The trade battle intensifies
There’s no letup in sight to the trade war: This morning, China raised its tariffs on U.S. imports yet again.
Beijing said it would not make economic sense to raise them further, and called the Trump administration’s dizzying tariffs barrage “a joke.” And this morning, Tesla stopped taking orders in China for two models it imports from the U.S. (That raises the question: What does Elon Musk think about how President Trump’s trade fight is going?)
The U.S. dollar and Treasuries are being battered as well, casting further uncertainty over their safe-haven status.
Where things stand: As of tomorrow, Chinese levies on U.S. goods will rise to 125 percent from 84 percent. That’s after the Trump administration placed 145 percent tariffs on imports from China; the White House has also put 10 percent tariffs on most other trade partners as it faces a 90-day deadline to reach scores of trade deals.
Watch the market volatility closely. Treasury Secretary Scott Bessent said on Thursday that he saw “nothing unusual” about the market swings. But simultaneous drops in the dollar, stocks and long-dated Treasury bonds are extreme, especially in the United States, and suggest a potentially larger capital flight away from U.S. financial assets, analysts noted.
The sell-off in bonds in particular appeared to spook the White House into pausing most of its reciprocal tariffs.
Bondholders remain wary. They appear concerned about the inflationary effects of tariffs, “squeezing margins and reducing household real incomes,” Andrew Wishart, an economist at Berenberg, wrote in a research note this morning. Berenberg forecasts that the yield on the 10-year treasury note will rise to 4.8 percent, up from about 4.4 percent this morning.
Investors appear to be worried about what’s next for the “Trump put,” shorthand for the president walking back policies that could hurt the economy.
Because Trump has shown that he will listen to the bond market, the thinking goes, he has lost negotiating leverage — especially since he is seeking allies to team up against China. That means other trading partners can demand things from the U.S., and not, as the White House wants, the other way around.
Thursday’s market plunge seems tied in part to a growing belief that the only way for Trump to get out of this predicament is walk away from his fight altogether.
DEALBOOK WANTS TO HEAR FROM YOU
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HERE’S WHAT’S HAPPENING
The House passes a Trump-endorsed budget blueprint. Holdout Republican lawmakers dropped their opposition to the plan, which seeks drastic cuts to taxes and government spending, despite their concerns that it would significantly increase the national debt. But party leaders in both chambers have yet to agree on how much spending to cut, and where.
Elon Musk appears to drop his cost-cutting target again. In a cabinet meeting on Thursday, the billionaire said that his so-called Department of Government Efficiency anticipates cutting $150 billion in the 2026 fiscal year, which runs from October 2025 to September 2026. It’s unclear whether Musk meant that number was what his team had identified so far, or all it expected to achieve, but it’s well below the $2 trillion he pledged last year. (A White House official said $1 trillion remains the goal.)
More law firms near deals with Trump. The president told his cabinet that four or five firms were close to committing $125 million each to do pro bono work — more than others have pledged. Among those that have held talks with Trump advisers in recent days are Latham & Watkins, Kirkland & Ellis and Simpson Thacher & Bartlett, according to The Times. It’s the latest sign of corporate law firms bending to Trump to avoid facing his wrath.
Republican lawmakers target the Ivy League over claims of price fixing. The Senate and House Judiciary committees began inquiries into the eight universities to examine whether they were violating antitrust laws by collaborating over tuition policies. It represents another attack on higher education institutions. Relatedly, the Trump administration is looking to place Columbia University under a consent decree.
More scrutiny for trading around tariff reversal
Senator Elizabeth Warren, Democrat of Massachusetts, has sent a letter to the S.E.C. asking the agency to investigate whether President Trump violated securities laws while reversing course on his global tariffs on Wednesday, Lauren Hirsch is first to report.
It is far from certain Warren’s request will lead to an investigation. But the letter — whose signatories include Senator Chuck Schumer of New York, the minority leader — underscores how much scrutiny Trump’s comments before he announced a 90-day pause on tariffs are getting.
Trading around Trump’s tariff U-turn was dizzying. During a period of intensely volatile trading, Mr. Trump wrote on social media, “THIS IS A GREAT TIME TO BUY!!!” Hours later, he announced a 90-day pause on many of his reciprocal tariffs, sending the S&P 500 soaring more than 7 percent in just minutes. It was the best day for the benchmark index since the fall of 2008.
The Times has reported that Trump’s change of heart on tariffs followed a rapid rise in bond yields and increasing concern about the economic fallout of the levies.
Warren wants to know who knew what, and when. “In recent days, President Trump has announced a series of erratic, reckless tariffs, leading to significant market turmoil,” Warren wrote.
“It is unclear which officials and affiliates of President Trump had advance knowledge of his plans to delay tariffs — but insiders may have known that he was going to announce a tariff pause and that the market would improve.”
A spokesman for the White House did not respond to a request for comment.
Others have made similar requests. Representative Maxine Waters. Democrat of California, sent a letter to the S.E.C. and the U.S. Government Accountability Office on Thursday. Of particular concern to her was a spike in trading of call options — bets that a stock will rise — in the period directly leading up to Trump’s announcement of the pause on tariffs.
“The timing and scale of the call option purchases would suggest that an official of the Administration, or perhaps the President himself, provided friends or associates with a heads up that the announcement was happening,” Waters wrote.
Market volatility makes it hard to assess wrongdoing. Financial experts said they saw no immediate proof of insider trading, and that many of the spikes in buying Wednesday occurred at the same time as the announcement. “Speed is not illegal,” said Steve Sosnick, the chief strategist at Interactive Brokers.
But given the heavy trading volume surrounding Trump’s announcement, it would be difficult to detect illegal activity from looking at market moves alone.
“Just because I can’t find a smoking gun doesn’t mean there wasn’t one,” Sosnick added.
“Last fall, I asked teammates across the company to send me bureaucracy examples that they were experiencing. I’ve received almost 1,000 of these emails, and read every single one.”
— Andy Jassy, the C.E.O. of Amazon. In his annual letter to shareholders, Jassy reiterated his desire to make the e-commerce and tech giant move faster, including by removing red tape across its operations. He wrote that Amazon has already made more than 375 changes based on that feedback.
Can the courts halt the Trump tariffs?
U.S. markets sold off on Thursday as investors feared further uncertainty around President Trump’s tariffs and concerns about an economic war with China.
The only way to stop the broad levies on U.S. trading partners is through the courts, Paul Sracic, a professor of politics and international relations at Youngstown State University and an adjunct fellow at the Hudson Institute, told Sarah Kessler.
Congress was always going to be a limited check on Trump’s policy. Four Republican senators voted with Democrats last week to pass a measure that would block Trump’s tariffs on Canadian goods. And seven Republican senators have signed on to another bipartisan bill that would give Congress a 60-day window to approve new tariffs imposed by the president.
On Thursday, Senator Lisa Murkowski, Republican of Alaska called on her fellow lawmakers to reassert their authority over tariffs.
But those bills aren’t likely to pass in the House, with Speaker Mike Johnson saying Monday that his chamber would give Trump “space” to enact his tariffs. Even if Congress were to pass such legislation, Trump would probably veto it — a move that could only be overturned with a two-thirds vote in both the House and Senate.
The bills also ignore a bigger question. The Constitution grants Congress, not the president, control over levies. “The idea shouldn’t be that Congress gets permission to approve what the president does,” Sracic said. “The argument should be, can the president do this?”
The Supreme Court has previously ruled that the executive branch cannot claim authority to decide “major questions” of economic and political significance unless Congress has clearly delegated it.
Legal challenges are already underway. The libertarian New Civil Liberties Alliance, a nonprofit that has previously received funding from the Charles Koch Foundation, filed a lawsuit last week over the Trump’s tariffs on Chinese goods.
The U.S. Chamber of Commerce, one of the most powerful business lobbying groups in Washington, is also said to be considering a legal challenge to Trump’s global tariffs, according to Fortune. The Retail Industry Leaders Association began planning to sue over the tariffs, but put the efforts on hold because members feared angering Trump, according to Bloomberg.
And the editorial board of The Wall Street Journal has also pointed out specific limits on Trump’s power to apply tariffs. “Someone should sue to block his abuse of power,” it argued.
The administration’s argument: Trump is relying on a 1977 law that gives the president expanded powers during an emergency. In imposing tariffs on China in February, Trump cited what he said was a surge of illegal drugs from the country; on the worldwide tolls, he called the U.S. trade deficit “an unusual and extraordinary threat to the national security and economy of the United States.”
In its lawsuit, the New Civil Liberties Alliance argues that the 1977 law does not grant the president the authority to enact broad tariffs. Even if Congress wanted to give the president that authority, it could not, since the Constitution specifically gives it to the legislature. “It’s a non-delegation problem,” Sracic said.
THE SPEED READ
Deals
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Prada agreed to buy Versace, an embattled rival luxury fashion label, for $1.38 billion despite uncertainty about President Trump’s tariff fight. (NYT)
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Thinking Machines Lab, the artificial intelligence start-up founded by the former OpenAI executive Mira Murati, has reportedly raised its fund-raising target to around $2 billion. (Business Insider)
Politics, policy and regulation
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