Powell Faces Pressure From the Markets and Trump Over Rates

“A difficult place”

Volatility has been a near-daily feature of President Trump’s trade war. And Thursday morning is no exception as the president escalates his feud with the Fed.

The latest beef started on Wednesday. Investors learned that the Fed was in no rush to bail out their battered portfolios even as Jay Powell, the central bank’s chair, warned that tariffs could make things worse for the economy.

With Powell signaling that the central bank won’t intervene any time soon to buoy asset prices — known in market-speak as the “Fed put” — stocks fell sharply. But investors are questioning the Fed’s resolve and are left to wonder about threats to its independence.

Trump called for rate cuts on Truth Social Thursday morning, repeating his frequent demand that the central bank lower borrowing costs. “‘Too Late’ Jerome Powell of the Fed, who is always TOO LATE AND WRONG, yesterday issued a report which was another, and typical, complete ‘mess!’” Trump posted.

He added, “Powell’s termination cannot come fast enough!” (Powell’s term as the central bank’s chair ends next year; Treasury Secretary Scott Bessent, who has recently emphasized his good relations with the Fed chair, said this week that the White House will start interviewing potential successors this fall.)

Investors appear to be disregarding Powell’s warnings. Markets are pricing in four Fed rate cuts this year. That’s even after Powell told the Economic Club of Chicago on Wednesday that “for the time being, we are well positioned to wait” as the Fed closely watches the inflationary effects of tariffs. (In the latest warning from corporate America, Ford said it may need to raise prices as soon as next month.)

Powell sees the Fed between a rock and hard place. Tariffs have increased the odds of stagflation, he said, with a “strong likelihood” of higher consumer prices and higher unemployment.

That could tie policymakers’ hands, since lower borrowing costs, for example, could bolster the labor market but reignite inflation.

• In other tariffs news: California on Wednesday sued to overturn the levies, calling the trade war an illegal act that has done “immediate and irreparable harm.” But the U.S. Chamber of Commerce reportedly backed off on filing a lawsuit, instead focusing on lobbying efforts, according to Politico. And while Trump hailed “big progress” in trade negotiations with Japan, officials there had a more measured assessment of the talks.

DEALBOOK WANTS TO HEAR FROM YOU

We’d like to know how the tariffs are affecting your business. Have you changed suppliers? Negotiated lower prices? Paused investments or hiring? Made plans to move manufacturing to the U. S.? Or has it helped your business? Please let us know what you’re doing.

HERE’S WHAT’S HAPPENING

Elon Musk’s government-cutting team is working on “gold card” visas. Engineers associated with the so-called Department of Government Efficiency are working on the program, which would grant permanent residency to those who bought visas for $5 million, The Times reports. Separately, Musk’s team is pushing to eliminate the I.R.S. tool that allows Americans to file their federal taxes for free, according to The Associated Press.

Drug development is slowing amid cuts at the F.D.A. Biotech companies are delaying clinical trials in the wake of broad layoffs at the agency, including in its divisions that advise on such testing, according to The Wall Street Journal. Cuts at federal health agencies aren’t letting up anytime soon: The Trump administration is seeking to reduce the Department of Health and Human Services’s discretionary spending by about a third, The Washington Post reports.

Mark Zuckerberg bemoans the dominance of TikTok. Wrapping up his testimony in the F.T.C.’s antitrust case against Meta, the tech mogul said that the video app was beating his company’s offerings, including Instagram. (“TikTok is still bigger than either Facebook or Instagram, and I don’t like it when our competitors do better than us,” Zuckerberg said.) Sheryl Sandberg, Meta’s former president, also took the stand on Wednesday and defended blocking Google from advertising a rival social network on Facebook.

Maybe DeepSeek didn’t do it on the cheap

When the Chinese company DeepSeek announced it had created a large language model for a bargain, the news sent tech stocks cratering and national security alarms blaring.

But its claim of working with severely limited resources is facing increasing scrutiny.

The latest: Nvidia’s chief, Jensen Huang, is in China, meeting with officials and others, The Times reports. His visit comes as the chip giant faces a congressional investigation into its ties with DeepSeek and costly new import restrictions from the Trump administration.

Tech stocks in particular took a beating on Wednesday, especially as chipmakers found themselves in the middle of the trade fight between Washington and Beijing.

Washington is watching closely. A House committee opened an investigation on Wednesday into whether Nvidia knowingly provided DeepSeek with critical technology to develop A.I., potentially violating U.S. laws.

The impression was that since DeepSeek didn’t have access to the latest chip technology, it found a way around those limitations. The government is effectively questioning that claim.

Congress asked Nvidia to provide details about large customers from 11 Asian countries. The House Select Committee on the Chinese Communist Party also asked for details about the companies that were expected to use those chips.

An Nvidia spokesman told The Times that the company followed the U.S. government’s directions on what products it could sell and where it could sell them “to the letter.”

The committee suspects that DeepSeek somehow averted U.S. restrictions on sales of some chips to China. It previously reported that Chinese companies may be purchasing critical chips for developing A.I. from other countries, citing a Reuters article that said Singapore had charged three men with fraud for selling Nvidia chips to DeepSeek.

In other words, the company could have had many more Nvidia chips on hand than previously thought.

DeepSeek may have also hacked OpenAI. In the previous report, the House committee said that “it is highly likely” that DeepSeek used “distillation,” the common practice of using data from one A.I. system to build another one.

Taking data from proprietary technology could be illegal, and the committee cited a letter from OpenAI that said the company had “found that DeepSeek employees circumvented guardrails in OpenAI’s models” in order to harvest data. (OpenAI has recently tightened access to its most advanced models.)

The costs of Harvard losing its tax-exempt status

The Trump administration has escalated its war against Harvard, with the I.R.S. weighing whether to strip the university of its tax-exempt status. That follows President Trump calling for such a move on social media.

It would be the biggest blow yet to Harvard, which has resisted acceding to demands from Trump. Here’s what it might mean for the world’s wealthiest university.

Where things stand: The administration has already frozen more than $2 billion in federal funds and contracts after Harvard rebuffed its demands. The latest attack came on Wednesday from the Department of Homeland Security, which canceled nearly $3 million in grants.

Things could get much worse. Were Harvard to lose its tax status, it could owe not only federal income taxes, but it could owe taxes on its real estate holdings, which include properties in the Boston area, Washington and beyond. Perhaps more important, donations to the university would no longer be tax-deductible, which could put a serious dent in the gifts the school receives from its wealthiest alumni and supporters.

“Such an unprecedented action would endanger our ability to carry out our educational mission,” Harvard said in a statement. “The unlawful use of this instrument more broadly would have grave consequences for the future of higher education in America.”

The Wall Street Journal notes that the administration has also discussed a 35 percent tax on large university endowments. That could potentially cost Harvard more than $1 billion annually were it to earn a 10 percent return on its $52 billion endowment.

Despite Harvard’s wealth, it doesn’t have unlimited funds. The majority of its endowment is earmarked for specific purposes, meaning that it isn’t an A.T.M. That said, the school has moved to raise $1.2 billion so far this year.

There’s a broader concern. Federal law bars the president from either directly or indirectly asking the I.R.S. to audit specific targets. The prospect of a more politically driven tax regulator could weigh heavily not just on other higher education institutions, but on businesses more broadly.

A White House spokesman said that the I.R.S.’s deliberations had begun before Trump’s social media post. Still, many legal experts said that any effort to strip Harvard of its special tax status would take time, and the school could eventually appeal such a move all the way to the Supreme Court.

• In other Trump attacks on institutions: The administration is weighing whether to press the law firms like Paul Weiss that settled with the president to work on a wider array of issues than just charitable causes, The Times reports. That could include trade deals or even defending Trump in court.

Even Netflix isn’t trade-proof — for now

Netflix is expected to post higher quarterly earnings and revenue on Thursday after the market close. But President Trump’s early rhetoric on trade and tariffs, which has led to boycotts of U.S. goods around the world, has already cut into the streaming giant’s business.

The drop in demand for Netflix across Europe “seems to reflect anti-American sentiment, Alejandro Rojas, an analyst with Parrot Analytics, told Edmund Lee.

“For instance, Denmark Q1 net adds estimates declined more than 80 percent after Trump’s comments about Greenland,” Rojas said. “Poland’s decline of 65 percent occurred right after the impasse with its prime minister. France’s net adds predictions were reduced by 26 percent the week the White House press secretary said that France should be thankful they’re not speaking German.”

Netflix is already changing the narrative. Company leaders internally announced a set of ambitious goals to double revenue by 2030 and become a $1 trillion company by market value, according to The Wall Street Journal.

That’s not as outrageous as it sounds. Most of Netflix is international: It spends more than half its production budget developing shows and films overseas, and 73 percent of its paid members are outside the U.S.

To meet the new revenue target, sales would need to grow at an annual rate of 12.7 percent, compared to the 11.5 percent anticipated by analysts, according to S&P Capital IQ. (The bigger swing is asking for a rosier price-to-sales multiple of 12.5 times from the current 7.6. If Netflix hits its targets, investors might give it that bump.)

But the company will stop revealing some key metrics. Starting with this quarter’s earnings, Netflix no longer will provide subscriber figures. Instead, you’re likely to hear a lot about “paid sharing,” the company’s program to boost revenue by asking current customers to add other people to their account for an additional fee, which is part of its ongoing program to crack down on password sharing.

And the anti-American sentiment may eventually wane. “Netflix is definitely impacted by the tariffs right now,” Laurent Yoon, an analyst at Bernstein, told DealBook. “But longer term, I’m not sure it’ll be as much of a factor.”

In some of the top overseas markets like Britain, Germany, Italy and France, Netflix is the No. 1 platform, Yoon points out. (Amazon Prime is second; Disney Plus is third.) “If you hate America, what are you going to do?” he said. “Stare at the wall?”

THE SPEED READ

Deals

• OpenAI is reportedly in talks to buy the A.I.-assisted coding tool maker Windsurf for roughly $3 billion, which would be its biggest deal yet. (Bloomberg)

• “Private equity goes ‘risk off’ as it pauses dealmaking” (FT)

Politics, policy and regulation

• A dozen House Republicans warned Speaker Mike Johnson that they wouldn’t vote for a budget bill that cuts Medicaid too deeply. (Axios)

• “Trading in two stocks surged before Trump family appointments announced” (FT)

• Billy Long, President Trump’s pick to lead the I.R.S., disclosed that a six-figure personal loan was essentially paid off by tax consulting firms or companies facing scrutiny from the agency. (The Lever)

Best of the rest

• How an options trader known as “Captain Condor” amassed a social media following that can move markets. (WSJ)

• “Astronomers Detect a Signature of Life on a Distant Planet” (NYT)

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Andrew Ross Sorkin is a columnist and the founder of DealBook, the flagship business and policy newsletter at The Times and an annual conference.

Ravi Mattu is the managing editor of DealBook, based in London. He joined The New York Times in 2022 from the Financial Times, where he held a number of senior roles in Hong Kong and London.

Bernhard Warner is a senior editor for DealBook, a newsletter from The Times, covering business trends, the economy and the markets.

Sarah Kessler is an editor for the DealBook newsletter and writes features on business and how workplaces are changing.

Michael J. de la Merced has covered global business and finance news for The Times since 2006.

Lauren Hirsch covers Wall Street for The Times, including M&A, executive changes, board strife and policy moves affecting business.

Edmund Lee covers the media industry as it grapples with changes from Silicon Valley. Before joining The Times he was the managing editor at Vox Media’s Recode.

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