US-China trade is in a sudden stop, not unlike the COVID shock of the 2020s. Retailers may have about a month’s or two inventory left before the shelves start going empty. For example, approximately 70-80% of products sold on Amazon and Walmart are made in China and they are all facing 100% - 250% tariffs.
Booking volumes from the last week of March to first week of April across global and U.S. trade lanes have plummeted (cnbc).
This is basically a trade embargo.
Markets seem to be under the impression that these tariffs will be rolled back before the US economy dives off a cliff. The bet is that the Mad King Trump will blink first.
What if he doesn’t?
Markets this Week
A short but sweet week for Indian markets. Will they hold up through the earnings season?
The Mag7 are in serious trouble…
… while crypto did its thing.
Links
Research
Hedging inflation in the stock market (outcastbeta)
While the stock market as a whole is not an inflation hedge, certain industries or equity factors can provide protection against inflation. A resource equity-heavy industry portfolio—including Precious Metals, Coal, Fabricated Products, Petroleum and Natural Gas, Steel Works, Agriculture, and Non-Metallic and Industrial Metal Mining—has historically provided protection against high inflation levels. Value and momentum factors have provided protection against high inflation levels, but not against rising inflation. On the other hand, profitability and quality factors, as well as the low beta factor to some extent, have underperformed during periods of high and rising inflation.
Market Signals from Social Media (SSRN)
We find that sentiment extrapolates from past market-wide returns and exhibits a strong reversal. In contrast, attention predicts negative returns as a continuation of previous trends.
Multi-day Return Properties of Leveraged Index ETFs (SSRN)
This paper examines the multi-day return properties of leveraged ETFs, which use daily rebalancing to maintain a constant leverage ratio.
Tariffs
The Inevitability of Trade, Trump & Tariffs (lewisenterprises).
Chinese officials are not counting on a return to pre-2018 normalcy, nor are they banking on a sweeping diplomatic resolution. The goal is staying power: to buy time, contain vulnerability, and adjust expectations – domestically, bilaterally, and globally (thediplomat).
China holds cards in US tariff stand-off (ft).
China has stopped exporting rare earths to everyone, not just the U.S., cutting off critical materials for tech, autos, aerospace, and defense (yahoo).
China Wants Countries to Unite Against Trump, but Is Met With Wariness (nytimes).
As tariffs darken the economic outlook, Trump sizes up Powell as a scapegoat (cnn).
Trump tariffs on China will soon bring ‘irreversible’ damage to many American businesses (cnbc). U.S. businesses sue to block Trump tariffs, say trade deficits are not an emergency (cnbc).
In South Carolina, a Once Thriving Textile Hub Is Baffled by Trump’s Tariffs (nytimes).
What the U.S. Can Learn from China's Industrial Playbook (rand)
China’s imports of US liquefied natural gas have completely stopped for more than 10 weeks (ft). China stops Boeing jet deliveries amid trade war with U.S (thehindu).
US lays out plans to hit Chinese ships with port fees (bbc).
Mack Trucks announces layoffs, blames tariffs (penncapital-star).
Trump's ongoing 25% auto tariffs expected to cut sales by millions, cost $100 billion (cnbc).
All the arguments for Trump's tariffs are wrong and bad (noahpinion).
Trump’s Focus on Trade Deficit Bewilders Economists (nytimes).
India
India's retail inflation slips to over 5-year low, opens door to more rate cuts (reuters).
Raghuram Rajan and Rohit Lamba are wrong. India should not give up on manufacturing (indianexpress).
Apple now assembles 20% or one in five of all its iPhones in India, increasing production by nearly 60% from the previous year (msn).
Time for India to reverse its rash of quality control orders. By one count, India had as many as 187 QCOs covering 769 products by mid-March (livemint).
Bosses of India's top three IT firms flag macroeconomic concerns (livemint).
How the Jaggi brothers diverted loan funds meant for BluSmart’s EVs (indianexpress). Rs 1.5 lakh electricity bill, 2-3 labourers: How an NSE official discovered Gensol’s EV plant had ‘no manufacturing activity’ (businesstoday).
row
GLD 0.00%↑ has beaten SPY 0.00%↑ in the last 10 and 20 years. Just ignore gold’s ~10 year drawdown in between.
Shares outstanding across the top 50 levered ETFs ranked by assets have risen 20% since Liberation Day on April 2 (bloomberg).
Britain’s rural communities could be destroyed if ministers sign a US trade deal that undercuts British farming standards (theguardian).
A Chinese satellite company linked to the country’s military is supplying Iran-backed Houthi rebels in Yemen with imagery to target US warships and international vessels in the Red Sea (ft).
For the past four decades, China has tried to use the promise of access to its market as a way to get foreign companies to transfer expertise and technology to its own companies — often much to the angst of the would-be investors. Now Europe is trying to use some of the very same tools to catch up with innovations from China (ft).
China's Military is Quietly Gaining Control of the Pacific (newsweek).
Most caviar imported by the US is farmed in China. Chefs note that some of the most expensive and desirable sturgeon roe in the world is coming from China (bloomberg).
Google loses ad tech monopoly case (theverge, bbc).
BYD Semiconductor Deep Dive (nomadsemi).
Companies in the EU are starting to look for ways to ditch Amazon, Google, and Microsoft cloud services amid fears of rising security risks from the US (wired).
Federal Reserve surveys offer early look at challenges Trump's tariff plans create for US manufacturers (yahoo). Philadelphia Fed Manufacturing Index: Sinks to 2-Year Low (advisorperspectives).
80% Of Americans Say The Country Would Be Better Off With More Manufacturing Jobs—But Only 25% Want One Themselves (yahoo).
Stagflation Is Now America’s Best-Case Scenario (bloomberg).
Trump isn’t trying to engineer prosperity for Americans. He’s seeking power for himself (theatlantic).
Trump's whiplash tariffs may have inadvertently achieved his goal of reordering the global economy by inspiring investors to sell U.S. assets and move their money elsewhere (axios).
White House launched a COVID-19 website in which it blamed the origins of the coronavirus on a lab leak in China while criticizing former President Joe Biden, former top U.S. health official Anthony Fauci and the World Health Organization (reuters).
Elon Musk has blazed a staggering trail of destruction as Trump’s DOGE chief, firing tens of thousands of workers while cashing in (rollingstone).
It’s not just trade - Trump is addressing scientific research, public health, and other crucial issues with the same lack of care (slowboring).
Odds & Ends
The West is bored to death. Our nihilistic politics are a product of the crushing ennui and spiritual vacancy of modern life (newstatesman).
Meme of the Week
