US Manufacturing Activity Contracted in June for a Fourth Month
The Institute for Supply Management’s manufacturing index edged up 0.5 point last month to 49, according to data released Tuesday. Readings below 50 indicate contraction. A measure of prices paid for raw materials showed slightly faster inflation.
Bookings contracted by the most in three months and have been shrinking for the past five months, likely a reflection of higher tariffs and a general slowdown in the economy. An index of order backlogs fell 2.8 points, the most in a year, to 44.3. Backlogs have contracted a record 33 straight months. (…)
Tepid demand and shrinking order backlogs help explain a faster rate of decline in factory employment. The ISM gauge dropped to a three-month low. It’s also contracted five straight months. (…)
According to the report, for every comment on hiring, there were 3.2 indications of employment cutbacks. That is one of the widest ratios since the ISM began tracking employment comments and shows companies are focused on accelerating headcount reductions due to a lack of clarity on demand.
Nine manufacturing industries reported overall growth in June, led by apparel, petroleum and nonmetallic minerals products. Six contracted, led by textiles and wood products.
Select ISM Industry Comments
“Business has notably slowed in last four to six weeks. Customers do not want to make commitments in the wake of massive tariff uncertainty.” — Fabricated Metals
“The biopharmaceutical space is starting to see more pronounced headwinds: Stock prices have significantly eroded, companies are facing hiring freezes, and so on.” — Chemical Products
“The tariff mess has utterly stopped sales globally and domestically. Everyone is on pause. Orders have collapsed.” — Machinery
“Tariff volatility has impacted machinery, steel and specialized components. Also, potential shortages of skilled labor for construction, maintenance and installation.” — Food, Beverage & Tobacco Products
“Tariffs continue to cause confusion and uncertainty for long-term procurement decisions. The situation remains too volatile to firmly put such plans into place.” — Computer & Electronic Products
“Tariffs, chaos, sluggish economy, rising prices, Ukraine, Iran, geopolitical unrest around the world — all make for a landscape that is hellacious, and fatigue is setting in due to dealing with these issues across the spectrum.” — Primary Metals
“The word that best describes the current market outlook is ‘uncertainty.’ The erratic trade policy with on-again/off-again tariffs has led to price uncertainty for customers, who appear to be prepared to hold off large capital purchases until stability returns. This has resulted in further reductions in customer demand and softening sales for the balance of 2025.” — Transportation Equipment
Meanwhile, higher materials costs remain an issue for producers, the ISM survey indicated. The group’s price measure ticked up to 69.7, near the highest level since June 2022.
The import and export measures also contracted but at a slower pace. The import gauge jumped 7.5 points, the most in five years, after tumbling a month earlier.
S&P Global’s own Manufacturing PMI has different vibes:
The headline index from the report, the seasonally adjusted S&P Global US Manufacturing Purchasing Managers’ Index™ (PMI®), improved to 52.9 in June, from 52.0 in May. The latest reading was the highest since May 2022, and indicative of a solid rate of expansion. It was also the sixth successive month in which the PMI has posted above the critical 50.0 no-change mark.
Manufacturers recorded a first rise in production for four months. Growth was the second-steepest since March 2024, surpassed only by February’s near three-year record.
Firms often linked the rise in production to higher volumes of new orders at their plants, which rose in June as they have done throughout the year to date. Improved domestic demand was noted, with some success in securing new work linked to positive marketing campaigns. International sales also strengthened, with new export orders up modestly and for a second successive month, although growth was partly limited by tariffs.
Tariffs also impacted purchasing and prices during June. Some manufacturers noted that tariff uncertainty had encouraged the building up of inventory and the purchasing of more inputs. The latter rose to the greatest degree in over three years and helped to drive a further monthly increase in stocks of input purchases. Pre-production inventory growth was marked, and the second-fastest in over three years, surpassed only by May’s survey record increase.
There was some notable upward pressure on input prices during June, with inflation accelerating to its highest in just under three years. Firms widely reported the inflationary impact of tariffs on prices, especially for metals like steel. In response, output charges were raised to the greatest degree since September 2022.
US manufacturers are hopeful of a more stable economic environment in the year ahead. Trade uncertainty is expected to dissipate, whilst a generally stronger economy is anticipated to drive sales higher. Overall, confidence with regards to output in 12 months’ time improved to its highest in four months.
A relatively positive outlook also helped to underpin a rise in employment during June. Some pressure on capacity encouraged firms to add to their staffing numbers – backlogs of work increased for the first time since September 2022 during June. Overall, employment increased during June for a second successive month and at the fastest pace for over two-and-a-half years.
The ISM surveys mostly larger companies. It appears from S&P Global’s comments that tariff front running was more prevalent among smaller manufacturers. Both surveys agree on prices however.
(…) in this latest read on activity in the manufacturing sector, there is a case that supply chains remain disrupted, inventory management is fraught with trade-offs and pricing pressure is mounting.
Tariffs are a top-of-mind worry across businesses with nine out of ten purchasing managers mentioning it in their responses. While tariffs are a universally held concern, it is clear that some industries are impacted more than others. In the machinery space, for example, one respondent said the “tariff mess has utterly stopped sales globally and domestically. Everyone is on pause. Orders have collapsed.” The new orders component dropped to 46.4. (…)
Inventories could be serving as a bulwark against the immediate pass-through of higher prices but those defenses are crumbling. The inventories index rose 2.5 points to 49.2; that means firms are still drawing down stockpiled inputs to sustain production, but the pace of that drawdown has slowed. When assessing their customer’s inventories, firms suspect those stockpiles are also too low and being drawn upon more incrementally.
While the extent of tariff-induced inflation remains to be seen, the trend move higher in the ISM manufacturing prices paid index certainly suggests manufacturers are operating in a higher-cost environment. The prices paid index has now risen in nine of the past twelve months and remains the highest of any component above its prior six-month average. As the nearby chart shows, the overall consumer price index tends to track more closely with service-sector price pressure, but early price pressure tends to show up for manufacturers first.
Mexican manufacturers face another marked drop in new orders and rising input prices
Mexico’s manufacturing sector remained firmly in contraction territory throughout June. The latest S&P Global PMI® survey indicated significant declines in total new business and international sales, as clients often postponed orders. In response, goods producers trimmed output volumes, cut input purchases and scaled back employment.
Companies experienced another sharp rise in input prices. Amid heightened competitive pressures, only a small proportion of firms passed higher costs on to clients. The rate of output charge inflation was slight and the weakest in three months.
Canada’s PMI is out today.
Powell Cites Solid Economy in Keeping Wait-and-See Stance on Rates
(…) “We’re simply taking some time,” Powell said Tuesday, repeating his earlier view. “As long as the U.S. economy is in solid shape, we think the prudent thing to do is wait and learn more and see what those effects might be.” (…)
Powell said the Fed would likely have continued to gradually lower rates this year if not for concerns that tariffs might derail the last interval of officials’ recent fight to subdue inflation. (…)
“I wouldn’t take any meeting off the table or put it directly on the table,” he said.
Officials will “be monitoring, particularly, what does show up in terms of inflation or what does not show up,” Powell said. On the labor market, he said, “We watch very carefully for signs of unexpected weakness.” (…)
Where previously the Fed might have needed clear signs of deterioration to justify a rate cut, Powell has hinted that the current environment suggests weak employment data this summer and milder-than-anticipated price increases could be sufficient to put rate cuts back in play. (…)
The Fed leader received a standing ovation from attendees at the opening dinner of the central banking conference on Monday after his counterpart, ECB President Christine Lagarde, said he “epitomizes the standard of a courageous central banker.”
Ed Yardeni:
There is method to President Donald Trump’s madness regarding Fed Chair Jerome Powell. Trump has been hammering Powell almost daily recently because doing so is very effectively hammering the foreign-exchange value of the dollar. Trump wants a weaker dollar to boost US exports and depress US imports. He has said that he favored a weaker dollar many times in the past, but now he has found a way to achieve that: by beating up on Powell.
Trump wants Powell to resign so that he can replace him with one of his loyalists, who will cut interest rates more quickly than Powell. (…)
Powell’s term as Fed chair ends on May 15, 2026. He might then decide to serve out his term as Fed governor through January 31, 2028. If so, then Trump would have to chose one of the current Fed governors as the new Fed chair. In this case, he would most likely pick Fed Governor Christopher Waller, who Trump appointed and who has been publicly lobbying for the job by advocating lowering interest rates sooner rather than later. (…)
Car Sales Cooled in June as Trump Bump Fades Shoppers are no longer rushing to get ahead of tariff-related price increases
(…) Fearing higher prices, many Americans rushed to showrooms. Sales in March and April jumped to their highest number in years; U.S. car buyers bought some 173,000 extra vehicles during those two months in an effort to get ahead of tariffs, according to J.D. Power.
By mid-May, business began to slow, and the sluggishness continued into June.
“Things have tapered off a bit,” said Sean Hogan, vice president of Sierra Automotive Group, an L.A.-area dealership chain. The tariff threat coupled with Memorial Day sales drove many car purchases in the months leading up to June, he said. (…)
Buyers paid on average $46,233 for a new car or truck in June, a $1,400 increase from a year prior, according to research firm J.D. Power. Several automakers have cut back on importing vehicles, while North American auto factories are making fewer vehicles.
In addition to higher duties, trade wars could hobble availability of key materials as has been the case with crucial magnets made with Chinese-supplied rare-earth elements.
If the moves result in significantly tighter supply, vehicle prices could remain high even if demand cools.
“There has really been a triple whammy on the consumer,” Toyota’s Christ said.
Construction Spending Weakens in May High Rates and Elevated Economic Uncertainty Continue to Weigh on Outlays
Construction spending dipped 0.3% in May, the seventh straight monthly decline. The drop largely was broad-based, with total residential and nonresidential outlays pulling back during the month. (…)
May JOLTS: A Dubious Rise in Openings
Job openings unexpectedly jumped to 7.8 million in May, up from 7.4 million in April. While the beat appears out of step with separate data (e.g., Indeed job postings, small business hiring plans, continuing jobless claims) that show the labor market cooling, the favorable May Job Openings and Labor Turnover Survey data suggest the pace of softening remains gradual on trend. The advance in openings nudged the number of job openings per unemployed worker up to 1.07 from 1.03 in April despite the modest rise in unemployment during the month. The near-leveling out of this ratio in recent months suggests a broad-based slackening in the labor market has yet to meaningfully take hold, similar to the unemployment rate having moved sideways for nearly a year now.
JOLTS tracks vacancies at the end of month and thus captured hiring intentions following the significant deescalation in U.S. tariffs on Chinese goods in mid-May. The trade détente helped reinvigorate small business confidence over the month and may have contributed to the better-than-expected increase in job openings. Openings in goods industries most directly affected by tariffs rose over the month, including transportation & warehousing (+60K) and manufacturing (+22K). But the lion’s share of the increase stemmed from a jump in leisure & hospitality services (+279K), which may be hard to sustain given growing signs of consumer spending fatigue. (…)
Eurozone’s Jobless Rate Creeps Higher as Business Uncertainty Abounds Unemployment increases to 6.3% as trade barriers and rising oil prices pose hiring challenges
Unemployment rose to 6.3% in the 20-nation currency area, up from 6.2% in April, the European Union’s statistics agency Eurostat said Wednesday. A consensus of economists polled by The Wall Street Journal had expected the rate to hold at 6.2% in May.
Despite the uptick, the jobless rate is near historically tight levels. April’s level equaled the eurozone’s record-low rate, although it came after March’s level had been revised higher to 6.4%. (…)
The European Central Bank expects unemployment to average 6.3% in 2025, according to its latest projections. However, it said there could be a renewed decline in the rate from early next year should economic growth accelerate as it anticipates.
Trump Said Trade Deals Would Come Easy. Japan Is Proving Him Wrong. Difficult talks with many nations cast doubt on next week’s deadline; ‘We can do whatever we want,’ Trump said.
(…) After slapping so-called reciprocal tariffs on dozens of countries on what Trump dubbed “Liberation Day”—then putting them on hold—the White House vowed to strike a spate of trade deals before July 9. The standoff with Japan shows how hard that is turning out to be.
Administration officials attempting to negotiate multiple deals have at times contradicted one another about goals and timelines, and Trump has further muddied the picture with references to sending letters. Adding to the uncertainty is an appeals court hearing set for late July over the legality of the emergency authority Trump used to impose the so-called reciprocal tariffs.
Even the tariff deadline is in question. On Friday, after Treasury Secretary Scott Bessent indicated some countries could get an extension, Trump injected further uncertainty. “We can do whatever we want,” he said in a news conference. “We can extend it, we can make it shorter. I’d like to make it shorter.” On Tuesday, Trump said he’s “not thinking about” extending the deadline. (…)
Thus far, the administration has cut only a limited trade agreement with the U.K. and struck a tariff truce with China. Hanging over the entire process is Trump’s earlier promise to restore the Liberation Day tariffs on countries that don’t do deals—potentially triggering another round of market chaos. (…)
In April, Peter Navarro, Trump’s senior trade and manufacturing adviser, said the administration could land 90 deals in 90 days. After the U.S. struck the limited agreement with the U.K. in early May, Trump said he believed the deals would start flowing at a rapid pace.
Administration officials looked to Japan to keep the momentum going. (…)
The U.S. complicated its negotiating position with Japan and other countries by increasing tariffs as talks progressed, such as in June when Trump doubled global steel tariffs with no warning for trading partners. Other so-called national-security tariffs on products such as lumber, semiconductors and critical minerals remain in the planning process, making some nations hesitant to strike deals before they are unveiled. The administration’s bellicose approach also became a political issue in some countries it was negotiating with, encouraging resistance to the U.S. rather than cooperation. (…)
Trump’s reciprocal tariffs for Japan had been set at 24% before the pause—far above the roughly 1.5% average tariffs that had been in place, according to the Richmond Fed. Besides seeking a reduction to those, Japanese officials have said repeatedly they cannot agree to any deal that doesn’t reduce industry-specific tariffs, particularly after the U.K. received some relief from steel and auto tariffs. In June, after another round of talks, Akazawa said all U.S. levies must be reduced in any deal. (…)
In June, Prime Minister Ishiba flew to Canada for a leadership summit of the Group of Seven industrialized nations hoping to force a compromise, but a meeting between Trump and him yielded no breakthrough. (…)
The two sides appear to remain far apart on key issues like the auto tariffs, said people with knowledge of the talks. As of late June, they hadn’t even decided whether any deal would include those levies or focus only on the reciprocal tariffs.
An official from Greer’s office told The Wall Street Journal the administration is prioritizing negotiations with trading partners who have presented more serious offers than Japan has. (…)
Many of those nations are balking at being forced to choose between the U.S. and China, making any deals on those issues unlikely in the short term. One Asian economic official said the U.S. demands would be difficult to meet, given that the export-led economies in the region are so entwined with both the U.S. and China. (…)
European Commission President Ursula von der Leyen pushed back, saying certain topics legislated by the EU are “absolutely untouchable.” (…) “But where it is the sovereign decision-making process in the European Union and its member states that is affected, this is too far,” she said.
Even some Republicans are growing frustrated with the White House’s negotiating strategy. During a recent Senate Appropriations Committee hearing, Sen. John Kennedy (R., La.) asked, “Are you or are you not pursuing reciprocity?” when Lutnick said he wouldn’t agree to a hypothetical deal with Vietnam that would cancel out all tariffs and trade barriers in both countries.
Kennedy later said: “I was confused more after the hearing than before about their negotiating strategy here.”
ING:
(…) Despite trade talks, the US is not pursuing reciprocity – tariff revenue is a strategic goal to finance at least part of the Big Beautiful Bill Act. Commerce Secretary Howard Lutnick has made it clear: zero-for-zero deals are off the table. (…)
Despite potential trade deal announcements, the trade war and the reshuffling of trade flows are far from over. With Canada introducing a new tariff quota (TRQ) on steel mill product imports from non-free trade agreement (FTA) partners as of 27 June, redirecting goods via third countries is becoming increasingly difficult. China has once again expressed strong discontent with other countries entering trade agreements with the US that it perceives as undermining its interests. The Chinese Ministry of Commerce warned that it would take “firm, resolute countermeasures” if such deals come at China’s expense, calling the US strategy of reciprocal tariffs “unilateral bullying” that disrupts the international trade order.
We have warned before that the US tariff strategy could prompt global concessions and isolate China, with countries targeted by potential US tariff action making significant concessions, ultimately improving trade relations between the US and the rest of the world, but at the expense of China.
As China is perceived as the largest geopolitical threat to the US administration, there is a huge possibility that American policies will focus more on indirect trade impediments, including investment, social media, and technology cooperation, pressuring companies to reduce their business with China if they wish to invest in the US. This places both Asian/Chinese trade partners and US allies in a difficult position.
While many trading partners have launched anti-dumping investigations into some of China’s trade practices, the Chinese market is even more important to ASEAN nations, African, Latin American countries and even Germany in terms of imports than the US market. Many countries rely on Chinese components and raw materials, and the flexing of China curbing rare earth exports shows that there is no easy way out when choosing between the US and China.
The US does not have all the cards…and cannot do whatever Trump wants.
Meanwhile
Tariff Cash Is Rolling In: June’s Record Take Spikes by $20.5 Billion Year-over-Year
(…) This $20.5 billion is additional revenues, compared to a year ago. If tariffs bring in an additional $20.5 billion a month going forward, it would amount to about $250 billion a year in additional revenues.
This money flowing into the Treasury has been paid by US-based importers.
Whether or not, and to what extent tariffs can be passed on to consumers is unpredictable and depends on whether or not companies will have the pricing power to raise prices without crushing their sales – they had this pricing power during the free money era in 2021 and 2022 but then lost it as the free money ran out – so we’ll be watching this closely:
In 2024, PPI-Core Goods inflation was 2.4%. It averaged 3.2% in February-March, 3.9% in the last 2 months.
The Meh Tax Bill That Has to Pass The Senate version adds tax permanence and more Medicaid reform.
The WSJ Editorial Board:
The Senate passed President Trump’s tax bill on Tuesday, to exaggerated glee and consternation. Republicans say it is the start of a new economic golden age, while Democrats call it spendthrift and cruel. They’re both wrong. The bill had to pass to avoid a $4.5 trillion tax hike next year when the 2017 reforms expire, but as a reform of the post-Covid welfare state it is a disappointment.
The bill’s best news is the economic certainty it will provide businesses. It makes permanent the 2017 reform’s lower marginal tax rates, 20% deduction for pass-through businesses, increased estate-tax exemption and immediate expensing for capital investment and research and development. It also provides full expensing for new factories through 2028.
Although largely extending the tax status quo, the bill could boost growth at the margin by giving businesses the confidence they need to make long-term investments. Permanence also means Democrats can’t leverage the future expiration of the tax cuts to extract more spending—or tax hikes—from Republicans.
On another positive note, the bill ends the Inflation Reduction Act’s tax credits for wind and solar projects that begin construction later than a year from now, and eliminates the electric-vehicle credits. In return, Republicans from windy Great Plains states extracted a two-year extension of the IRA’s biofuels tax credit. Call it the Hawkeye Heist.
One bad development is that MAGA-era Republicans are imitating Democrats in using the tax code for industrial and social policy. The bill boosts the Chips Act tax credit for semiconductor plants to 35% from 25%. A new auto-loan interest deduction for cars assembled in the U.S. is a sop to a single industry and more debt-financed consumption.
Other examples include new “Trump accounts” with $1,000 deposits for each newborn from 2025 to 2028 and a tax exclusion for income from tips (limit: $25,000) and overtime ($12,500). The exemptions are set to lapse after 2028, which reduces their cost on paper (roughly $150 billion). (…)
Savings from food stamps and Medicaid come entirely from policy tweaks that reduce waste and abuse such as stricter eligibility checks. The bill attempts to crack down on state scams that expand food-stamp eligibility and use provider taxes to launder more federal Medicaid matching funds. It also includes modest Medicaid work requirements for adults covered under ObamaCare and makes it harder for states to get waivers from food-stamp work requirements. (…)
The bill caps graduate loans ($100,000 for masters degrees and $200,000 professional ones), which will make it harder for colleges to raise tuition to extract more loan subsidies. The bill also rolls back Obama repayment plans that provide de facto loan forgiveness.
The bill’s other main upside is $150 billion for defense, though some in the White House want to use this bump to reduce defense spending in future years. The defense boost is also less than the bill’s $170 billion for homeland security and immigration enforcement, which is excessive given that border crossings are now at a trickle. The astonishing $45 billion for the border wall could be better spent on new weapons systems and ships.
The House planned to take up the Senate bill as we write this, and the Members might as well pass it and live to fight another day. The bill is more than anything the triumph of GOP political necessity, and the end of tax uncertainty is its main virtue.
China Is Quickly Eroding America’s Lead in the Global AI Race Chinese AI models are becoming more popular worldwide, testing American superiority
In Europe, the Middle East, Africa and Asia, users ranging from multinational banks to public universities are turning to large language models from Chinese companies such as startup DeepSeek and e-commerce giant Alibaba as alternatives to American offerings such as ChatGPT.
HSBC and Standard Chartered have begun testing DeepSeek’s models internally, according to people familiar with the matter. Saudi Aramco, the world’s largest oil company, recently installed DeepSeek in its main data center.
Even major American cloud service providers such as Amazon Web Services, Microsoft and Google offer DeepSeek to customers, despite the White House banning use of the company’s app on some government devices over data-security concerns.
OpenAI’s ChatGPT remains the world’s predominant AI consumer chatbot, with 910 million global downloads compared with DeepSeek’s 125 million, figures from researcher Sensor Tower show. American AI is widely seen as the industry’s gold standard, thanks to advantages in computing semiconductors, cutting-edge research and access to financial capital.
But as in many other industries, Chinese companies have started to snatch customers by offering performance that is nearly as good at vastly lower prices. A study of global competitiveness in critical technologies released in early June by researchers at Harvard University found China has advantages in two key building blocks of AI, data and human capital, that are helping it keep pace.
The competition, some industry insiders say, has set the world on the path toward a technological Cold War in which countries will have to decide to align with either American or Chinese AI systems.
“The No. 1 factor that will define whether the U.S. or China wins this race is whose technology is most broadly adopted in the rest of the world,” Microsoft President Brad Smith said at a recent Senate hearing. “Whoever gets there first will be difficult to supplant.” (…)
U.S. lawmakers recently introduced a bipartisan bill that would ban federal agencies from using AI developed in China.
As the competing systems become more closed off to each other, industry insiders say AI models will have freer rein to lock users inside bubbles of misinformation and propaganda. Further down the line, a breakdown in U.S.-China cooperation on safety and security could cripple the world’s capacity to fight future military and societal threats from unrestrained AI.
The fracturing of global AI is already costing Western makers of computer chips and other hardware billions in lost sales. (…)
Adoption of Chinese models globally could also mean lost market share and earnings for AI-related U.S. firms such as Google and Meta.
This year, privately held OpenAI has been making a strong push to expand overseas, opening offices in Europe and Asia.
In a public post on Substack on June 25, OpenAI wrote that Zhipu AI, a Chinese AI upstart, was making inroads helping Southeast Asian, Middle Eastern and African nations build out their AI infrastructure.
OpenAI said the Chinese startup’s goal was to “lock Chinese systems and standards into emerging markets before U.S. or European rivals can,” and claimed its leadership frequently engaged with Chinese Communist Party officials. OpenAI has a similar business line selling AI solutions to governments around the world.
“We want to make sure democratic AI wins over authoritarian AI,” OpenAI Chief Executive Sam Altman said in May.
While American AI companies give priority to the pursuit of major breakthroughs in a race to build artificial superintelligence, China’s AI industry is focused far more on using AI to build practical applications—an emphasis that could help it win new users quickly.
Leading Chinese AI companies—which include Tencent and Baidu—further benefit from releasing their AI models open-source, meaning users are free to tweak them for their own purposes. That encourages developers and companies globally to adopt them.
Analysts say it could also pressure U.S. rivals such as OpenAI and Anthropic to justify keeping their models private and the premiums they charge for their service.
On Latenode, a Cyprus-based platform that helps global businesses build custom AI tools for tasks including creating social-media and marketing content, as many as one in five users globally now opt for DeepSeek’s model, according to co-founder Oleg Zankov.
“DeepSeek is overall the same quality but 17 times cheaper,” Zankov said, which makes it particularly appealing for clients in places such as Chile and Brazil, where money and computing power aren’t as plentiful.
Developers have created more than 100,000 derivative models based on Alibaba’s flagship open-source AI model, Qwen, Alibaba said.
Abeja, a Tokyo-based AI startup, chose Qwen over similar products from Google and Meta last fall when asked to build a series of customized models for Japan’s Ministry of Economy, Trade and Industry.
At the University of the Witwatersrand in South Africa, research managers chose DeepSeek for a pilot grant-writing project because it is open-source and can be used offline, keeping the university’s data safe, according to Taariq Surtee, the university’s head of e-research.
A few years ago, the American and Chinese AI sectors were tightly intertwined.
In 2018, U.S. investors participated in deals covering around 30% of the $21.9 billion in funding for the Chinese AI sector, according to PitchBook. Elite Chinese students flooded into American universities and Silicon Valley companies.
Today, U.S. venture-capital investment in Chinese AI companies has largely dried up. Chinese nationals are finding it harder to study and work in the U.S.
The less dominant American AI companies are, the less power the U.S. will have to set global standards for how the technology should be used, industry analysts say. That opens the door for Beijing to use Chinese models as a Trojan horse for disseminating information that reflects its preferred view of the world, some warn.
While the open-source version of DeepSeek deployed by some institutions and researchers isn’t censored, the app’s consumer version produces censored answers on topics considered sensitive by the Communist Party, such as ethnic assimilation campaigns in Xinjiang and Tibet.
The U.S. also risks losing insight into China’s ambitions and AI innovations, according to Ritwik Gupta, AI policy fellow at the University of California, Berkeley.
“If they are dependent on the global ecosystem, then we can govern it,” said Gupta. “If not, China is going to do what it is going to do, and we won’t have visibility.”
BlackRock Sees Growing Client Push to Diversify From US Assets
More than 20% of the firm’s clients said in a recent survey that they were looking at trimming their exposure to US markets and the dollar, said Elaine Wu, head of Asia-Pacific investment and portfolio solutions, at a media briefing in Hong Kong on Wednesday.
“There was a pretty good amount of people that were looking to Asia equity positioning,” said Wu, although she added that other clients remain interested in the US and those cutting back could return. (…)
Sales of risky European corporate debt surged to their highest ever level in June, as lowly rated companies take advantage of a capital flight out of US markets on fears over the fallout from President Donald Trump’s trade tariffs. (…)
June also saw the greatest number of deals on record at 44, according to PitchBook data. (…)
European high-yield bond funds, meanwhile, have posted seven straight weeks of inflows, according to Bank of America data. (…)
High-yield spreads — the extra yield over government debt that risky borrowers must pay — have dropped from more than 4 percentage points in April to 3.1 percentage points at the end of June, according to Ice BofA data.
“You can print pretty high-risk stuff at very attractive rates at the moment. The market is running red hot,” said one high-yield bond investor. “There are inflows coming into our market as people are looking to diversify away from the US.” (…)
“There’s a huge amount of capital flowing into the asset class . . . and we are starting to see larger managers focus more on Europe,” said Thompson. (…)
Paramount Settles Trump’s ‘60 Minutes’ Suit for $16 Million
Paramount Global reached a settlement with President Donald Trump over a lawsuit that alleged election interference by the company’s CBS news network when it showed two different versions of a 60 Minutes interview with then-Vice President Kamala Harris in October.
Paramount agreed to pay $16 million, including plaintiff’s fees, according to a statement from the company. What’s left will go to a future presidential library. Trump had sought damages of $20 billion. No money will be paid to him directly.
The settlement doesn’t include an apology. The network has agreed to release transcripts of presidential candidate interviews in the future. Although officially unrelated, the settlement is widely viewed as critical for Paramount to gain approval from federal regulators for its pending merger with Skydance Media. (…)
Shari Redstone wanted to know what 60 Minutes was going to say next about President Donald Trump.
The CBS newsmagazine aired two segments involving Trump on April 13 that angered the president, one on his plans to take over Greenland and another an interview with Ukraine President Volodymyr Zelenskiy that discussed US policy in the region. Trump immediately lashed out on social media, saying 60 Minutes should “pay a big price” for its frequent reporting on him, which he called “fraudulent.”
Following Trump’s post, Redstone, who is the chair of CBS’ parent company Paramount Global, had a conversation with CBS Chief Executive Officer George Cheeks to discuss 60 Minutes’ upcoming slate of stories about the president. Redstone indicated which ones she thought were fair and those that could be problematic, according to CBS employees Bloomberg spoke with.
60 Minutes didn’t change its plans based on her feedback, the employees said. The network aired a segment Sunday about Trump’s cuts to the National Institutes of Health. Still, Executive Producer Bill Owens announced to his staff last week that he’s leaving, citing corporate interference at the most-watched TV news program in the US. (…)
Paramount is also waiting for the Federal Communications Commission to approve its merger with Skydance Media, a deal that includes a $2.4 billion payment for the Redstone family’s holding company. FCC Chairman Brendan Carr, who was appointed to that position by Trump, has been a staunch ally of the president. (…)
While the merger hangs in limbo, Redstone’s final months as a media mogul are engulfed in controversy, as the Boston-bred lawyer is caught between a defiant news division and a president who has sought to punish media companies he sees as disagreeing with him. (…)