running would be a yearslong and expensive process. In the meantime, American businesses that need rare earths would likely pay more for their imports if new tariffs were introduced — assuming China allows these materials to be exported. (…)

Trump is looking beyond US shores for rare earths as well. He’s homed in on the mineral riches of Greenland, which has the eighth-largest reserves of rare earths in the world, mooting a potential takeover of the Danish territory.

The US has also signed an agreement to exploit Ukraine’s critical minerals. Trump has pointed to the European country as a source of rare earths but it doesn’t have any major reserves that are internationally recognized as economically viable. (Bloomberg)

The FT’s Ed Luce:

(…) China has shown that it can innovate rapidly on semiconductors and other dual-use technologies. The US, by contrast, has had 15 years to make up for its lack of rare earths and processing capabilities and has done almost nothing to fix it. China’s ability to damage the US economy is more potent for the time being than vice versa. Which means Trump is again likely to blink first. (…)

Why are Republican hawks so muted in their criticisms of Trump on China? Only partly because of fear. Mostly it is because he is giving them what they want on AI. Trump has done away with the few guardrails that existed. In Silicon Valley they extol AI’s many benefits to humankind. Their Washington lobbyists chiefly cite the race with China.

Either way, Trump’s administration is a field day for Palantir, OpenAI, xAI, Anduril and others. Trump may think he is the ultimate peacemaker. But his actions are stoking China’s self-belief and elevating America’s military-AI complex. It would be eccentric to assume he knows what he is doing. 

Jeep Maker Stellantis Plans $13 Billion Investment to Boost U.S. Manufacturing Automaker says that American production will grow by 50% with 5,000 new jobs at plants across the Midwest

Stellantis said Tuesday that it would spend $13 billion through the end of the decade as it launches five new vehicles and a new four-cylinder engine, creating more than 5,000 jobs at plants across the Midwest. Suppliers providing parts for those models may add 20,000 jobs, Chief Executive Antonio Filosa said in an interview.

“The most important and relevant objective that we have with this investment is to grow in this market,” Filosa said.

The plan could help one of the country’s largest car manufacturers defray costs from tariffs imposed by President Trump’s administration. The company has said it expects a total tariff impact of $1.5 billion for the year. (…)

In 2024, Stellantis imported roughly 45% of cars it sold in the U.S.

The investment plans include a mix of gas-powered vehicles and electrified models at plants in Michigan, Indiana, Illinois, and Ohio. In the interview, Filosa said additional plans will be announced in the future for the company’s other key American brands, including Chrysler and Dodge. He declined to provide specifics. (…)

More than $600 million will be spent to reopen the Belvidere factory to build the Jeep Cherokee midsize SUV and Compass SUV in the U.S. Both Jeeps are currently assembled in Mexico. Production is expected to begin there in 2028. (…)

• Canadian Jeep Plant At Risk in Stellantis’ $13 Billion US Plan Stellantis NV said it’s halting plans to manufacture the Jeep Compass SUV at its factory in the Toronto region, throwing into doubt the future of one of the company’s two major assembly plants in Canada.

Average US Car Prices Top a Record $50,000 on EV Sales Surge

(…) “Today’s auto market is being driven by wealthier households.”

New car prices are up more than 25% from five years ago, as Americans increasingly snap up pricey trucks and sport-utility vehicles, while spurning budget models that once represented the on-ramp for young, new car buyers. Those consumers are now turning to used cars or just holding on to their clunkers longer, as the average age of cars on the road now tops a dozen years, according to researcher S&P Global.

Those who do buy new cars are stretching the length of their loans to seven years or more, with the average monthly car payment being $754 in the third quarter, according to researcher Edmunds.com. One in five new car buyers now pays over $1,000 a month on their auto loan.

An EV buying binge, as consumers looked to qualify for the federal tax credit, drove up prices in September. That sales frenzy pushed battery-powered models to a record 12% of the US market. Electric models sold for an average of $58,124 last month, according to Kelley Blue Book.

Luxury cars also flew off lots in September. More than 60 models with average prices north of $75,000 accounted for 7.4% of the total new car market last month, up from 6% a year earlier, Kelley Blue Book said. (…)

• Americans Are Falling Behind on Their Car Payments Delinquency rates on subprime auto loans are at records

(…) The percentage of new-car buyers with credit scores below 650 was nearly 14% in September, roughly one in seven people, J.D. Power said last month. That is the highest for the comparable period since 2016.

And the portion of subprime auto loans that are 60 days or more overdue on their payments hit a record of more than 6% this year, according to Fitch Ratings, while delinquency rates for other borrowers have remained relatively steady.

An estimated 1.73 million vehicles were repossessed last year, the highest total since 2009, according to data from Cox Automotive, an industry-research firm.

Delinquencies have leveled off but have remained higher than in the prepandemic period, economists say.

“These are borrowers who may have stretched their budgets to afford a higher price of the asset, as well as a higher payment because of the interest rate,” said Joelle Scally, an economic policy adviser at the Federal Reserve Bank of New York.

The stress placed on some subprime borrowers was highlighted last month with the bankruptcy filing of lender Tricolor Holdings, home to some 100,000 outstanding loans. The company, which catered to customers with little or no credit history or no Social Security number, faces allegations of fraud in its dealings with banks. (The company’s trustee has sought to hire an adviser to examine the allegations.) (…)

Elevated new-car prices have been weighing on the industry for years, with average monthly payments rising to more than $750. Nearly 20% of loans and leases now exceed $1,000 in monthly payments.

Trump Tariffs’ Role in First Brands Saga Point to Slowly Emerging Economic Damage

(…) When it comes to measuring the impact of tariffs on the global economy, though, reading through the legal filings in the First Brands bankruptcy case may be more instructive. That’s certainly the lesson credit markets are learning.

The unexpected cost of Trump’s tariffs, it turns out, was a big contributor to the liquidity crisis at the brake pads to wiper blades company with operations and suppliers on five continents that has exposed a tangled $10 billion debt pile and embroiled financial institutions like Jefferies and UBS. (…)

Moore [the turnaround specialist appointed last month to oversee First Brand’s restructuring] goes on to detail $219 million in unexpected costs that will sound familiar to any CEO of a multinational company with global supply chains.

There’s the $60 million spent rushing in products before Trump’s tariffs took effect. Then comes $99 million in additional costs for landed goods once the new duties were in place. Add to that $25 million in reduced margins before product prices could be hiked to offset the cost of tariffs. And then there’s the $35 million invested in a “Made-In-USA Rotor Project” as a longer-term solution to avoid import taxes.

Even that doesn’t tell the entire story. Moore also points to “the price increases of necessary materials” for the company’s factories and “industry-level confusion” over Trump’s tariffs that led to supply chain interruptions amid months of tariff negotiations. All of which “caused operational inefficiencies” and “diminished cost savings that historically have been central to First Brand’s competitive advantage,” he wrote. (…)

Cleveland-based First Brands is just one company that few people outside the auto industry had heard about before it hit the news in recent weeks. Its total tariff exposure is a fraction of the at least $7 billion in unexpected costs from duties that Detroit’s Big Three automakers have said they’ll have to absorb this year.

What policymakers gathered in Washington this week should take away from all this is that Trump’s tariffs have injected stress into the system. And that stress is starting to yield more. This is the first high-profile bankruptcy linked to Trump’s tariffs. The question now is how many more will come. And how far the impact will reverberate. Not just in losses but in more cautious lending and bond market tremors. (…)

Blomberg yesterday gave more details (my emphasis):

Jefferies, the bankrupt auto-parts supplier’s go-to bank, saw its shares slide 18% this week to the lowest in months after disclosing details of its ties. A joint venture from Japan’s Norinchukin Bank — already recovering from a massive bond writeoff earlier this year — faces more than $1 billion in exposure to First Brands’s trade finance debt. Cantor Fitzgerald is now reviewing what it’ll pay UBS for O’Connor, a hedge fund owned by the Swiss bank also involved in First Brands’ supply-chain financing.

And, in perhaps the biggest bombshell to come from its Chapter 11 case yet, Raistone, a platform for short-term financing which relied heavily on First Brands, is alleging as much as $2.3 billion has “simply vanished.”

“How much is in the segregated accounts in respect of the factored receivables as of today?” Raistone’s lawyer asked. The response from First Brands’ restructuring lawyer: “$0.”

It all suggests that while holders of the company’s $6 billion leveraged loans are nursing losses, the ripple effects are just beginning to be felt across financial firms that funded the company’s trade debt.

Jefferies’ direct exposure to First Brands loans across some of its funds’ holdings is manageable. But, crucially, Point Bonita Capital — one of the funds owned by its Leucadia division — had almost a fourth of its $3 billion portfolio tied up in receivables owed to First Brands by its customers.

Nochu’s joint venture JA Mitsui said its wholly-owned unit Katsumi has no exposure to First Brands, as the scheme was “based on a factoring transaction structured as a true sale.”

But here’s where problems emerge.

Katsumi, just like Point Bonita, held receivables owed to First Brands by its blue-chip customers, in theory exposing the fund to the credit risk of the likes of Amazon and Walmart. However, the company may have pledged these invoices as collateral more than once, raising the risk of losses.

To make things worse — at least in the case of Point Bonita — First Brands was the servicer on these payments. In other words, the auto-parts supplier was responsible for collecting the payments from the customers and directing them to Point Bonita, as opposed to the clients paying Point Bonita directly. These payments already stopped on Sept. 15, two weeks before the bankruptcy filing.

The reputational risks could outstrip the dollar losses for Jefferies. Some of Point Bonita’s investors, including BlackRock, Morgan Stanley’s asset-management business and Texas Treasury Safekeeping Trust Co., have already asked to reduce their exposure.

Trade finance has already attracted unwelcome attention in recent years. Greensill Capital, a London-based trade finance provider, went insolvent facing accusations that it had understated the risks of the short term lending it facilitated and obscured the nature of the underlying loans.

Its demise was one of the reasons for the collapse of Credit Suisse, which had poured billions of its clients’ money into the Greensill funds.

Fear is back:

@zerohedge

How China and the U.S. Are Racing to De-Escalate the Trade War Beijing is eager to save a Trump-Xi summit; Washington wants to stem losses in the stock market

After threatening additional 100% tariffs on Chinese imports starting Nov. 1, Trump in recent days spoke with senior officials, including Treasury Secretary Scott Bessent, about sending a message to the world that the U.S. wants to de-escalate trade tensions with China, according to people familiar with the matter. (…)

“China’s export controls are not export bans,” the ministry said, while adding the new rule was intended to target military end-uses, not the broader civilian applications that have rattled global markets. “All applications for compliant export for civil use can get approval, so that relevant businesses have no need to worry,” it said. (…)

Beijing has threatened retaliation if Trump sticks to his 100% tariff threat. “If the U.S. insists on its own way, China will resolutely take corresponding measures to safeguard its legitimate rights and interests,” foreign ministry spokesman Lin Jian said at a regular news briefing on Monday. The Commerce Ministry followed up with a statement Tuesday morning, saying that if the U.S. wanted a fight, it would “fight to the end.” (…)

• China Hits Back at US on Shipping With Hanwha Curbs, Probe

(…) China sanctioned the US units of a South Korean shipping giant and threatened further retaliatory measures on the industry, the latest in a series of tit-for-tat moves as Beijing and Washington jockey for leverage before expected trade talks.

The sanctions, targeting five US units of Hanwha Ocean Co., fueled a slump in global equities on Tuesday as traders dialed back hopes for an easing of tensions between the world’s largest economies. Hanwha Ocean’s stock sank as much as 8%, while shares of Chinese shipbuilders rallied.

China’s moves escalate a long-standing dispute with the US over maritime dominance. Both sides have already slapped special port fees on each other’s vessels, while the US has rallied allies — especially South Korea — to help it revive a moribund American shipbuilding industry. (…)

In its announcements on Tuesday, China said it was looking into the impact of the US Trade Representative’s Section 301 investigation into the nation’s maritime sector, and may roll out more responses. Hanwha Ocean’s subsidiaries assisted and supported investigative activities of the US government, thereby endangering China’s sovereignty, security and development interests, according to a commerce ministry statement.

In March, as Washington was deliberating on the final shape and form of the actions it would take against China’s shipping prowess, Hanwha Shipping submitted public comments to trade representative Jamieson Greer in support of the probe.

The five firms blacklisted by China on Tuesday are Hanwha Shipping LLC, Hanwha Philly Shipyard Inc., Hanwha Ocean USA International LLC, Hanwha Shipping Holdings LLC and HS USA Holdings Corp.

China now leads the U.S. in this key part of the AI race Free artificial intelligence technology released by Chinese tech companies appears to be more powerful and popular than that developed by American rivals.

The artificial intelligence boom started in the United States, but companies from China are quietly outcompeting their U.S. rivals when it comes to AI technology that anyone can freely use and build upon, according to a Washington Post analysis of publicly available data.

Last year, the best freely available or “open” AI models were largely made in the United States. Now, they are all made in China.

American companies are widely seen as offering the most powerful proprietary AI tools, such as OpenAI’s ChatGPT and Google’s Gemini chatbots. But by openly sharing AI software, Chinese firms could have a major influence over the trajectory of technology.

Entrepreneurs and researchers often use open software as a cheap and adaptable way to develop and launch new ideas. Trump administration officials have claimed the U.S. must lead in open AI technology to maintain its edge in AI.

Open models from Chinese firms such as e-commerce giant Alibaba are rated higher than those from American companies such as OpenAI and Meta on LMArena, a site that uses blind tests to discover which AI outputs users prefer.

Chinese companies such as Alibaba, the maker of popular Qwen open models, are more prolific than other AI developers, said Irene Solaiman, chief policy officer at Hugging Face, a popular site used by AI developers and researchers to share models and datasets. They are “shipping frequently and shipping well, which is also how you build your user base,” she said.

In previous tech shifts such as the rise of the internet and smartphones, free and open source technology that others can modify has played a crucial role. Much of it originated with U.S. firms, helping establish Silicon Valley’s global dominance. (…)

No metric is perfect, and others look rosier for the U.S.

Artificial Analysis, a company that tests AI models on such tasks as trivia, math and coding, placed an open model released by ChatGPT maker OpenAI in August a tick ahead of DeepSeek.

OpenAI’s release transformed the company into an American champion for open source alongside Meta, said Solaiman of Hugging Face. But in addition to being more prolific, Chinese competitors are also highly competitive in AI for other use cases, she said, releasing state-of-the-art open software for generating images and videos. (…)

The popularity of China’s open-weight models concerns some in the U.S., who fear they will spread the values of the country’s government. The Trump administration’s AI strategy urges development of open AI technology “founded on American values” that become global standards with “geostrategic value.” (…)

China’s Biggest Builders Hobble Toward End of Restructurings

Most of China’s biggest defaulted developers are reaching a restructuring milestone, as creditors increasingly accept that better terms are unlikely during a real estate crisis that has triggered $130 billion of defaults.

Eight of China’s 10 most indebted developers have largely if not entirely put the offshore restructuring process behind them. One of those, Sunac China Holdings Ltd., which has already gained majority support for its restructuring from creditors, is scheduled to hold a vote on Tuesday, among the last procedural hurdles it has to clear.

While policymakers have rolled out a slew of measures aimed at propping up the housing market, sales are still sluggish and Chinese developers continue to face challenges. So far, eight of the country’s 30 major builders that have defaulted on dollar debt have received liquidation orders, including China Evergrande Group and China South City Holdings Ltd., according to Bloomberg-compiled data. Many defaulted companies are still working on onshore debt plans also.

Bondholders who once banged tables and peppered executives with questions during debt negotiations are now more muted, people familiar with several Chinese real estate restructuring deals said.

“Creditors have come to realize that things won’t get better anytime soon, so they’re willing to take larger haircuts,” said Ron Thompson, managing director and head of the Asia restructuring practice at Alvarez & Marsal. (…)

While some creditors are willing to accept more onerous terms, others are choosing to abandon debt talks and seek immediate liquidation. (…)

Sunac declined to comment. Yuzhou and China South City didn’t respond to requests for comment.

The China real estate era has changed and the last thing international creditors are looking for is dragged out talks, said Jason He, debt capital markets advisory leader at Deloitte China.

“Either take the terms or press the liquidation button — both work,” he added.

Finally. Some light at the end of this long tunnel.

ABB and Nvidia Collaborate to Develop Next-Generation Data Centers

Zurich-based ABB will focus on the development of solutions needed to create high-efficiency, scalable power delivery for future artificial intelligence workloads, it said in a statement Monday. ABB shares gained as much as 1.9% in Zurich after the announcement.

These projects will support Nvidia’s planned introduction of 800-volt architecture, which enables a faster and less energy intensive way to transfer power. (…)

Utilities are seeing greater demand for power, as companies build data centers to handle the surging use of artificial intelligence. Global data center demand is forecast to rise from 80 gigawatts in 2024 to reach around 220 GW by 2030, with capital expenditure projected to exceed $1 trillion, ABB said in the statement, citing Dell‘Oro Group. (…)

China’s Trojan Horse Rolls Through Latin America

While the US is isolating itself, China keeps the long and strategic view.

(…) While Washington has focused more on counterterrorism and short-term aid programs in LAC, China has played the long game, financing ports, railways and power grids. This in turn has helped foster goodwill and shaped its relationship with the region for decades and perhaps generations to come.

Between 2000 and 2021, Beijing financed an estimated $1.5 trillion worth of overseas development projects, 85% of them as loans rather than aid, making the country the largest official creditor to emerging markets.

In contrast, total U.S. foreign assistance, which has averaged around 1% of the federal budget, has barely kept pace with inflation (and, indeed, has been gutted by the second Trump administration.)

This has allowed China to present itself as the only offer on the table. Latin America’s infrastructure deficit is enormous at an estimated $180 billion a year through 2030, according to the Inter-American Development Bank (IDB). (…)

All of this coincides with the Chinese yuan’s ascent as a foreign reserve asset and settlement currency.

According to the Bank for International Settlements (BIS), the yuan now accounts for 8.5% of global transactions, up from 7% just three years ago and closing in on the British pound’s 10.2% share. The U.S. dollar remains the global leader by far, representing nearly 90% of all transactions, but the yuan has made impressive strides, quadrupling its share of total transactions since 2013. (…)