Digest | 16 April 2025
- Edward von der Schmidt
- 5 days ago
- 4 min read
Updated: 5 hours ago
Technology-sector weakness and an unmoved Federal Reserve Chair facilitated equity losses on Wednesday as banks continued to profit from market volatility. With no reprieve from trade headlines or boost from hoped-for prospects of Fed easing, dollar selling dovetailed with another record high in gold, which had its best daily performance in five years. Safe haven currencies and assets rallied, bringing Treasuries with them. Robust growth figures from China and retail sales data in the US offered little comfort in the face of tariff-driven uncertainty.
EDWARD VON DER SCHMIDT
Around the World
US-China:
Nvidia disclosed that it had been instructed to tighten export controls related to H20 chips used by China on April 9; the US government specifically flagged risks that the processing units "may be used in or diverted to a supercomputer in China". More advanced models have already been restricted in a competition for global AI dominance. The instruction applied to other chip companies including AMD. According to reports, Chinese salespeople and clients were not alerted to forthcoming restrictions before they took effect. (AP, Reuters).
China replaced its lead international trade negotiator on Wednesday, turning from Wang Shouwen to Li Chenggang. Li recently served as China's ambassador to the World Trade Organization (WTO), where China has filed a dispute with the US. (AP)
While China's President Xi visited Malaysian Prime Minister Anwar Ibrahim in Kuala Lampur for a short tour through Southeast Asia - in which he has stressed regional cooperation and shared interests - a Foreign Ministry spokesperson commented, "for any dialogue to happen [with the US], it must be based on equality, respect, and mutual benefit". (AP)
Who will make the first overture in order to break a diplomatic impasse remains unclear. Various outlets have highlighted the US administration's strategic objectives to use trade negotiations with foreign countries to influence their policies and to isolate China. (WSJ, Politico).
Both the US and China appear open to walking back trade antagonism, but optics matter and their respective political constituencies may make any appearance of "caving" unpalatable.
The US also initiated another broad-based Section 232 investigation into critical minerals and rare earths. (WSJ)
Separately, China restricted deliveries of Boeing jets and Hong Kong's post office will stop shipping parcels to the US. (Reuters, AP).
US-Japan:
A trade delegation from Japan arrived in Washington on Wednesday to hold talks with Treasury Secretary Bessent and USTR Greer, which were joined by President Trump. (AP)
In a first against a major technology company, Japan's Fair Trade Commission issued a "cease and desist" order instructing Google not to pre-install its web browser on Android phones. (AP)
US-Europe:
Secretary of State Rubio and envoy extraordinaire Witkoff planned to travel to Paris on Thursday to meet with President Macron and Foreign Minister Barrot to discuss Ukraine, the Middle East, and Iran. Meanwhile, Italian Prime Minister Giorgia Meloni will be visiting the White House. (AP)
European Commission President von der Leyen told Zeit in an interview, "The West as we knew it no longer exists". (via euronews)
World Trade Organization:
In its latest report, the WTO lowered estimates of global goods trade. They projected a 0.2% decline after previously forecasting 2.7% growth. A more severe trade environment in which reciprocal tariffs are effected could lead to a 1.5% decline.
Director-General Ngozi Okonjo-Iweala remarked, "enduring uncertainty threatens to act as a brake on global growth, with severe negative consequences for the world, the most vulnerable economies in particular".
Middle East:
Israel's defense minister announced that Israeli troops will remain in security buffer corridors in Gaza, Lebanon, and Syria - indefinitely - as opposed to evacuating those areas. (AP)
Central Banks, Governments, & Data
Federal Reserve:
Economic Outlook
Speaking in Chicago, Chair Powell dismissed hopes of near-term Fed intervention as keeping inflation expectations in check remained the Fed's primary concern with labor markets still near full employment, slowing growth notwithstanding. Powell anticipated that trade-related effects were likely to negatively affect both sides of the Fed's mandate for the balance of this year. Once again, he called for greater clarity before any shift in the monetary policy stance. His appearance is worth watching in full.
"The level of tariff increases announced so far is significantly larger than anticipated and the same is likely to be true of the economic effects which will include higher inflation and slower growth."
"That's why we're waiting really to see what the policies ultimately are, and then we can make a better assessment of what the economic effects will be."
The interview will be discussed in greater detail in Notes | Powell Holds the Line.
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Fed 101: Approaching Monetary Policy with Heart, Brains, and Courage
In Columbus, Cleveland Fed President Beth Hammack echoed calls for further clarity in order to better inform appropriate monetary policy. (Reuters)
"Given the economy's starting point, and with both sides of our mandate expected to be under pressure, there is a strong case to hold monetary policy steady in order to balance the risks coming from further elevated inflation and a slowing labor market."
"When clarity is hard to come by, waiting for additional data will help inform the path ahead."
Bank of Canada:
The Bank of Canada held policy rates after having cut at seven consecutive meetings. The central bank offered two distinct scenarios in lieu of its traditional quarterly forecast in light of an exceptional uncertain horizon.
China - March GDP
China's economy grew more than expected in March, with activity climbing 5.4% year-over-year. Quarterly growth slowed to 1.2% q/q, however, from 1.6% in 4Q. Strong retail sales and factory output were supported by government stimulus measures. (AP, Reuters)
US - Retail Sales
Figures from the Commerce Department showed that retail sales increased more than expected in March, gaining 1.4% after tepid 0.2% growth in February and a 1.2% decline in January. Excluding sales at motor vehicles and parts dealers (which grew 5.3%), retail sales increased 0.5% - still above consensus. (AP)