Pentagon officials have told their Israeli counterparts that the US will begin a phased withdrawal of its troops from Syria within two months, the Israeli news site Ynet reported on Tuesday.
A senior Israeli official said that the US withdrawal could be partial, meaning only some of the estimated 2,000 US troops in eastern Syria could leave. Reuterslater reported that the US is planning to “consolidate” its presence in Syria and will likely reduce the number of troops in the country to about 1,000.
Israel is opposed to any drawdown or a full withdrawal of US troops from Syria, and the Ynet report said Israeli officials are working to prevent it over concerns related to Turkey.
Since the regime change that ousted former Syrian President Bashar al-Assad, which Israel supported, the Israeli military has invaded southern Syria and has been bombing military targets across the country.
Israel now appears focused on keeping Turkish forces out of central Syria, warning it would impede the Israeli military’s “operational freedom” in the country.
Israel recently bombed the T-4 air base in Tadmur, central Syria, amid reports that Turkey is planning to establish a military presence there, and Israeli officials said the airstrikes were meant as a “message” to Ankara.
One Israeli security source told Ynet that the attacks on the T-4 base were part of “a race against time” before “the Americans pack up and leave.”
During the first Trump administration, Israel played a role in convincing President Trump to keep troops in Syria after he announced plans for a withdrawal. At the time, Israel didn’t want Iran or its allies, which included the Assad government, gaining a foothold in the areas currently occupied by the US, which include oil and gas fields.
The US backs the Kurdish-led SDF in eastern and northern Syria, which recently began handing over control of some areas in the northern Aleppo Governorate to government forces under an integration agreement with the Syrian government that’s led by the al-Qaeda offshoot Hayat Tahrir al-Sham.
It remains there have been many ‘false starts’ and premature headlines announcing withdrawal, such as this 2018 NBC story…
The deal has eased tensions in northern Syria, ending fighting between the SDF and the Turkish-backed SNA, and was seen as a potential path to a US withdrawal.
Are Democrats Unintentionally Sabotaging Retailer Target
New high-frequency data on monthly store visits and consumer sentiment metrics reveal a slowdown in activity at retail giant Target. Interestingly, when the same data is applied across the broader retail industry, similar signs of softening are far less pronounced at other retailers, raising the question: Why is Target being hit harder?
One potential explanation lies in the political composition of Target’s customer base. Data from the research firm Morning Consult showed a strong tilt toward Democratic-leaning consumers, a group currently exhibiting apocalyptic views on the economy via the highly skewed and laughable UMich survey.
This wave of negative sentiment among Democratic-leaning consumers – driven in part by conspiracy-laden stories on platforms like BlueSky, MSNBC, CNN, and the unhinged show The View – could very well be influencing the spending habits of the rudderless party’s consumer base.
Goldman analysts Kate McShane, Mark Jordan, and others published a new note on Wednesday, “downgrading TGT to Neutral from Buy given concerns around seeing a recovery in growth for discretionary categories, more downside risk in EPS than upside given possible top-line deleverage and tariff risk, and recent data from HundredX and Placer indicating that TGT’s sales may be slowing.”
We’re taking high-frequency data from HundredX and Placer.ai a step further than the analysts, injecting Morning Consult’s data to understand better who exactly shops at Target: “Walmart is more popular among Republicans, while more Democrats see Target in a favorable light.”
McShane explained:
HundredX and Placer data indicate TGT’s sales may be slowing. We analyzed monthly visitation data using Placer for the broadlines category, including TGT, through mid April. As shown in Exhibit 1, while average visits per location (y/y) were largely positive in Apr’ 25-to-date, TGT came in at -5.4%. TGT’s trends have lagged behind select peers (BJ, COST, and WMT) since Aug ’24, with the gap widening sequentially in Apr’ 25-to-date: Goldman
Exhibit 1: Placer monthly visitation trends for broadlines came in largely positive in April-to-date, aside from TGT at -5.4%
We must note that Goldman analysts did not blend politics into their report.
McShane then used NPI (Net Purchase Intent) and NPS (Net Purchase Score)—key consumer sentiment metrics – to find that both metrics declined significantly year over year.
“Specifically, as of Mar ’25, TGT’s NPI is -9%, lower than its 3-year average of -2% and Mar ’24 NPI of -3%; TGT’s NPS is 30, lower than its 3-year average of 43 and its Mar ’24 NPS of 39,” McShane said.
Notice HundredX’s NPI measured across BJ, Costco, Target, Walmart, and Dollar General showed that consumer sentiment at Target was the worst of all retailers—and this might only make sense given that we established earlier that Democrats make up the majority of shoppers at the retailer.
Similar findings for NPS.
Target’s NPI across three household income levels (<$50K, $50K-$100K, >$100K) aggressively tumbled, beginning with the election of Trump and into 2025.
Could the Democratic Party’s infowar to sway their voter base about an imminent ‘Great Depression’ have an unintended consequence (dial back spending) of hitting retailers heavily frequented by Democrats?
Stocks Puke As Fed Chair Powell Raises Specter Of Stagflation, Awaiting “Greater Clarity”
Update (1330ET): Key highlights from Powell’s prepared remarks:
Powell said: “tariffs are highly likely to generate at least a temporary rise in inflation.”
“The inflationary effects could also be more persistent. Avoiding that outcome will depend on the size of the effects, on how long it takes for them to pass through fully to prices, and, ultimately, on keeping longer-term inflation expectations well anchored.
Powell again stressed the central bank’s focus on preventing potential tariff-driven price hikes from triggering a more persistent rise in inflation.
“Our obligation is to keep longer-term inflation expectations well anchored and to make certain that a one-time increase in the price level does not become an ongoing inflation problem,” Powell said.
Powell added that policymakers would balance their dual responsibilities of fostering maximum employment and stable prices, “keeping in mind that, without price stability, we cannot achieve the long periods of strong labor market conditions that benefit all Americans.”
Powell raised the spectre of stagflation:
“We may find ourselves in the challenging scenario in which our dual-mandate goals are in tension. If that were to occur, we would consider how far the economy is from each goal, and the potentially different time horizons over which those respective gaps would be anticipated to close.”
This differs from Waller earlier this week:
Should the Fed face both a rapidly slowing economy and still elevated inflation, “the risk of recession would outweigh the risk of escalating inflation.”
As they seek greater certainty about how President Donald Trump’s economic policies, especially on trade, will affect the US economy, Powell and other Fed policymakers have expressed support for holding rates steady.
“For the time being, we are well positioned to wait for greater clarity before considering any adjustments to our policy stance,” Powell said.
The remarks reinforce a message Powell has repeatedly emphasized, including most recently on April 4: Fed officials are in no hurry to change the central bank’s benchmark policy rate.
Neil Dutta at Renaissance Macro quipped:
“Recession odds are climbing even further as Powell pushes back the timing of cuts.”
Stocks tumbled on the prepared remarks:
* * *
Which economy will Fed Chair Powell choose to discuss this afternoon as, for the second time in less than two weeks, he will weigh in with his sense of what’s in store for Americans on inflation and jobs, and what the central bank may do about it if they veer off course.
Will it be the ‘soft’ survey based economy (with this morning’s collapse in the New York Business Leaders survey as the latest example) or the ‘hard’ data based economy (with this morning’s surge in retail sales and manufacturing production showing strength)…
The last time he spoke (on April 4th – 2 days after Liberation Day), Powell voiced essentially a wait-and-see approach, saying “it is too soon to say what will be the appropriate path for monetary policy.”
Marcin Kazmierczak, Co-founder & COO of RedStone:
“Markets will be hyper-focused on Powell’s inflation commentary and rate cut signals, with any acknowledgment of economic growth concerns potentially triggering significant market reactions.”
As Reuters reports, earlier this week Fed Governor Christopher Waller said that if Trump continues to peel back tariffs to a lower baseline, the central bank would do well to hang tight on interest rates in the first half of this year and perhaps cut gradually in the second half as tariff-elevated inflation subsides.
If Trump sticks to higher tariffs, Waller said, the unemployment rate could jump and the Fed would need to cut more aggressively.
Other Fed policymakers have been more hawkish, focusing on signs that short-term inflation expectations have surged and could, as St. Louis Fed President Alberto Musalem put it, “seep” into longer-term expectations, potentially forcing the Fed to keep rates high or even raise them further.
It’s not clear which view is closer to Powell’s, or in how much detail he might articulate which way he leans.
“Besides the guidance on rates (where a probability close to 80% is discounted for a rate cut in June), the market will be looking for cues about the Fed’s possibilities to deal with market turmoil,” says Commerzbank’s head of interest rates strategy, Michael Leister in a note this morning.
Of course, President Trump has been very public about his views on what he thinks Powell should do… demanding rate-cuts to prop up markets/economy during the interregnum between tariff teror and tax-cut euphoria.
Watch Fed Chair Powell speak live before the Economic Club of Chicago here (due to start at 1330ET):
Read Powell’s Prepared Remarks here…
Thank you for the introduction. I am looking forward to our conversation, Professor Rajan. First, I will briefly discuss the outlook for the economy and monetary policy.
At the Fed, we are always focused on the dual-mandate goals given to us by Congress: maximum employment and stable prices. Despite heightened uncertainty and downside risks, the U.S. economy is still in a solid position. The labor market is at or near maximum employment. Inflation has come down a great deal but is running a bit above our 2 percent objective.
Recent Economic Data
Turning to the incoming data, we will get the initial reading on first-quarter GDP in a couple of weeks. The data in hand so far suggest that growth has slowed in the first quarter from last year’s solid pace. Despite strong motor vehicle sales, overall consumer spending appears to have grown modestly. In addition, strong imports during the first quarter, reflecting attempts by businesses to get ahead of potential tariffs, are expected to weigh on GDP growth.
Surveys of households and businesses report a sharp decline in sentiment and elevated uncertainty about the outlook, largely reflecting trade policy concerns. Outside forecasts for the full year are coming down and, for the most part, point to continued slowing but still positive growth. We are closely tracking incoming data as households and businesses continue to digest these developments.
In the labor market, during the first three months of the year, nonfarm payrolls grew by an average of 150,000 jobs a month. While job growth has slowed relative to last year, the combination of low layoffs and lower labor force growth has kept the unemployment rate in a low and stable range. Meanwhile, the ratio of job openings to unemployed job seekers has remained just above 1, near its pre-pandemic level. Wage growth has continued to moderate while still outpacing inflation. Overall, the labor market appears to be in solid condition and broadly in balance and is not a significant source of inflationary pressure.
As for our price-stability mandate, inflation has significantly eased from its pandemic highs of mid-2022 without the kind of painful rise in unemployment that has frequently accompanied efforts to bring down high inflation. Progress on inflation continues at a gradual pace, and recent readings remain above our 2 percent objective. Estimates based on data released last week show that total PCE prices rose 2.3 percent over the 12 months ending in March and that, excluding the volatile food and energy categories, core PCE prices rose 2.6 percent.
Looking forward, the new Administration is in the process of implementing substantial policy changes in four distinct areas: trade, immigration, fiscal policy, and regulation. Those policies are still evolving, and their effects on the economy remain highly uncertain. As we learn more, we will continue to update our assessment. The level of the tariff increases announced so far is significantly larger than anticipated. The same is likely to be true of the economic effects, which will include higher inflation and slower growth. Both survey- and market-based measures of near-term inflation expectations have moved up significantly, with survey participants pointing to tariffs. Survey measures of longer-term inflation expectations, for the most part, appear to remain well anchored; market-based breakevens continue to run close to 2 percent.
Monetary Policy
As we gain a better understanding of the policy changes, we will have a better sense of the implications for the economy, and hence for monetary policy. Tariffs are highly likely to generate at least a temporary rise in inflation. The inflationary effects could also be more persistent. Avoiding that outcome will depend on the size of the effects, on how long it takes for them to pass through fully to prices, and, ultimately, on keeping longer-term inflation expectations well anchored.
Our obligation is to keep longer-term inflation expectations well anchored and to make certain that a one-time increase in the price level does not become an ongoing inflation problem. As we act to meet that obligation, we will balance our maximum-‑employment and price-stability mandates, keeping in mind that, without price stability, we cannot achieve the long periods of strong labor market conditions that benefit all Americans. We may find ourselves in the challenging scenario in which our dual-mandate goals are in tension. If that were to occur, we would consider how far the economy is from each goal, and the potentially different time horizons over which those respective gaps would be anticipated to close.
Conclusion
As that great Chicagoan Ferris Bueller once noted, “Life moves pretty fast.” For the time being, we are well positioned to wait for greater clarity before considering any adjustments to our policy stance. We continue to analyze the incoming data, the evolving outlook, and the balance of risks. We understand that elevated levels of unemployment or inflation can be damaging and painful for communities, families, and businesses. We will continue to do everything we can to achieve our maximum-employment and price-stability goals.
Stellar 20Y Auction Stops Through, Benefits From Solid Foreign Demand
After last week’s basis trade collapse (which we now know has already claimed several relative value multistrat hedge funds), many were dreading the outcome of today’s 20Y auction, a reopening of 19-Year, 10-Month cusip UJ5. It turned out they have nothing to fear.
The $13BN auction priced at 1:01pm ET at a high yield of 4.810%, up sharply from last month’s 4.632% and the highest since February; more importantly it stopped through the When Issued 4.814% by 0.4bps, the second consecutive stop through (if fractionally weaker than last month) and 3rd in the past 4 months.
It wasn’t just the headline: the Bid to Cover was 2.63, which while down from last month’s 2.78 was comfortably above the six-auction average of 2.57.
But like last week, the internals were most closely watched because in a time when there was virtually no Direct demand for US paper (amid the basis trade unwind), the composition of today’s takedown distribution was sure to be a buzz if there were any outliers. In the end, there would be no buzz because there were no surprises: Indirects took down a decent 70.7%, the highest since August and naturally above the six-auction average; As for Directs, unlike last week’s collapse, today they took down a healty 12.3% – yes still the lowest since November, but hardly a single digit affair like we saw last week. Finally Dealers were left holding 17.0%, just fractionally above the 15.3% average, and in line with recent auctions.
Overall, this was a remarkable solid 20Y auction, and one which certainly brushed away concerns that foreigners are boycotting US Treasury auctions, if only for now. As for the secondary market, that’s a different story.
Watch Live: Stocks Puke As Fed Chair Powell Raises Specter Of Stagflation, Awaiting “Greater Clarity”
Update (1330ET): Key highlights from Powell’s prepared remarks:
Powell said: “tariffs are highly likely to generate at least a temporary rise in inflation.”
“The inflationary effects could also be more persistent. Avoiding that outcome will depend on the size of the effects, on how long it takes for them to pass through fully to prices, and, ultimately, on keeping longer-term inflation expectations well anchored.
Powell again stressed the central bank’s focus on preventing potential tariff-driven price hikes from triggering a more persistent rise in inflation.
“Our obligation is to keep longer-term inflation expectations well anchored and to make certain that a one-time increase in the price level does not become an ongoing inflation problem,” Powell said.
Powell added that policymakers would balance their dual responsibilities of fostering maximum employment and stable prices, “keeping in mind that, without price stability, we cannot achieve the long periods of strong labor market conditions that benefit all Americans.”
Powell raised the spectre of stagflation:
“We may find ourselves in the challenging scenario in which our dual-mandate goals are in tension. If that were to occur, we would consider how far the economy is from each goal, and the potentially different time horizons over which those respective gaps would be anticipated to close.”
This differs from Waller earlier this week:
Should the Fed face both a rapidly slowing economy and still elevated inflation, “the risk of recession would outweigh the risk of escalating inflation.”
As they seek greater certainty about how President Donald Trump’s economic policies, especially on trade, will affect the US economy, Powell and other Fed policymakers have expressed support for holding rates steady.
“For the time being, we are well positioned to wait for greater clarity before considering any adjustments to our policy stance,” Powell said.
The remarks reinforce a message Powell has repeatedly emphasized, including most recently on April 4: Fed officials are in no hurry to change the central bank’s benchmark policy rate.
Neil Dutta at Renaissance Macro quipped:
“Recession odds are climbing even further as Powell pushes back the timing of cuts.”
Stocks tumbled on the prepared remarks:
* * *
Which economy will Fed Chair Powell choose to discuss this afternoon as, for the second time in less than two weeks, he will weigh in with his sense of what’s in store for Americans on inflation and jobs, and what the central bank may do about it if they veer off course.
Will it be the ‘soft’ survey based economy (with this morning’s collapse in the New York Business Leaders survey as the latest example) or the ‘hard’ data based economy (with this morning’s surge in retail sales and manufacturing production showing strength)…
The last time he spoke (on April 4th – 2 days after Liberation Day), Powell voiced essentially a wait-and-see approach, saying “it is too soon to say what will be the appropriate path for monetary policy.”
Marcin Kazmierczak, Co-founder & COO of RedStone:
“Markets will be hyper-focused on Powell’s inflation commentary and rate cut signals, with any acknowledgment of economic growth concerns potentially triggering significant market reactions.”
As Reuters reports, earlier this week Fed Governor Christopher Waller said that if Trump continues to peel back tariffs to a lower baseline, the central bank would do well to hang tight on interest rates in the first half of this year and perhaps cut gradually in the second half as tariff-elevated inflation subsides.
If Trump sticks to higher tariffs, Waller said, the unemployment rate could jump and the Fed would need to cut more aggressively.
Other Fed policymakers have been more hawkish, focusing on signs that short-term inflation expectations have surged and could, as St. Louis Fed President Alberto Musalem put it, “seep” into longer-term expectations, potentially forcing the Fed to keep rates high or even raise them further.
It’s not clear which view is closer to Powell’s, or in how much detail he might articulate which way he leans.
“Besides the guidance on rates (where a probability close to 80% is discounted for a rate cut in June), the market will be looking for cues about the Fed’s possibilities to deal with market turmoil,” says Commerzbank’s head of interest rates strategy, Michael Leister in a note this morning.
Of course, President Trump has been very public about his views on what he thinks Powell should do… demanding rate-cuts to prop up markets/economy during the interregnum between tariff teror and tax-cut euphoria.
Watch Fed Chair Powell speak live before the Economic Club of Chicago here (due to start at 1330ET):
Read Powell’s Prepared Remarks here…
Thank you for the introduction. I am looking forward to our conversation, Professor Rajan. First, I will briefly discuss the outlook for the economy and monetary policy.
At the Fed, we are always focused on the dual-mandate goals given to us by Congress: maximum employment and stable prices. Despite heightened uncertainty and downside risks, the U.S. economy is still in a solid position. The labor market is at or near maximum employment. Inflation has come down a great deal but is running a bit above our 2 percent objective.
Recent Economic Data
Turning to the incoming data, we will get the initial reading on first-quarter GDP in a couple of weeks. The data in hand so far suggest that growth has slowed in the first quarter from last year’s solid pace. Despite strong motor vehicle sales, overall consumer spending appears to have grown modestly. In addition, strong imports during the first quarter, reflecting attempts by businesses to get ahead of potential tariffs, are expected to weigh on GDP growth.
Surveys of households and businesses report a sharp decline in sentiment and elevated uncertainty about the outlook, largely reflecting trade policy concerns. Outside forecasts for the full year are coming down and, for the most part, point to continued slowing but still positive growth. We are closely tracking incoming data as households and businesses continue to digest these developments.
In the labor market, during the first three months of the year, nonfarm payrolls grew by an average of 150,000 jobs a month. While job growth has slowed relative to last year, the combination of low layoffs and lower labor force growth has kept the unemployment rate in a low and stable range. Meanwhile, the ratio of job openings to unemployed job seekers has remained just above 1, near its pre-pandemic level. Wage growth has continued to moderate while still outpacing inflation. Overall, the labor market appears to be in solid condition and broadly in balance and is not a significant source of inflationary pressure.
As for our price-stability mandate, inflation has significantly eased from its pandemic highs of mid-2022 without the kind of painful rise in unemployment that has frequently accompanied efforts to bring down high inflation. Progress on inflation continues at a gradual pace, and recent readings remain above our 2 percent objective. Estimates based on data released last week show that total PCE prices rose 2.3 percent over the 12 months ending in March and that, excluding the volatile food and energy categories, core PCE prices rose 2.6 percent.
Looking forward, the new Administration is in the process of implementing substantial policy changes in four distinct areas: trade, immigration, fiscal policy, and regulation. Those policies are still evolving, and their effects on the economy remain highly uncertain. As we learn more, we will continue to update our assessment. The level of the tariff increases announced so far is significantly larger than anticipated. The same is likely to be true of the economic effects, which will include higher inflation and slower growth. Both survey- and market-based measures of near-term inflation expectations have moved up significantly, with survey participants pointing to tariffs. Survey measures of longer-term inflation expectations, for the most part, appear to remain well anchored; market-based breakevens continue to run close to 2 percent.
Monetary Policy
As we gain a better understanding of the policy changes, we will have a better sense of the implications for the economy, and hence for monetary policy. Tariffs are highly likely to generate at least a temporary rise in inflation. The inflationary effects could also be more persistent. Avoiding that outcome will depend on the size of the effects, on how long it takes for them to pass through fully to prices, and, ultimately, on keeping longer-term inflation expectations well anchored.
Our obligation is to keep longer-term inflation expectations well anchored and to make certain that a one-time increase in the price level does not become an ongoing inflation problem. As we act to meet that obligation, we will balance our maximum-‑employment and price-stability mandates, keeping in mind that, without price stability, we cannot achieve the long periods of strong labor market conditions that benefit all Americans. We may find ourselves in the challenging scenario in which our dual-mandate goals are in tension. If that were to occur, we would consider how far the economy is from each goal, and the potentially different time horizons over which those respective gaps would be anticipated to close.
Conclusion
As that great Chicagoan Ferris Bueller once noted, “Life moves pretty fast.” For the time being, we are well positioned to wait for greater clarity before considering any adjustments to our policy stance. We continue to analyze the incoming data, the evolving outlook, and the balance of risks. We understand that elevated levels of unemployment or inflation can be damaging and painful for communities, families, and businesses. We will continue to do everything we can to achieve our maximum-employment and price-stability goals.
Bessent’s Grand Strategy: Use Tariff Negotiations To Isolate China From The Rest Of The World
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
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.
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
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
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.”
China’s Next Step: “Helicopter Money” Or “Keynes Is Dead”
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.”
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.”
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.”
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.
New York Business Leaders Say Economic Outlook Worse Since Lehman
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!?
AMD Joins NVDA Plunge After Huge Hit From U.S. Export Chip Controls
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
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.
