Yesterday, president Trump laid out the stakes in the ever-escalating trading war between the US and China, in typical laconic fashion: “We may want countries to choose between us and China” (a topic discussed further here), with the White House adding that “The ball is in China’s court. China needs to make a deal with us.”

This strategy, of forcing the world into “us (or US) vs them” camps first emerged last week when Trump reduced reciprocal tariffs for all countries except China, something we highlighted at the time.

This is actually a very smart move: clubbing the entire world against China https://t.co/fsBagdFRRR

— zerohedge (@zerohedge) April 9, 2025

A few days later, this now appears to be the official strategy in the global trade war.

As the WSJ reports, the Trump admin plans to use ongoing tariff negotiations to pressure U.S. trading partners to limit their dealings with China, according to people with knowledge of the conversations.

The idea, as we laid out in not so many words, is to extract commitments from U.S. trading partners to isolate China’s economy in exchange for reductions in trade and tariff barriers imposed by the White House. US officials plan to use negotiations with more than 70 nations to ask them to disallow China to ship goods through their countries (the so-called “transshipment” loophole), prevent Chinese firms from locating in their territories to avoid U.S. tariffs, and not absorb China’s cheap industrial goods into their economies.

Those measures are meant to put a final stake in China’s already sinking economy (which somewhat ironically got a boost in the first quarter as its export partners front-loaded purchased goods ahead of the tariff price surge which is already in place and which will put a deep freeze on China’s manufacturing empire) and force Beijing to the negotiating table with less leverage ahead of potential talks between Trump and President Xi Jinping. The exact demands could vary widely by nation, given their degree of involvement with the Chinese economy.

US officials have already presented the idea in early talks with some countries according to WSJ sources, who added that Trump himself hinted at the strategy on Tuesday, telling the Spanish-language program “Fox Noticias” he would consider making countries choose between the US and China in response to a question about Panama deciding not to renew its role in the Belt and Road Initiative, China’s global infrastructure program for developing nations.

Trump gives ULTIMATUM to Latin America:

Choose between USA and China

‘They SHOULD do that’

What should Latin America do? pic.twitter.com/MWVq2AJXJj

— RT (@RT_com) April 15, 2025

According to the WSJ, the brain behind the strategy is Treasury Secretary Scott Bessent, who has taken a leading role in the trade negotiations since Trump announced a 90-day pause on reciprocal tariffs for most nations—but not China—on April 9.

Bessent pitched the idea to Trump during an April 6 meeting at Mar-a-Lago, the president’s club in Florida, said people familiar with the discussion, saying that extracting concessions from U.S. trading partners could prevent Beijing and its companies from avoiding U.S. tariffs, export controls and other economic measures.

The tactic is part of a strategy conceived by Bessent to isolate the Chinese economy that has gained traction among Trump officials recently. Debates over the scope and severity of U.S. tariffs are ongoing, but officials largely appear to agree with Bessent’s China plan.

It involves cutting China off from the U.S. economy with tariffs and potentially even cutting Chinese stocks out of U.S. exchanges. Bessent didn’t rule out the administration trying to delist Chinese stocks in a recent interview with Fox Business. Still, the ultimate goal of the administration’s China policy isn’t yet clear.

Bessent has also said there is still room for talks on a potential trade deal between the U.S. and China. Such talks would have to involve Trump and Xi. White House press secretary Karoline Leavitt read a new statement from Trump during Tuesday’s press briefing suggesting a deal with China isn’t imminent.

“The ball is in China’s court,” Leavitt said when reading Trump’s statement. “China needs to make a deal with us. We don’t have to make a deal with them. China wants what we have…the American consumer.”

Indeed it does, as do all the countries that China uses for tolling and/or transshipment, so if the White House truly cracked down on all possible ports of entry to US consumers, who account for 70% of the roughly $30 trillion in US GDP, then China will have no choice but to either concede, or pursue two other approaches which we laid out before: devalue the currency or unleash a massive fiscal stimulus.

China has three options:

1. Concede defeat to whatever terms Trump demands
2. Devalue the yuan by 20-40%
3. Unleash biggest fiscal stimulus in its history (talking $2-3 trillion) which will push its debt off the chart

— zerohedge (@zerohedge) April 4, 2025

It also isn’t clear that the anti-China line has entered into negotiations with all nations. Some countries haven’t heard demands from U.S. negotiators related to China, although negotiations remain in early stages. Many expect the Trump administration to raise China-related demands sooner or later.

Bessent has shown his desire for anti-China pledges from U.S. trading partners before. In late February, he said that Mexico had offered to match U.S. tariffs on China as part of negotiations over Trump’s tariffs on Mexico imposed because of the fentanyl trade. Bessent called Mexico’s offer a “nice gesture,” but the idea didn’t find much traction with the administration.

Since then, Bessent has taken a more central role in trade negotiations, assuming a lead in talks over reciprocal tariffs after Trump announced his 90-day pause on April 9. The Treasury secretary is slated to meet with Japan’s economic revitalization minister today and has laid out a list of nations he thinks could soon reach deals with the U.S., including Japan, the U.K., Australia, South Korea and India.

Of course, China isn’t waiting for the trap to close in on it, and is conducting its own trade diplomacy. This week, Xi traveled to Vietnam, a key U.S. trading partner hard-hit by Trump’s tariffs, and signed dozens of economic pledges with the Hanoi government, although at the same time Vietnam has hinted it could balance out its trade balance with the US by purchasing substantial military equipment from the US.

China views Trump’s reciprocal trade gambit as an opportunity, Peter Harrell, the former senior director for international economics on former President Joe Biden’s National Security Council, said on a panel discussion Tuesday at Georgetown Law.

But China’s ability to counteract U.S. trade policies is limited, Harrell said. While the U.S. remains a “massive net importer,” China is reducing its imports from the rest of the world and focusing on self-sufficiency. The problem, as Michael Pettis has laid out, is that China is years if not decades behind having a vibrant consumer class of its own. Which only leaves mercantilism for now.

1/4
Because the only sustainable way to rebalance the Chinese economy towards a greater role for consumption in driving demand requires that household income, including transfers, rise faster than GDP, it is good news that…https://t.co/W9sv8XBx15

— Michael Pettis (@michaelxpettis) April 16, 2025

And that’s why Beijing is scrambling to inflict as much financial damage on the US as possible – up to and including dumping US Treasuries in hopes of sending the dollar tumbling and prompting narratives about “the end of the US dollar reserve status” while maintaining the impression that all is well domestically as discussed here.

China “isn’t going to replace the U.S. as a source of demand for the products that a bunch of these developing countries…make,” Harrell said. “So the economics of this are going to prove challenging for China, but I think we see them playing the politics of this reasonably savvily.”

Depending on whom you ask, China’s economy is either imploding or swallowing the world. The Chinese are masterminds of espionage or bloated central planners creating empty skyscrapers. So which is it?

Last night, to get to the root of the dispute, we gathered two men who have been studying and living in China for decades:

Professor Michael Pettis, who sees Chinese economic contractions on the horizon, renewed rounds of fiscal stimulus by Beijing, and a dominant U.S. hand in the trade war.

Analyst Peter Alexander, who sees continued Chinese global trade dominance and fiscal austerity domestically by Beijing.

Below were the key moments, moderated by the greatMichael Green.

Who needs whom more?

China makes all our stuff. In theory, the U.S. could be flung into poverty in a matter of weeks if the flow of goods were cut off. On the other hand… we are Beijing’s best customer. So is it the case — as Green puts it — that “the customer is always right”?

Pettis and Alexander fall on opposite sides of the coin.

Alexander: “The United States manufactures nothing and China manufactures everything… it is very evident that the majority of the leverage resides with the Chinese.”

Pettis: “I think that’s a misreading of previous trade conflicts in history.”

pic.twitter.com/GeaFFay5W7

— ZeroHedge Debates (@zerohedgeDebate) April 16, 2025

“Too much success”:

From one of the most underinvested economies pre-1980’s to “the fastest growth in investment the world has ever seen”, China has paradoxically run into a problem, Pettis argues:

“China has to bring investment levels down, but cannot bring investment levels down as long as it has excessively high GDP growth targets.”

“Because it cannot bring investment levels down and it cannot bring consumption levels up quickly enough, it’s forced to rely on a growing trade surplus.”

pic.twitter.com/OnaYgSIkvv

— ZeroHedge Debates (@zerohedgeDebate) April 16, 2025

Beijing pivoting: Bernanke or Volcker?

Both Pettis and Alexander agreed that the Chinese government is pivoting but differ drastically on the direction of the pivot. Alexander argues that “China is the only large economy globally that learned the lessons of 2008 and 2009” and that no stimulus bazooka will be coming.

Alexander: “Keynes is dead in China.”

Pettis on the other hand says the matter is not even up for debate among Chinese economists. The government is actively looking for ways to goose domestic consumption:

“They’re looking at alternative ways. So various types of fiscal support, often called helicopter money… Last month, there was pressure on banks to significantly expand their consumer loan portfolios. These are all ways of temporarily boosting consumption.” 

“But it’s pretty widely recognized in Beijing that China must boost consumption.”

pic.twitter.com/J7spT36hB7

— ZeroHedge Debates (@zerohedgeDebate) April 16, 2025

Watch the full debate which lasted over an hour here. Available exclusively to ZeroHedge premium and professional subscribers.

Authored by Nathan Worcester via The Epoch Times (emphasis ours),

Columbia University student Mohsen Mahdawi was detained by Immigration and Customs Enforcement (ICE) on April 14 during a naturalization interview in Vermont.

The move comes weeks after the detention of Mahdawi’s Columbia associate, Mahmound Khalil, as the Trump administration continues to target non-citizen students in a crackdown on alleged support for Hamas during university protests in the wake of the Oct. 7, 2023, attacks by the terrorist group on Israel.

In January, President Donald Trump signed an executive order that allows non-citizen students to be deported for expressing views aligned with Hamas and accused protesters of anti-Semitic activities on campuses.

Mahdawi’s attorneys issued a habeas corpus petition the same day as his detention, April 14. It alleges his detention violates the First and Fifth Amendments, saying the student’s “speech regarding Israel’s military campaign in Gaza, human rights, international law, obligations arising from international law, and related matters is speech protected by the First Amendment.”

“Mr. Mahdawi is fearful that, if he loses his lawful permanent resident status and he is removed to the West Bank, he will experience the same harassment, detention, and torture that his family has experienced, and would be in even more danger in light of the campaigns that have targeted and spread lies about him,” the petition states.

Within hours, a Vermont district court judge, William K. Sessions III, blocked the student’s immediate deportation.

Mahdawi was a legal permanent resident of the United States.

According to the filing, Mahdawi was born in a refugee camp in the West Bank and co-founded a Palestinian student group, Dar, at Columbia with Khalil.

Last week, an immigration judge ruled that the Trump administration could deport Khalil after the government argued his presence in the United States had “potentially serious foreign policy consequences.” Khalil’s team said they would appeal that decision.

After Khalil’s detention, Secretary of State Marco Rubio told reporters: “This is not about free speech. This is about people that don’t have a right to be in the United States to begin with.

“I think being a supporter of Hamas and coming into our universities and turning them upside down and being complicit in what are clearly crimes of vandalization, complicit in shutting down learning institutions … if you told us that’s what you intended to do when you came to America, we would have never let you in,” the secretary of state added.

In the weeks after the Oct. 7 attacks, Mahdawi’s student organization joined with the Columbia University Apartheid Divest (CUAD) coalition.

CUAD’s goals have included “the total eradication of Western civilization” in an Instagram post that states, “Our intifada is an internationalist one.”

In response to the July Revolution in Bangladesh, which led to the overthrow of the prime minister, CUAD’s Instagram account lauded a statement that appeared to endorse the actions taken by Hamas on Oct. 7. Attackers killed roughly 1,200 people, mostly civilian Israelis, and kidnapped more than 250.

The statement, attributed to the People of Hind’s Hall, reads: “Just as the Palestinian resistance escalated the intifada on October 7th, it is now the people of Bangladesh who are escalating the global battle for liberation.”

The filing from Mahdawi’s attorney describes him as a Buddhist who “believes in non-violence and empathy as a central tenet of his religion.” It also claims that he spoke out against anti-Semitism during a protest.

A complaint against Columbia from Stop Antisemitism and other plaintiffs in February 2024 names Mahdawi. It alleges that he “yelled, ‘back’ and ‘shame’ into a megaphone while instructing other students to physically push a small group of pro-Israel students back as the protestors conducted a ‘die-in’ and shouted, ‘from the River to the Sea.’”

It also alleges Mahdawi “encroached on and shouted through a megaphone at Jews and other Israel supporters.”

Sen. Bernie Sanders (I-Vt.), Sen. Peter Welch (D-Vt.), and Rep. Becca Balint (D-Vt.), the Vermont delegation, condemned the government’s action, writing in a statement that Mahdawi “must be afforded due process under the law and immediately released from detention.”

The Epoch Times has reached out to ICE for comment.

The drastically decoupled trend of hard data improvement and soft data dissolution continued this morning with US Manufacturing improving while NY Fed Business Leaders’ survey collapsing.

Source: Bloomberg

Business activity in the region’s service sector declined significantly for a second consecutive month in April, according to firms responding to the Federal Reserve Bank of New York’s April Business Leaders Survey. 

“The business climate was much worse than normal, and firms were the most pessimistic they’ve been about the outlook since 2020,” said Richard Deitz, Economic Research Advisor at the New York Fed

The survey’s headline business activity index came in at -19.8, its lowest level in more than a year, with 6-mnth forward expectations plunging to the weakest since COVID…

The business climate index dropped nine points to -50.0, its lowest level since Lehman; as expectations for Prices Paid soared top three year highs…

The stagflationary stench from soft data continues.

So, take your pick – worst since the peak of COVID lockdowns or worse since Lehman & the GFC!?

Update (0937ET):

The U.S. Commerce Department announced new export licensing requirements Tuesday evening for Nvidia’s H20 AI chips and AMD’s MI308 chips bound for China. In response, Nvidia disclosed that it would incur a $5.5 billion charge due to the restrictions on H20 exports, while AMD revealed that it could face nearly $1 billion in related charges from the new export controls.

*AMD SEES UP TO $800M CHARGES FROM US EXPORT CONTROLS ON MI308

— zerohedge (@zerohedge) April 16, 2025

In an 8-K filing on Wednesday morning, AMD stated it plans to apply for export licenses for its MI308 AI chips to China but noted no guarantee it will be approved. The chipmaker expects charges of up to $800 million:

On April 15, 2025, Advanced Micro Devices, Inc. (the “Company”) completed its initial assessment of a new license requirement implemented by the United States government for the export of certain semiconductor products to China (including Hong Kong and Macau) and D:5 countries, or to companies headquartered or with an ultimate parent in such countries (the “Export Control”).

The Export Control applies to the Company’s MI308 products. The Company expects to apply for licenses but there is no assurance that licenses will be granted. The Company expects that the Export Control may result in charges of up to approximately $800 million in inventory, purchase commitments and related reserves.

On Tuesday, the Commerce Department called the new export licensing requirements for the two U.S. chipmakers necessary and said it is “committed to acting on the President’s directive to safeguard our national and economic security.” 

In markets, AMD shares were down around 8%. 

Nvidia shares were down about 7%. 

Sliding AMD and Nvidia shares added pressure on Nasdaq 100 futures, down around 1.8% in the early U.S. session. 

*    *    *  

Nvidia tumbled in afterhours trading after the company said the US government will begin requiring a license to export the company’s H20 chips to China, an escalation of restrictions that the company has publicly opposed.

The government informed Nvidia on Monday that such a license would be in effect “for the indefinite future,” the company said in an 8K filing. The company now expects to report charges of about $5.5 billion during the fiscal first quarter from “inventory, purchase commitments and related reserves” tied to the H20 line, Nvidia said.

On April 9, 2025, the U.S. government, or USG, informed NVIDIA Corporation, or the Company, that the USG requires a license for export to China (including Hong Kong and Macau) and D:5 countries, or to companies headquartered or with an ultimate parent therein, of the Company’s H20 integrated circuits and any other circuits achieving the H20’s memory bandwidth, interconnect bandwidth, or combination thereof. The USG indicated that the license requirement addresses the risk that the covered products may be used in, or diverted to, a supercomputer in China. On April 14, 2025, the USG informed the Company that the license requirement will be in effect for the indefinite future. – 8K filing

As a reminder, the H20 is a scaled-down chip that was designed to comply with US export regulations and has been Nvidia’s primary AI GPU legally available for sale in China after the H100/A100 were banned.

Bloomberg News reported in January that the Trump administration was exploring such a step. 

NVDA stock tumbled as much as 7% in afterhours trading as the market tried to make sense of this latest escalation in the trade war.

*  *   *

US Industrial Production dipped in March from record highs…

Source: Bloomberg

The headline industrial production fell 0.3% MoM (slightly worse than the 0.2% decline expected (after February’s jump was revised higher to +0.8% MoM)…

Source: Bloomberg

But, US Manufacturing rose 0.3% MoM – its 5th straight monthly rise…

Source: Bloomberg

Output at utilities declined on warmer weather, while mining and energy extraction rose.

Capacity Utilization also dropped after three straight months of improvement…

Source: Bloomberg

Is Trump’s dream of re-shoring of manufacturing about to take us to the moon?

Thousands of Afghans and Cameroonians living in the United States will have their temporary protected status (TPS) revoked in the coming months, the Department of Homeland Security (DHS) said on Monday.

DHS Secretary Kristi Noem has terminated TPS designations for Afghanistan and Cameroon as she determined that the countries’ current conditions no longer warrant protections, DHS Assistant Secretary Tricia McLaughlin said in an emailed statement to The Epoch Times.

As The Epoch Times’ Aldgra Fredly reports, the decision will affect about 14,600 Afghans, who are set to lose their legal status in May, and approximately 7,900 Cameroonians, whose protected status will expire by June.

McLaughlin stated that Noem decided to terminate Afghanistan’s TPS designation following a review by U.S. Citizenship and Immigration Services (USCIS), which had also consulted with the State Department.

TPS is a designation that allows individuals from countries affected by armed conflict, natural disasters, or other extraordinary events the ability to remain in the United States.

Global Refuge, a U.S.-based nonprofit refugee resettlement agency, has condemned the DHS move to revoke protections for Afghan nationals and urged the government to reverse its course.

Krish O’Mara Vignarajah, president and CEO of Global Refuge, stated that Afghanistan has been facing a humanitarian crisis under Taliban rule, which seized power in August 2021 following the withdrawal of American troops from the country.

In a statement, Vignarajah called the decision to revoke protections for Afghans “a morally indefensible betrayal,” saying that the individuals could face oppression if deported to Afghanistan.

“Afghanistan today is still reeling from Taliban rule, economic collapse, and humanitarian disaster,” she said. 

“Forcing them back to Taliban rule, where they face systemic oppression and gender-based violence, would be an utterly unconscionable stain on our nation’s reputation.”

CASA—which organizes working-class black, Latino, African-descendant, Indigenous, and immigrant communities—said that ending TPS for Cameroonians would put them at “severe risk” due to the ongoing humanitarian crisis in the Central African nation.

The nonprofit stated that nearly 1 million people have been displaced in Cameroon due to an ongoing armed conflict, and that now is not the right time to force the return of Cameroonians.

“Cameroon clearly meets the statutory basis for the redesignation of TPS,” CASA Executive Director Gustavo Torres stated.

“This termination of TPS is a xenophobic attack that targets our families and neighbors and endangers the economy of the U.S.”

The Epoch Times has reached out to DHS for comment but did not receive a response by publication time.

The move to revoke TPS for Afghans and Cameroonians comes amid the Trump administration’s efforts to enhance border security and review immigration programs it says no longer align with national interests.

Last month, DHS said it would revoke the TPS of more than 530,000 immigrants from Cuba, Haiti, Nicaragua, and Venezuela who entered the United States under the Biden administration’s humanitarian parole program, known as the CHNV program.

The program, launched in 2022, had allowed up to 30,000 immigrants from the four countries into the United States each month, provided they met certain conditions, including having a sponsor in the United States who would provide them financial support.

Noem said in a March notice that such parole programs “do not serve a significant public benefit” and are not effective in reducing the levels of illegal immigration in the United States.

The Trump administration has faced legal pushback in its efforts to deport immigrants. On April 10, U.S. District Judge Indira Talwani agreed to block the government from revoking the temporary legal status of Venezuelans, Nicaraguans, Haitians, and Cubans.

Talwani said that the administration’s plan to expose hundreds of thousands of immigrants to expedited deportation was based on an incorrect reading of the statute overriding the process.

Following two disappointing months, US Retail Sales were expected to rebound strongly in March (despite all the chatter about consumer sentiment collapsing thanks to Trump’s tariff policies). BofA’s omniscient analysts team were slightly less exuberant than consensus but still expected a big 1.2% MoM jump in the headline (and stronger than expected prints in core data).

Notably, before we dive into the data, this was before the real turmoil of Trump’s reciprocal tariffs hit.

Following January’s plunge and February’s small rebound, March headline Retail Sales rose 1.4% MoM (as expected) – the biggest MoM jump since Jan 2023.

This raised the YoY sales rise to +4.6% – the highest since Dec 2023…

Source: Bloomberg

Ex-Autos, sales jumped 0.5% MoM (better than expected) and February’s print was revised dramatically higher. 

Ex-Autos-and-Gas, sales also beat expectations (as BofA suggested), rising 0.8% MoM and also seeing a sizable upward revision for February.

Source: Bloomberg

It appears there was a dramatic front-running impact in Autos buying (ahead of the Auto tariffs) and Building Materials (ahead of Canadian tariffs?). We also note that sales at Gasoline Stations tumbled (as gas prices dropped)…

Source: Bloomberg

Obviously the seasonals help to…

Source: Bloomberg

Adjusted roughly for inflation, real retail sales are up by the most in 3 years…

Source: Bloomberg

Of course this will be dismissed by the ‘other’ as a one-off pre-tariff surge in spending… while we should take the word of respondents from UMich surveys about their view of inflation as holy writ of course.

Maybe they can shrug off the auto and recreation spending surge, but it’s hard to suggest that people piled into restaurants in some tariff front-running form?

In fact this surge makes sense if the Democrats in the UMich survey are truly expecting 6, 7, 8% inflation this year… they should be buying everything with both hands and feet!

Although President Trump rolled back some reciprocal tariffs last week (ex-China), U.S. imports still face an average effective tariff rate of 27%—the highest since 1903. These elevated duties, hitting just as the spring housing and remodeling season gets underway, complicate the sourcing of overseas building materials and home goods from high-tariff countries and may even force sourcing from low-tariff countries or even domestically. 

Goldman analysts Susan Maklari, Charles Perron-Piche, and Rhea Bhatia cited United States International Trade Commission data to help clients understand where the most basic imported home goods and building materials were sourced from in 2024.

Maklari provided clients with a country-by-country breakdown of the top U.S. imports of home goods and building materials, including washers, dryers, water heaters, cabinets, vinyl tile, ceramic tile, carpets, lighting, mattresses, and lumber.

The note serves as a guide for identifying alternative sourcing options in countries with lower tariffs and a robust manufacturing base should these products be tariffed higher in top-producing countries at a cost-prohibitive rate:

Exhibit 9: Share of Washer Imports by Market (2024, in units)

Exhibit 11: Share of Dryer Imports by Market (2024, in units)

Exhibit 13: Share of Electric Tank Water Heater Imports by Market (2024, in units)

Exhibit 15: Share of Electric Tankless Water Heater Imports by Market (2024, in units)

Exhibit 17: Share of Gas Tank Water Heater Imports by Market (2024, in units)

Exhibit 19: Share of Gas Tankless Water Heater Imports by Market (2024, in units)

Exhibit 21: Share of Cabinet Imports by Market (2024, in units)

Exhibit 23: Share of Vinyl Tile Imports by Market (2024, in units)

Exhibit 25: Share of Ceramic Tile Imports by Market (2024, in units)

Exhibit 27: Share of Carpet Imports by Market (2024, in units)

Exhibit 29: Share of Lighting Fixture Imports by Market (2024, in units)

Exhibit 31: Share of Mattress Imports by Market (2024, in units)

Exhibit 33: Share of Nonwoven Glass Imports by Market (2024, in units)

Exhibit 35: Share of Framing Lumber Imports by Market (2024, in units)

Exhibit 37: Share of OSB Imports by Market (2024, in units)

Exhibit 39: Share of Plywood Imports by Market (2024, in units)

We wouldn’t even be having this conversation if America had a robust manufacturing base capable of producing even the most basic home goods. Time to re-shore some of these supply chains.  

Nasdaq 100 and S&P 500 e-mini futures trimmed overnight losses after China reportedly laid out a set of preconditions for resuming trade talks with President Trump and his administration, Bloomberg reported, citing a source familiar with Beijing’s internal deliberations. 

According to the source:

• Demand for Respect: China wants a more respectful tone from the U.S., particularly reducing disparaging remarks from U.S. cabinet members. Beijing was especially angered by Vice President JD Vance’s recent “Chinese peasants” comment. Chinese Foreign Ministry spokesman called Vance’s remarks “ignorant and disrespectful.”

• Unified U.S. Messaging: Chinese officials are confused by conflicting signals from Washington. While Trump’s tone on Chinese President Xi Jinping has been moderate, hawkish comments from other high-ranking White House officials have conflicted. Without a clear and consistent U.S. position, China sees little value in engagement.

• Point Person: Beijing wants the Trump administration to designate a point person to oversee trade talks. 

News of the preconditions crossed the Bloomberg wires at 0427 ET. 

This sent the U.S. main equity index futures surging, trimming earlier losses from European and Asian sessions. 

As of 0630 ET, Nasdaq futures are still down 1.5%, while S&P 500 futures are down around 1%. 

Commenting on the Bloomberg report, Gary Ng, senior economist at Natixis, said these developments of potential trade talks between the U.S. and China might fuel more risk-on sentiment:

“The impact on the dollar will still be mixed for now, but there will be more inflows into equities, both in China and the US.”

Ng emphasized that this is not a U-turn in strategy, noting China had already signaled its openness to talks in a white paper published on April 9. However, he cautioned that a deal remains uncertain given the wide range of unresolved issues and the deepening economic and geopolitical rivalry between the two economic superpowers. 

Goldman analyst Rich Privorotsky commented on the latest trade developments and markets: 

China IP and retail sales strong overnight…largely ignored as markets lower on the back of U.S. restrictions on NVDA chip exports to China. This follow’s yday’s announcement of China halting the import of Boeing plans. Seems like the conflict between the two countries continues to escalate without a clear off ramp. “US President Donald Trump is willing to strike a trading deal with China, but the latter should reach out first” (RTRS)   The upshot “China has appointed a new top trade negotiator amid the tariff war with the U.S.” Bar feels low for some face saving exercise to bring both sides to the table (tricky part is who makes the first move). In a sense that could be a short term positive catalyst from here but even if tariffs are reduced they are likely to persist on China at some elevated level. The implications on U.S. consumers, global trade and growth remain impaired.

So technicals we’re largely supportive yday and we for the most part ignored those trade headlines including news that European/U.S.  trade negotiations had made little progress and EU trade delegation came back expecting no change to U.S. tariff policy. Hard to read too deep with another ~85 days left in trade negotiations… did we really think we’d have a breakthrough on day 5?

Despite supportive technicals those pesky fundamentals continue to point a pretty downbeat picture. Second European bellwether to miss this morning ASML: orders seemingly well below consensus and Q2 guidance seems light (downside compounded by NVDA news). UAL (forgive the dad joke) gave guidance wide enough for jumbo jet to fly between “United Airlines shared two financial outlooks for its full-year earnings because it believes it is “impossible to predict” how the economy will shape up during the rest of the year. The first outlook, which is the same range it previously shared in January, is based on a stable economic scenario where books remain weaker but stable. If the U.S. enters a recession, United is modeling an incremental five-point reduction to total operating revenue, further capacity reductions and a lower adjusted earnings range. “A single consensus no longer exists, and therefore the Company’s expectation has become bimodal,” United said. If corporate are experiencing this level of uncertainty its hard to see how orders/activity/capex/any form of forward planning in the economy isn’t materially slowing (see side-note).

Macro dinner last night think we all acknowledge that the market could continue to squeeze up in the short-term. Vol compression, holiday, lack of incremental trade bad news (Can we really go higher than this: “China now faces up to a 245% tariff on imports to the United States as a result of its retaliatory actions.”

The fate of the global economy and financial markets hinges on a trade deal. The latest effective rate of 145% on Chinese goods entering the U.S. and 125% on U.S. goods entering China have already created ructions in global trade routes (read here and here) that only suggest macroeconomic headwinds are incoming in both China and the U.S.