Business
Donald Trump carried out his threat to impose tariffs of 25% on most goods imported to the United States from Canada and Mexico (he gave the car industry a one-month reprieve). He also increased the tariffs America imposes on Chinese exports from 10% to 20%, which are in addition to US trade duties that China is already subjected to. The American president warned that he would soon also introduce “reciprocal tariffs” on any country with “unfair” trade imbalances. Canada’s prime minister, Justin Trudeau, said the tariffs were “a dumb thing” and imposed retaliatory levies on a range of American products, including peanut butter. China also applied counter-measures and Mexico said it would react soon.
GDP deflator
Mr Trump says his tariffs policy will bring only “a little disturbance” to the American economy. Markets think otherwise. The S&P 500 and NASDAQ Composite fell sharply and are back to where they were when Mr Trump was elected, wiping out their gains since November. The Stoxx Europe 600 and German DAX also fell heavily. Various companies, including Target, warned that the tariffs would lead to higher costs and hurt profits. Meanwhile, some economists weighed the risk of recession from the trade war.
The European Central Bank cut interest rates again, reducing its deposit facility by a quarter of a percentage point, to 2.5%. The bank said the “disinflation process is well on track.” But with the euro area’s economy already flatlining before America’s new tariffs came into effect, markets think it was the last rate cut for a while.
Mr Trump suggested that TSMC, based in Taiwan and a global powerhouse in chipmaking, would avoid tariffs, after it decided to invest an extra $100bn in America and open three new factories in addition to the one that is set to start full production this year. TSMC describes it as the single largest foreign direct-investment ever in America. Mr Trump used the announcement to call for ditching Joe Biden’s CHIPS Act, arguing that the subsidies it provides are a “horrible, horrible thing”.
Anthropic, the startup behind the Claude generative artificial-intelligence models, raised $3.5bn in its latest round of fund-raising, tripling its valuation to $61.5bn. Anthropic is backed by Amazon and Google as well as venture capitalists. It recently released Claude 3.7 Sonnet, which it describes as the “first hybrid reasoning model on the market”, allowing users to choose when it should answer normally and when it should “think” longer before answering.
A federal judge rejected Elon Musk’s request for a preliminary injunction to stop OpenAI’s attempt to change its status from non-profit to for-profit, but said she would fast-track his case this year. Mr Musk was one of the startup’s founders but has been feuding with it for years over what he claims is a shift away from its original intention to work for the good of humanity.
Apple reportedly started a legal challenge in Britain to the government’s order to create a back-door for British intelligence to its encrypted cloud services. The company recently withdrew its Advanced Data Protection tool for the iCloud from the British market rather than accede to that order. Donald Trump has likened the British request to access private data of Apple users to the practices of the Chinese state.
Microsoft is shutting down Skype, the video-calling service that it bought in 2011. Skype came to market in 2003 and was a pioneer in enabling video chats across the globe, but it has since been eclipsed by smartphones, Google Meet, Zoom and the like.
Oil prices tumbled to three-year lows, as markets speculated that Mr Trump’s trade war would hurt the global economy. Another factor was the unexpected decision by OPEC+ to proceed with a plan to raise output in April. The cartel had hitherto placed curbs on production to boost prices. Its announcement may be designed to pre-empt another clash with Donald Trump, who wants to see a big drop in the commodity’s price.
The new chairman of the Federal Communications Commission, Brendan Carr, sent a letter to Verizon warning it about its promotion of diversity, inclusion and equity practices, linking it to a veiled threat about Verizon’s “pending transactions” at the FCC. The telecoms giant is seeking regulatory approval for its takeover of Frontier Communications. Mr Carr’s letter drew a sharp rebuke from a fellow commissioner at the FCC. Geoffrey Starks said it set a “dangerous precedent” that could “chill investment”.
A frothy market
Mixue’s share price soared by 43% on its first day of trading on the Hong Kong stock exchange. The Chinese company sells flavoured teas and soft-serve ice-cream and is the best known purveyor of bubble tea, a milky brew containing chewy tapioca balls. Its growth over the past few years has been phenomenal. Mixue now has over 45,000 franchised stores across Asia and Australia, more than McDonald’s or Starbucks have worldwide.