China’s GDP Beat Masks Fragile Demand, Sparking Outlook Concerns
Gross domestic product expanded 5.2% in April-June from a year earlier, after a gain of 5.4% in the first quarter, according to data released Tuesday by the National Bureau of Statistics. (…)
Analysts at Morgan Stanley expect GDP growth to slip below 4.5% in the second half of the year due to “payback of front-loading, weaker global trade amid renewed tariff escalation, and continued deflation loop.”
Industrial output rose 6.8% in June from a year earlier, faster than the 5.6% expansion forecast by economists. Retail sales increased 4.8% last month, worse than economists’ projection. (…)
Manufacturing output surged 7.4% in June from a year ago, the fastest growth in three months, driving the overall improvement in industrial production.
Economists had expected retail sales growth to pull back in June after a strong gain in May, but the slump was far deeper than anticipated.
In June, sales of beverages, cigarettes and alcohol as well as cosmetics all declined from a year ago, while catering services grew far slower. That dragged on overall consumption even as purchases of home appliances, communications equipment and furniture continued to soar thanks to government subsidies.
Consumption contributed just over 52% of economic growth in the second quarter, according to the NBS, accounting for a bigger share relative to the start of 2025 but down from more than 60% a year ago.
The GDP deflator — a broad measure of prices across the economy — declined for the ninth consecutive quarter, extending the longest streak since the quarterly data began in 1993. (…)
Despite a 24% slump in shipments to the US in the second quarter, overall exports still rose, while fiscal stimulus propped up domestic demand and construction. (…)
Central and local authorities still have more than 7 trillion yuan ($976 billion) of bonds that will be issued in the second half of the year to help support economic growth, according to an earlier state media report. (…)
Chinese President Xi Jinping called for the acceleration of a “new model” for property development, advocating a more measured approach to urban planning and upgrades while falling short of some investors’ expectations for more aggressive policies. (…)
While Tuesday’s announcement lacked detailed support measures that some investors were hoping for, it’s not uncommon for China’s top leaders to set a general policy direction and task lower-level officials with working out specifics to be revealed in the weeks and months that follow. (…)
Official data Tuesday showed a weakening home market in June, with new-home prices falling the most in eight months. (…)
Preliminary figures for June show “a clear trend of market weakening,” UOB Kay Hian analysts Jieqi Liu and Damon Shen wrote in a report last week.
All four tier-1 cities saw their used-home values drop at least 0.5% from a month earlier. Market watchers have pinned recovery hopes on the top cities, as sentiment worsens in smaller areas.
Residential sales slumped 12.6% on year in June, the sharpest decline this year, according to Bloomberg calculations based on separate data. Real estate investment tumbled 11.2% in the first six months, marking a new low since the start of the pandemic.
Nvidia Wins OK to Sell AI Chip to China Again After CEO Meets Trump Jensen Huang’s case proves persuasive as U.S. agrees to grant licenses for H20 chip
Nvidia said it has received assurances from the Trump administration that it can sell its H20 artificial-intelligence chip in China, days after Chief Executive Jensen Huang met President Trump.
The administration’s move marks a turnabout after the Commerce Department restricted sales of the chip in April, costing Nvidia billions of dollars. The news came during a visit by Huang to Beijing, where he was meeting senior officials. “I’m very happy,” he told reporters.
(…) Nvidia still can’t sell its most-advanced chips to Chinese customers. (…)
In addition, Huang said Nvidia has developed a new AI chip for China that he said would be useful for factory automation and logistics. The chip is built on the Blackwell architecture—Nvidia’s most advanced on the market—but is downgraded in some features to address U.S. officials’ concerns about exports to China, people familiar with the chip said.
The U.S. decision to allow more Nvidia chips to flow to China again was viewed in Beijing as a gesture of good faith in trade talks, said people close to official thinking. Access to chips and advanced technology has been a main priority for Chinese negotiators. (…)
This week, China granted conditional approval to a $35 billion acquisition by U.S. chip-design software company Synopsys that had been held up by Beijing’s review since last year. (…)
Huang told Trump that Nvidia should be allowed to sell its technology freely to most parts of the world so American companies can dominate AI instead of Chinese companies, the people said. The CEO also discussed similar topics with Commerce Secretary Howard Lutnick, they said. (…)
In May, Huang called U.S. export control policy a failure. (…)
Europe Draws Up Retaliatory Tariffs for U.S. Goods in Case No Trade Deal Is Reached Aircraft and booze are among imports targeted as EU debates how to respond to Trump’s latest trade threats
(…) The new EU list, circulated to the bloc’s 27 member states and viewed by The Wall Street Journal, covers American imports that were together valued at roughly $84 billion last year.
The list covers about $77 billion worth of industrial imports, including aircraft, machinery, automotive products, chemicals, plastics and medical devices. It also covers about $7 billion worth of agricultural and food products, such as fruits and vegetables, wine, beer and spirits.
European officials are debating what would trigger those tariffs, and whether to go further by preparing additional measures that could put levies or other restrictions on American services, not just physical goods. (…)
One way to demonstrate the bloc’s power, some European officials argue, is through an untested legal tool known as the anticoercion instrument, which could allow for levies on American services, among other measures. U.S. services exports to the EU include financial services and digital products such as online advertising. It is unclear exactly how the EU might wield the instrument in a trade fight with the U.S.
Other options under the anticoercion instrument include restricting American companies’ intellectual property rights in Europe or making it harder for them to participate in public tenders. European Commission President Ursula von der Leyen suggested in April that the EU could consider a levy on American tech companies’ digital advertising revenue. (…)
“There’s an old saying, if you want peace, you have to prepare for war,” Danish Foreign Minister Lars Lokke Rasmussen said Monday about EU trade preparations. “I think that’s where we are.”
Delta Strips Engines Off New Airbus Jets to Overcome US Shortage
Delta Air Lines Inc. has been cannibalizing new Airbus SE jets in Europe by stripping off their engines and using them to get grounded planes in the US back into service, as it seeks to overcome a shortage and avoid aircraft import tariffs.
The airline has been taking US-made Pratt & Whitney engines off new European-built A321neos and shipping them back to the States without any duties, according to people familiar with the matter. The engine-less aircraft, meanwhile, remain in Europe.
Delta has parked some older A320neo-family jets because of issues with their original turbines. These aircraft can be fitted with engines originally built in the US and installed on the new aircraft, said the people, asking not to be identified discussing confidential information.
The carrier has been unable to fly the new planes because their seats haven’t yet been certified by regulators, said one of the people with knowledge of the matter. These planes can potentially be sent tariff-free to the US at a later date, once trade talks between the US and the European Union are resolved.
Delta Chief Executive Officer Ed Bastian confirmed that the airline was shipping a “very small” number of new engines to the US. Asked if Delta planned to keep pulling engines from new planes, Bastian said Delta “will continue that.”
“We are not planning to pay tariffs on aircraft deliveries,” Bastian said in an interview this week as Delta reported earnings, echoing his previous remarks. He said tariffs were partly responsible for the planes not being imported into the US.
Aircraft built in Europe currently attract 10% tariffs as part of President Donald Trump’s trade war. Delta has vowed that it won’t absorb the cost of import duties on aircraft, and the company has previously found ways to circumnavigate tariffs. Earlier this year, it flew new Airbus long-haul jets through Japan before bringing them to the US to skirt import costs. (…)
SENTIMENT WATCH
ALL IN!
Trump’s dueling economic realities will inevitably collide
President Trump seems to think financial markets are perfectly happy with his tariffs and open to his more aggressive approach, because stocks keep hitting all-time highs.
Meanwhile, financial markets think there’s absolutely no chance Trump will go ahead with the tariffs he’s threatened, and therefore … keep bidding assets up to all-time highs.
The two beliefs can’t co-exist for much longer, and the disconnect can’t end well, either.
At some point between now and Aug. 1, the U.S. will or will not strike trade deals, and will or will not adjust tariff rates accordingly.
- That may seem a painfully obvious binary, but almost six months of trade war have taught the world it’s not quite as simple as it looks.
- “We have given up speculating about any longer-term strategies in these trade negotiations,” ING’s global head of macro Carsten Brzeski wrote Monday. (…)
This time is different.
- The tariffs are higher, the language is angrier and the pushback from the stock and bond markets is mostly missing.
- There’s also the realization that Trump’s trade policy may contradict his industrial policy, but there’s no real plan to change either.
If you want a manufacturing renaissance and AI dominance, putting (or raising) tariffs on the steel, aluminum and copper you need to build the factories and data centers would seem to be your last move, not your first.
- Trump did all three in recent weeks, even though the U.S. gets anywhere from a quarter to half of its consumptions via import.
- “The US is operating under a “‘zero sum’ framework” that doesn’t acknowledge the benefits of trade, per a recent note from Naomi Fink, chief global strategist at Japan’s Nikko Asset Management.
- That framework “involves inflicting losses on trade partners, even if it is not the optimal result for the US itself,” Fink said.
Markets may keep pushing higher, but the voices saying they shouldn’t are growing louder.
- “(We) are increasingly convinced that tariff risks have not been appropriately discounted in financial asset prices,” Corpay chief market strategist Karl Schamotta wrote over the weekend.
- “Stock markets look too high, foreign exchange trading ranges too narrow, and measures of background volatility too low, given the material threat that looms over the world economy.”
- His caution echoes the like of JPMorgan Chase CEO Jamie Dimon, who warned last week about “complacency in the market.”
“Stock and bond market rallies, low inflation, trillions in historic investment commitments, and strong wage growth all prove that the Administration’s America First agenda of deregulation, tariffs, and the pro-growth tax cuts of The One, Big, Beautiful Bill is paying off,” White House spokesman Kush Desai said in a statement.
“President Trump remains committed to building on these successes by negotiating – or simply setting – new trade deals that will level the playing field and create new export opportunities for American workers, farmers, and businesses.”
Aug. 1 is a little more than two weeks away.
- “A moment of reckoning is approaching, whether in markets themselves, or in the White House, when the true impact of America’s turn toward isolationist policies hits home,” Corpay’s Schamotta said.
- “We don’t know who will blink, but someone will.”
Labubu Craze to Spur 350% Surge in Profit, China’s Pop Mart Says
Chinese toymaker Pop Mart International Group Ltd. expects the soaring global popularity of its Labubu plush toys to drive a threefold increase in first-half revenue and an even bigger boost to profit.
Labubu — a plush, pointy-eared, serrated-tooth monster — is the center of a global collectibles craze, with celebrities like Rihanna and BlackPink’s Lisa flaunting them. Last month, a human-sized toy sold for $150,000 at an auction in Beijing.
What began as an obsession among young Chinese has exploded internationally, with fans lining up for hours to get their hands on the cult toys. The surging popularity of Labubus has turned Pop Mart into a more than $40 billion company and its Hong Kong-listed shares have jumped 588% over the past year. (…)
We have seen similar movies many times before.
Pop Mart went from $7 billion to $42 billion in about a year. Here’s the story courtesy of J.L. Bernstein:
The story of the Labubu dolls is there’s a guy who’s an artist around 2015. He’s in the Netherlands. He gets inspired to create like a toy world. So like a character world based on where he’s at in the Netherlands. So he designs these ugly cute doll things in 2015.
Not a lot happens from there. In 2019, four years later, he partners with this company PopMart to sell them. And PopMart was started about a decade ago because this guy Wang Ning had this insight which is he thought of this trend → kids toys for adults is going to be a big thing.
He creates this store to really take advantage of this business mechanic called blind boxes where you buy the box but you don’t know what’s inside. Similar to Pokemon card packs. So this mechanic, which I think they call like the gotcha mechanic, creates a lot more spending. People will keep buying because it’s a little bit like a treasure hunt or even gambling.
Pop Mart was already doing okay – they went public in 2020, stock doubled first day, solid $7 billion company selling various collectibles. But then came the hurricane.
First, Rihanna gets spotted in 2023 casually wearing a Labubu clipped to her bag. Organic, unsponsored. Just Rihanna being Rihanna with a weird doll hanging off her purse.
Meanwhile in Thailand, people start thinking these ugly dolls are good luck charms. Kinda like spiritual protectors (Wind Chime type vibe)
Going nuclear: Lisa from Blackpink (if you don’t know Blackpink, ask your teenage daughter – they’re basically the Beatles for Gen Z). She goes to Thailand, tries to buy some Labubu dolls, they’re sold out. The salesperson tells her it’s impossible to get them.
Wrong thing to say to a pop star.
Lisa becomes obsessed. Starts collecting them. Then in April 2024, she posts on Instagram hugging a 2-foot tall Labubu.
That photo? Pop Mart stock is up 600% since then. One. Flippin. Photo. (…)
Pop Mart found the perfect formula: gambling mechanics + artificial scarcity + celebrity endorsement + adult regression + status signaling. They turned a $10 piece of plastic into a $44 billion company.
It’s brilliant. It’s insane. It’s unsustainable.
The pattern is hilariously consistent:
Cabbage Patch Kids: Peak $600M → Crashed to $50M (down 92%)
Beanie Babies: Peak $1.4B → Worthless (down 96%)
Pokemon Cards: Actually came back 20 years later (the exception)
Stanley Cups: Remember when people were fighting over those? Your wife or girlfriend has two different colors in the cabinet right now.
Cabbage Patch Kids, Beanie Babies, Pokemon cards, Stanley cups – they all peaked at around $1.6 to 2 billion in sales.
Labubu only did about $700 million last year. So on that scale, Labubu is actually still small compared to those peaks.
ARMAGEDDON WATCH
Donald Trump asked Volodymyr Zelenskyy if Ukraine could hit Moscow, say people briefed on call US president encouraged Ukrainian leader to step up deep strikes on Russia
Donald Trump has privately encouraged Ukraine to step up deep strikes on Russian territory, even asking Volodymyr Zelenskyy whether he could strike Moscow if the US provided long-range weapons, according to people briefed on the discussions. (…)
While it remains unclear whether Washington will deliver such weapons, the discussion underscores Trump’s deepening frustration with Russian President Vladimir Putin’s refusal to engage in ceasefire talks proposed by the US president, who once vowed to resolve the war in a day.
The conversation with Zelenskyy on July 4 was precipitated by Trump’s call with Putin a day earlier, which the US president described as “bad”. (…)
“Volodymyr, can you hit Moscow? . . . Can you hit St Petersburg too?” Trump asked on the call, according to the people.
They said Zelenskyy replied: “Absolutely. We can if you give us the weapons.”
Trump signalled his backing for the idea, describing the strategy as intended to “make them [Russians] feel the pain” and force the Kremlin to the negotiating table, according to the two people briefed on the call.
A western official, who had been informed of the call, said the conversation reflected a growing desire among Ukraine’s western partners to supply long-range weapons capable of “bringing the war to Muscovites” — a sentiment echoed privately by American officials in recent weeks. (…)
During a meeting in the Oval Office with Nato secretary-general Mark Rutte on Monday, Trump announced a plan to provide Ukraine with Patriot air defence systems and interceptor missiles but did not disclose any shipments of other weapons systems. (…)
Russia has repeatedly threatened to attack western targets in response to western supplies of advanced weaponry to Ukraine, but has yet to do so.
After Ukraine first used the Atacms system to strike military targets inside Russian sovereign territory last November, Putin said the war had “taken on elements of a global nature” and responded by test-firing the Oreshnik, an experimental intermediate-range missile, on the city of Dnipro.
The Russian president said Moscow was entitled to “use our weaponry against military facilities of countries that allow their weapons to be used against our facilities, and in the case the aggressive action escalates, we will respond just as decisively and symmetrically”.
Following the Atacms strikes, Russia also published an updated version of its nuclear doctrine that lowered the threshold for potential use. The changes could envision a Russian nuclear first strike against the US, UK and France — Nato’s three nuclear powers — in response to Ukraine’s strikes on Russia with weapons such as the Atacms and Storm Shadow missiles.
Washington has at times warned Ukraine off using them to strike deep inside Russia, but those constraints appear to be loosening now. (…)