Red tape
Down, up, and down again: U.S. futures and stocks in Asia and Europe are lower on Wednesday as more companies get pulled into the crossfire of President Trump’s trade war with China.
Nvidia fell sharply in premarket trading after the chip giant issued a $5.5 billion write-down on Tuesday because of more restrictions on shipments to China. ASML, a Dutch maker of semiconductor manufacturing equipment, was also down significantly on trade-war warnings.
They’re signs of fresh worries for the semiconductor industry. The Trump administration has ordered manufacturers to obtain permits to ship more of their products to China and other countries. The extra red tape will probably curb Nvidia’s sales of H2O processors intended specifically for the Chinese market.
The sector is already worried about forthcoming tariffs, after a brief reprieve from Trump. (It’s also figuring out how to navigate the tricky spot occupied by Taiwan, a major manufacturing hub, in the U.S.-China trade fight.)
Another cloud for business: Trump signed an executive order on Tuesday tasking the Commerce Department to begin an investigation that could end up putting levies on critical minerals, many of which are used in making high-tech and military equipment.
Trump’s hard-nosed China strategy is beginning to take shape. The aim of country-by-country trade talks is to extract guarantees that the countries will also isolate China as a trade partner, The Wall Street Journal reports.
Treasury Secretary Scott Bessent is said to be behind the strategy, which involves preventing China from using these countries as a base to ship to the U.S. and thus skirt trade barriers.
The initiative faces many questions. Has the administration’s on-again-off-again tariffs approach already undermined the Trump team’s negotiating stance? (Consider: Why would trade partners give anything up if they believed Trump could be forced into granting exceptions?)
And where does this leave Trump’s other China bargaining objectives, including a deal for TikTok?
But China isn’t exactly operating from a position of strength. Beijing reported on Wednesday that first-quarter economic growth exceeded most analysts’ forecasts. But much of that appears to be because of a flood of orders aimed at getting ahead of Trump’s tariffs.
How would a protracted trade war hit the exports-driven economy? One potential countermeasure by Beijing: pressuring Chinese consumers to ditch American brands.
There’s no resolution in sight. “The ball is in China’s court,” Karoline Leavitt, the White House press secretary, said on Tuesday. She added, “China needs to make a deal with us. We don’t have to make a deal with them.”
China on Wednesday said it wanted Trump to pick a point person and show more respect before it agreed to talks, according to Bloomberg.
Others are feeling the cold shoulder from Washington. The European Union has made little progress on trade talks, Bloomberg reports, as reciprocal tariffs and levies on cars and metals show no sign of lifting.
It’s also worth watching how Japan, a close ally with a large trade surplus with the U.S., fares as negotiations heat up. Trump posted on Truth Social that he would participate in those talks on Wednesday as the administration pushes for a breakthrough on “Tariffs, the cost of military support, and ‘TRADE FAIRNESS.’”
HERE’S WHAT’S HAPPENING
President Trump threatens Harvard’s tax-exempt status. On Truth Social, the president weighed whether to tax the school as a political entity after it rebuffed a list of demands by his administration. Such a move could cost Harvard billions, on top of the billions in federal funding that is now frozen. Separately, Columbia’s acting president pledged to reject any government requirements that would “require us to relinquish our independence and autonomy.”
Mark Zuckerberg reportedly offered to settle with the F.T.C. for nearly $1 billion. The Meta chief had repeatedly proposed ways to end the agency’s antitrust case on the eve of the matter going to trial and had lobbied Trump for support, according to The Wall Street Journal. But Andrew Ferguson, the F.T.C. chair, wouldn’t settle for less than $18 billion and a consent decree. On day two of the trial, Zuckerberg defended Meta’s takeovers of Instagram and WhatsApp and conceded he had considered spinning out Instagram in 2018.
Former President Joe Biden breaks his silence on Trump. In his first expansive public comments since leaving office, Biden accused the White House of “taking a hatchet” to the Social Security Administration, as Americans grow concerned that entitlements could be on the chopping block amid thousands of potential job cuts at the agency. Trump has insisted those payouts are protected, but calls from worried people have flooded into the agencies’ offices.
dealbook series: how tariffs are impacting U.S. business
‘An emotional purchase’
We asked DealBook readers how tariffs had affected their companies. Today, we’re featuring a response from Ben Koren, the founder and C.E.O. of Frameology, a direct-to-consumer photo framing company based in New York that employs 13 people and generates an eight-figure annual revenue.
After the pandemic snarled supply chains, Koren switched to domestic suppliers, but the uncertainty around tariffs has started to hurt business. He writes:
All of our products are made in the U.S., but like many brands, we’ve historically relied on components from overseas — particularly China.
After the COVID-19 disruptions, we realized how fragile global supply chains had become and began shifting aggressively toward domestic sourcing. It’s been a multiyear investment, but today more than 90 percent of our cost of goods sold is U.S.-sourced. We even launched a fully domestic product line, our Luxe Wall Collection, using American-made paper, molding and wood.
It has definitely added to our cost basis — I estimate a hit of 300 to 400 basis points to our gross margins. But as it was a multiyear process we’ve been able to grind out savings around logistics and shipping to offset those increases. Net-net we’ve been able to maintain consistent pricing for our customers.
We also stocked up significantly ahead of the 2024 election cycle, and currently hold a two-year supply of imported materials. As a result, the latest tariffs will have minimal impact on our pricing or ability to fulfill orders.
What concerns us more is the demand picture. The uncertainty created by tariff wars, inflation fears, and market volatility is already weighing on consumer sentiment. Framing is an emotional purchase — but ultimately a discretionary one.
A full-blown recession would hurt us far more than a material shortage. Comparing our pre- and post- “Liberation Day” growth rates, there was a noticeable pull back of around 37 percent. Time will tell if it persists, but it’s something we’re thinking about and trying to plan for.
We’ve worked hard to future-proof our business. But economic instability, not supply disruption, is the greater threat now.
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.
Seen and heard, corporate edition
“A lot of this uncertainty is challenging that a little bit, so you’re going to be reading about this nonstop until hopefully these tariff and trade wars settle down and go away, so people can say, ‘I can rely on America.’” — Jamie Dimon of JPMorgan Chase, warning that President Trump’s tariffs policy risks eroding America’s economic primacy.
“If what you want is to build manufacturing capacity in the U.S., both in medtech and in pharmaceuticals, the most effective answer is not tariffs, but tax policy.” — Joaquin Duato of Johnson & Johnson, on the health giant’s earnings call on Tuesday. Duato added that domestic drug and health tech manufacturing had increased “significantly” since the 2017 Trump tax cuts.
“The company’s outlook is dependent on the macro environment which the company believes is impossible to predict this year with any degree of confidence. Accordingly, two guidance benchmarks are provided below.” — United Airlines, unusually providing profit forecasts for both a “stable” environment and a “recessionary” one. Executives may say more on an earnings call Wednesday.
“Our economists, your economists, I’m sure are all predicting a slowdown in growth.” — Brian Moynihan of Bank of America, on an earnings call on Tuesday. But he defended his bank’s outlook, arguing that consumer spending hadn’t yet tailed off.
The tariff ad slump
It’s hard to plan an ad campaign for a car when its cost may be about to skyrocket, or to market a toy that might not be imported from China by Christmas. And so President Trump’s tariffs are hitting the $380 billion American advertising industry hard.
Among the signs of trouble, The Times’s Tiffany Hsu writes:
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In a survey conducted in February by the Interactive Advertising Bureau, 45 percent of American ad executives said they were planning to make cuts this year.
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WARC, a research firm, downgraded its expectations for ad spending growth over the next two years by $19.8 billion.
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Publicis, one of the largest advertising holding companies, said on Tuesday that clients are “facing a very challenging situation” and may cut marketing budgets.
Ads are a lagging indicator of trouble in the U.S. economy. Companies’ unwillingness to invest in marketing is often viewed as a sign of whether G.D.P. will grow or contract. (Still, some companies are buying ads now to urge customers to buy before tariffs take effect.)
An ad slowdown could also affect the enormous U.S. services sector, which includes both tech giants like Google and Meta — the latter gets about 10 percent of its ad revenue from China — and entertainment companies including Netflix and CBS.
That could scramble some of America’s trade math: Services companies account for 72 percent of G.D.P. and accounted for a $300 billion trade surplus for the U.S. last year. Manufacturing, which Mr. Trump has repeatedly cited as a focus of his tariff policies, accounts for just 10 percent of G.D.P.
THE SPEED READ
Deals
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Elliott Investment Management has reportedly taken a $1.5 billion stake in Hewlett Packard Enterprise, with plans to push the tech company to bolster its stock price. (Bloomberg)
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The hedge fund H Partners, which owns a 9 percent stake in Harley-Davidson, is said to be planning a proxy fight at the motorcycle maker, seeking to oust several board members and its C.E.O. (WSJ)
Politics, policy and regulation
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A federal judge blocked President Trump’s effort to punish the law firm Susman Godfrey via executive order, calling his effort a “shocking abuse of power.” (NYT)
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Some major banks are finding alternative ways to communicate with the Office of the Comptroller of the Currency after the financial regulator disclosed a cyberbreach. (WSJ)
Best of the rest
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A deep dive into how Elon Musk reportedly manages his “legion” of children by multiple mothers, including nondisclosure agreements, big monthly child-support payments and soliciting new surrogates via X. (WSJ)
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Elaine Wynn, the billionaire co-founder of Wynn Resorts and a prolific donor to education and arts organizations, died Tuesday. She was 82. (LAT)
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Jamie Dimon has hinted that when he steps down as JPMorgan Chase’s C.E.O., next act may be “a little media thing” that “could be a competitor or an aid” to traditional publishers. Send us your best guess! (FT)
We’d like your feedback! Please email thoughts and suggestions to [email protected].
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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