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INTERNATIONAL ECONOMY – TRENDS
[Wall Street Journal] Federal Reserve projections foresee an economy drastically reset by Trump’s election Months ago, policymakers predicted they would spend 2025 gradually cutting rates to keep inflation down without a significant rise in unemployment to achieve a so-called soft landing. The latest projections point to tariffs affecting a wide range of goods and materials that will push up prices while weakening investment, confidence and growth, at least in the short term. Officials projected weaker growth, higher unemployment and higher-than-expected inflation in December. A combination of stagnant growth and higher prices, sometimes called stagflation, could make it difficult for the Fed to cut interest rates this year to prevent any slowdown.
[Bloomberg] U.S. manufacturing activity nears stagnation as prices rise In February, U.S. manufacturing activity neared stagnation as orders and employment contracted, while a gauge of prices paid for materials rose to the highest level since June 2022 as tariff concerns mounted. As companies assess the implications of Trump’s tariffs, rising input costs pose a challenge for manufacturers amid slowing orders. Steel and aluminum prices increased immediately after Trump’s tariff announcement, and some suppliers are reportedly not taking as many new orders due to disagreements over who will pay the additional cost.
[Financial Times] U.S. adds dozens of Chinese entities to export restriction list The United States added six subsidiaries of Inspur Group, China’s leading provider of cloud computing and big data services, and dozens of other Chinese entities to its export restriction list. Inspur units were included for contributing to the development of supercomputers for the Chinese military, according to the Commerce Department. The lists are intended to restrict China’s ability to develop high-performance computing capabilities, quantum technologies and advanced artificial intelligence, and to impede the development of its hypersonic weapons program.
[Reuters] China hits back at Canada with new agricultural tariffs China announced on Saturday tariffs on Canadian agricultural and food products (rapeseed oil, pork, among others) worth more than $2.6 billion. The levies, scheduled to take effect on March 20, coincide with the 100% and 25% import tariffs that Canada applied to electric vehicles and Chinese-made steel and aluminum products just over four months ago. The tariffs could also serve as a warning as the Trump administration has signaled that it could ease the 25% import tariffs the White House is threatening Canada and Mexico with if they apply the same additional 20% tariff it has imposed on Chinese products for fentanyl flows.
[DHL] DHL Trade Atlas 2025 World trade is forecast to grow at a slightly higher rate (3.1%) over the next five years than during the previous decade. However, historical uncertainty about future trade policies clouds the outlook. Over the next five years, India, Vietnam, Indonesia and the Philippines are forecast to rank among the top 30 countries in terms of speed and scale of trade growth. South Asia, Sub-Saharan Africa and Southeast Asia are projected to achieve much faster trade volume growth than all other regions between 2024 and 2029. However, Europe, with slower growth, is expected to generate a larger share (30%) of total world trade growth. Contrary to predictions that recent disruptions would lead to more regionalized trade patterns, trade was conducted over the longest average distance on record during the first nine months of 2024 (5000 km). Most trade is in manufactured goods, but rising prices have increased the value of trade in mineral fuels. The share of U.S. imports coming directly from China continues to decline, but U.S. reliance on Chinese-made content has not declined substantially. U.S. imports from other countries contain more inputs from China, and direct U.S. imports from China may be underestimated.
[Financial Times] Automakers rush to ship vehicles to U.S. ahead of new round of tariffs in April According to industry officials, international automakers are rushing to ship vehicles and core components to the United States to get ahead of President Donald Trump’s next round of tariffs, which threaten to wreak havoc on automotive supply chains. Car carriers have been dispatched to Asia and Europe amid plans to ship “thousands” more vehicles than usual to the United States. It is even believed that the increase would be greater were it not for the industry’s shortage of car carriers. The boom has led to a 22% year-on-year increase in vehicle shipments from the EU to the U.S. in February, while those from Japan rose 14%. Shipments from South Korea to North America were up 15%.
[Reuters] Brazil’s foreign trade secretary, Tatiana Prazeres, warned, following Trump’s auto tariff announcement, that global trade is at risk of being “weaponized” and that WTO tensions will likely get worse before they get better. Brazil’s president, for his part, has already promised to file a complaint with the WTO over Trump’s 25% tariffs on Brazilian steel.
[NPR] India expects its manufacturing sector to benefit from Trump’s tariffs on China In Sriperumbudur, an industrial city in India’s southern state of Tamil Nadu, growing demand for jobs in factories like Foxconn – which makes iPhones for Apple – reflects how India is benefiting from US-China tensions. Women make up 70% of the workforce at the Foxconn plant, attracted by wages double what they were earning in textile factories. The Indian government, and Tamil Nadu in particular, is looking to attract more labor-intensive manufacturing, taking advantage of the trend of companies moving out of China. Tamil Nadu is especially attractive because of its leaner bureaucracy, more efficient judicial system and large female labor force. Although it represents only 6 % of the Indian population, the state accounts for more than 40 % of the country’s female factory workers. India expects to increase its share of global iPhone production from 15% today to 25%, having exported more than $20 billion worth of cell phones by 2024, a 44% increase over the previous year. However, there are obstacles: although Trump was expected to impose harsher tariffs on China, tariffs remained at 20%, far from the 60% promised during his campaign. In addition, Trump has shown dissatisfaction with India for its $45 billion trade surplus with the US and its high tariffs, reaching up to 150 % on some products. During his State of the Union address, Trump announced reciprocal tariffs for India starting April 2, which could cost the country up to $7 billion in trade with the U.S. However, Tamil Nadu officials believe that companies will continue to relocate to India, motivated by the need to diversify away from China and tap into the large domestic Indian market. However, the uncertainty generated by Trump’s trade policies worries investors. Moreover, according to experts, Trump prioritizes foreign investments to be directed to the US rather than to countries such as India.
[Reuters] Major U.S. toymaker accelerates plan to move production out of China U.S. toymakers are adjusting as fast as possible as a result of Trump’s trade war with China. MGA Entertainment, a toy supplier to Walmart and Target, is accelerating its exit from China, taking steps to move 40% of its manufacturing to India, Vietnam and Indonesia within six months or so, up from 10% to 15% currently. However, approximately 60% of the company’s production will remain in China. In addition, it may have to raise wholesale prices for products manufactured in China to protect its already slim profit margins. Chinese factories currently produce about 77% of U.S. toys. Mattel’s CEO stated that of the four company-owned factories in China, only one will remain by the end of the year. Hasbro, maker of Play-Doh, cited the China tariffs as a risk to its business.
[Bloomberg] How Rheinmetall capitalized on its golden opportunity in munitions While high-tech drones are hogging the limelight, the biggest death toll in the Ukrainian war comes from traditional artillery. Western governments, aware of the urgency to replenish their arsenals, are turning to Rheinmetall, the German company that has seen its valuation soar to €63 billion, surpassing even Volkswagen. The key to its success lies in its munitions business, which represents the fastest growing and most profitable division, with operating margins of 28%. The company has increased its large-caliber projectile production capacity tenfold since 2022, now making 750,000 rounds of NATO standard ammunition (155 mm) annually, more than the entire annual production of the U.S. Rheinmetall aims to reach 1.1 million rounds by 2027 and possibly up to 1.5 million, almost half of European requirements. Unlike its competitors, Rheinmetall produces all key components of its ammunition (“full shots”), such as the casing, explosive charge and powder, in-house, giving it cost and supply advantages. It has also made strategic acquisitions, such as the purchase of Spain’s Expal Systems, which tripled its artillery shell production capacity. Meanwhile, some competitors have been 
more cautious, waiting for firm orders before expanding, but Rheinmetall has aggressively invested its own capital and cut red tape to open new factories quickly, including facilities in Germany, Ukraine, Lithuania and a gunpowder plant in Romania. The boom in demand will continue, as NATO requires sufficient reserves for 30 days of high-intensity warfare, which means a shortfall of tens of millions of shells. Although there is a risk that increased competition will reduce prices, the urgent need for ammunition will continue to drive Rheinmetall’s growth in the coming years.
[PIIE] Modeling a U.S.-EU trade war, the imposition of tariffs by the U.S. on European Union products, as proposed by President Trump (25% on all EU goods), could reduce the bilateral merchandise trade deficit, but would do so at a high economic cost. According to G-Cubed economic model simulations, these measures would lead to higher inflation and slower growth in both the U.S. and almost all European economies, while failing to significantly reduce the overall U.S. trade deficit. Moreover, the inevitable European retaliation – expected in the form of mirror tariffs on iconic U.S. products such as bourbon, jeans and Harley-Davidson motorcycles – would amplify these negative effects. Countries such as Germany would suffer in particular, given its weight in durable goods exports and the drop in global investment. In contrast, France and some smaller eurozone countries would initially experience temporary relief from the depreciation of the euro, which would improve the competitiveness of their exports, although this effect would be short-lived. After a few years, the smaller, trade-dependent economies would suffer the most. Although tariffs alone would probably not push the US into recession, they would increase economic tensions in an already fragile context. Moreover, far from balancing global trade, the measure would strengthen European trade surpluses thanks to the fall in domestic demand and the competitive improvement resulting from the depreciation of the euro. The report stresses that such protectionist policies would not only fail to resolve U.S. trade imbalances, but would also have adverse side effects on inflation and economic growth on both sides of the Atlantic.
[CSIS] China’s exchange programs and plans to boost consumption Since the pandemic, China has faced deflation and weak domestic demand, unlike other major economies grappling with inflation. To stimulate consumption, the government has launched ambitious exchange programs (以旧换新), offering subsidies to consumers who replace old appliances, vehicles and electronics. These measures reflect a broader effort to shift China’s growth model from one historically based on investment to one driven by consumption. Traditionally, China has focused on supply-side policies, avoiding direct support to consumers so as not to fall into the “welfarism trap.” However, the real estate crisis and the depletion of traditional growth engines have increased the urgency to stimulate domestic demand. Recent government reports show a marked increase in references to consumption and domestic demand. Current replacement programs are unprecedented in scale, with more than RMB150 billion allocated in 2024 and another RMB300 billion planned, far exceeding previous initiatives. Consumers can easily access these subsidies through apps such as WeChat and Alipay. Results so far include millions of auto parts and a sharp increase in home appliance sales. However, these policies mainly advance short-term consumption decisions, without substantially changing consumer behavior. To broaden their impact, the government is increasing the range of eligible products. In addition, the replacement programs target not only consumers, but also businesses, encouraging the modernization of industrial equipment. This dual approach, part of the dual circulation (两新) policy, aligns with China’s traditional supply-side strategy, promoting both consumption and investment in line with broader goals such as energy efficiency and industrial upgrading. While promising, deep reforms will be key to achieving a lasting rebalancing. The recent “Special Action Plan to Boost Consumption” points to a broader agenda that includes improvements in social services, education, health and labor protection. However, there is skepticism about the depth of these reforms, given long-standing policy inertia. China’s ability to move toward sustainable consumption-led growth faces fiscal challenges, especially with falling revenues from land sales. For now, these replacement programs offer temporary relief, but comprehensive reform will be crucial for long-term success.
[Economic Times] Electronics have become the fastest growing segment in India’s export basket. In December 2024, India’s electronics exports increased by 25.1%, reaching a two-year high of $3.58 billion, up from $2.65 billion in the same month last year. And as India’s electronics exports record increases and record highs, Apple is looking to step up hiring before it begins manufacturing iPad, MacBook and AirPods in India. Several new job postings on Apple’s website reveal that the company is looking to ramp up hiring in its hardware, software, retail and online sales teams. The job descriptions indicate that the company is hiring in four cities – Bengaluru, Chennai, Delhi and Hyderabad. The company plans to begin production of AirPods in India, eight years after it began assembling iPhone models in the country.
[Financial Times] The illicit oil traffic that keeps Libya divided In March 2024, the Cameroon-flagged oil tanker Mardi disappeared from radars after several days near Malta. A month later, it reappeared north of Libya. This ship is one of 48 identified by a UN panel monitoring sanctions in Libya. According to the report, Mardi made 14 trips to the port of Benghazi and smuggled more than 13,000 tons of diesel between 2022 and 2024 in violation of international sanctions. The smuggling is facilitated through a controversial barter scheme, where Libya exchanges its crude oil for refined fuels due to its limited domestic refining capacity. Some of this subsidized fuel is illegally sold outside the country, generating revenue for the armed groups that sustain the two rival administrations: the UN-recognized government in Tripoli and Khalifa Haftar’s faction in the east. This illicit trade has hampered UN efforts to unify 
Libya after the fall of Gaddafi in 2011, and has reinforced the political divide in the country, Africa’s fourth-largest oil producer. According to experts, all actors involved benefit, which has “stabilized” the current fragmentation. Under domestic and international pressure, Libya’s public prosecutor’s office recently ordered an end to the barter scheme. However, this does not mean an end to the misuse of the country’s oil resources. A new player, the Arkenu company, linked to armed groups in the east and Haftar’s son, has already begun exporting crude oil, something historically reserved for the state-owned NOC. Since the scheme began in 2021, the volume of oil exchanged for fuel doubled, reaching $8.65 billion between 2021 and 2023. The lack of transparency allowed start-up and low-profile companies, many registered in the UAE, to benefit enormously. Fuel imports nearly doubled since 2020, with much of the diesel coming from Russia, shut out of European markets by the war in Ukraine. High domestic subsidies and low fuel prices further incentivize smuggling. In 2023, apparent fuel consumption in Libya was triple the world average. The barter scheme has cost the Libyan state some $12.5 billion annually in subsidies, and smuggling losses are estimated to exceed $5 billion annually, according to the World Bank. Although the new NOC chairman promised to end the scheme by March 2025, he warned that he will not be held responsible for potential fuel shortages. However, many experts fear that smuggling money flows will continue, now through new routes and players such as Arkenu.
[Financial Times] China’s export boom generates record number of WTO disputes In 2024, China faced a record 198 trade disputes at the World Trade Organization (WTO), twice as many as the previous year and accounting for nearly half of all global cases. This increase is related to China’s booming exports, which have been key to sustaining economic growth amid weak domestic demand and the protracted property sector crisis. China’s trade surplus reached nearly $1 trillion last year. Many of the disputes were initiated not only by developed economies, but also by emerging markets, reflecting widespread concern about Chinese overproduction. Developing countries filed 117 cases, with India, Brazil and Turkey among the most active. Even close partners of China, such as Russia and Pakistan, adopted protectionist measures against Chinese imports. The United States, under the Trump presidency, stepped up the pressure by applying a 20% tariff on all Chinese products, prompting retaliation from Beijing. Analysts point out that trade restrictions in large economies such as the US and Japan divert Chinese exports to other markets, increasing global competition. China’s industrial overcapacity, especially in high-tech sectors, raises global concerns. Policymakers in China recognize the need for structural change to boost domestic consumption, but concrete policy details have so far been limited. Experts argue that profound change is required, as China’s traditional growth model has prioritized production and investment over consumption.
COMPETITION BETWEEN GREAT POWERS – INTERNATIONAL SYSTEM
[The Wall Street Journal] Taiwan dares to hope for Trump’s support vis-à-vis Beijing Alaska’s governor visited Taiwan to advance plans to sell its natural gas to energy-starved Taiwan, while last month, the Trump administration quietly released $870 million in previously frozen military aid to Taiwan and sent two warships through the Taiwan Strait. U.S. military trainers have kept up their pace of activity with Taiwanese troops, while political contacts between the U.S. and Taiwan have intensified, with officials from the White House National Security Council, the State Department and the Pentagon offering assurances to their counterparts in Taipei. Alex Po, Taiwan’s deputy defense minister, attended a ceremony in South Carolina marking the handover of part of an $8 billion purchase of F-16V fighter jets to the island on a visit to the United States by a senior Taiwanese official. Signs of a tilt toward Taiwan came after Taiwan Semiconductor Manufacturing Co. chief executive CC Wei appeared at the White House with Trump earlier this month to announce a $100 billion investment in the United States.
[Foreign Affairs] China has already reinvented the international system; far from having succeeded in bringing China fully into the liberal economic model promoted by the United States, the opposite has happened: it is Washington that has adopted practices that increasingly resemble those of Beijing. Since the Donald Trump administration, the United States has imposed widespread tariffs, restrictions on foreign investment – especially Chinese investment – and promoted an active industrial policy to relocate production. This approach mirrors the Chinese model of protecting the domestic market and strengthening strategic industries, a strategy that China has been successfully pursuing for decades. The initial premise of the U.S. strategy toward China was that its incorporation into the liberalized global economy would lead it to adopt deeper market reforms and even policy changes. However, this expectation was wrong: China never intended to transform its model. While in the 1990s and early 2000s China, under Jiang Zemin and Zhu Rongji, advanced certain reforms and achieved WTO accession, it has since consolidated its model of state capitalism, especially under the leadership of Hu Jintao and, more emphatically, under Xi Jinping. With heavy subsidies and clear state support for its “national champions,” China became the world’s factory, overtaking industrial powers such as Japan and Germany, while many manufacturing sectors in the West were rapidly deindustrializing. China’s rise also had a mixed global impact: while it helped lift more than a billion people out of poverty, the benefits of that economic integration were not evenly distributed, leaving many industrial communities in the United States and Europe lagging behind. Against this backdrop, the author concludes that the idea of “reasserting U.S. leadership” in defense of a rules-based order seems disconnected from reality. The international economy no longer reflects the Washington model, but has been reconfigured according to Beijing’s vision. In the author’s words, the United States is already living inside the world that China helped shape.
[Reuters] China implements new rules to step up countermeasures to foreign sanctions Chinese Premier Li Qiang signed an order to implement new rules to strengthen China’s countermeasures to foreign sanctions under China’s law against foreign sanctions, passed in 2021. The law stipulates that individuals or entities involved in developing or implementing discriminatory measures against Chinese citizens or entities may be placed on a Chinese government sanctions list. They could be denied entry to China or expelled from the country.
[The Epoch Times] 12 takeaways from Trump’s first major policy speech to Congress President Donald Trump delivered a lengthy 100-minute address to Congress, closing out his first six weeks in office. The presentation reviewed his more than 100 executive orders and outlined his priorities for his term under the slogan “America is back.” Trump promised sweeping tax cuts for all Americans, including personal, corporate and industrial income. He proposed eliminating taxes on tips, overtime and Social Security benefits, and allowing interest deductions on loans for U.S.-made cars. He also pressed Congress to make these cuts, which would total $4.5 trillion over a decade, retroactive to January 20, 2025. On migration, he highlighted the declaration of emergency on the southern border and the mobilization of the military and border patrol, which he said reduced illegal crossings to the lowest level on record. He ordered the classification of transnational cartels and gangs as foreign terrorist organizations. Trump also announced a «common sense revolution» focused on eliminating «woke» policies from public institutions.He signed orders to legally recognize only the two biological sexes, eliminate federal funding for schools that allow men to compete in women’s sports, and promote merit-based hiring, not diversity quotas. On trade, he defended his tariff policies, including tariffs of 25% on products from Canada and Mexico, and an additional 20% on goods from China, as a strategy to attract foreign investment and balance the trade balance. He downplayed concerns about the inflationary impact, assuring that it would be “a small disruption.” Trump praised Elon Musk’s work at the helm of the Department of Government Efficiency (DOGE), which he said saved more than $105 billion through contract cancellations and staff reductions. He also laid out a goal of balancing the federal budget for the first time in nearly 24 years, even suggesting a “gold card” program for foreigners to pay $5 million for a pathway to citizenship. During the speech, Trump honored victims of crimes committed by illegal immigrants, such as Laken Riley and Jocelyn Nungaray, and announced that a wildlife refuge will be renamed in Jocelyn’s honor. In a surprising part of his speech, Trump made a direct appeal to Greenlanders to consider joining the United States, stressing the economic and security benefits to the island and the country. In addition, he mentioned a letter from Ukrainian President Volodymir Zelenski expressing readiness to negotiate a strategic minerals agreement that would allow Ukraine to use part of its revenues to repay U.S. financial aid, following the suspension of U.S. assistance. Trump also announced the capture of the main terrorist responsible for the Abbey Gate bombing during the 2021 Afghanistan withdrawal, who will be brought to the U.S. for trial. The Democratic response was critical and visible both inside and outside the House. There were disruptions during the speech, demonstrations with signs such as “Save Medicaid” and public criticism, accusing Trump of favoring billionaires at the expense of ordinary citizens and imposing tariffs that they claim act as backdoor taxes on Americans.
[Bloomberg] Europe prepares for the end of NATO With the second Trump administration, doubts are growing about the alliance’s continued existence. Some Republican politicians are pushing the idea of leaving or reducing support, as evidenced by the vote of 46 lawmakers in favor of defunding NATO, the criticism of Vice President JD Vance, and the recent public spat between Trump and Zelenskiy. In Europe, skepticism is also growing. Leaders such as Emmanuel Macron and future German Chancellor Frederick Merz advocate greater European military autonomy. Zelenskiy has also called for a unified military force in Europe in the face of uncertainty over U.S. support. Despite the tensions, Europe has significantly increased its defense spending, reaching 2% of GDP, and there is even discussion of raising it to 3.5%, as in the U.S. Europe collectively already has the second largest defense budget in the world, ahead of China or Russia. Moreover, the European military industry is poised to expand, potentially displacing U.S. suppliers. If the U.S. leaves NATO, the consequences would be severe: the withdrawal of nearly 100,000 U.S. troops and equipment from Europe would weaken regional defense. In that scenario, Europe would likely create a new alliance, perhaps called the European Treaty Organization (ETO), or strengthen the European Union’s military capabilities. Europe is expected to increase its spending on nuclear weapons, cybersecurity, intelligence and space, and possibly resort to mandatory conscription. In addition, Europe could distance itself from the U.S. and seek strategic alliances with China or Iran, while strengthening its support for Ukraine vis-à-vis Russia. NATO was born to keep the Americans in, the Russians out and the Germans in check. If the U.S. withdraws, Europe will take the lead out of necessity. The author concludes with a warning: if the transatlantic bridge breaks down, it will be disastrous for both sides.
[Asia Nikkei] China shows anger over CK Hutchison’s sale of Panama ports Chinese authorities have expressed displeasure over the sale of Panama Canal port assets by Hong Kong conglomerate CK Hutchison to a consortium led by U.S. investment firm BlackRock, sending the share price of Li Ka-shing’s family business down sharply. The stock fell as much as 6.8% to HK$46.05, while CK Asset Holdings, another flagship conglomerate of Li Ka-shing’s family empire, was down more than 3% in early trading.
[Financial Times] BlackRock to buy Panama Canal ports after pressure from Donald Trump BlackRock agreed to buy two major ports from their Hong Kong-based owner as part of a $22.8 billion deal. The group would acquire a 90% stake in the company that owns and operates the two ports in Panama. Trump has frequently alleged that “China is controlling the Panama Canal” and unnerved Panama when he threatened earlier this year to “take it back” under U.S. control.
[Politico] Armenia and Azerbaijan agree on historic peace treaty After Armenia accepted the two remaining elements of a peace agreement with Azerbaijan, the latter established several formal requirements that Armenia must complete before the agreement can be signed. Azerbaijan expects Armenia to amend its Constitution and eliminate claims against Azerbaijan’s territorial integrity and sovereignty. Armenia must also dissolve the Minsk Group, a 1992 format created under the Organization for Security and Cooperation in Europe and co-chaired by the United States, Russia and France to resolve a conflict over the Nagorno-Karabakh border region between the two countries.
[Financial Times] The costly end of the European “peace dividend” European countries are facing a brutal reckoning as they embark on a race to remilitarize after Trump threatened to reduce U.S. support for the continent. While today the EU spends just under 2 percent of its GDP on defense, European leaders are openly discussing increasing spending to 3.5 percent of GDP or more over the next decade, a level not seen in continental Europe since the late 1960s. Spending at this level between 1995 and 2023 would have required EU member states to allocate an additional $387 billion a year to defense. Low military spending allowed Europe to build one of the world’s most generous social security systems for an aging population.
[The Economist] Elon Musk’s antics aren’t the only problem for Tesla Elon Musk’s support for Donald Trump, which once seemed like a shrewd business strategy, has backfired. Although Trump promised to buy a Tesla, that won’t slow the company’s falling sales or stock. Musk’s proximity to the former president and his support for far-right causes have led to protests, vandalism against Tesla dealerships and even boycotts by car owners who want to distance themselves from his figurehead. Tesla’s problems go beyond politics, however. Sales were already falling before Musk’s offensive against the public sector. In 2023, Tesla abandoned its goal of producing 20 million cars per year by 2030 and reported its first annual sales drop in years. The numbers continue to fall in 2024, especially in Europe, where a drop of around 30% is estimated in the first quarter. In Germany, sales plummeted 76% in February. While in the U.S., sales remained stable, in China they fell by about 14%, although not for political reasons, as Musk has a good relationship with the country. Interestingly, in the UK, where his political stance should have had an impact, sales rose by 21%. The declines are also explained by other factors: Tesla stopped manufacturing inventory of the previous Model Y model to make way for the updated one, which limited supply. But the deeper problem is Tesla’s limited model range and increasing competition from other manufacturers, especially from China. Tesla remains overvalued in the marketplace, betting more on Musk’s ability to revolutionize industries than on solid fundamentals. Musk claims that robotaxis and robots will make Tesla the most valuable company in the world, but his dispersion of efforts among Tesla, other companies and the government is taking its toll. While Trump defends Tesla in the face of protests, much of the responsibility for its problems lies precisely with Musk.
[POLITICO] The sharp escalation in the tariff war between the United States and China has prompted trade experts to warn that we could be on the verge of witnessing an accelerated uncoupling of the world’s two largest economies. “The problem with trade wars is that usually the protagonists quickly lose control, so this can get really ugly, really fast,” said Marc Busch, who has advised both the U.S. Trade Representative and the Commerce Department on technical barriers to trade and is now a professor at Georgetown University. President Donald Trump raised tariffs on China twice on Wednesday: first to 104%, and then, just over 12 hours later, to 125%. That second increase came after Beijing raised its own tariffs on U.S. goods to a total rate of 84%. Trump said on Truth Social that his decision was based on “the disrespect China has shown to world markets.” China, in this situation, is not only a villain but also a warning from Trump to the rest of the world. “They are sending a message to countries affected by reciprocal tariffs that they better not retaliate,” Busch said, calling the tariffs on China “the clearest example of what happens if you do.” Other countries received a reprieve from Trump in the form of a 90-day pause on many tariffs that had been planned. At this point, it seems likely that China will strike back, and on multiple fronts. “China feels pressure to respond in a proportional way to curb new tariffs or to change the conversation with the United States,” said Greta Peisch, former general counsel in the Office of the U.S. Trade Representative and now a partner at Wiley Law. The Chinese government has already made it clear that it is willing to extend its anger over tariffs beyond the trade arena. Beijing has reportedly already pulled out of a potential TikTok deal because of the tariffs. And on Wednesday, China’s Ministry of Culture and Tourism advised Chinese citizens to “fully assess the risk of traveling to the United States and travel with caution.” The statement cited the “deteriorating economic and trade relations” between Washington and Beijing. The Biden administration had promoted a “de-risking” policy toward China – repatriating the production of key national security items while blocking the export of cutting-edge technology products that could benefit Beijing’s military-industrial complex. Trump’s tariffs could lead to a complete breakdown in trade relations with China, said Harry Broadman, a former U.S. deputy assistant U.S. trade representative during the George H. W. Bush and Bill Clinton administrations. “It’s a form of decoupling, but boy, there are a lot of casualties along the way in the way he’s doing it,” Broadman said. “We’ll see jobs being lost here and businesses closing or downsizing.” Roughly half of Chinese imports to the U.S. are inputs for local manufacturing, meaning tariffs will likely quickly raise prices on products ranging from imported toys and clothing to any U.S.-made electronics that rely on lithium-ion batteries made in China. In addition, the U.S. could face supply chain disruptions similar to those experienced during the worst of the pandemic due to a lack of goods produced in China. And while experts say such high tariffs are unlikely to be sustained in the long term, there are scenarios in which this could create a bifurcated global trade order, with the U.S. and its allies on one side and China and its partners on the other. Trump sought to downplay these fears by speaking positively about his affection for Chinese leader Xi Jinping and the chances of a U.S.-China trade deal later Wednesday. “I think President Xi is a very smart person, and I think we’ll end up getting a very good deal for both of us,” Trump told reporters.He added that he “cannot imagine” raising tariffs on China again. From Beijing, there are some signs that China would be open to talks. The Chinese government on Wednesday released a 17,000-word “White Paper” praising the mutual benefits of fair trade between the U.S. and China. And Chinese Foreign Ministry spokesman Lin Jian combined his complaints about the 104% tariff with a call for the Trump administration to «show that it is ready to treat others with equality, respect and mutual benefit.»
[Bloomberg] Russia will extend its military support to military juntas in West Africa Russia has agreed to supply weapons and military training to the newly formed joint force of Mali, Niger and Burkina Faso. Russian Foreign Minister Sergei Lavrov said from Moscow that Russian military trainers already in these three Sahel countries will be used to support the Alliance of Sahel States. Lavrov described this cooperation as a necessary step to properly equip the trilateral force and added that Russian specialists will help develop and arm these forces with specific weapons and machinery. Taking advantage of instability stemming from military coups and Islamist insurgencies in the region, Moscow has been expanding its influence, while exploiting popular discontent towards Western interventions and, in particular, towards the former colonial power, France. Since 2021, mercenaries of the Wagner Group started to deploy in Mali, followed by Burkina Faso and Niger; after the death of the founder of the group, Yevgeny Prigozhin, part of these troops have been replaced by troops of the Africa Corps, consolidating the Russian presence in the region. Mali’s Foreign Minister Abdoulaye Diop described Russia as a permanent ally in the fight against terrorism, highlighting the positive results already achieved with Niger and Burkina Faso. However, data from the Armed Conflict Location & Event Data Project show that violence has increased dramatically: reported deaths in the three Sahel countries reached a record 7,600 in the first half of 2024, up 190 % from 2021, before the three countries were under military governments and supported by Russian mercenaries.
ARTIFICIAL INTELLIGENCE
[Bloomberg] China announces generative AI labeling to stamp out misinformation Beijing calls for labeling generative AI. Amid DeepSeek mania spreading from China to the rest of the world, the Chinese government is requiring AI companies to label all AI-generated media they produce. The rules, which were announced Friday and will go into effect Sept. 1, require all generative AI to explicitly indicate that it was produced by AI – for example, by watermarking – or to encode that information in its metadata. “The Labeling Law will help users identify misinformation and hold service providers accountable for labeling their content,” the Cyberspace Administration of China wrote in a statement. “This is to reduce the abuse of AI-generated content.” It is unclear how Chinese companies will comply. Critics of watermarking requirements in the U.S. have warned that watermarks are easily removed or manipulated. The relationship between Beijing and the Chinese tech sector is always a tug-of-war: it is unclear whether the government will be cheerful with its thriving private players for long, or will institute additional rules like this to rein them in and reassert its dominance.
[Techcrunch] Baidu launches two new versions of its Ernie AI model. China is seeing a flurry of impressive new AI models. DeepSeek caught the world’s attention in January with its powerful and supposedly inexpensive R1 model, then Alibaba followed with a new model called Qwen 2.5-Max, before Tencent launched the Hunyuan Turbo S model that it claimed was faster than DeepSeek. But now there is even more competition. Recently, Baidu announced two new versions of its AI model, Ernie, that are capable of more complex “reasoning” tasks, a major point of interest right now for major U.S. AI companies like OpenAI and Anthropic. And a Chinese newcomer called Manus has just launched an AI “agent” that can perform multi-step tasks for users-for example, ordering and paying for pizza-and is getting a lot of publicity, though it’s currently invitation-only. The Chinese tech industry has broken the siege and now all the players are rushing to launch software capable of beating DeepSeek and competing with the best countries in the world in the field of artificial intelligence.
CLIMATE CHANGE
[Bloomberg] Trump threatens expansion of grid batteries with tariffs President Trump’s trade war threatens to drastically slow the growth of a key technology for the transition to clean energy and grid stability: large energy storage batteries. 
While these installations have grown rapidly in the U.S. – up 33% last year – and are essential for preventing blackouts and managing the integration of solar and wind power, the country remains heavily dependent on imports of lithium-ion batteries, primarily from China, which supplies 69% of them. The new tariffs imposed by Trump are significantly increasing the costs of storage projects, to the point that many are expected to be cancelled or delayed, slowing the strong pace of expansion in the sector. According to BloombergNEF, battery prices that should have fallen by 13% this year will instead rise by 17%, reaching an average of $266 per kilowatt-hour, not counting any additional tariffs that Trump has threatened to impose. The tariffs do not only affect China: 24 % will also apply to Japan and 25 % to South Korea, which together account for another 13 % of US battery imports. Meanwhile, domestic battery manufacturing is underway, but still in its infancy, and local plants rely on imported components: it is estimated that 83% of the cathodes and 67% of the anodes used in the US will be imported by 2025. Although the Biden-era Inflation Reduction Act had boosted investments in local production, political uncertainty under the Trump administration could slow these gains. Industry experts stress that the lack of policy stability, amid shifting tariffs and uncertain tax credits, is chilling investment and slowing job creation. Without clear long-term policy, they warn that it will be difficult to build the capacity needed to meet the growing demand for energy storage and compete globally in this strategic industry.
ELECTROMOBILITY
[Financial Times] BYD’s 5-minute charge: is time running out for electric vehicle rivals? BYD’s founder unveiled a new charging system that could add around 470 kilometers of range to BYD’s batteries in just five minutes. The launch of the so-called Supere-Platform has put BYD at the forefront of industry-wide competition to develop battery cells for electric vehicles that allow refueling as quickly as refueling gasoline or diesel. The platform could charge batteries at a speed of approximately 2 km per second and increase range by 400 km in five minutes. This would address consumer complaints that electric vehicles take too long to charge and increase their fears of running out of charge on longer trips. This follows the announcement in February of the free availability of its advanced “God’s Eye” driver assistance system on all its models. The network’s charging capacity allows Teslas to charge up to 320 km of additional range in 15 minutes, so it doesn’t live up to BYD’s promises.
NUCLEAR ENERGY
SMRs are the most expensive power generation technology per kW generated A report by consulting firm ICF revealed that small modular reactors (SMRs) are currently the most expensive power generation technology per kilowatt (kW) generated, with an estimated cost in the U.S. of $863 per kW, well above other sources such as natural gas, traditional nuclear power and renewables. 
While recognizing that nuclear power offers consistent supply and zero carbon emissions, ICF cautions that economic viability, technological uncertainty, long development times, scalability, government incentives, fuel supply and public acceptance will determine the future of this technology. A key obstacle is the existence of more than 50 different gigawatt-scale reactor designs in the U.S., making it difficult to reduce costs. According to ICF, it would be necessary for the nuclear industry to focus on a single design for costs to come down. In addition, there is a shortage of SMR demonstration projects outside of Russia and China, and production of the fuel needed for these reactors is limited outside of those countries. Currently, in the U.S., there is only one pilot project operated by Centrus Energy. Phil Johnstone, a researcher at the University of Sussex, commented that these results come as no surprise to those who follow nuclear economics and questioned why countries such as the US and UK continue to go for SMRs despite their disadvantages, suggesting that the motivation could be linked to maintaining industrial capabilities for military nuclear submarines. In the UK, the publicly funded SMR program (Great British Nuclear) could face budget cuts. However, the UK government argues that new nuclear projects, including SMRs, will be crucial for energy security and the generation of skilled jobs.
CHIPS and SEMICONDUCTORS
[Bloomberg] TSMC to invest in the U.S. Taiwan Semiconductor Manufacturing Co. (TSMC) CEO CC Wei met with Trump at the White House to reveal the company’s vision for expanding its U.S. presence. The artificial intelligence chip producer plans to invest an additional US$100 billion in U.S. plants. The spending adds to TSMC’s US$65 billion in planned U.S. investments and would eventually bring its U.S. presence to a total of five plants: three for advanced wafer fabrication and two for advanced packaging. Following the announcement, Nvidia said it would rely on TSMC’s new plants to anchor a resilient technology supply chain in the United States. TSMC’s additional spending will still need Taiwan government approval.
[Reuters] Trump administration backs off offensive against Nvidia’s H20 chip U.S. controls on exports of these chips had been in the works for months, but were suspended after CEO Jensen Huang attended a dinner at Mar-a-Lado. The change of plans came after Nvidia promised the Trump administration new investments in AI data centers.
SOUTH KOREA
[AP News] The country’s Constitutional Court overturned the impeachment of South Korean Prime Minister Han Duck-soo and reinstated him in office in a 7-1 ruling. After unanimously dismissing Yoon Suk Yeol, requiring elections within 60 days, South Korea will hold early presidential elections on June 3 to choose a successor. The next president will serve a full five-year term. It is believed that deep political polarization will likely turn the election into a two-way showdown between Yoon’s People Power Party and its main liberal rival, the Democratic Party, which holds the majority in the National Assembly.
By Dafne Esteso (@dafnech_esteso) and Brenda Vladisauskas (@bvladisa)
