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House Republicans have initiated the process to keep former President Donald Trump's tax cut proposals alive by passing a budget resolution. This resolution, which passed by a slim margin, sets the stage for potential tax legislation but faces significant hurdles due to the sheer number and cost of Trump's tax ideas. The resolution allows for up to $4.5 trillion in tax cuts, which is insufficient to cover even the smallest estimates of Trump's tax promises, which range from $10 billion to $18 trillion over the next decade. Speaker Mike Johnson is navigating a delicate balance between conservative demands for deeper spending cuts and moderate Republicans wary of cuts to popular programs like Medicaid. The budget blueprint suggests cuts to Medicaid, which could impact healthcare for many, including in Republican districts. Despite these challenges, there's political pressure to deliver on tax cuts, especially with key provisions of the 2017 Tax Cuts and Jobs Act set to expire. The situation underscores the complexity of aligning fiscal policy with political promises in a divided Congress.
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China has escalated its trade war with the United States by raising its tariff on US goods to 84%, in response to the US imposing a hefty 104% tariff on Chinese imports. This move comes after the Trump administration followed through on its threat to add a 50% tariff on top of existing duties, bringing the total to 104%. The escalation has further strained US-China trade relations, with China vowing to "fight to the end." The impact of these tariffs has been felt on Wall Street, with the S&P 500 (^GSPC) nearing a bear market. Despite opposition from his own party and Wall Street, President Trump remains defiant, asserting that other countries are eager to negotiate. Meanwhile, various countries are responding with their own tariffs, and companies are adjusting to the new economic reality by raising prices. The situation continues to evolve as global markets react to the ongoing trade tensions.
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The US financial markets have been in turmoil following President Trump's tariff policies, leading to a significant increase in long-term Treasury yields. The 10-year Treasury yield (^TNX) surged by 47 basis points in a short period, while the 30-year yield (^TYX) also saw substantial gains. Despite these movements, market analysts like Mark Newton from Fundstrat Global Advisors believe these increases might be temporary, predicting a decline to around 3.5% by fall due to potential decreases in inflation. The bond market's reaction suggests a cautious optimism, with some experts like Nancy Tengler indicating that the market might not be in a recessionary state yet. However, the overarching concern is the potential for stagflation, where economic growth stalls, inflation persists, and unemployment rises. This scenario is fueled by recent trade policies and other economic uncertainties, including the possibility of reduced foreign demand for US Treasuries, which could force the US to issue bonds at higher rates to attract investors. The market's struggle to price even low-risk assets like Treasuries reflects the broader uncertainty and volatility in the financial landscape.
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Elon Musk's public disagreement with the Trump administration's tariff policies has escalated, highlighting a significant rift between the Tesla CEO and the President. While both Musk and Trump recognize issues within global trade, their solutions diverge sharply. Musk has openly criticized Peter Navarro, Trump's trade advisor, for suggesting that Tesla's opposition to tariffs stems from its reliance on foreign parts. Musk counters this by emphasizing Tesla's vertically integrated manufacturing approach, which reduces the need for extensive international trade. Despite Musk's general avoidance of commenting on tariffs, especially during his time as head of the Department of Government Efficiency, he has consistently pushed for zero-tariff systems between major trading partners like the US and Europe. Trump, however, favors tariffs and has dismissed the idea of zero-for-zero tariffs, focusing instead on broader trade deficits. This disagreement was further highlighted when Musk confronted Trump over the weekend, unsuccessfully attempting to sway the President's stance on tariffs.
