1. Two graphics that capture the difference between Trump 1 and Trump 2. First on the stock market performance.
2. Scott Galloway points to a graphic that highlights how important US government spending on R&D has been to US leadership in technology sectors.
3. Stock market corrections (more than 10% declines) and bear markets (more than 20% declines) in the US.
4. As the Trump administration mounts pressure on restricting imports from China, its officials are worried about the possibility of tariff increases by the likes of Mexico. A loophole in the WTO rules allows developing countries which were erstwhile members of GATT to legally raise tariffs steeply and suddenly on Chinese goods while Beijing would have no right to retaliate.
Mexico is also one of several dozen developing countries that were members of the General Agreement on Tariffs and Trade, which preceded the creation of the W.T.O. These countries reached a special deal at the founding of the W.T.O., making very few binding commitments to reduce their tariffs. They were instead encouraged to gradually lower tariffs voluntarily... W.T.O. rules bar countries from raising tariffs against a single country... But the W.T.O. does allow countries to raise tariffs to their highest bound ceilings provided that the increase applies to all imports of the targeted product from around the world. China exports almost all of the world’s supply in many categories of manufactured goods. That makes it possible for developing countries to raise their applied tariffs in these categories and hit almost exclusively goods from China... Mexico is not one of the 27 countries that has signed a free-trade agreement with China, so the Mexican government can raise tariffs on Chinese goods... Mexico has reduced its average tariff to 7 percent, according to the W.T.O. But Mexico’s average “bound” tariff — which it could start charging immediately by simply sending a notification to the W.T.O. — is 36 percent.
5. Thread on the failed security and economic promise of Pakistan's Gawdar port.
6. Drone warfare in Ukraine
The latest battlefield reports from Kherson, the frontline city liberated in late 2022 after months of Russian occupation, reinforce his depiction of a high-tech war. Oleksandr Prokudin, head of the Kherson regional military administration, says the number of drone attacks on the city is intensifying, most recently to about 1,700 a week. The Russians, he adds, are now using a new type of drone operated via fibre optic cables rather than radio signals, which are harder to detect and jam. Ukrainian forces are trying to respond by using nets to tangle the cables. It is like a scene out of Star Wars, Prokudin says. Ukraine drone production has soared and is due to reach 2.5mn to 3mn units this year. Oleksandr Yakovenko, the chief executive of TAF Drones, is one of the leading manufacturers in the nascent drone industry. Last year his company manufactured 400,000 drones. This “will be the year of the land drones” or robots with wheels, which are used to evacuate the wounded or deliver supplies, he predicts.
7. John Burn-Murdoch has a great set of graphics that illustrate how Maga America of Donald Trump is closer in political and internationalist values to China and Russia than it's to even the right-wing parties in Europe.
The US Republicans of 20 years ago were no keener on autocracy than the average Canadian or western European — and just as supportive of international co-operation... But the breadth and depth of the divide today means dialogue between Trump and Sir Keir Starmer or Emmanuel Macron is akin to the first meeting between two previously isolated civilisations. Goals, strategies and tactics that are a given across the rest of the west seem anathema to Trump and Vance. This disconnect explains why the UK’s prime minister could have what was by all accounts a successful meeting with the US president, only to be blindsided on a fundamental issue hours later. While the Maga movement had already begun this value divergence in 2016, the bulk of Trump’s most norm-breaking inclinations were kept in check by those around him in his first term. But those moderating influences have since been replaced by cheerleaders and powerful lieutenants. In this sense, the US government now embodies the values behind Trump’s and his supporters for the first time, and is rapidly showing them to be misaligned even with most western conservatives.
According to a first-of-its-kind government survey released on Thursday, 47.6 per cent of South Koreans under the age of six are enrolled in cram schools known as hagwon, for-profit private education centres that come on top of regular schooling. The survey also showed that a quarter of children under two are in cram schools. Families’ monthly tuition cost for preschoolers averaged Won332,000 ($228), with children attending private classes for an average of 5.6 hours a week. The average monthly tuition for kindergartens specialised in teaching English — popular in wealthy districts of Seoul — reached Won1.5mn. Cram schools, which offer lessons in subjects such as English, maths, science and essay writing, have grown into a big industry in South Korea. Parents turn to them to give their children a leg up in the intense competition for places at top universities and well-paying jobs at the country’s handeducful of conglomerates... This competition, in turn, has put a significant burden on family finances, driving up household debt and depressing domestic consumption. Total family spending on private education rose 7.7 per cent last year to a record Won29.2tn, even as the number of students fell 1.5 per cent, according to the statistics office.
9. French wines are threatened with 200% tariff by President Trump.
Épernay sits in the heart of a region that produces the world’s finest bubbly. The United States is its biggest foreign market, with 27 million bottles shipped there in 2023, valued at around 810 million euros ($885 million). Chardonnay, pinot noir and meunier grapes blanket the rolling hills and deep valleys of Champagne, which covers more than 130 square miles, from the city of Reims to the Aube river. The area is under France’s strict Appellation d’Origine system, which ensures that only the sparkling wine made here, using specific methods, can legally be called Champagne. With more than 4,000 independent winemakers and 360 Champagne houses, the region produces around 300 million bottles annually, with one billion more resting in cellars. The biggest houses — including Dom Pérignon, Veuve Clicquot and Moët & Chandon, owned by the luxury conglomerate LVMH Moët Hennessy Louis Vuitton — dominate production and exports and account for a third of total sales.
10. Good set of suggestions on GST rate rationalisation.
There is now some consensus that the key to boosting employment lies in the growth of four labour-intensive manufacturing industries, namely textiles (from yarn to fabrics of both cotton and man-made fibre), leather and footwear, food processing, and toys. Therefore, as a starting point in the rate-rationalisation process, we should bring all these four product categories under the merit rate of 5 per cent, which must now be raised to at least 8 per cent to allow for input tax credits to flow seamlessly without accumulation. This should be combined with imposing zero rate on all single-use inputs and intermediates used in these four sectors. This import duty regime should be allowed for imports from all countries under the Most Favoured Nation (MFN) arrangement. This will give a boost to these labour-intensive industries and also encourage foreign direct investment in these sectors, which has not yet happened.
11. Europe strikes back!
Arms companies from the US, UK and Turkey will be excluded from a new €150bn EU defence funding push unless their home countries sign defence and security pacts with Brussels. The planned fund for capitals to spend on weapons would only be open to EU defence companies and those from third countries that have signed defence agreements with the bloc, according to a European Commission proposal put forward on Wednesday. It would also exclude any advanced weapons systems upon which a third country had “design authority” — restrictions on its construction or use of particular components — or control over its eventual use... The policy is a victory for France and other countries that have demanded a “Buy European” approach to the continent’s defence investment push, amid fears over the long-term dependability of the US as a defence partner and supplier triggered by President Donald Trump.
In a landmark vote, the German parliament approved with more than two-third majority the constitutional changes required for relaxing the country's strict debt, thereby endorsing Friedrich Merz's plans to inject up to €1tn in military and infrastructure.
The Christian Democrat is seeking to increase defence spending and create a €500bn, 12-year fund to modernise hospitals, schools, roads and energy networks. Economists have estimated that the country’s armed forces need more than €400bn in coming years, funding likely to be unleashed by Merz’s reform, which will also loosen borrowing rules for the country’s 16 federal states... The key move sought by the incoming chancellor is to exempt most defence spending from the “debt brake” enshrined in the constitution in 2009.
12. Gillian Tett points to the possibility of the Trump administration forcing the sale of Danish company Novo Nordisk (maker of weight-loss drugs Ozempic and Wegovy) to an American firm as part of negotiations on Greenland!
One colourful idea floating around the Trump ecosystem is that the drugs could be a bargaining chip in future negotiations with Denmark, perhaps by pushing for a US acquisition. After all, many American “voters care about Ozempic,” as one observer tells me, noting that another possible tactic would be for the US to demand a krone revaluation, to keep Denmark linked to dollar-based finance.
She also writes about how the normal rules of diplomacy and business are being upended by the Trump regime.
Investors parsing the world should pay attention to four practical points. First: as Elon Musk noted this week, the so-called “Overton Window” — or frame for policy ideas — is widening fast; nothing can be ruled out. Second, Trump’s team want to expand their negotiating leverage by mixing economic, financial, trade, tech and national security issues in a manner alien to anyone trained in a 20th-century MBA programme — or, for that matter, economics. Third, some of Trump’s advisers have a mental vision of great power rivalry that feels uncannily familiar to students of Central Asian history. Nuuk, Greenland’s capital, is the 21st-century version of Samarkand or Kabul — and Ozempic akin to saffron. This explains why Trump has focused on the frozen north, with its minerals, future transit routes and long borders with Russia and China. So, too, his ambivalence about Nato... a fourth point: institutions such as Nato, and smaller countries, suddenly look vulnerable. Just consider the recent ritual humiliation of Volodymyr Zelenskyy, Ukraine’s president, in the Oval Office. This may be a template for how bullying gets ratcheted up.
13. An important red flag for the US economy, its housing development market.
In an era of higher-for-longer interest rates, many homeowners have held off big-ticket projects that require financing. With mortgage rates hanging above 6.5 per cent, homeowners who locked in cheaper loans have been less likely to move, slowing the pace of housing turnover that historically prompted renovations... Existing-home sales fell 1.2 per cent in February from a year before to a seasonally adjusted annual rate of 4.26mn, according to data released on Thursday.
14. Are we at peak-booze?
In the US, the sector’s most important market, alcohol consumption per person fell 3 per cent last year in the biggest drop since the prohibition era a century ago, according to research by Bernstein. Drinking is now languishing at its lowest level since 1962, down 20 per cent on its 1980s peak. The World Health Organization said last month that drinks should carry prominent labels warning consumers of the link between alcohol and cancer, something Ireland will become the first country to do in May next year... The warnings come as declining alcohol consumption, growing health awareness and the effects of weight-loss drugs on drinking habits cement a negative narrative around the industry... alcohol’s decline has been more gradual, with consumption in developed markets steadily falling since the 1960s, according to the WHO, a steeper drop-off over the past three years has sounded alarm bells for investors. Global drink stocks have sunk almost 8 per cent in the 12 months to February. Alcohol shares now trade at a significant discount to the rest of the consumer goods... Studies show that weight-loss and diabetes drugs, such as Wegovy and Ozempic, could cut opioid and alcohol abuse up to half.
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