Category: Economy

Trump Threatens 25% Tariff on Apple, Says Samsung and Other Tech Firms Could Be Targeted Next
President Donald Trump on Friday demanded Apple and other smartphone makers like Samsung make their phones in the United States or face a 25% tariff.
“I have long ago informed Tim Cook of Apple that I expect their iPhone’s that will be sold in the United States of America will be manufactured and built in the United States, not India, or anyplace else,” Trump posted Friday morning on Truth Social. “If that is not the case, a Tariff of at least 25% must be paid by Apple to the U.S.”
Speaking to press in the Oval Office on Friday after signing executive orders, Trump said the tariff would apply to any phone maker selling devices in the US.
“It would be more. It would be also Samsung and anybody that makes that product,” Trump told reporters. “Otherwise it wouldn’t be fair.”
Trump last week during his Middle East trip said he was displeased with Cook, Apple’s CEO, over the company’s plan to manufacture iPhones set to be sold in the United States at newly built plants in India.
Over the past several years, Apple had been working to diversify its production capabilities. Some iPhone production had already moved to India, and Cook on Apple’s earnings call with investors earlier this month said he expected “the majority of iPhones sold in the US will have India as their country of origin.”
On that call, Cook said he expected Apple would face a tariff burden of up to $900 million this quarter. However, it could have been significantly worse: Apple and other US tech companies scored a big win last month when Trump exempted electronics from his massive tariffs on China.
Unlike Apple, Samsung doesn’t rely on China for smartphone production. The South Korea-based tech giant closed its last phone factory in China in 2019 after losing market share to domestic rivals, though it still has operations there. Sources within Samsung previously told CNN that the vast majority of its smartphone manufacturing takes place in South Korea, Vietnam, India and Brazil.
Despite lowering his tariff to at least 30% on most Chinese goods — down from 145% earlier this month — a 10% universal tariff remains on the majority of goods entering the United States. Roughly 90% of Apple’s iPhone production and assembly is based in China, according to Wedbush Securities’ estimates.
Trump met with Cook in Riyadh at the beginning of the president’s Middle East trip last week. In Qatar, he called out Cook for his plan to build US-bound iPhones in India.
“I had a little problem with Tim Cook,” Trump said last week in Qatar. “I said to him, ‘Tim, you’re my friend. I treated you very good. You’re coming in with $500 billion.’ But now I hear you’re building all over India. I don’t want you building in India.’”
Cook met with Trump once again at the White House on Tuesday, an administration official told CNN. The official did not divulge the subject matter of the meeting.
Treasury Secretary Scott Bessent said in an interview with Fox News on Friday morning that Trump is trying to “bring back precision manufacturing to the US.”
“I think that one of our greatest vulnerabilities are these, is this external production, especially in semiconductors, and a large part of Apple’s components are in semiconductors,” Bessent said. “So we would like to have Apple help us make the semiconductor supply chain more secure.”
Some of Apple’s chips are already made in the United States, thanks to its partnership with TSMC, which recently opened a chipmaking plant in Arizona. The company did not immediately respond to a request for comment.
‘Those jobs aren’t coming back’
The world’s most valuable publicly traded company is flush with cash and rakes in tremendous profit — more than any company in history. But Apple has long contended that it cannot manufacture iPhones in America.
Apple has invested billions of dollars training millions of skilled engineers abroad. China and India, with their massive populations, simply have more skilled engineers than the United States does. And it costs Apple significantly less to pay those workers.
Steve Jobs, Apple’s late CEO, famously brought up the issue during an October 2010 meeting with former President Barack Obama. He called America’s lackluster education system an obstacle for Apple, which needed 30,000 industrial engineers to support its on-site factory workers.
“You can’t find that many in America to hire,” Jobs told Obama, according to his biographer, Walter Isaacson. “If you could educate these engineers, we could move more manufacturing plants here.”
In a 2012 interview with tech journalists Kara Swisher and Walt Mossberg, Apple CEO Tim Cook said he agreed with Jobs’ assessment. When asked if the day would ever come when an Apple product is made in the United States, he said: “I want there to be … and you can bet that we’ll use the whole of our influence on this.”
The notion Apple can reshore iPhone production is a “fictional tale,” Dan Ives, global head of technology research at financial services firm Wedbush Securities.
US-made iPhones could cost more than three times their current price of around $1,000, he said, because it would be necessary to replicate the highly complex production ecosystem that currently exists in Asia.
“You build that (supply chain) in the US with a fab in West Virginia and New Jersey, they’ll be $3,500 iPhones,” he said, referring to fabrication plants, or high-tech manufacturing facilities where computer chips that power electronic devices are normally made.
And even then, it would cost Apple about $30 billion and three years to move just 10% of its supply chain to the US to begin with, Ives told Burnett.
Ives reiterated that stance in a statement following Trump’s Friday tariff threat, saying, “the concept of Apple producing iPhones in the US is a fairy tale that is not feasible.” He estimated moving all of Apple’s iPhone production to the United States would take five to 10 years.
An additional 25% tariff on Apple products could result in higher prices for US iPhone buyers. Rumors have already been swirling that Apple is considering raising prices when it releases its new lineup of iPhones in the fall — a move that could further irk Trump, although the company will likely avoid directly attributing the increases to tariffs.
Gene Munster, managing partner at Deepwater Asset Management, estimates it would be difficult for Apple not to raise iPhone prices if it faces tariffs of 30% or higher.
“Anything below 30, they will probably carry the vast majority of that increase,” he said. “But I think at some point they’re going to have to start to share it.”
While moving iPhone production to the United States may not be possible, Apple did announce a $500 billion investment to expand its US facilities earlier this year, in an apparent effort to appease Trump.
The company said the investment would create a new facility to produce servers — previously made outside the United States — in Houston to support Apple Intelligence, its new brand of artificial intelligence products. It will also expand data center capacity in several states, and plans to invest in corporate facilities and production of Apple TV+ shows in 20 states, among other efforts.
May 24, 2025
Trump shifts from tax cuts to tariffs, disregarding economic red flags
One day after House Republicans approved an expensive package of tax cuts that rattled financial markets, President Trump pivoted back to his other signature policy priority, unveiling a battery of tariff threats that further spooked investors and raised the prospects of higher prices on American consumers.
For a president who has fashioned himself as a shrewd steward of the economy, the decision to escalate his global trade war on Friday appeared curious and costly. It capped off a week that saw Mr. Trump ignore repeated warnings that his agenda could worsen the nation’s debt, harm many of his own voters, hurt the finances of low-income families and contribute far less in growth than the White House contends.
The tepid market response to the president’s economic policy approach did little to sway Mr. Trump, who chose on Friday to revive the uncertainty that has kept businesses and consumers on edge. The president threatened 50 percent tariffs on the European Union, and a 25 percent tariff on Apple. Other tech companies, he said, could face the same rate.
Since taking office, Mr. Trump has raced to enact his economic vision, aiming to pair generous tax cuts with sweeping deregulation that he says will expand America’s economy. He has fashioned his steep, worldwide tariffs as a political cudgel that will raise money, encourage more domestic manufacturing and improve U.S. trade relationships.
But for many of his signature policies to succeed, Mr. Trump will have to prove investors wrong, particularly those who lend money to the government by buying its debt.
So far, bond markets are not buying his approach. Where Mr. Trump sees a “golden age” of growth, investors see an agenda that comes with more debt, higher borrowing costs, inflation and an economic slowdown. Investors who once viewed government debt as a relatively risk-free investment are now demanding that the United States pay much more to those who lend America money.
That is on top of businesses, including Walmart, that say they may have to raise prices as a result of the president’s global trade war. The onslaught of policy changes has also left the Federal Reserve frozen in place, unsure as to when the economy will call for lower interest rates in the face of persistent uncertainty. As a result, borrowing costs for mortgages, car loans and credit cards remain onerous for Americans.
Still, Mr. Trump continues to proclaim that his policies will bring prosperity. This week, the White House released data showing that its tax cuts could increase U.S. output as much as 5.2 percent in the short term, compared with the gains it would have achieved if the bill is not adopted. The administration has stood largely alone in offering such rosy predictions about the effects of Mr. Trump’s policies on businesses, average workers and the nation’s fiscal future.
In report after report, economists this week predicted that Mr. Trump’s signature tax package could add well over $3 trillion to the national debt. Some found that the measure is unlikely to deliver substantial economic growth, and could enrich the wealthiest Americans while harming the poorest, millions of whom could soon lose access to federal aid for food and health insurance.
The tax cuts are largely an extension of ones that Congress passed in 2017, meaning that few taxpayers will see an increase to their after-tax income. In fact, some might see their financial situation deteriorate: Many of the lowest earners may even see about $1,300 less on average under the Republican bill in 2030, according to the nonpartisan Penn Wharton Budget Model, which factored in the proposed cuts to federal safety-net programs.
Facing an onslaught of red flags and dour reports, the White House has remained bullish.
“I think folks have cried wolf a lot,” Stephen Miran, the chairman of the president’s Council of Economic Advisers, said in an interview, stressing that Mr. Trump’s agenda would “grow the economy.”
In the past, investors and businesses might have rejoiced over Mr. Trump’s grand proclamations about lowering taxes, reducing regulations and opening access to foreign markets. But the most common reaction this week was concern over Mr. Trump’s sclerotic approach, which has renewed fears that the economy could enter a prolonged period of pain.
“It’s possible that you’re going to get a big benefit to growth, but the costs are so obvious and so clear that I think it’s hard to put a lot of faith in that at the moment,” said Eric Winograd, an economist at the investment firm AllianceBernstein.
By most metrics, Mr. Trump inherited a solid economy. Layoffs were low when he took office, and have stayed that way, helping to keep the unemployment rate stable. And consumers, even amid elevated prices, continued to spend apace.
Four months into his second term, however, there are signs that the economy is beginning to come under greater strain, in what experts worry is a prelude to a more substantive slowdown. While economists do not expect the economy to tip fully into a recession, they say Mr. Trump’s tariffs in particular have raised the odds of a downturn, as both businesses and consumers begin to cut back.
Many of the president’s allies maintain that Mr. Trump is doing exactly as he promised during the 2024 presidential campaign, acting out of a belief that his vision can spur robust economic growth. In doing so, that can help to create jobs, raise wages and generate the sort of activity that can lessen the nation’s fiscal imbalance, said Stephen Moore, a conservative economist who served as one of Mr. Trump’s advisers during his first term.
“So many of these problems are the result of low growth,” Mr. Moore said of the economy. Mr. Trump is aiming to get growth back up to 3 percent, Mr. Moore added.
But the administration has at times ignored a steady stream of data suggesting its policies may not deliver those gains.
The disparity between vision and reality became apparent Thursday as House Republicans voted to advance a bill that would extend the set of tax cuts enacted in the president’s first term. The measure also included Mr. Trump’s campaign promises to eliminate taxes on tips and overtime pay.
An analysis released Thursday by the Joint Committee on Taxation, a nonpartisan advisory arm of Congress, found that the new Republican measure may raise the average rate of growth in U.S. output by only 0.03 percentage points compared with current expectations through 2034. The finding cast doubt on the administration’s long-held assertion that economic activity can help to lower the deficit. The joint committee also said the president’s tax package could add $3.7 trillion to the nation’s debt over the next decade.
Mr. Miran maintained on Friday that congressional analysts and others had underestimated the effects of Mr. Trump’s initial tax cuts, and had done the same this year.
“Better tax policy creates better economic growth, and better economic growth creates better revenue,” he said.
Focusing on the debt, Kevin Hassett, the director of the White House National Economic Council, said on Fox News on Thursday that there was “a lot of spending reduction in this bill,” adding that the Trump administration would seek additional savings as the bill moved through the Senate.
The prospect of a worsening fiscal imbalance prompted Moody’s Ratings just last week to downgrade the U.S. credit rating, citing Republican tax cuts and the proclivity of past G.O.P. administrations to spend. Party lawmakers swiftly rejected the finding, but bond markets took notice, sending yields on longer-term U.S. debt higher. Soft demand at an auction of 20-year Treasuries on Wednesday gave markets another jolt, pushing up bond yields and weighing on U.S. stocks.
Mr. Trump sent markets into another tailspin on Friday as he abruptly shifted his attention to tariffs. He attacked the European Union and threatened to raise tariffs on its exports to a flat rate of 50 percent. He signaled a mixed appetite for negotiations, telling reporters in the Oval Office: “I don’t know. We’re going to see what happens.”
The president also took aim at Apple, signaling he would impose a 25 percent import tax on iPhones, months after his administration relaxed some of its trade policies to aid tech giants. Mr. Trump later suggested his new tariffs might also apply to Samsung.
The S&P 500 fell nearly a percentage point on Friday and pushed the U.S. dollar lower against a basket of its peers. Many from Washington to Wall Street yet again scrambled to decipher Mr. Trump’s intentions — and sort out the extent to which the president is serious, bluffing or set to walk back his policies again.
Some companies, including Walmart, have said they may have to raise prices as a result of the president’s global trade war. (Karsten Moran for The New York Times)
Some businesses have forecast price increases as a result of Mr. Trump’s tariff threats. A report this week from Allianz found that many businesses are trying to push the added tariff costs onto suppliers or consumers, with roughly half of its survey respondents saying they may increase prices.
The potential for rising prices while growth is slowing poses a unique challenge for the Fed and its voting members, forcing them to reconcile with conflicting missions — a goal to pursue low, stable inflation, and a desire to sustain a healthy labor market.
“The bar for me is a little higher for action in any direction while we’re waiting to get some clarity,” Austan Goolsbee, the president of the Chicago Fed and a voting member on this year’s rate-setting committee, told CNBC on Friday.
Mr. Goolsbee recalled a recent exchange with the chief executive of a construction business, who said: “We’re now in a put-your-pencils-down moment.” Businesses, Mr. Goolsbee said, now “have to wait if every week or every month or every day there’s going to be a new major announcement.”
“They just can’t take action until some of those things are resolved,” he added.
May 24, 2025
China is an obstacle to a U.S.-Vietnam trade agreement
China’s giant logistics machine was humming inside rows of metal warehouses near Ho Chi Minh City in southern Vietnam this month. Hundreds of workers packed cosmetics, clothes and shoes for Shein, the Chinese fast-fashion retailer. Recruiters needing to fill hundreds more jobs were interviewing candidates outside.
At another industrial park, owned by the supply chain arm of Alibaba, the Chinese e-commerce giant, trucks drove in and out at a steady clip.
This kind of activity, powered by Chinese money, has brought jobs to Vietnam. It is one of the forces that have made Vietnam a thriving destination for companies around the world looking for alternatives to China’s factories.
But as President Trump’s trade war is turning supply chains upside down, China’s role is emerging as the biggest obstacle for Vietnam as it tries to avoid a 46 percent tariff.
Vietnamese officials are rushing to secure a deal before a 90-day pause on the new tariffs ends in early July. They met with administration officials in Washington this week for a second round of talks. The talks will resume next month, Vietnamese officials said.
The Trump administration wants Vietnam to do more to crack down on companies that are rerouting goods from China to Vietnam to avoid tariffs, a practice known as transshipment.
But the administration is also taking a view of the issue that goes beyond the usual definition of transshipment as it tries to wean the American economy off its dependence on Chinese imports. That puts countries that rely on China to make goods they export under heavy pressure.
For Vietnam, the challenge is proving that what it sends to the United States was made in Vietnam and not in China. In a sign of the awkward position it finds itself in, Peter Navarro, a top trade adviser to Mr. Trump, recently called Vietnam “a colony of China.”
Vietnam was a big beneficiary of tariffs that Mr. Trump placed on Chinese goods during his first presidency. Its trade surplus with the United States swelled to $123.5 billion in 2024, from $38.3 billion in 2017.
The reordering of trade flows accelerated in April, when China was facing 145 percent tariffs, Vietnamese imports from China ballooned to $15 billion while its exports to the United States totaled $12 billion. Beijing and Washington have since reached a temporary deal to slash the tariffs.
“The priority for Trump is for Vietnam to fix the transshipment problem and make sure that the two countries can sign something that shows Vietnam is taking action,” said Adam Sitkoff, the executive director of the American Chamber of Commerce in Hanoi.
In response, Vietnam created a special task force this month to “aggressively crack down on smuggling, trade fraud” and “the export of goods falsely labeled as ‘Made in Vietnam,’” and its finance ministry has met with U.S. Customs and Border Protection to talk about working together and sharing information.
Despite the efforts, Trump officials have said it is not enough.
“It has become very difficult for Vietnam to justify to the U.S. government that this isn’t just rerouting Chinese goods,” said Priyanka Kishore, an economist in Singapore and the founder of Asia Decoded, a consulting firm.
“China is Vietnam’s biggest intermediate goods supplier, so if you are pushing your exports to the U.S. up, you would see an increase in imports from China,” Ms. Kishore said.
Vietnam and other Asian countries depend on China for the supplies used to make finished goods. So as production shifts from factories in China to factories elsewhere, much of the spike in exports from China to its neighbors may be raw materials used by factories.
Still, some Vietnamese imports from China are undeniably finished goods shipped through Vietnam to other countries with their origin in China disguised, which is universally considered illegal.
There is little data on exactly how much falls into the category of transshipment, Ms. Kishore said. By one estimate, rerouting activity increased to 16.5 percent of exports to the United States after Mr. Trump’s first-term tariffs on China, driven in part by Chinese-owned companies.
The prohibitively high tariffs on Chinese goods last month caused more manufacturers to seek options in Vietnam. After Mr. Trump ended a loophole that let Americans buy cheap goods from China tax free, Shein offered guidance and subsidies to factories to move operations to Vietnam. Shein did not respond to a request for comment.
Much of that activity has been the legitimate movement of the supply chain as companies shift their production out of China and into places where tariffs are lower.
But the Trump administration is taking a hard line. “China uses Vietnam to transship to evade the tariffs,” Mr. Navarro said. The goal is to put a fence around China’s exports.
“The United States seems to be arguing that anything that comes from China is by default transshipment, so you tar and feather every single product that comes from China,” said Deborah Elms, the head of trade policy at the Hinrich Foundation, an organization that focuses on trade.
Stopping illegal transshipment is one thing; disconnecting supply chains from China would be much more complicated. Most of the things that Americans buy have raw materials from China — whether it is the plastic in their children’s toys, the rubber in their shoes or the thread in their shirts.
“Asian governments are being asked to redefine supply chains to something that might be decades in the making in exchange for what? It’s a little unclear,” Ms. Elms said.
For Vietnam’s textile and garment industry, taking China out of the equation would be hugely problematic. Factories import around 60 percent of the fabrics they use from China, according to Tran Nhu Tung, the vice chairman of the Vietnam Textile and Apparel Association.
“Without China, we cannot make products,” he said. “Vietnam would have no material to produce to make the finished goods. And without the U.S., Vietnam cannot export the finished goods. So the Vietnamese government has to find a balance between China and the U.S., and it’s very difficult for them to do this.”
To try to sweeten any deal with the Trump administration, Vietnam has offered to increase its purchase of American goods like agricultural products and Boeing aircraft, and curb the shipment of Chinese goods to the United States.
But the flood of investment and hiring by Chinese companies continues to complicate things.
In the southern province of Long An, where many shoe and textile factories are based, Shein is on a hiring drive.
On a recent Friday, Huy Phong, a recruiter, hung an advertisement for jobs on the fence outside a Shein warehouse soliciting work to load goods and sort, classify and package fashion items like handbags, clothing and footwear. The pay: $385 to $578 a month. Shein needs 2,000 workers for its warehouse and has hired only half that number so far, he said.
Finding workers was hard. A lot of warehouses and logistics companies were recruiting.
Nearby, Duong Minh Giang was leaving his interview feeling dismayed. He said the job would entail handling raw materials from China like thread and chemical dye to store at the warehouse and send to nearby factories to make clothes.
“But I don’t think I will take the job,” he said. “The salary is low.”
May 24, 2025
iPhone Price Could Soar to $3,500 if Made in the U.S.
US President Donald Trump boasted “jobs and factories will come roaring back” when he unleashed unprecedented tariffs around the world during his “Liberation Day” address last month.
But there’s one product the president is particularly eager to produce in the US: iPhones.
“I have long ago informed Tim Cook of Apple that I expect their iPhone’s that will be sold in the United States of America will be manufactured and built in the United States, not India, or anyplace else,” Trump posted Friday morning on Truth Social. “If that is not the case, a Tariff of at least 25% must be paid by Apple to the U.S.”
But Dan Ives, global head of technology research at financial services firm Wedbush Securities, told in April that idea is a “fictional tale.”
US-made iPhones will likely cost more than three times their current price of around $1,000, Ives said, because of the costs associated with replicating the highly complex production ecosystem that currently exists in Asia.
“You build that (supply chain) in the US with a fab in West Virginia and New Jersey. They’ll be $3,500 iPhones,” he said, referring to fabrication plants, or high-tech manufacturing facilities where computer chips that power electronic devices are normally made.
And even then, it would cost Apple about $30 billion and three years to move just 10% of their supply chain to the US to begin with, Ives told Burnett.
The making and assembly of smartphone parts shifted to Asia decades ago, as American companies largely focused on software development and product design, which generate much higher profit margins. That move has helped make Apple one of the world’s most valuable companies and cement itself as a dominant smartphone maker.
Since Trump’s inauguration in late January, Apple’s shares have lost more than 14% of their value due to concerns about the impact of tariffs on its sprawling supply chain, which is highly dependent on China and Taiwan. About 90% of Apple’s iPhone production takes place in China, according to Ives.
“That’s why I think you see what’s happened to the stock, because no company is more caught up in this tariff front and center in this category five storm than Cupertino and Apple,” he said in April. “It’s an economic Armageddon, but especially for the tech industry.”
The chips that power iPhones are mainly manufactured in Taiwan, while its screen panels are supplied by South Korean companies. Some other components are made in China, and final assembly mostly takes place in the country.
The administration’s exemption of smartphones and other electronics containing semiconductors from the elevated “reciprocal” tariffs on China has spared iPhones from the harshest levies, but Apple still faces a 20% tariff on Chinese goods for the country’s role in the fentanyl trade. Apple CEO Tim Cook said on the company’s most recent earnings call that “the majority” of iPhones coming into the United States will now be shipped from India, adding that tariffs could add $900 million to Apple’s costs this quarter.
In February, Apple announced it would invest $500 billion in the United States over the next four years as part of its effort expand production outside China and to avoid Trump’s tariffs on the country.
Apple has been seeking to diversify its production bases from China to India and Brazil. But Gene Munster, managing partner at Deepwater Asset Management, estimates it would be difficult for Apple not to raise iPhone prices if it faces tariffs of 30% or higher.
“Anything below 30, they will probably carry the vast majority of that increase,” he said. “But I think at some point they’re going to have to start to share it.”
May 23, 2025
Trump advocates for Apple to pay a 25% tariff on iPhones manufactured outside the U.S.
President Donald Trump said in a social media post Friday morning that Apple will have to pay a tariff of 25% or more for iPhones made outside the United States.
“I have long ago informed Tim Cook of Apple that I expect their iPhone’s that will be sold in the United States of America will be manufactured and built in the United States, not India, or anyplace else. If that is not the case, a Tariff of at least 25% must be paid by Apple to the U.S.,” Trump said on Truth Social.
Shares of Apple fell about 2% on Friday after the post.
Production of Apple’s flagship phone happens primarily in China, but the company has been shifting manufacturing to India in part because that country has a friendlier trade relationship with the U.S.
Some Wall Street analysts have estimated that moving iPhone production to the U.S. would raise the price of the Apple smartphone by at least 25%. Wedbush’s Dan Ives put the estimated cost of a U.S. iPhone at $3,500. The iPhone 16 Pro currently retails for about $1,000.
This is the latest jab at Apple from Trump, who over the past couple of weeks has ramped up pressure on the company and Cook to increase domestic manufacturing. Trump and Cook met at the White House on Tuesday, according to Politico.
Treasury Secretary Scott Bessent said in an interview with Fox News on Friday that he was not part of the meeting at the White House but the Apple situation could be part of the Trump administration’s push to bring “precision manufacturing” back to the U.S.
“A large part of Apple’s components are in semiconductors. So we would like to have Apple help us make the semiconductor supply chain more secure,” Bessent said.
Cook gave $1 million to Trump’s inauguration fund and attended the inauguration in January. Apple has announced a $500 billion spend on U.S. development, including AI server production in Houston.
Apple declined to comment for this story.
The company said during its May 1 earnings report that it expects about $900 million in additional costs for tariffs in the current quarter. Cook said on the company’s earnings call that the tariff outlook was “very difficult to predict” past June.
Foxconn, one of Apple’s main iPhone assembly partners, is spending $1.5 billion on expanding its India facilities, the Financial Times reported Thursday.
Trump has made public criticisms of other major U.S. companies, including Walmart, during his trade war push, but the levies on a specific consumer product is a new step. The exact legal mechanism for the tariff is unclear.
Trump followed up his post about Apple with another calling for a 50% tariff on products from the European Union. Taken together, the posts point to trade tensions increasing again after the U.S. had temporarily lowered many of its levies, including in an agreement with China.
Apple also had to navigate tariff threats during Trump’s first term, when a 15% tariff on Chinese imports was being considered in 2019. At that time, Cook had a strong relationship with Trump and the final trade deal excluded core Apple products from the duties.
As Apple is caught in the U.S. president’s crosshairs, the company is also seeing weak demand in China. On Friday the company hiked trade-in incentives for iPhones in China.
May 23, 2025
Britain’s economy is showing encouraging signs, but it’s not entirely in the clear yet
It’s been rare for a string of positive economic news to emerge out of the U.K. in 2025 — but this week in particular has given Britain three reasons to be optimistic.
Data on Friday signaled unexpected positive momentum in the country’s economy, with retail sales rising by a much better-than-expected 1.2% in April, and GfK’s consumer confidence index showing an improvement in sentiment.
Sterling gained 0.6% against the U.S. dollar after the figures were published on Friday, to trade at around $1.35.
The combination of the two positive figures on Friday bucked expectations, and logic, for some economists. Economic activity in April was widely expected to show a downtrend, in part thanks to U.S. President Donald Trump’s global trade war.
“Well now, that challenges the idea of a cautious consumer,” said Rob Wood, chief U.K. economist at Pantheon Macroeconomics, adding that a number of factors, some not influenced by politicians or businesses, were at play.
“That said, official sales growth looks too good to be true, likely as the seasonal adjustment fails to adequately control for the later Easter this year,” Wood added. “There’s no doubt the weather helped a lot, with both March and April registering the most sunshine since records began.”
Taken in isolation, Friday’s retail figures and consumer confidence data perhaps point to growth in the current quarter. However, British electricity regulator Ofgem added to the positive sentiment by declaring on Friday that electricity prices are set to decline by 7% in July. That could potentially fuel spending in other sectors in the coming months.
“This is certainly an improvement for household expenses, with monthly bills likely to fall on average by around £11,” said Ellie Henderson, economist at Investec.
Meanwhile, the string of positive elements could potentially bump up U.K. economic growth for the second quarter as a whole, according to Allan Monks, chief U.K. economist at JPMorgan who is forecasting a 0.6% annualised gain.
The U.K. has the fastest economic growth among G7 nations
“With the household savings rate so high, a continued improvement in confidence has the potential to unlock further consumer spending gains,” JP Morgan’s Monks said in a note to clients on Friday. “High inflation, softer wage growth and weak employment argue against a continuation of that trend. But the rise in confidence in May was matched by a notable drop in unemployment fears, lower inflation expectations and a rise in spending intentions.”
The outlook for the U.K. has seesawed over the past year. The country has grappled with setbacks like unexpected economic contraction and mounting concern about fiscal spending plans, while also seeing some more positive data and the agreement of landmark trade deals with the U.S., India and the EU.
Earlier this week, official figures showed the economy grew by 0.7% in the first quarter of 2025 — although that came as domestic inflation surged to 3.5% in April. Last week, another data print showed average earnings in the U.K. had grown by 5.9% on an annual basis.
The mix of data meant economists appeared divided on Friday about what the latest bout of data meant for the U.K.’s long term economic picture.
Alex Kerr, U.K. economist at Capital Economics, warned that “the sun won’t shine on [Britain’s] retail sector forever.”
“Although for the first time since 2015, excluding the pandemic, retail sales volumes have risen for four months in a row, April’s impressive 1.2% m/m rise was largely driven by the unusually warm weather,” he said in a note sent shortly after the figures were published.
“That boost won’t last. So even though consumer confidence ticked up slightly in May, we suspect retail sales growth will slow over the coming months.”
‘Depressed’ Brits resorting to retail therapy
While most economists viewed the small increase in consumer confidence in May as a positive signal for next quarter’s economic growth, others suggested that as overall sentiment remains below pre-pandemic levels, the link between spending and sentiment may be broken instead.
“Depressed British consumers have resorted to retail therapy to cope with their economic and financial woes,” said Andrew Wishart, senior UK economist at Berenberg.
Instead, Wishart said a combination of the pandemic, and the ensuing inflation and interest rate hikes led consumers to shore up their finances.
“Households have increased their saving rate (the share of household income not spent) to a level previously unseen outside of periods of mass unemployment,” Wishart added.
Having stabilized their bank balances and secured pay rises, consumers are now spending in anticipation of a more stable interest rate and price environment, according to the economist.
Counter intuitively, the additional spending means the Bank of England was more likely to hold rates for the rest of the year, than cut, he added.
Janet Mui, head of market analysis at wealth manager RBC Brewin Dolphin, said in an email on Friday morning that with wage growth now outpacing inflation, U.K. households are spending more generously. However, she cautioned that the state of Britain’s public finances “remain a constraint.”
“With higher borrowing costs, more tax rises and departmental spending cuts may happen,” she explained. “This poses some medium-term growth risks for the U.K amid ongoing uncertainty with how the global trade situation will settle.”
May 23, 2025
New York Fed Official Says Overnight Lending Facility Will Play a Bigger Role
As the Federal Reserve continues to wind down its balance sheet and navigate a changing interest rate landscape, the central bank’s standing overnight lending tool—the Standing Repo Facility—is poised to play a bigger role in stabilizing short-term borrowing costs, a top New York Fed official said Monday.
Roberto Perli, the manager of the System Open Market Account (SOMA) at the Federal Reserve Bank of New York, told an audience at a fixed-income conference in Manhattan that the Standing Repo Facility (SRF) will likely take on greater prominence as a backstop for overnight funding markets as excess reserves in the banking system continue to decline.
“As the Fed’s balance sheet normalizes, and reserves become less abundant, we expect the Standing Repo Facility to be increasingly important in maintaining control over short-term interest rates,” Perli said. “It provides a ceiling on overnight borrowing costs and supports the effective transmission of monetary policy.”
A Quiet Corner of Monetary Policy Grows Louder
The Standing Repo Facility, launched in July 2021, allows eligible counterparties—primarily large banks and primary dealers—to borrow overnight cash from the Fed in exchange for high-quality collateral, such as Treasurys, agency debt, and agency mortgage-backed securities. The facility effectively acts as a cap on overnight interest rates by offering liquidity at a fixed rate—currently set at 5.5%, the upper bound of the federal funds target range.
Though underutilized for much of its existence, the SRF is now expected to play a critical role as the Fed continues reducing its holdings of Treasurys and agency MBS, a process known as quantitative tightening (QT). The Fed’s balance sheet has declined to just under $7.4 trillion, down from a peak of nearly $9 trillion in 2022.
As QT progresses, bank reserves are gradually declining, increasing the risk of stress in overnight funding markets—a risk the SRF is designed to mitigate.
“The SRF helps avoid spikes in repo rates that could spill over into broader funding markets,” Perli explained. “It’s not just a tool of last resort—it’s a structural part of the post-pandemic monetary policy framework.”
Fed officials are keen to avoid a repeat of the September 2019 repo market turmoil, when a sudden shortage of bank reserves caused overnight lending rates to spike above 10%. That episode, which occurred before the pandemic-era balance sheet expansion, prompted the Fed to eventually launch the SRF as a standing facility.
Perli emphasized that the Fed is aiming for a “minimally ample” reserve regime—enough reserves to support smooth market functioning without flooding the system. In such an environment, the SRF would serve as a safety valve, absorbing fluctuations in liquidity demand.
Wall Street analysts see the Fed’s messaging as a clear signal that short-term repo markets will become a key battleground in monetary policy implementation.
“The SRF is no longer just a theoretical backstop—it’s becoming a live tool in rate control,” said Priya Misra, head of global rates strategy at TD Securities. “As QT reduces excess liquidity, we’re going to see more frequent use of this facility, especially in periods of tax payments, bill issuance, or market stress.”
In recent months, repo market participants have seen growing usage of the reverse repo (RRP) facility decline, while demand for SRF remains near zero—but that dynamic could change quickly if reserves fall too far.
“The Fed is trying to thread a needle,” said Joseph Abate, repo market expert at Barclays. “They want to shrink the balance sheet without triggering another funding squeeze. The SRF is their insurance policy.”
Perli also noted that an active SRF helps the Fed maintain the integrity of its interest rate corridor, ensuring that market rates do not drift too far from the policy rate. With the federal funds target range currently at 5.25%–5.50%, the SRF ensures that no institution pays more than the upper bound for overnight funds.
Moreover, the SRF could take on additional importance if future geopolitical shocks, debt issuance surges, or year-end liquidity pressures push up repo rates.
“This facility helps the Fed maintain monetary control without needing to keep reserves excessively high,” said Julia Coronado, president of MacroPolicy Perspectives. “It’s part of a more flexible, responsive monetary toolkit.”
Fed officials are widely expected to slow the pace of QT later this year, especially as money market funds shift from the Fed’s reverse repo facility into higher-yielding T-bills. Perli declined to speculate on when QT might end but reiterated that money market stability remains a core priority.
The next major test for the SRF could come during the mid-June tax payment period, when Treasury cash balances surge and drain reserves from the system.
For now, the SRF’s mere presence is helping anchor market confidence—but as the Fed walks a tightrope between inflation control and liquidity management, that backstop could soon become a front-line tool.
Key Facts:
- Standing Repo Facility Rate: 5.5% (as of May 2025)
- Fed Balance Sheet Size: $7.4 trillion (down from $9 trillion in 2022)
- Launch Date of SRF: July 2021
- Usage: Currently near zero, but expected to increase as reserves decline
- Eligible Collateral: Treasurys, agency debt, agency MBS
- Fed Funds Target Range: 5.25%–5.50%
May 22, 2025
Britain’s most popular corporate event isn’t what you’d expect
This week saw one of the most important — and perhaps surprising — events in corporate Britain’s annual calendar: the gala night of the Royal Horticultural Society (RHS) Chelsea Flower Show.
This traditionally marks the beginning of what, in English high society, is referred to as “the season.”
Coined as such by Debrett’s, the publisher and authority on society and etiquette, the summer social whirl was framed around the British royal family, which traditionally remained in London from April to July and from October until Christmas.
This meant that Britain’s ruling classes and key movers and shakers did the same — participating in balls, parties and court presentations.
These have largely now faded away, but what remains is a series of sporting and cultural events where the great and good continue to get together. Highlights include opera at the Glyndebourne Festival; flat racing at the Epsom Derby, Royal Ascot and Glorious Goodwood meetings; rowing at the Henley Royal Regatta; yachting at Cowes and, of course, tennis at Wimbledon.
All these events see gatherings of corporate chieftains, their bankers, lawyers and other advisors, but none brings together quite as many key figures, in a short space of time, as the Chelsea gala night: two hours of champagne (this year’s bubbles were supplied by Pommery), canapes and networking over displays carefully cultivated by hundreds of professional gardeners and landscape architects.
Tickets for the gala, which runs from 7 p.m. to 9 p.m. (the King, who is patron of the RHS, visits earlier in the afternoon), cost £620 ($827) while those for the gala dinner which follows on site go for £885.
Seeds are sown
Many of the City’s top bankers can be spotted there: recent attendees have included Anthony Gutman, co-chief executive officer of Goldman Sachs International; Russell Chambers, the former head of investment banking at Credit Suisse and Charlie Nunn, chief executive of Lloyds Banking Group. Leading business figures also regularly attend, including the likes of John Browne, the former chief executive of BP; Martin Sorrell, the advertising kingpin and Nigel Wilson, the former chief executive of Legal & General.
Top politicians and policymakers can also be spotted at the event: George Osborne was a regular attendee when he was chancellor of the exchequer, while last year both Jeremy Hunt, then the chancellor, and Rachel Reeves, then his shadow, were guests of one of the U.K.’s major lenders.
While the cultivation of plants is central to Chelsea, the cultivation of client relationships is also paramount. Headline sponsors of the event have included Merrill Lynch Investment Managers (now part of BlackRock) and asset manager M&G Investments.
The seeds sown, too, are not necessarily of the horticultural kind.
The RHS Chelsea Flower Show on May 19, 2025 in London, England. (Ben Montgomery/Getty Images News/Getty Images)
For example, the 2018 sale of data provider Refinitiv (since acquired by the London Stock Exchange Group) by Thomson Reuters to Blackstone is said to have had its origins in a meeting between David Craig, the Refinitiv chief executive, and Joseph Baratta, Blackstone’s head of private equity, at the 2013 gala night.
Long-time attendees grumble that the event does not have quite the pull it used to. There are arguably fewer bankers present than there were 15 years ago which, according to some, reflects caps on the value of corporate hospitality some business people are now allowed to accept.
There is also a school of thought that modern CEOs are more likely to be seen competing in triathlons and, when they do accept invitations, it is likely to be for a more egalitarian and less elitist event such as, say, a Premier League football match.
This year’s gala suggested there may be some truth to that.
From the C-suite, there were certainly more FTSE 100 chairs than CEOs in attendance, although several individuals who have in the last year stepped down from such roles were spotted among the blooms.
Among the main talking points, a few common themes emerged. One was the uncertainty that continues to stalk businesses in the United States due to a combination of factors, chiefly President Donald Trump’s tariffs, which several attendees suggested may benefit the U.K. if it drives capital and business investment elsewhere.
Another is the impact that continues to be felt by Chancellor Rachel Reeves’ decision to abolish the so-called “non-dom” rules which enabled U.K. residents who declared their permanent home as being overseas to avoid U.K. tax on their foreign income and gains. It is credited with having driven hundreds of wealthy individuals out of the U.K. and harmed entrepreneurship in the process.
The third theme, though, was altogether more surprising. The mood music surrounding the U.K. economy during the last 12 months has been unremittingly bleak. Yet there were, on Monday evening, an unexpectedly high number of corporate chiefs who, when questioned how their business was faring, answered along the lines of: “I probably shouldn’t say this, given the backdrop, but we’re actually doing better than I expected so far this year.”
The U.K. economy still faces headwinds, not least Reeves’s recent increase in employer’s national insurance contributions, which makes it more expensive to hire people. There is also a sense that the GDP figures for the first quarter of the year were flattered by stockpiling of goods and strong export figures ahead of Trump’s tariffs kicking in.
However, leaving the show on Monday evening, there was a strong sense that these surprisingly strong figures may not have been a flash in the pan.
May 22, 2025
Hong Kong has enacted a stablecoin law, reflecting the growing global acceptance of digital assets by governments
Hong Kong passed a stablecoin bill on Wednesday to expand its cryptocurrency licensing regime as more governments recognize the digital asset.
Unlike volatile digital assets like bitcoin, the value of stablecoins is tied to a real-world asset like fiat currencies or commodities like gold.
The new law — focused on fiat-referenced stablecoins — will require stablecoin issuers to obtain a license from the Hong Kong Monetary Authority and comply with a range of requirements, including proper management of asset reserves and segregation of client assets.
It will “enhance Hong Kong’s existing regulatory framework on virtual-asset (VA) activities, thereby fostering financial stability and encouraging financial innovation,” the central banking body said. It added that it would conduct further consultations on the detailed regulatory framework.
The Hong Kong government said in a statement that the stablecoins policy is expected to come into effect this year, with “sufficient time” allowed for the industry to understand the requirements.
In 2023, Hong Kong introduced its virtual asset licensing regime, which requires cryptocurrency firms with an official presence in the city to apply for licenses and meet specific standards and requirements to offer digital assets to retail investors in the city. However, the existing policy did not include stablecoins in its purview.
“Hong Kong’s new stablecoin policy sets a global benchmark by mandating full reserve backing, strict redemption guarantees, and HKMA oversight,” YeFeng Gong, risk and strategy director of HashKey OTC, told CNBC. HashKey OTC is a trading arm of the HashKey Group, which has a licensed crypto platform in Hong Kong.
The policy “ensures institutional-grade reliability for traders while positioning Hong Kong as a leader in compliant digital finance,” he added.
Crypto adoption and legitimacy
The move from Hong Kong comes just days after the U.S. Senate advanced the GENIUS Act, which would establish the first regulatory framework for issuers of stablecoins if implemented.
A push to regulate stablecoins has been intensifying globally, with other jurisdictions having also implemented their own regulatory frameworks, including the European Union, Singapore, the United Arab Emirates and Japan, blockchain intelligence firm Chainalysis said in a report on Wednesday.
Chengyi Ong, head of Asia-Pacific policy at Chainalysis, told CNBC that the latest regulations are expected to help with crypto adoption and legitimacy.
″[Stablecoins] form the backbone of the crypto ecosystem, but their stability also opens the door to their use in overcoming frictions dogging traditional finance, such as slow cross-border payments and settlement,” Ong said.
“This potentially transformative utility is what has driven governments around the world, from Europe to Asia, to take steps toward regulatory regimes that will facilitate the emergence of high-quality stablecoins,” she added.
According to Chainalysis, the total market cap of stablecoins is around $232 billion as of this month.
May 22, 2025
Rising Mortgage Rates? Increased Inflation? What the U.S. Credit Downgrade Might Mean
Moody’s decision to join other major ratings agencies in downgrading the U.S.’s once-pristine credit rating could have a tangible impact on Americans’ wallets.
The agency has dropped the U.S. sovereign credit rating—an assessment of the country’s ability to pay its debts—down one level from the highest possible Aaa to Aa1. The decrease marks the third time a major ratings agency has downgraded the U.S. in recent years, following S&P’s decision to do the same in 2011 and Fitch’s in 2023.
The move on Friday caused little movement in the stock market, but experts say the rating dip could affect the economy moving forward. If a country is perceived as a bigger credit risk, its creditors will demand higher interest rates in exchange for lending to that country, potentially leading to higher interest rates for consumers and an uptick in inflation.
“Higher government debt means higher rates, making it harder for people to grow their financial foundation. This is where policy meets the paycheck,” says Preston Cherry, director of the Charles Schwab Center for Personal Financial Planning at the University of Washington–Green Bay.
Here’s what to know about the motivation for the downgrade—and what it might mean for you.
Why did Moody’s decrease the U.S.’s credit rating?
Moody’s cited an increase in government debt for more than a decade and “interest payment ratios to levels that are significantly higher than similarly rated sovereigns” as the reasoning behind its decision.
The rating drop is reflective of the reality of the U.S. government’s “unsustainable fiscal path,” says Katie Klingensmith, chief investment strategist at Edelman Financial Engines. The national debt has been sharply rising since the 1980s and experienced particular surges during the 2008 Great Recession and the COVID-19 pandemic—the latter of which saw spending increase by about 50%.
The federal debt currently stands at $36.22 trillion, according to the Treasury Department, compared to nearly $28 trillion in 2019.
Moody’s decision comes as Republicans weigh President Donald Trump’s “big, beautiful” tax and spending bill, which economic experts warn would further increase the federal debt by more than $2.5 trillion—though the White House has said it would save the government $1.6 trillion.
How could the downgrade impact Americans?
The dip in the U.S. credit rating indicates that ratings agencies believe the government is at a higher risk of default on its debt. While the U.S. rating still remains relatively high, the decrease may make investors more hesitant to lend to the government, and demand higher compensation for lending in the form of higher interest rates.
And those increased rates could be passed on to Americans: Because mortgage and other lending rates are tied to the yield on Treasury bonds, higher costs of borrowing for the U.S. government trickle down to higher costs of borrowing for consumers.
Both Treasury bond yields and mortgage rates have already ticked up in the days since Moody’s dropped the U.S. credit rating. Thirty-year bond yields climbed two basis points to just over 5%, while 10-year yields—which mortgage rates tend to track—also increased by two basis points to nearly 4.5%. At the same time, the average interest rate for a 30-year mortgage temporarily rose above 7%, per Mortgage News Daily.
Beside the increase in loan interest rates, Klingensmith also warns that the decreased credit rating may cause inflation.
Federal Reserve Chair Jerome Powell previously spoke about the risk of increased inflation in April, warning that Trump’s turbulent tariff policy could cause inflation rates to temporarily rise. Experts agree. “Markets don’t like what they can’t measure. And policy uncertainty, especially around government fiscal battles, tax policy, and potential shutdowns, is a volatility amplifier,” says Cherry.
Klingensmith adds that increases to the debt and higher government borrowing costs can also raise inflation risks.
“If the government struggles to service the debt and has to pay increasingly higher interest rates, this could be a burden on the overall economy, slowing growth,” she says. “Higher debt levels don’t automatically cause inflation, but they pose the risk of inflation through monetization.”
May 21, 2025