Year: 2025

US Importers Pay Record $16.5 Billion as April Tariff Bill Lands

Daily revenue from US customs duties rose to a record $16.5 billion as American importers made monthly payments to the government for goods received in April.

That revenue, disclosed in Treasury Department data released Friday, reflects the full impact of President Donald Trump’s new universal tariffs for the first time. About two-thirds of importers pay customs duties in one monthly sum — the month after goods arrive in US ports — and the deadline for April payments was Wednesday.

If tariffs continue at the present rate, the data suggest that Trump will fall short of the $2 billion a day in tariff revenue he’s counting on to help pay for the record tax cuts included in a bill passed by the House of Representatives this week. (…)

The new levies being collected consist mostly of a 10% baseline tariff for most of the world, a 25% duty on steel and aluminum, and 25% on autos. The tariff rate on China was about 20% when Trump took office, hit a high of 145% and is now 51%. (…)

With monthly collections for April now accounted for, the Treasury will bring in at least $22.3 billion in customs duties and other excise taxes this month, the data show. (…)

There are only 2 ways for these billions in costs to trickle back into the economy: higher prices or lower profit margins. Likely both.

On the other side of the ledger, these billions will increase federal government revenues. The nonpartisan Committee for a Responsible Federal Budget (CRFB) currently estimates that Trump’s One Big Beautiful Bill Act of 2025 (OBBBA) would add $3.1 trillion in incremental debt over the next 10 years but that could decline to $0.4T with tariff revenues estimated at $2.7T by the Yale Budget Lab, or $2,800 per year in additional cost per household. But “given the negative output effects of the tariffs, there would be additional dynamic reductions in tax revenue as a result. Based on Congressional Budget Office rules-of-thumb, TBL estimates that these effects would total -$394 billion over the decade.”

Deficits don’t matter until they do, like now. No doubt that Moody’s downgrade of US Treasuries woke many people up.

Spending remains out of control (the chart below is based on CBO’s 2024 projections, not factoring in the House-passed bill, but story remains the same… spending grows faster than revenue & well-above historical average as Callum Thomas notes).

And US debt is exploding:

Long rates are rising everywhere…

…when leverage and coverage have deteriorated…

… even more so in smaller companies…

Source:  @MikeZaccardi

… unnerving equity investors cognizant of history …

… right when equity/bond valuations are historically extreme …

… and the USD scarily weak …

… bringing the shorts back …

Source: MarketWatch

… even while retail investors show extreme confidence as Lance Roberts explains:

Monday was a record-setting day. Stocks opened down 1% on news that Moody’s downgraded the US credit rating to AA. While some perceived the downgrade as problematic, retail investors, aka individuals, bought stocks at the highest rate ever. Per JP Morgan, retail investors purchased a net of $4.1 billion of US stocks in the first three hours of trading. As their graph below shows, Monday’s retail buying stampede dwarfs prior instances.

Smart money (institutions and hedge funds) is aggressively selling this market while individual investors, aka dumb money, are aggressively buying. The difference in opinions is stunning.

The data below confirms that view, with the recent stretch of Hedge Fund short selling remaining unprecedented and reflective of some skeptics. Over the past 3 COT reports, Hedge Fund shorts surged ~$25bn – the largest amount for at least the past 10 years.

Viewed through another lens, Hedge Fund shorts as a percentage of total open interest reached 41% – the max dating back to February of 2021.

Typically, institutional investors tend to be right. However, in the short term, particularly over the last few years, retail investors have been heavy buyers of corrections. The only question is whether retail investors run out of money before institutions are forced to cover?

Corporate insiders, the smartest of the so-called smart money, are not back in as Barchart shows. They have been consistent net sellers since Liberation Day:

Insider Trading Activity – Follow the Smart Money

Wait, wait:

Ed Yardeni Says It’s Not as Bad as You Think

Think it’s all over for US markets? Think they’re finally going to sink under high valuations, inflated expectations and now a nervous bond market? Maybe think again, says Ed Yardeni of the eponymous firm Yardeni Research, who joins this week’s Merryn Talks Money.

“I’ve been doing this for 45 years, and for that entire period the naysayers, pessimists and doomsayers have been saying that this time we are finally going to have to pay the price for our sins [of borrowing],” Yardeni says. But as he tells host Merryn Somerset Webb, it mostly turns out fine.

Even as everyone works themselves up about the world’s problems, stock markets are mostly near record highs. And for all the endless talk about a US recession over the last three years, it just hasn’t happened. The truth is that the US consumer is as resilient as they come, he says.

The baby boomers have some $80 trillion in net worth. They’re both spending it and giving it to their kids to spend. At the same time, US investors seem to have developed a long-term mentality: they see sell-offs as opportunities rather than “freakout situations.”

All of this makes perfect sense to Yardeni: others may be wobbling on the Magnificent Seven, but he is not. They may have just had their own mini bear market but he sees those big tech companies as uniquely American, and with their huge cash flows and stunning innovations, genuinely exceptional. And beyond them are more extraordinary technological advances—artificial intelligence, autonomous cars, humanoid robotics and the like. These will drive growth and productivity to new heights in the US, he predicts.

Yes, it all comes down to the mighty US consumer. Americans are born to consume; give them money, they will spend it unless really constrained:

Nominal consumer spending is still running +5.5% YoY while aggregate payrolls (employment x hours x wages) are rising 5% YoY. Retail sales have even reaccelerated lately.

This in spite of historically low expectations …

Spending and sentiment link remains robust

… particularly about jobs and inflation:

Households expect unemployment will climb

Source: Macrobond, ING

These may be soft data, they nonetheless reflect serious concerns for most people. Consumer sentiment indicators suggest an economic cliff right ahead. Americans are thus not blind or unconscious.

But however anxious they may be about the future, things are simply pretty good, now. Calm before the storm?

The critical hard data is still ok:

• unemployment claims are not spiking;
• the Sahm Rule is stable at 0.27, still far from the 0.50 trigger (which did not work at 0.57 last August);
• corporate profits are still booming, keeping CFOs happy;
• inflation numbers are not threatening real income yet;
• oil prices are down 21% YoY;

Trump’s backtracking was a relief, but we’re not out of the swirl just yet and tariffs are still up meaningfully.

U.S. Average Effective Tariff Rate

Awaiting more hard data, several investors, and FOMC members, are worried about

• the economy (recession or soft landing);
• inflation;
• the Administration;
• the USD

Hubert Marleau offers other potentially positive avenues:

Debt held by the public now stands at $28.9 trillion, about 100% of the N-GDP: more worrisome is that total debt outstanding is now around 130% (Only Australia, New Zealand, Canada, Denmark, Sweden, Luxembourg, Germany, Norway, Singapore, and Switzerland have better ratios, thereby meriting the top grade). As a consequence, the fiscal deficit ran at 6.5% of N-GDP in 2024, a level not seen outside of wartime periods. By all accounts, an amelioration in the US’s credit standing is out of the question for now: DOGE is tapering off, and the “Big, Beautiful Tax Bill” (BBTB) currently worked on is worsening the fiscal outlook.

The Joint Committee on Taxation estimated that BBTB, including the renewal of the Tax Cut and Jobs Act of 2017, would increase the fiscal deficits by $3.8 trillion through 2034, equal to 1.1% of N-GDP, while the Bipartisan Policy Center calculated that if the “BBTB” were extended permanently, the deficit would be worse: $5.3 trillion higher, or 1.5% of N-GDP. That would take the debt/GDP ratio to either 8.1% or 8.5%, given the current run rate for 2025 of 7.0%. According to the Penn Wharton Budget Model, the “BBTB” would increase the “primary” deficit, which excludes interest costs, by $6.0 trillion over 10 years.

The fact is that this spending problem is unsolvable. Around 75% of it is mandatory: 60% on programs like social security, Medicare and Medicaid with another 13% covering interest of existing debt. The final 25% covers defence (12%), plus education and infrastructure (13%), all of it core expenditures.

(…) unless the promise of pro-productivity policies delivers the necessary growth path to rectify the twin-deficit issue. This is why Bessent is so keen on producing growth when considering the net national savings rate of the U.S. is -3.1% of N-GDP (-7.0% budget deficit +3.9% personal savings rate), according to Andrew Lees of Macro Strategic Partnership, who is of the opinion that the only way to arrest the fiscal deficit problem with some political acceptance is through pro-growth public sector spending. Counterintuitively, he’s gambling that public sector deficits will become private sector savings, like they did during the Covid-pandemic, and that higher tax receipts will come from more people in the workforce with the help of more productivity, like it did during the 1990s.

This is more than a mere possibility. In this connection, investors should watch the market behaviour of the exchange value of the greenback and long-dated Treasury yields for answers, because that is where funding problems would show up first, if it were to come to that. It will indeed become increasingly important to monitor these two markets because the trajectory of trade and debt has become so interwoven that they will graphically illustrate foreign appetite for US Treasuries, US dollars, and US risk assets.

At present, so-called forex and bond vigilantes are running the show, because they are effectively an outside branch of the government, which has as much veto power as Congress and is therefore able to impact final decisions. (…)

Investors should also be conscious that the extension of the 2017 tax reform and technology infrastructure spending are also big features in Washington that could catapult into more productivity growth, especially if the Administration decides to ditch the reciprocal tariff proposal. With a bit of luck, it is even conceivable the US could upgrade to a 3-plus-3 economy from 2-plus-2: that is 3% for growth and 3% for inflation.

How lucky do you feel given current valuation levels amid such uncertainty?

This seems like a giant tug of war between gloomy surveyed Americans (with Republicans vs Democrats and Independents), cautious institutional investors (foreigners?) and buoyant retail investors (all Republicans?).

EARNINGS WATCH

From LSEG IBES:

476 companies in the S&P 500 Index have reported earnings for Q1 2025. Of these companies, 76.1% reported earnings above analyst expectations and 18.9% reported earnings below analyst expectations. In a typical quarter (since 1994), 67% of companies beat estimates and 20% miss estimates. Over the past four quarters, 77% of companies beat the estimates and 17% missed estimates.

In aggregate, companies are reporting earnings that are 6.5% above estimates, which compares to a long-term (since 1994) average surprise factor of 4.3% and the average surprise factor over the prior four quarters of 6.8%.

Of these companies, 62.7% reported revenue above analyst expectations and 37.3% reported revenue below analyst expectations. In a typical quarter (since 2002), 62% of companies beat estimates and 38% miss estimates. Over the past four quarters, 62% of companies beat the estimates and 38% missed estimates.

In aggregate, companies are reporting revenues that are 0.9% above estimates, which compares to a long-term (since 2002) average surprise factor of 1.3% and the average surprise factor over the prior four quarters of 1.2%.

The estimated earnings growth rate for the S&P 500 for 25Q1 is 14.0%. If the energy sector is excluded, the growth rate improves to 16.0%.

The estimated revenue growth rate for the S&P 500 for 25Q1 is 5.0%. If the energy sector is excluded, the growth rate improves to 5.4%.

The estimated earnings growth rate for the S&P 500 for 25Q2 is 5.8%. If the energy sector is excluded, the growth rate improves to 7.7%.

Q2 earnings are now seen rising 7.7% ex-Energy, down from +8.6% on May 2 but investors remember that Q1 earnings were expected to rise 8.0%…

… and surely notice that guidance for Q2 is pretty steady:

Ed Yardeni:

We still believe that Trump needs to declare victory in his trade war before the end of the summer to avoid a recession later this year that might threaten the Republicans’ current slim majorities in both houses of Congress come next year’s midterm elections. The risk is that he won’t do so and that TTT will continue to weigh on S&P 500 forward earnings per share, which has stalled at a record high around $278 for the past several weeks (chart). To get to 6500 on the S&P 500 by the end of this year, we need forward earnings to climb to $300 with a forward P/E of 21.7.

TECHNICALS WATCH

The 13/34 week EMA’s March 31 downtrend signal might reverse amid high volatility and erratic policies we’re all getting used to . Ed Yardeni says that “stock investing is likely to continue to be like riding a mechanical bull in rowdy sports bar.”

Source: Stockcharts.com via Trade Signals

Healthcare stocks have put in one of their worst performances vs the index ever (healthcare stocks suffering from RFK MAHA threats, and Trump EO on drug pricing). (Callum Thomas)

Source:  @sentimentrader

• What is the impact of pharmaceutical drug tariffs?

The Trump administration’s expansive tariff agenda is expected to increasingly focus on pharmaceuticals in the coming months, with the goal of addressing national security risks, creating domestic jobs, and onshoring of profits.

In a new video, Marta E. Wosińska explains that the actual effects of pharmaceutical tariffs are likely to be quite different.

Watch the video

To learn more about pharmaceutical tariffs, prescription drug shortages, and supply chain reliability, explore Marta’s related research here.

Oil chiefs warn of end to US shale boom Companies cut spending and idle their drilling rigs despite Donald Trump’s pledge to ‘unleash’ production

(…) Oil output will fall by 1.1 per cent next year to 13.3mn barrels a day, according to S&P Global Commodity Insights, as prolific shale drillers that made the US the world’s biggest producer idle rigs in the face of prices driven lower by fears of oversupply and Trump’s trade war. (…)

Scott Sheffield, the former head of shale driller Pioneer Natural Resources, told the Financial Times that if crude drops to $50 a barrel, US production would probably lose up to 300,000 barrels a day — more than the total output of some smaller Opec members. (…)

Tariffs have pushed up the prices of steel and aluminium — crucial inputs in the oil patch. The price of casing, the metal used to line wells and the largest expense to drill a well, has risen 10 per cent in the past quarter alone. “The economics will be challenged. We’ll see more capital pullback as the quarters progress,” said Doug Lawlor, chief executive of Continental Resources, one of the country’s biggest privately held energy companies. (…)

US Tariffs Loom Over Asia Summit as Ties With China Strengthen

Southeast Asian leaders start two days of talks from Monday, seeking to deepen ties with China and Gulf nations, and mitigate the fallout from US President Donald Trump’s tariff hikes.

Trade and economic cooperation will likely dominate the agenda of the 10-nation Association of Southeast Asian Nations summit taking place in Kuala Lumpur, along with conflicts in Gaza and Myanmar.

While the first of the two Asean summits held annually is usually reserved for Southeast Asian leaders, China is sending its No. 2 official, Premier Li Qiang. The leaders of the Gulf Cooperation Council nations, Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates will also be in attendance. By contrast, the US and other Western nations won’t be represented.

For Malaysian Prime Minister Anwar Ibrahim, the summit he’s hosting is a chance to foster trade ties at a time nations with large surpluses with the US are on the hunt for new investment opportunities abroad. China is warning partners to avoid any deal with the US that comes at Beijing’s expense, leaving Asean members to walk a delicate balance between the world’s two top economies. (…)

Trade between China and Asean nations reached $982.3 billion last year, according to a report by state-run Xinhua News Agency. By comparison, US goods trade with the region totaled $476.8 billion in 2024 — $352.3 billion of which were American imports from the region, official data shows.

The summit comes weeks after Chinese President Xi Jinping visited Vietnam, Malaysia and Cambodia, during which he pitched for a unified “Asian family” — an apparent effort to counter US pressure on nations to limit trade ties with Beijing. (…)

Indonesia became a full member of the Russia and China-led BRICS group of developing nations earlier this year, with Malaysia, Vietnam and Thailand given partner nation status. Last week, Asean and China concluded talks to upgrade a free trade pact that includes chapters on digital and green economies and small and medium-sized enterprises, according to Chinese state media.

“I see this as a very good opportunity for us to show that Malaysia is a neutral country that wants to trade with any country that would like to trade with us,” Malaysian Communications Minister Fahmi Fadzil told reporters of the summit.

Back in Washington, negotiators from several countries in the region are working on deals to avert some of the highest tariff hikes announced last month by Trump. Whether those efforts will pan out are unclear and the US rejected a Malaysia-led attempt to negotiate as a bloc, according to local reports.

(…) more than 90% of goods traded in the region are already tariff-free. (…)

John Authers today has this chart demonstrating that isolating China is not working as expected:

China Premier Calls on Asean, Gulf States to Create ‘Big Market’

Chinese Premier Li Qiang rallied a group of Southeast Asian and Gulf states to deepen cooperation, as the Asian nation ramps up its charm offensive abroad to counter US efforts to isolate the economy.

“We should firmly expand regional opening up and develop a big market,” Li said at a meeting with leaders from Southeast Asia and the Middle East in Kuala Lumpur on Tuesday. “We should effectively manage differences in the spirit of mutual understanding.”

The inaugural joint summit offers Beijing yet another chance to sway countries caught between the world’s two largest economies. Li’s visit to Southeast Asia comes on the heel of President Xi Jinping’s tour last month, when he called for a united Asian family in an apparent effort to counter US containment.

“Countries of the three sides are at different stages of development, yet we should not let these differences stand in a way of our cooperation, but transform them into complementary strength that we can harness,” China’s No. 2 said. (…)

Malaysian Prime Minister Anwar Ibrahim, making his opening remarks at the Asean-GCC-China Summit, highlighted the region’s combined GDP of $24 trillion as he expressed a message of unity.

“This collective scale offers vast opportunities to synergize our markets, deepen innovation and promote cross-regional investment,” Anwar said. (…)

Li visited Indonesia before Malaysia. In his meeting with President Prabowo Subianto, Li called for more cooperation and cited rising protectionism.

Their central banks signed a MOU on a framework for bilateral transactions in local currencies on Sunday, while wealth funds China Investment Corporation and Danantara Indonesia entered an investment agreement.

Greenland says it will turn to China if US and EU shun its mining sector

(…) Nathanielsen said the new four-party coalition government in Nuuk was ‘‘first and foremost committed to creating development for Greenland and Greenlanders” and would prefer to work with “allies and like-minded partners”.

But she added that Greenland was “having a difficult time finding our footing” in the changing nature of the western alliance. “We are trying to figure out, what does the new world order look like? In those terms, Chinese investment is of course problematic, but so, to some extent, is American,” she said. “Because what are the purpose of [the US investments]?”

The EU is a “good fit” for Greenland as it had few of the minerals it needs itself, Nathanielsen added, as well as being aligned on environmental metrics.

China Raises Cross-Border Yuan Use Requirement for Major Banks

China’s central bank asked its major lenders to raise the share of yuan when facilitating cross-border trade, in its latest push for the use of the currency as the world grapples with the onslaught of tariffs by the US.

The People’s Bank of China increased the floor ratio for yuan-denominated trade transactions to 40% from 25% as part of its recent adjustment to the so-called Macro Prudential Assessment, according to people familiar with the matter, who asked not to be identified discussing a private matter. While not mandatory, banks missing the ratio often receive a lower score in regulatory review which will impact their future business expansion.

The sharp increase highlights Beijing’s determination to accelerate the use of the yuan in global trade and may have a significant impact on demand for the currency just as Trump’s sweeping tariffs raised concerns about the international appeal of dollar-based assets.

China’s imports and exports of goods amounted to 43.8 trillion yuan ($6.1 trillion) in 2024. The proportion of cross-border yuan payments in goods trade reached 30%, central bank Governor Pan Gongsheng said in January.

China has been actively advancing the cross-border use of the yuan through various initiatives over the past few months. (…)

A $20,000 ‘Home Companion’ Robot From China to Debut This Year

China’s UBTech Robotics Corp. is planning to unveil a $20,000 humanoid robot that can serve as a household companion this year, seeking to expand beyond factories.

The company sees “home companion” robots as a bright spot in China partly because of the growing need for elderly care, Chief Brand Officer Michael Tam told Bloomberg News in an interview on Friday. Still, he didn’t give a timing for when the product goes on sale and said an all-purpose robot that can handle many types of household chores and look after human beings is years away as the technology isn’t ready. (…)

Elon Musk said last year Tesla’s Optimus robot will handle many household tasks and could eventually be available to consumers for $20,000 to $30,000 each, with production starting in 2026. (…)

Tam said intense rivalry helps Chinese firms become more efficient.

“White-hot competition creates a lot of pressure on a single company, but for the whole industry, it does help preserve good companies and eliminate bad ones,” Tam said.

US FLASH PMI: Output growth improves in May, but prices spike higher amid tariff impact

The headline S&P Global US PMI Composite Output Index rose from 50.6 in April to 52.1 in May, according to the ‘flash’ reading (based on about 85% of usual survey responses). The rise in the index signaled an acceleration of activity growth from April’s 19-month low to the fastest since March, although it remained one of the weakest readings seen since early-2024.

The strongest expansion was recorded in the service sector, where business activity growth rebounded from April’s 17-month low but remained below March’s pace and the average seen in 2024. Manufacturing output meanwhile returned to growth after falling in both March and April, albeit expanding only slightly.

The improved performances were driven by faster rates of growth of new orders. Inflows of new work in the manufacturing sector notably rose at the sharpest pace for 15 months while demand growth for services was merely the strongest since March.

These order book improvements were fueled principally by domestic demand, as exports of both goods and services fell for second successive months in May.

While tariffs had in some instances reportedly helped encourage new sales to domestic customers and prompted increased activity to front-run tariff-related price hikes, trade policy was widely linked to falling foreign sales of both goods and services.

Although manufacturing reported an easing in the steep export decline reported in April, exports of services (which includes spending by foreigners in the US) fell at the sharpest rate since the pandemic lockdowns of early 2020. In fact, excluding the pandemic, the fall in exports of services was the largest recorded since comparable data were first available in late 2014.

Having slumped sharply to a two-and-a-half year low in April, sentiment among companies about their output over the coming year rebounded in May to its highest since January.

Sentiment was buoyed in part by reduced trade worries following the pause on additional tariffs and accompanying improved economic growth prospects. Confidence about the outlook rose to a four-month high in services and the best in three months in manufacturing. Goods producers also continued to display relatively greater optimism largely based on hopes of greater reshoring of production and demand switching to domestically produced goods in response to tariffs.

Despite the rebound, overall optimism was still slightly below the average seen in 2024, attributable to reports of supply worries, rising prices, ongoing uncertainty and concerns over detrimental impacts from government policies including tariffs and spending cuts.

Employment fell slightly in May, having risen in March and April, primarily reflecting concerns over future demand prospects but also in response to worries over rising costs and labor shortages.
Service sector payrolls were trimmed for the second time in four months, while manufacturing jobs were cut for a second successive month.

Manufacturers stocked up on inputs, generally citing concerns over potential tariff-related price increases and supply shortages, the latter reflected in suppliers’ delivery times lengthening in May to the greatest extent since October 2022. The increase in buying activity was the highest since July 2022 and the resulting rise in inventories of purchases was the largest recorded in the 18-year survey history.

Average prices charged for goods and services jumped higher in May, rising at a rate not witnessed since August 2022, when pandemic-related shortages caused widespread price inflation.

An especially steep rise was seen for manufacturers’ selling prices, which posted the largest monthly increase since September 2022. Charges levied for services rose to the greatest extent since April 2023.

The latest rise in output prices was overwhelmingly linked to tariffs, having directly driven up the cost of imported inputs or caused suppliers to pass through tariff-related cost increases. Manufacturing input costs rose at the sharpest rate since August 2022 while service sector costs rose at the fastest rate since June 2023.

The S&P Global Flash US Manufacturing PMI rose from 50.2 in April to 52.3 in May, signaling the strongest improvement in business conditions since June 2022.

Factory production moved back into expansion territory after two months of decline, and new order growth hit a 15-month high. However, the biggest positive contribution came from inventories, which rose to the greatest extent recorded since the survey began in 2009. Longer delivery times – which are typically associated with busier manufacturing supply chains –also helped push the PMI higher, with delays the most pronounced in 31 months. However, employment fell for a second successive month, acting as a drag on the PMI.

Commenting on the flash PMI data, Chris Williamson, Chief Business Economist at S&P Global Market Intelligence said:

“(…) both sentiment and output growth remain relatively subdued, and at least some of the upturn in May can be linked to companies and their customers seeking to front-run further possible tariff-related issues, most notably the potential for future tariff hikes after the 90-day pause lapses in July.

In particular, concerns over tariff-related supply shortages and price rises led to the largest accumulation of input inventories recorded since survey data were first available 18 years ago.

Supply chain delays are now more prevalent than at any time since the pandemic led to widespread shortages in 2022, and prices charged for both goods and services have spiked higher as firms and their suppliers seek to pass on tariff levies to customers. The overall rise in prices charged for goods and services in May was the steepest since August 2022, which is indicative of consumer price inflation moving sharply higher.”

CONSUMER WATCH

Consumers moderated spending in April

On a seasonally adjusted basis, Bank of America credit and debit card spending was flat month-over-month. While services spending recovered slightly in April, there was a MoM pullback for retail (excluding gas and restaurants) – in part reflecting the easing in “buy ahead” durables demand.

What do we see in May? So far, Bank of America card data suggests that consumer spending was flat at the start of the first half of the month, with no YoY increase in the two weeks ending on May 17.

Dwindling buying ahead was much clearer in electronics spending. While spending spiked in late March and early April, it peaked on April 12 after exemptions were granted for several electronics products including computers and smartphones, and subsequently fell below 2024 levels.

Bank of America internal data on consumer vehicle loan (CVL) applications suggests application growth remained elevated through April compared to the period between October 2024 through most of March 2025. However, it has been far lower in recent weeks.

• Applications for unemployment benefits just fell to a four-week low of 227,000. It’s the latest reminder the job market remains healthy despite trade-war uncertainty and headlines about the bond market stumbling. And since these are data for the week ended May 17—the Labor Department’s survey week—the employment report might confound the skeptics yet again. Likewise, continuing unemployment claims suggest that the unemployment rate isn’t likely to rise much, if at all, and the duration of unemployment isn’t rising. Its increase in the latest week was to 1.9 million, a level that should allay recession fears. Despite job cuts at Amazon, Microsoft, Nike, and elsewhere, data suggest that a critical mass of companies are comfortable with their current staffing levels. (Ed Yardeni)

US Firms Face Biggest Hit on Trump Tariffs, HSBC Survey Says

US businesses are the most worried about the impact of President Donald Trump’s shifting tariff policies on their revenues, with more than half projecting a hit of at least 25% to their revenue, according to a survey by HSBC Holdings Plc.

About a quarter of US companies that took part in the British lender’s trade survey released Friday said they were forecasting their revenues more than halving over the next two years due to the impact of the levies on their supply chains.

By contrast, Chinese businesses appear more sanguine about the impact with about a quarter projecting an impact of 25% or more on revenues, though more than half expect a 10% to 25% decline.

London-based HSBC is the world’s largest trade bank and its report is based on a survey of over 5,700 international firms in 13 countries. The bank said it had found widespread concern about the impact of tariffs, with two-thirds of respondents saying they had already experienced cost increases due to tariffs and trade uncertainty.

“Everyone we’ve spoken to is planning to reshape their supply chains, look at new markets or change their business model,” Vivek Ramachandran, head of global trade solutions at HSBC, said in a Bloomberg Television interview on Friday. After building supply chains over decades to minimize costs effectively, “now they need to become resilient and they need to actually be able to move based on geopolitical concerns. That’s a big concern for companies,” he added.

  Bessent Wins G-7 Partner Plaudits in First Conference Abroad

(…) During Wednesday night’s official dinner at the resort hotel in the Canadian Rockies — at a restaurant dubbed “a dining sanctuary in the sky” — Bessent was relaxed and even cracked a few jokes, sparking laughter, a person familiar with the exchanges said. Europeans at the reception had the feeling the US is figuratively back in the room and engaging, the person said.

Back in February, when the broader Group of 20 held finance and foreign minister sessions in South Africa, US principals weren’t even physically in the room. Bessent and Secretary of State Marco Rubio skipped those meetings. While Rubio attended a G-7 meeting with his counterparts in Canada in March, he avoided several group events. (…)

“The fact that we get along on a personal level is a good foundation for what will undoubtedly be difficult political discussions,” German Finance Minister Lars Klingbeil said. “The fact that we agreed to talk further and that he invited me to Washington is a sign that the conversation wasn’t so bad.”

Canadian Finance Minister Francois-Philippe Champagne struck similarly positive tones at the closing news conference on Thursday. “We get along well,” he said. “We had discussion on a number of issues. I can tell you the secretary’s contribution was welcomed by all the G-7 colleagues, in particular when we talk about supply chain resiliency.” (…)

Bank of Canada Governor Tiff Macklem said he is encouraged by the fact that Bessent was in Banff for all three days of talks. “He was very engaged and participated a lot. The atmosphere was collegiate and collective. But there is still work to do,” Macklem said at the closing news conference. (…)

“I sometimes had the feeling that we were not far from a meltdown on the financial markets,” German central bank President Joachim Nagel said in Banff. “The message in April was so strong that it got through to those involved,” he said. “That’s why I would definitely consider the talks here a success – I hadn’t expected that.”

At the same time, “It would be a mistake to think that we are returning to business as usual,” the Bundesbank chief said.

Champagne said there was discussion about the US tariff policy behind closed doors in Banff. “But I would say there’s also a very constructive discussion about what’s the way forward that we can adopt, and where can we find common ground to tackle other global challenges — like we’ve seen on overcapacity and non-market practices, which are affecting our respective economies.”

• US-China trade war is pushing Asian nations to pick sides, ministers warn Malaysia and Singapore find harder to maintain neutrality as geopolitical tensions grow

(…) “China is looking and watching,” Malaysian trade minister Zafrul Aziz, who is leading tariff negotiations with Washington on behalf of the Association of Southeast Asian Nations, told the Financial Times.

“They are saying, ‘Whatever you give to the US, we want the same because whatever you give to the US is at our expense,’” Zafrul said. (…)

“If you try to be neutral and walk the middle road, the road is getting narrower and narrower, eventually it will be a knife edge and you won’t be able to stand up,” Gan [Singapore’s trade minister and deputy prime minister] told a UBS conference on Thursday.

“The key is we have to take sides, we have to take positions, we have to really do so based on principles.”

But he said the approach taken by Singapore — which plays a critical role linking China to the west — was to adopt positions on contentious geopolitical issues based on its own national concerns, rather than to side with one country over another. (…)

Heads of state and government from Asean and the Gulf Cooperation Council countries will gather in Kuala Lumpur next week to try to build a broad trade agreement between the two blocs against the backdrop of a collapse in the world trading system. Chinese Premier Li Qiang will also attend.

• JPMorgan’s Jamie Dimon to ‘deepen engagement’ with China State media reports meeting between US investment bank chief and senior officials

JPMorgan chief executive Jamie Dimon has vowed to “deepen” the bank’s engagement with China, according to a state media account of a meeting between the banker and senior Chinese officials that included Beijing’s top trade negotiator. (…)

In a meeting with trade negotiator and vice-premier He Lifeng, Dimon said the US bank would “deepen its engagement” with China’s capital markets as well as helping multinationals in the mainland and Chinese companies in their overseas development, according to the Xinhua news agency.

The vice-premier, a close ally of President Xi Jinping, said China wants US companies to “continue contributing to the healthy, stable and sustainable development of China-US economic and trade relations,” according to the Xinhua readout. (…)

• Apple set to expand India supply chain through $1.5bn Foxconn plant

This was yesterday.

Today:

• Trump tells Apple to build iPhones in U.S. or pay 25% tariff
• Trump Threatens a 50% Tariff on EU Goods Starting in June President Donald Trump threatened a 50% tariff on goods from the European Union starting on June 1, saying “our discussions with them are going nowhere.”

Unrelated, but maybe not…:

• Summers Slams Trump’s Move Against Harvard as ‘Stuff of Tyranny’

Euro-Zone Wage Growth Sinks, Supporting Further ECB Easing

Negotiated wages rose 2.4% from a year ago in the first quarter, the ECB said Friday. That’s down from 4.1% in the final three months of 2024 and less than half the 5.4% peak recorded last year.

The data reinforce the idea that wage pressures are cooling and will eventually translate into softer underlying inflation that’s so far proven stubborn. Prices in the services sector, where salaries play an important role, rose 4% in April. (…)

Public-sector unions in Germany recently agreed to a 5.8% increase staggered over two years, calling it a “difficult result.”

An ECB tracker developed to predict future pay increases also signals a sharp slowdown toward year-end.

Analysts at Morgan Stanley have cautioned that pay indicators will remain volatile for now, partly because of the strong use of one-off payments in Germany. They predict negotiated wages will rise more strongly this quarter before abating again in the second half of the year.

EngineAI Targets $1 Billion Valuation as Chinese Robots Heat Up

(…) EngineAI, founded in 2023, is among a coterie of up-and-coming firms hoping to take human-like robots into the mainstream. The Shenzhen-based company generated buzz this year after posting a video of one of its robots performing a frontflip.

Chinese startups such as Unitree made headlines in 2025 with a plethora of machines that dance, run and otherwise execute human-like maneuvers — albeit at times less than gracefully. EngineAI and its rivals hope to perfect the technology ahead of US competitors such as Boston Dynamics.

EngineAI expects to ship close to 1,000 robots this year and 10,000 by 2028, he said. It eventually wants to introduce robots to the household.

“If the US and China can work together, we can build better robots,” Ren said. “But without such a partnership, I still believe we can create good robots” as China has a comprehensive supply chain. (…)

I asked Perplexity.ai to compare the US and China on humanoid robotics (sources linked)

Key Insights

• AI vs. Hardware: US humanoid robots are generally superior in artificial intelligence, autonomy, and software-driven adaptability, often integrating the latest generative AI and vision-language models. Chinese robots are more advanced in hardware agility, cost efficiency, and large-scale manufacturing, with models like Unitree’s H1 and G1 excelling in speed, balance, and acrobatics 6 10 11.

• Production and Cost: China’s manufacturing ecosystem enables rapid scaling and lower costs, making humanoid robots more accessible for industrial and consumer markets. US robots, while technologically advanced, are produced at a smaller scale and higher cost, but are closing the gap as companies like Tesla ramp up production 6 9 12.

• Government Strategy: China’s government provides more direct support, with national and local policies aimed at making the country a global leader in humanoid robotics. The US relies more on private sector innovation and R&D funding, especially in AI and advanced hardware 5 9 10 13.

• Market Dynamics: The US excels in AI “brains,” while China dominates in robot “bodies” and manufacturing scale. Both are racing to integrate these strengths for global leadership, but China’s pace of commercialization and cost advantage currently gives it an edge in mass deployment 6 9 12 13.

“Industry analysts believe that the United States is superior in AI technology, which is responsible for the robot’s ‘brain,’ while Chinese technology companies have flourished in the hardware manufacturing capabilities of the robot’s ‘body.’”11

In summary: US humanoid robots lead in intelligence and autonomy; Chinese robots lead in agility, affordability, and production volume. The global race is intensifying, with each side leveraging its traditional strengths—AI for the US, manufacturing for China—to shape the future of humanoid robotics 6 10 12 13.

A few more facts:

• China is home to 56% of the world’s publicly traded humanoid robotics companies and 61% of global robotics unveilings since 2022 1.
• Major cities like Beijing, Shanghai, and Shenzhen have launched multi-billion-yuan funds and industrial clusters to foster R&D and commercialization, explicitly supporting the training and hiring of engineers in humanoid robotics 7 13.
• China dominates industrial robot installations (52% of the global total in 2022) 10, and the rapid scaling of companies like Unitree and AgiBot suggests thousands—potentially tens of thousands—of engineers are engaged in humanoid robotics development, manufacturing, and deployment 3 8 13.
• The US robotics workforce is smaller than China’s, reflecting the country’s more focused, innovation-driven approach 4 5 6.
• Leading US companies are scaling up, but the overall engineering workforce dedicated to humanoid robots is likely in the low thousands, given the smaller number of manufacturers and production volumes compared to China 5 6 9.
• In China, the sector is described as the “next groundbreaking innovation” after computers and electric vehicles, with the government aiming to “reshape the global industrial landscape” and outpace the United States in emerging technologies 7.
• Chinese analysts predict that, as with electric vehicles, aggressive investment and competition will drive down costs and accelerate global adoption of Chinese humanoid robots1 4 6.

Short-Term Thinking Is Driving the US’s Pivot Away from Africa Despite its interest in securing mineral supplies, the Trump administration has decided that soft power on the continent is a waste of time and money.

When South African President Cyril Ramaphosa sat down for a meeting with US President Donald Trump in the Oval Office this week, he was likely hoping to strengthen their relationship and boost trade between the two countries. Instead, Trump embarrassed the veteran politician in front of the world’s media with a video that used out-of-context and inaccurate information to suggest that a genocide of White Afrikaner farmers is taking place in South Africa, along with seizures of their land.

The genocide claim has been widely debunked, including by Afrikaner rights groups that decry murders of local farmers. (As if to head off the accusation, Ramaphosa brought two White South African professional golfers and the country’s White agriculture minister to the meeting with Trump, saying, “If there was Afrikaner farmer genocide I can bet you these three gentlemen would not be here.”) But that reality hasn’t stopped the US from using the charges as justification to cease almost all aid to South Africa and boycott Group of 20 meetings being held in the country.

The May 22 sit-down was a far cry from Dec. 3, 2024, when then-President Joe Biden visited the Angolan capital of Luanda to celebrate the US’s pivotal role in reviving a 122-year-old railway. The $2.3 billion project aims to expedite the delivery of critical minerals from parts of Zambia and the Democratic Republic of Congo to the Angolan port of Lobito — securing an American foothold in the exploitation of some of the world’s biggest deposits of copper and cobalt and signifying US re-engagement with the continent after well over a decade of indifference opened the door to China.

In the space of just six months, and one presidential inauguration later, that rapprochement lies in tatters.

The Trump administration maintains that it’s interested in Africa — specifically in mineral supplies — and talks of bespoke deals with both Congo and Rwanda even as the Lobito project forges ahead. But its actions have set back those aims and harmed its ambition of weakening China’s status as partner of choice for the continent.

In the space of four months, Trump and his appointees have abruptly canceled billions of dollars of health aid for the continent, threatening to reignite an HIV pandemic that had been brought under control. Humanitarian assistance has been slashed, prompting the United Nations World Food Programme to tell staff that it’s “significantly cutting the number of people we can feed.” The organization’s two biggest appeals are in Sudan, where war has left half the population facing extreme hunger, and Congo.

The US also reneged on a pledge to provide $555 million in development finance to Africa’s main multilateral lender, the African Development Bank, and withdrew a $1 billion commitment to a landmark climate finance agreement in South Africa. A broad free-trade agreement in place for 25 years has been effectively scrapped by Trump’s tariffs, including a 50% levy on the nation of Lesotho, which the US president belittled in his state of the union address as a “country nobody has ever heard of.”

(…) Trump has effectively decided that so-called soft power, long seen as a way of building alliances between the US and developing nations, is a waste of time and money.

“Every dollar we spend, every program we fund, and every policy we pursue must be justified with the answer to three simple questions,” US Secretary of State Marco Rubio said in his Jan. 15 Senate confirmation hearing. “Does it make America safer? Does it make America stronger? Does it make America more prosperous?” (…)

Across the continent, Trump’s aid cuts and reneged pledges have created a climate of uncertainty and ill will toward the US. Analysts say that Africa may chafe at being reduced to a source of critical minerals — resentment that could come back to haunt the United States if it isn’t the only potential partner. (…)

“What the US is saying very boldly is this is going to be a transactional world,” Nowrojee said. “Even if you are somebody who’s on the poverty line with HIV-AIDS, the question is still the same: What can you do for us?”

The turmoil and abrupt policy changes risk undermining the US’s goal of furthering its interests in the region, and are also creating opportunities for China and an array of other powers competing for the continent’s treasure trove of minerals. That’s a race that the world’s biggest economy was already losing.

(…) other nations have already been stepping up targeted assistance in a bid to build influence on the continent. (…)

The past two months also saw announcements of Chinese commitments in Kenya rail and road networks, and the extension of a $652 million loan by the Export-Import Bank of China for construction of a key Nigerian road. (…)

Much of Africa’s infrastructure has been built with money from China, which accounts for about 13% of the continent’s external borrowings. The US doesn’t feature on a list of major creditors. And while the State Department says that China’s attempts to control African critical minerals poses a threat, in reality US officials realize that they’ve taken an interest in the continent far too late and will struggle to gain a foothold. (…)

China has held a regular economic and political summits with most African countries since 2000, and in 2011 supplanted the US as sub-Saharan Africa’s main trade partner — a position America held for decades. Last year, China did $213 billion of trade with the region. At just under $53 billion, the US lagged behind the United Arab Emirates and India.

If history is anything to go by, Trump is unlikely to turn the relationship around. In his first term, Trump had the least interaction with African presidents of any of the past 12 US presidents, meeting only the leaders of Kenya and Nigeria, according to a study by Judd Devermont, senior director for African Affairs under Biden. During that period, Trump referred to Namibia as “Nambia” and used an expletive to describe African nations.

More recently, US officials were conspicuously absent in Tanzania at the January launch of the World Bank-backed Mission 300 program, a drive worth as much as $85 billion to bring electricity to 300 million Africans by 2030, including through private investment. The event was meant to showcase what Rockefeller Foundation President Rajiv Shah described as “the biggest and most important global development project happening anywhere in the world” — and the world’s largest economy wasn’t there. (…)

Now even Africans hoping for a change of heart from the current US administration are looking elsewhere. South African agricultural lobby groups are urging their government to secure more access to Middle Eastern and Asian markets.

Zambia’s Samuel Maimbo, who’s running for president of the African Development Bank, says the US funding cuts are a “wake-up call” for the continent to diversify its sources of development financing. If the US pivot is permanent, Maimbo says, “we’ll take a different path.” His competitor, Mauritania’s Sidi Ould Tah, says there’s plenty of money available in Gulf Cooperation Council nations to help fund African nations’ development. (…)

For well over a decade the US has trailed China in the contest to secure critical mineral supply chains and broader trade in Africa, an arena where there’s increasing competition from other powers. Now it seems to have taken itself out of the race.

FYI:

• Africa is currently the second most populous continent after Asia 2.

• Africa’s population has grown rapidly, rising from 283 million in 1960 to 1.5 billion in 2024—a more than five-fold increase 3.

• By 2050, the population is projected to reach around 2.5 billion, accounting for about 28% of the global population 3 4 7.

• By 2070, the UN projects Africa’s population could more than double, reaching between 2.7 and 3.7 billion 4.

• By 2100, Africa may have 3.9 billion people, nearly matching Asia’s projected 4.7 billion 2.

• The continent has the highest youth share and the smallest elderly population globally (only 3% aged 65+) 2.

• Life expectancy has increased from 43 years in 1960 to 66 years in 2024, projected to rise to 70 by 2050 3.

• Africa is experiencing rapid urbanization, with cities absorbing 80% of projected population growth. By 2050, two-thirds of Africans are expected to live in urban areas.

• Access to infrastructure, education, and stable governance are key factors in reducing poverty and improving living conditions 4.

  South Africa’s mugging at the White House

From the FT Editorial Board:
There is no white genocide in South Africa, but there has certainly been a mugging in the Oval Office. When Donald Trump forced his guest, South Africa’s President Cyril Ramaphosa, to watch excruciating footage of hate speech and fake evidence of burial grounds of white farmers, he proved that no visitor to the White House is safe from the sort of ritualised humiliation infamously meted out to Ukraine’s Volodymyr Zelenskyy. Leaders of other nations will have to think hard about whether it is worth seeking a once-coveted meeting in the Oval Office if the chances are that they are being set up for an ambush.

Trump’s parade of falsehoods was clearly directed at his Maga base. No one who knows South Africa could take seriously his portrayal of the country. It is a fact that violence is commonplace and that Afrikaner farmers are sometimes the victims. But to say this amounts to a genocide is a lie, one that wilfully ignores the fact that the South Africans who suffer disproportionately from violence are non-white.

For the neutral observer — and potential tourist or investor — South Africa’s reputation was ritually trashed in prime time. The entire optics of the event, in which Trump deferred to white golfers over a Black president and cabinet ministers, evoked nasty echoes of apartheid. (…)

Donald Trump’s slapdown diplomacy Spectacles in the Oval Office are undermining America’s influence in the world, warn foreign policy experts (FT)

America has a new spectator sport: it’s unruly, made for primetime, and the venue is the Oval Office.

In Wednesday’s bout, President Donald Trump was in the red corner, facing off against his South African counterpart Cyril Ramaphosa. The guest had come for talks about trade and investment. He found himself in the diplomatic equivalent of an arm and head choke. (…)

“Champagne corks will be popping in Russia and China,” said Christoph Heusgen, who served as national security adviser to former German chancellor Angela Merkel. “The US is going to massively lose influence in the world as a result of incidents like this.”

America’s international standing is already in decline. According to the latest Democracy Perception Index survey, conducted in April, the share of countries with a positive image of the US is now 45 per cent, down from 76 per cent last year.

The perception of Trump was also negative in 82 of the 100 countries surveyed. By contrast, Russian President Vladimir Putin was viewed negatively in 61 countries and Xi Jinping in only 44. “This spectacle in the Oval Office will only contribute to the [US’s] unpopularity,” said Wertheim. (…)

But the encounter with Ramaphosa was, for many observers, simply puzzling. The US and South Africa had much to discuss: trade and investment, the future of BRICS, the G20 summit that’s being held in Johannesburg in November.

Instead Trump became fixated on false claims of a genocide against white Afrikaner farmers. Bolton questioned whether the claims had been vetted by US experts on South Africa — who would doubtless have cast doubt on their validity — ahead of the meeting.

“If not, what does that tell the other leaders of the world that sheer propaganda, if it sinks into Trump’s brain, suddenly becomes what he talks about in public to the head of a foreign government?” he said.

Middle class? Depends who you ask in Congress

The upper bound of “middle class” in America is often pegged at an annual income of between $150,000 and $250,000, but looking at legislation being drawn up by Republicans in Congress, it seems to be much, much higher.

Some of the proposals for the forthcoming budget raise income cutoff levels to as high as $2.5 million per year.

The House is considering allowing state and local tax deductions of as much as $40,000 for people making up to $500,000, Axios’ Hans Nichols reported this week, a sign that some blue-state Republicans consider $500,000 to be a middle-class income. (…)

The current incarnation of the bill also raises the level at which the estate tax starts being levied from $15 million to $30 million. (…)

Now that home values and retirement balances regularly make their way into seven-figure territory, we’ve solidly entered a world of middle-class millionaires.

Trump’s new bill threatens major tax increases for Canadian companies

U.S. President Donald Trump‘s new tax bill is threatening to significantly hike rates for Canadian corporations and could cost investors holding U.S. securities up to $81-billion in additional taxes over seven years. (…)

The 1,100-page document includes section 899, a tax proposal created as a retaliatory measure against what the U.S calls “discriminatory or unfair taxes” of foreign countries, including Canada’s digital services tax (DST), which was introduced in 2024. (…)

Canadian corporations that receive dividends from U.S. subsidiaries are currently subject to a 5-per-cent withholding rate under the tax treaty between the U.S. and Canada, much lower than the statutory rate of 30 per cent.

But under section 899, Canadian companies would see their tax rate increase by five percentage points each year until it reaches 20 percentage points above the statutory rate, or 50 per cent. It would remain in place until the “unfair tax” is removed.

Similarly, Canadian individuals who own U.S. securities directly are subject to a 15-per-cent withholding tax rate under the current treaty, reduced from the statutory rate of 30 per cent. Under section 899, the withholding rate could ultimately rise to 50 per cent. (…)

Max Reed, a cross-border tax lawyer and principal of Polaris Tax Counsel in Vancouver, said that if the bill is enacted, section 899 would “rupture” the Canada-U.S. tax relationship the same way that Mr. Trump‘s tariffs have impaired the Canada-U.S trade relationship.

“The results would be significant,” Mr. Reed said in an online post to clients. “Virtually all cross-border planning would be turned on its head.”

The tax bill also removes long-standing tax exemptions for governments and related entities. That means organizations such as the Canadian Pension Plan Investment Board and First Nation communities could be required to pay tax.

For Canada’s multinational companies with operations in the U.S., the proposed tax changes will place them at a competitive disadvantage to domestic U.S. companies and to subsidiaries of other foreign multinationals that don’t have similar discriminatory taxes, said Ron Nobrega, a tax partner at Fasken Martineau DuMoulin LLP in Toronto.

“I would assume that at some point, given the fiscal impact on Canadian companies and their competitiveness in the U.S. marketplace, that Canada will have to move away from the digital services tax, will have to repeal it,” Mr. Noberga said in an interview.

Kim Moody, founder of Moody Tax Law in Calgary, agrees that the Canadian government should drop the DST. (…)

Earlier this year, Prime Minister Mark Carney said in his campaign documents that the Canadian government “will not surrender on rules that ensure large multinational companies pay a fair and consistent share of the profits they earn in a country.”

As Mr. Trump‘s legislation makes its way through Congress, debate and analysis of its potential repercussions will continue, said Karl Dennis, KPMG‘s national leader for the U.S. corporate tax team in Canada. But he does expect Canadian individuals and businesses to face higher rates of U.S. tax on their U.S. income. (…)