INTERNATIONAL ECONOMY – TRENDS
[Bloomberg] Central banks began a rate cut that may not end Central banks must now decide how to deal with a Trump presidency committed to an economic agenda that seems more likely to increase inflation than reduce it. That is causing major rifts. Canada and Switzerland have cut more than expected this year, while the Bank of Japan – facing very different conditions – has raised rates somewhat more than expected. The Federal Reserve, the Bank of England and the European Central Bank have moved much less than expected. Central bankers outside the United States complain of dollar strength, a problem that intensified with the Fed’s hawkish December meeting. Nervousness about the US and its fiscal position has prompted a search for other safe havens, particularly gold. Across the border, Mexico’s central bank has since March eased rates by one percentage point, the same amount as the Fed. While Banxico’s easing cycle is supported by a slowdown in inflation in line with the central bank’s target, the proposed 25 per cent tariffs by Trump on Mexican imports could complicate matters.
The problems created by the strong dollar help explain why rates remain well above pre-pandemic levels, despite substantial reductions in inflation. Rates are lower, but the decline has been slow.Particularly by the standards of the decade before the pandemic, they remain very high in the developed world.The big global exception is China, where rates have remained well below the norm throughout the period.A country like Brazil, which in December raised rates by one percentage point as inflation soared, has a long history of high inflation and interest rates and could absorb this much more easily than the United States or the euro area.
[Financial Times] China’s trade surplus hits annual record of nearly $1 trillion China’s $992bn trade surplus, more than a third of which was with the US, is expected to fuel new tensions with Washington and other trading partners, which have held back a surge in Chinese exports this year. The figures are thought to have benefited from ‘front-loading’ of exports as producers sought to ship products ahead of an expected trade war with the incoming Trump administration.
Chinese producers have increased exports to offset weak domestic demand.In turn, China’s imports have also slowed as its exports have expanded, prompting accusations from trading partners that the country’s surpluses were unsustainable and threatened to deindustrialise the rest of the world. The country’s trade surplus in December was $104.8 billion, a record for a single month and up from $97.4 billion in November. Exports rose 10.7 per cent last month from a year earlier in dollar terms, while imports were up 1 per cent. The country’s trade surplus with the United States increased by 6.9 per cent in 2024 compared to the previous year, to $361.03 billion. However, the share of US exports in China’s shipments was gradually declining, to 14.7 per cent in 2024 from 14.8 per cent the previous year. Many manufacturers have also been diversifying production from China to friendly regional countries to avoid trade tariffs and other restrictions. The share of Chinese exports to Southeast Asian countries increased to 16.4 per cent in 2024 from 15.5 per cent the previous year.
[Reuters] Trump’s tariff policy sets the stage for market volatility Despite setting a tone of uncertainty in global markets, Trump’s initial dictates on tariffs were less stringent than feared. After taking office, he did not immediately impose tariffs; he only issued an order directing agencies to ‘investigate and remedy’ US trade deficits. However, he later said he was considering imposing 25% tariffs on Mexico and Canada on 1 February. The dollar initially fell on the news that there would be no tariffs, then recovered some of its lost ground against the Mexican peso and Canadian dollar after Trump’s remarks. The extent of Trump’s protectionist policies remains the main market concern. Chinese markets were relieved after Beijing avoided an instant barrage of executive orders.
[Estadão] How China intends to boost its economy in 2025 China is bracing for shocks to the economy from higher tariffs promised by the US president-elect. To help revitalise an economy mired in a real estate crisis and production disruptions during the pandemic, China is implementing a series of measures to get Chinese consumers and businesses to spend more money and combat China’s falling currency and stock prices. China plans to expand its old car trade-in and appliance recycling programmes to encourage more purchases of new, energy-efficient models. Subsidies will also be applied to a dozen types of household appliances and digital products, and the upgrading of obsolete industrial equipment will be subsidised. To improve the business environment, local authorities were warned not to carry out unwarranted ‘arbitrary inspections’ that interfere with normal business. To date, China has not launched a major stimulus spending bazooka, but the government is said to be planning to announce long-term treasury bonds of a ‘significantly larger’ scale to finance spending. At the same time, it is seeking to keep the value of the yuan stable and stabilise financial markets, as the renminbi weakened against the dollar. .
[Financial Times] China steps up efforts to break Boeing and Airbus’ grip on aircraft market Comac’s heavily subsidised C919, which made its first commercial flight in 2023, is already used on domestic routes by China’s big three state-owned airlines – Air China, China Eastern Airlines and China Southern Airlines. Now China Eastern will fly the C919 between Hong Kong and Shanghai, its first scheduled commercial route outside mainland China. The carrier would aim to have the single-aisle aircraft flying in Southeast Asia by 2026 and obtain European certification this year. Boeing’s financial problems and delivery delays, as well as wider supply chain problems in the industry that have left it and Airbus facing shortages of engines and components, have weighed on the global aviation sector and offered hope to newcomers. According to forecasts, the world will need 42,430 new aircraft over the next two decades, approximately 80 percent of which will be single-aisle aircraft. In this regard, it is believed that Comac could increase its C919 production from one to 11 per month by 2040, by which time it will be able to deliver almost 2,000 units of the aircraft.
[Bloomberg] China, Nigeria renew currency swap to boost bilateral trade Aiming to strengthen financial cooperation and expand the use of the two currencies, China and Nigeria have renewed a 15 billion yuan ($2 billion) currency swap agreement designed to boost trade and investment. The agreement is valid for three years and could be renewed by mutual agreement. The countries first signed the deal in April 2018 for a three-year period amid a dollar shortage in the West African nation. China is Nigeria’s largest trading partner, ahead of the United States. It imported $11.2bn worth of goods and services from China and made exports worth $2.4bn in 2023. While liquidity in the foreign exchange market has improved since Nigeria ended its currency peg, the naira has remained under pressure, losing 70 per cent of its value since the regime was relaxed. By reducing local demand for dollars in Nigeria, the mechanism could also help support the naira.
[Bloomberg] EU, Mexico seal trade deal as Trump threatens both with tariffs The agreement aims to boost trade and economic security by eliminating risks in supply chains, ensuring a sustainable supply of critical raw materials and tackling climate change. Bilateral trade in goods reached €81.7 billion ($84 billion) in 2023, while trade in services was €22 billion in 2022. The agreement, which will need to be ratified by both sides, aims to expand EU exports in areas such as financial services and telecommunications, strengthen the supply chain for critical raw materials and allow access to government contracts on equal terms with domestic firms. It will also reduce tariffs on agri-food products such as cheese, poultry, pork, pasta, apples and jams, as well as chocolate and wine.
[Project Syndicate] What tariffs can and cannot do Donald Trump’s proposed trade tariffs are causing concern in the global economy. Trump sees them as a multifunctional tool (‘Swiss army knife’) to solve problems such as trade deficits, competitiveness, domestic investment and job creation. However, economists criticise tariffs for creating inefficiencies, distorting markets and being blunt instruments. Moreover, they would benefit some sectors but harm others, especially those dependent on imported inputs or foreign markets. The costs of such tariffs would fall mainly on the US economy, and there is a risk that other countries would respond with retaliation, triggering a trade war harmful to all. While tariffs are often criticised, in some cases they have been effective when used as part of a broader strategy. For example, countries such as South Korea, Taiwan and China have used them in conjunction with industrial policies to encourage innovation and economic development. They can also be useful as a complement to green policies, such as the EU’s carbon tariffs or the local content requirements of the US Inflation Reduction Act. However, Trump’s tariffs, if implemented indiscriminately and without a coherent domestic plan, are likely to do more harm than good, especially for the US economy. In short, tariffs are not a magic bullet and their effectiveness depends on how they are implemented and the complementary policies that accompany them.
[Financial Times] When China’s peak oil demand meets ‘drill, baby, drill’ China’s demand, which has accounted for half of all global oil demand growth for three decades, shows signs of stabilising thanks to slowing economic expansion and a momentous shift to green energy and electric vehicles. Meanwhile, returning US President Donald Trump declared a national energy emergency aimed at boosting fossil fuel production and began reversing the Biden administration’s green agenda. Before taking office, Trump warned that the EU will face trade tariffs on its exports to the US unless its member states buy more US oil and gas. In theory, this dynamic could lead to an oil glut and falling prices. Coupled with the popularity of his ‘drill, baby, drill’ mantra among consumers who oppose green transition costs, Trump does not want the US to be dependent on a green energy supply chain dominated by China. But producers are unlikely to drive much drilling at current US benchmark prices of around $75 a barrel. Restrictions on Russia and Iran could open up a potential opportunity for Saudi Arabia; the OPEC consortium has been holding back for months on planned production increases to balance the market in the face of falling Chinese demand.
[Reuters] Apple’s troubles in China mount as foreign phone sales fall China’s shipments of foreign-branded smartphones, including Apple’s iPhone, fell 47.4 per cent in November from a year earlier, marking its fourth month of decline. Foreign-brand shipments fell to 3.04 million units from 5.76 million a year earlier. Faced with falling market share, Apple launched a four-day promotion in China, slashing prices by up to 500 yuan ($68.50) on its flagship models to boost sales. Huawei has emerged as a strong rival since its return to the premium segment in August 2023 with locally manufactured chipsets.
[SCMP] China vows to protect firms from arbitrary inspections to boost economy Chinese Vice Justice Minister Hu Weilie said Beijing’s demand that local governments refrain from arbitrarily fining private companies was ‘one of the important measures’ in a stimulus package aimed at addressing the country’s economic problems. Private companies, which serve as the backbone of job creation, investment and innovation in China, have expressed concern that frequent administrative inspections by local governments will interfere with their normal operations and rent-seeking.
[Politico] The EU and Mexico renewed their trade deal before tariff man Trump takes office. The European Union and Mexico renewed their 2000 trade agreement just before Donald Trump’s inauguration as US president. This updated agreement seeks to adapt to new global economic dynamics by reducing tariffs, strengthening supply chains and improving investment protections. The pact offers key benefits to European exporters in sectors such as automotive and agri-food, while strengthening bilateral cooperation in the face of global trade tensions.
COMPETITION BETWEEN GREAT POWERS – INTERNATIONAL SYSTEM
[Financial Times] Donald Trump says China tariffs could hinge on TikTok deal After reports that China is discussing selling its US operations of the group to Elon Musk were debunked, and amid an influx of US users to RedNote (Xiaohongshu) and Lemon8, Trump postponed a deadline requiring the Chinese parent company to sell its stake in the app or face a ban in the country. However, in signing an executive order to keep TikTok online in the US for 75 days, he mentioned that tariffs on China could be contingent on a deal over ownership of the platform. Trump argued that the US ‘should be entitled to get half of TikTok’ if the app continued to operate beyond that limit and that he ‘certainly’ could impose tariffs on China if it rejected a deal, which he said would be a ‘hostile attack’. He added that tariffs could be as high as 100 per cent. TikTok temporarily became unavailable to some 170 million US users when the ban went into effect at midnight on Sunday, after the Supreme Court upheld the law on Friday. But it resumed service hours later, and the company said Trump had given adequate assurances that service providers would not face sanctions.
[The Guardian] Europe must take responsibility for its own security, says Polish minister Poland begins its six-month presidency of the European Union with a warning: This is ‘the right time to say loudly that it is time for Europe to take responsibility for our future and our security’, Polish European affairs minister Adam Szłapka said on Wednesday. Poland holds the rotating presidency from 1 January until 30 June 2025. Poland has long warned that many EU members underestimate the threat Russia poses to Europe, and now that Trump is promising to negotiate a ceasefire deal in Ukraine, the Polish government wants to make sure Europeans understand the long-term risk. Szłapka warned that ‘very difficult times’ lie ahead. And while Polish officials are careful not to criticise Trump directly, at least until his approach to Russia, Ukraine and the future of NATO is clarified, Poland continues to insist that Europe cannot outsource its security indefinitely to the United States.
[CSIS] Indonesia became the first Southeast Asian nation to formally join BRICS. The bloc recently opened itself to expansion, accepting additional members Egypt, Ethiopia, Iran and the United Arab Emirates in 2024. President Prabowo Subianto prioritised BRICS membership soon after taking office in October, and Indonesia was initially one of 13 countries invited to become a BRICS partner country, along with Malaysia, Thailand and Vietnam. While BRICS leaders backed it to join in 2023, then Indonesian President Joko Widodo hesitated to join, fearing it would jeopardise Indonesia’s policy of non-alignment. In 2024, Indonesia’s trade with the BRICS nations amounted to approximately $150 billion, with its main exports being palm oil, coal and natural gas, and rubber. Indonesia is already considering increasing trade with the BRICS nations, particularly by importing oil from Russia.
[Americas Quarterly] Ties with China could be a burden for Mexico under Trump The growing economic relationship between Mexico and China has raised concerns in the United States and Canada, who fear that Mexico could become a backdoor for the entry of Chinese products under the preferential terms of the T-MEC. This issue takes on greater relevance with Donald Trump’s second term in office and the review of the agreement in 2026. China has significantly increased its presence in Mexico through expanded trade and foreign direct investment (FDI). Since 2018, Chinese FDI has grown by 50% annually, with a notable impact on strategic sectors such as automotive, technology and infrastructure. By 2023, Chinese cars accounted for 20% of sales in Mexico, and Chinese companies are playing a key role in infrastructure projects such as the Tren Maya and urban transport systems. However, concerns persist over the lack of transparency in the economic relationship between the two countries. Reports suggest that actual levels of Chinese investment could be much higher than officially reported, while the growing influence of technology companies such as Huawei poses security risks in critical sectors. Claudia Sheinbaum’s government seeks to balance these relations with measures such as strengthening local production and tighter controls on Chinese imports. This could turn Mexico into a regional manufacturing hub that attracts investment and reduces its trade deficit with China. The revision of the T-MEC in 2026 will be crucial for Mexico to reinforce its position as a reliable partner of the US and Canada, while carefully managing its economic relationship with China to seize opportunities without compromising its geopolitical position.
[ECFR] Why Merz’s new political generation will decide Germany’s future In February 2025, Germany will hold federal elections, and polls indicate that the conservative Christian Democratic Union (CDU) and its allies in the Christian Social Union in Bavaria (CSU) are likely to triumph. This shift will mark a generational transition in Berlin’s decision-makers, which could see the country move away from its supranational outlook to lead new intergovernmental alliances that include groups of northeastern European states, such as Finland, the Netherlands, Poland and Sweden. It could even extend to states outside the EU, such as Norway and the UK. However, this new approach comes not so much from the CDU’s likely chancellor, 69-year-old Friedrich Merz, as from the party’s leading figures. For the most part, they are much younger than Merz and see Germany’s role in Europe in a more confident and assertive way than previous generations of CDU politicians. If Merz succeeds, the new German government will have a mandate to pursue a foreign policy based on integration steps related to defence spending and debt-financed innovation policies. Eventually, Germany will be less likely to pursue the broad supranational alliances it previously developed to ensure that no state was left behind. Instead, a ‘two-speed Europe’ is likely to emerge, albeit at the cost of alienating its main EU partner, France.
[Financial Times] Saudi Arabia’s crown prince tells Donald Trump he wants to invest $600bn in the US The statement on the call between Prince Mohammed and Trump did not provide details on the sectors or industries that would receive the $600bn of investment, but said the amount could go ‘potentially beyond that if additional opportunities arise’. Trump said he would consider making Saudi Arabia his first foreign trip as president again if Riyadh agreed to buy $500 billion worth of US goods, as he claimed the kingdom did in his first term in office. The $600 billion investment pledge represents more than half of Saudi GDP and comes at a time of increasing pressure on the kingdom’s budget due to falling oil prices and rising deficits.
ARTIFICIAL INTELLIGENCE
[Reuters] Microsoft to invest $3 billion in India to expand AI and cloud capabilities Microsoft will spend $3 billion to expand its Azure cloud and artificial intelligence (AI) capabilities in India doubling down on a bet on a country with technology expertise and low costs to help make such investments profitable. The two-year investment comes on top of the company’s recently announced plan to invest $80 billion in AI-enabled data centers by fiscal 2025. Microsoft, which has more than 20,000 employees across 10 cities in India, would aim to help the local tech community develop and leverage its talent base. Microsoft plans to train 10 million people in artificial intelligence in India by 2030.
[The New York Times] How Chinese AI startup DeepSeek is competing with Silicon Valley giants. DeepSeek, a Chinese startup, unveiled its DeepSeek-V3 AI system, capable of matching the most advanced chatbots such as those from OpenAI and Google, but using just 2,000 specialized chips from Nvidia, far fewer than the 16,000 chips required by leading companies. The development cost was $6 million, a fraction of the hundreds of millions that giants like Meta spend on their systems. This achievement was made possible by more efficient training approaches, forced in part by U.S. trade restrictions limiting the export of advanced chips to China. These restrictions, designed to maintain the U.S. technological advantage and prevent military use of these technologies, have led Chinese engineers to become more creative, leveraging globally available open source tools. DeepSeek, backed by quantitative trading firm High Flyer, uses its technology exclusively for research, which frees it from the tighter restrictions of Chinese regulations for consumer-facing products. DeepSeek’s open source approach has enabled companies and developers around the world to use its technology to build new applications, challenging the idea that only large U.S. corporations can lead AI development. Since 2023, open source has gained traction thanks to initiatives such as Meta’s LLama system, and DeepSeek has demonstrated that even companies with more limited resources can contribute significantly to the advancement of the technology. DeepSeek’s success also underscores the risks for the U.S. if it limits its own open source ecosystem too much. Experts warn that China could gain a strategic advantage if its open technologies become the basis for global developments. This has sparked debate about how to balance protecting national security with promoting technological innovation.
The DeepSeek case shows how restrictions can have unintended effects, incentivizing more efficient and accessible developments that challenge the dominance of traditional industry leaders. As global competition in AI intensifies, technologies like DeepSeek-V3 could redefine who can lead and democratize access to advanced artificial intelligence tools. U.S. tech stocks start the week with sharp declines following the launch of the new DeepSeek version. The last week of January began with the Nasdaq index falling 3%, dragging down the rest of the U.S. market.
[China Talk] National pride in the face of U.S. competition. The Chinese media response has been quite positive. State media and industry leaders have celebrated DeepSeek’s achievements, often with a tone of nationalistic pride, especially after English-language reports highlighted its performance and cost efficiency. For example, China Daily stated, “For a Chinese large language model (LLM), it is a historic moment to surpass ChatGPT in the U.S.” Daily Economic News reflected this sentiment by stating, “Silicon Valley shocked! Chinese AI dominates in foreign media, AI experts say: ‘It’s caught up with the US!’” Tech executives have also weighed in. Feng Ji 冯骥, founder of Game Science (the studio behind Black Myth: Wukong), called DeepSeek “a scientific and technological achievement that shapes our national destiny (国运).” Zhou Hongyi, president of Qihoo 360, told Jiemian News that DeepSeek will be a key player in “China’s Big Model Technology Avengers Team” to counter U.S. AI dominance. In a viral post on Weibo (Chinese X) one user said, “I never thought the day would come when I would shed tears for an AI,” referring to DeepSeek’s response to his feelings of existential threat from AI’s ability to type.
STRATEGIC MINERALS
[Bloomberg] Rio Tinto and Glencore discuss the biggest potential merger ever in the mining sector Rio Tinto is the world’s second-largest miner, with a market value of about $104 billion when operations began in London, while Glencore was valued at about $56 billion. BHP, meanwhile, is worth around $126 billion. A possible combination of the two companies would be considered the largest mining deal ever, but any transaction would be complex and face multiple potential hurdles. While Glencore has large copper assets at a time when the world’s largest producers are looking to expand in the metal crucial to the energy transition, it also owns a huge coal business that would probably not be attractive to Rio. The CEO of the larger miner has repeatedly expressed caution about mega-deals, and the two companies have very different cultures.
[Financial Times] Apple is facing an investigation in Belgium for allegedly using “blood minerals” from the Congo. The investigation in Belgium is moving forward with the appointment of an investigating judge, while in France the process is slower. Apple has rejected the allegations, saying it is “deeply committed” to responsibly sourcing minerals such as coltan, essential to its products. However, the complaint alleges that Apple buys tantalum (extracted from coltan), tin, tungsten and gold (3TG minerals) from mines whose profits fuel armed conflict, child labor and environmental degradation in eastern DRC. DRC lawyers argue that the minerals certification system, which Apple and other tech companies use, is “deeply flawed.” Minerals labeled as coming from Rwanda would actually be mined in Congo and then “laundered” through Rwanda. A UN report backs up these claims, noting that Rwandan-backed rebel groups control key mines and illegally export Congolese minerals. Apple has denied any links to armed groups in the DRC and announced in 2024 that it would suspend the purchase of 3TG minerals from the DRC and Rwanda, claiming that it is no longer possible to ensure due diligence in the supply chain. DRC lawyers see this decision as a tacit admission that supply chains are contaminated with illegal minerals. In addition, the DRC has sought to involve the European Union (EU) in the case, criticizing an EU agreement with Rwanda on the sustainable sourcing of critical minerals, calling it a “sham” given that Rwanda does not possess large reserves of these minerals. The EU has defended its commitment to transparency and the fight against illegal mineral trafficking.
[Shanghai Metal Market] Lithium carbonate performance in 2024 The year 2024 was marked by fluctuations in lithium carbonate prices. Although not as dramatic as the drop from 500,000 yuan/tonne to 100,000 yuan/tonne in 2023, prices in 2024 varied due to cyclical mismatches between supply and demand and the occasional overseas export rush for the facility. The peak price hovered around 110,000 yuan/tonne, while the trough fell to 72,000 yuan/tonne, with an average annual price of 90,000 yuan/tonne. In 2024, total Chinese lithium carbonate production is expected to reach 680,000 tons, up 47% year-on-year. China’s lithium carbonate imports in 2024 are estimated at 230,000 tons, up 46% year-on-year. Chile and Argentina remain the main sources of China’s lithium carbonate imports. Chile’s imports are about 180,000 tons, up 29% y-o-y, accounting for 78% of China’s total imports, while Argentina’s imports are about 45,000 tons, up 156% y-o-y, accounting for 20% of China’s total imports. In 2025, both lithium carbonate supply and demand are expected to grow, but supply growth is likely to outpace demand, further amplifying the annual surplus.
CLIMATE CHANGE
Javier Milei’s government in Argentina is considering leaving the Paris Agreement, following in the footsteps of Donald Trump, who recently announced that the United States will exit the global climate pact. Although no final decision has been made, sources close to the discussions suggest that Argentina is likely to become the second country to withdraw from the agreement, signed by nearly 200 nations. Officials are reviewing an internal memo recommending the exit, after Argentina withdrew its negotiators from the COP29 climate summit and reassessed its international environmental commitments. Although some officials are trying to dissuade Milei, an Argentine diplomat noted that the final decision rests with the president and that it is “very likely” that the country will leave the agreement. Milei harshly criticized the global environmental movement in a speech at the World Economic Forum in Davos, calling it “environmental fanaticism” that sees humans as a “cancer” and economic development as a “crime against nature.” Withdrawal from the Paris Agreement could have economic and political consequences for the country, such as suspension of the EU-Mercosur trade agreement, complications in its bid to join the OECD and loss of access to international climate finance.
CHIPS and SEMICONDUCTORS
[Council on Foreign Relations] What to Know About New U.S. Artificial Intelligence Dissemination Policy and Export Controls During the final days of his administration, the Biden administration, through the Commerce Department’s Bureau of Industry and Security (BIS), released a Regulatory Framework for the Responsible Dissemination of Advanced Artificial Intelligence Technology. The policy establishes a global framework for regulating the export of cutting-edge artificial intelligence (AI) technologies, from chips to AI model weights, from the United States to the world. The policy builds on previous policy publications focused on limiting AI technology exports to the People’s Republic of China (PRC) and other countries of concern such as Russia. The policy seeks to enable U.S. companies to export and lead in key global AI markets by reducing and streamlining current bureaucratic barriers to exports. In addition, the policy further controls PRC access to the most advanced U.S.-based AI technologies through regulatory changes. The regime creates a three-tier licensing system for chips used in data centers that process AI computations. The top tier, which includes members of the G7 plus countries such as Australia, New Zealand, South Korea, Taiwan, the Netherlands and Ireland, will face no restrictions. Given the presidential transition, the longevity of the policy is uncertain and may depend on whether key figures in the incoming Trump administration view the policy more through the lens of geopolitical competition and restricting PRC access to U.S. technology or whether they see the diffusion policy as part of a regulatory framework that unduly overburdens and hurts U.S. AI companies. The move faced immediate pushback from the U.S. semiconductor industry.
[Tom’s Hardware] TSMC’s Fab 21 fab in Arizona now making 4nm chips TSMC has started chip production at its Fab 21 in Phoenix, Arizona, using 4nm-class process technology, marking the first time advanced nodes have been manufactured on U.S. soil. Secretary of Commerce Gina Raimondo confirmed that the quality and performance of these chips are on par with those produced in Taiwan. Currently, Fab 21 produces chips for Apple and AMD, including the A16 Bionic in the iPhone 15, the main processor in the Apple Watch S9, and AMD Ryzen 9000 series CPUs. Initial capacity is approximately 10,000 wafers per month. This project is key to the U.S. reaching its goal of producing 20% of the world’s advanced chips by 2030, supported by $6.6 billion in grants and up to $5 billion in loan guarantees under the CHIPS and Science Act. The facility includes three manufacturing modules scheduled for completion toward the end of the decade: – Phase : Production on 4nm and 5nm nodes; Phase 2 (2028): Production on 3nm nodes and Phase 3 (end of the decade): Production on 2nm and 1.6nm nodes with backside power delivery technology. The project, with an estimated total investment of $65 billion, reinforces the U.S. strategy to lead in advanced semiconductors.
MIDDLE EAST CONFLICT
[The New York Times] The cease-fires in Gaza and Lebanon are fragile, but all sides could hold them. Analysts say the cease-fires in Gaza and Lebanon are likely to hold for now, despite being tested over the weekend, as all parties involved want to avoid a full-scale conflict, at least for a few weeks. In southern Lebanon, Israeli troops remained in their positions after the deadline for their withdrawal, with Israel claiming that Hezbollah reneged on its promise to leave the area. In Gaza, Hamas did not release an Israeli hostage as expected, leading Israel to delay the return of displaced Palestinians to northern Gaza. Despite mutual accusations of non-compliance with agreements, both sides have reason to maintain flexibility. Hezbollah, although annoyed by the Israeli presence in southern Lebanon, avoids resuming rocket attacks so as not to provoke a devastating response from Israel. Hamas seeks to maintain control in Gaza and fears losing it in the event of war. Israel, for its part, needs to prolong the ceasefire to secure the release of more hostages and appease U.S. President Donald Trump, who vowed to promote peace in the Middle East. On Sunday night, Israel and Hamas appeared to resolve the crisis, with Qatar mediating the hostage release and the return of Palestinians to northern Gaza. In Lebanon, the truce was extended until February 18, as announced by the White House and confirmed by the Lebanese government. Experts stress that the agreements depend on mutual concessions and room for maneuver, which makes them fragile but viable. Despite violent incidents over the weekend, including civilian deaths in clashes with Israeli troops, the cease-fires survived. Hezbollah, weakened by the loss of leaders and the blockade of arms supplies through Syria, avoids resuming attacks to avoid risking a crushing response from Israel and losing the support of its Shiite base, especially before parliamentary elections in Lebanon. In Gaza, the cease-fire is seen as more fragile, with its biggest test scheduled for March, when Israel and Hamas will decide whether to extend the agreement beyond the initial 42 days. Israel wants to maintain the truce to secure the release of hostages, but an extension would require a permanent end to the war, something Prime Minister Benjamin Netanyahu appears reluctant to accept due to pressure from right-wing allies seeking total control over Gaza. The future of the ceasefire could depend on Trump’s influence over Netanyahu. If the U.S. president maintains his stance of promoting peace, the truce could be extended; otherwise, the conflict could resume.
COREA DEL SUR
[Bloomberg] South Korean Consumer Confidence Plummets to Highest Level Since Pandemic Hit by political turmoil triggered by President Yoon Suk Yeol’s declaration of martial law and his impeachment trial, the composite consumer sentiment index fell 12.3 points to 88.4 in December, well below the 100 threshold that divides optimism and pessimism, according to a Bank of Korea survey.
This is the biggest drop since the World Health Organization declared a pandemic in March 2020, which sent global consumer confidence plunging. Heightened political uncertainty and financial volatility are the main factors that dented confidence among South Koreans. There is speculation that the Bank of Korea may consider a rate cut in January to respond to emerging headwinds for the economy as political uncertainty continues.
BANGLADESH
[Sourcing Journal] Beximco lays off 40,000 garment workers One of Bangladesh’s largest textile and garment manufacturers, Beximco Group, has laid off 40,000 workers at 16 garment factories, including Beximco Fashions and Shinepukur Garments, due to severe financial difficulties. The company, which has been facing a crisis since the August arrest of its co-founder and vice chairman on charges of money laundering, embezzlement and other tax crimes, has struggled to maintain operations amid falling demand, labor unrest and liquidity problems. Beximco has spent 300 million taka (USD 25.1 million) since August, mainly on salaries, but its monthly revenue of 5-6 million taka (USD 419,000-502,000) is insufficient. Although the interim government has helped cover salaries through Janata Bank, it cannot sustain this indefinitely. The group, which has worked with brands such as Marks & Spencer, Target, PVH Corp. (owner of Calvin Klein) and Inditex (owner of Zara), is now looking to sell parts of its textile business to foreign investors. The government is also evaluating whether it can revive some divisions as independent companies, without the participation of the former owners. Layoffs, permitted under Bangladeshi labor law, are the only current legal recourse for the company
AFRICA
[Bloomberg] South Africa’s economy prepares to escape a decade of growth inertia Growth of 1.7% is expected by 2025, compared with 0.7% estimated for 2024 and lower than 1% on average over the previous 10 years.
The economy would have a credible prospect of stabilization driven by measures to address growth constraints and higher consumer spending. Factors favoring growth include political cooperation through a coalition government formed by the African National Congress after it lost its absolute majority in last year’s elections. Lower interest rates, higher levels of fixed investment and the current better performance of the country’s power, transport and logistics sectors will also have a positive impact. The central bank is expected to cut interest rates by 50 basis points to 7.25% in the first quarter and inflation is expected to remain below the 4.5% midpoint of its target range. Still, the expansion may not be enough to reduce one of the highest poverty and unemployment rates in the world.
[Bloomberg] Automakers ask ArcelorMittal to delay closures in South Africa, along with the country’s trade minister, are working to delay the planned closure of several steel plants this month. Associations representing automotive component and car makers, including companies such as Volkswagen and Toyota, warned in letters that they need at least a year to find alternative sources of steel supply. The closure of these plants could lead to production stoppages, factory closures and job losses in the automotive industry. AMSA announced on January 6 that it would close its long steel production plants in Newcastle and Vereeniging, as well as a rail manufacturing facility in eMalahleni, due to lack of profitability. These operations are the only local suppliers of essential steel products for industries such as construction, mining and automotive manufacturing. The automotive associations called on Trade Minister Parks Tau to support AMSA in finding a transitional solution to avoid “disruptions in the automotive sector and the serious threat of offshoring and ultimately deindustrialization.” Minister Tau stated that talks with AMSA are ongoing and that the government is “cautiously optimistic” that the closure can be avoided. However, AMSA maintains that the plants are not viable due to problems such as poor rail service, high electricity costs, competition from cheap imports and government policies that keep prices of recycled steel, used by smaller competitors, low. The automotive associations noted that their industries depend on 70,000 tons per year of special grades of long steel that only AMSA can supply locally. Switching to foreign suppliers could increase costs by 25% and result in the immediate loss of 3,000 jobs, with a potential long-term impact of 13,000 additional jobs. In addition, transitioning to new suppliers would require extensive testing and approvals, which could lead manufacturers to use already approved parts from international suppliers, hurting the local parts industry. The automotive industry is crucial to the South African economy, accounting for 5.3% of GDP and 15% of exports. Companies such as Stellantis, Ford, Mercedes-Benz, BMW and Isuzu also operate in the country, underlining the importance of maintaining a stable steel supply chain.
By Dafne Esteso (@dafnech_esteso) y Brenda Vladisauskas (@bvladisa)
