With President Donald Trump’s dramatic tariff hikes on the cusp of starting, countries around the world scrambled on Thursday to finalize their trade frameworks with the United States, figure out the tax rates their goods might face and prepare for the unknown.

Shortly before Friday deadline for the tariffs beginning, Trump said he would enter into a 90-day negotiating period with Mexico, one of the nation’s largest trading partners, with the current 25% tariff rates staying in place, down from the 30% he had threatened earlier.

“We avoided the tariff increase announced for tomorrow and we got 90 days to build a long-term agreement through dialogue,” Mexican leader Claudia Sheinbaum wrote on X after a call with Trump that he referred to as “very successful” in terms of the leaders getting to know each other better.

White House press secretary Karoline Leavitt said at Thursday’s news briefing that Trump “at some point this afternoon or later this evening” would sign an order to impose new rates starting at 12:01 a.m. EDT Friday. Countries that had not received a prior letter from Trump or negotiated a framework would be notified of their likely tariff rates, either by letter or executive order, she said.

The unknowns created a sense of drama that have defined Trump’s rollout of tariffs over several months, with the one consistency being his desire to levy the import taxes that most economists say will ultimately be borne to some degree by U.S. consumers and businesses.

“We have made a few deals today that are excellent deals for the country,” Trump told reporters on Thursday afternoon without detailing the terms of those agreements or nations involved.

Trump said that Canadian Prime Minister Mark Carney had called ahead of 35% tariffs being imposed on many of his nation’s goods, but “we haven’t spoken to Canada today.”

Trump imposed the Friday deadline after his previous “Liberation Day” tariffs in April resulted in a stock market panic. His unusually high tariff rates unveiled in April led to recession fears, prompting Trump to impose a 90-day negotiating period. When he was unable to create enough trade deals with other countries, he extended the timeline and sent out letters to world leaders that simply listed rates, prompting a slew of hasty deals.

Trump reached a deal with South Korea on Wednesday, and earlier with the European Union, Japan, Indonesia and the Philippines. His commerce secretary, Howard Lutnick, said on Fox News Channel’s “Hannity” that there were agreements with Cambodia and Thailand after they had agreed to a ceasefire to their border conflict.

Among those uncertain about their trade status were wealthy Switzerland and Norway.

Norwegian Finance Minister Jens Stoltenberg said it was “completely uncertain” whether a deal would be completed before Trump’s deadline.

But even the public announcement of a deal can offer scant reassurance for an American trading partner.

EU officials are waiting to complete a crucial document outlining how the framework to tax imported autos and other goods from the 27-member state bloc would operate. Trump had announced a deal Sunday while he was in Scotland.

“The U.S. has made these commitments. Now it’s up to the U.S. to implement them. The ball is in their court,” EU Commission spokesperson Olof Gill said. The document would not be legally binding.

Trump said as part of the agreement with Mexico that goods imported into the U.S. would continue to face a 25% tariff that he has ostensibly linked to fentanyl trafficking. He said autos would face a 25% tariff, while copper, aluminum and steel would be taxed at 50% during the negotiating period.

He said Mexico would end its “Non Tariff Trade Barriers,” but he didn’t provide specifics.

Some goods continue to be protected from the tariffs by the 2020 U.S.-Mexico-Canada Agreement, or USMCA, which Trump negotiated during his first term.

But Trump appeared to have soured on that deal, which is up for renegotiation next year. One of his first significant moves as president was to tariff goods from both Mexico and Canada earlier this year.

U.S. Census Bureau figures show that the U.S. ran a $171.5 billion trade imbalance with Mexico last year. That means the U.S. bought more goods from Mexico than it sold to the country.

The imbalance with Mexico has grown in the aftermath of the USMCA as it was only $63.3 billion in 2016, the year before Trump started his first term in office.

Besides addressing fentanyl trafficking, Trump has made it a goal to close the trade gap.

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Associated Press writers Lorne Cook in Brussels and Jamey Keaten in Geneva contributed to this report.

This story was originally featured on Fortune.com

Numerous countries around the world are facing the prospect of much higher duties on their exports to the United States on Friday, a potential blow to the global economy, because they haven’t yet reached a trade deal with the Trump administration.

Some of the United States’ biggest trading partners have reached agreements, or at least the outlines of one, including the European Union, the United Kingdom, and Japan. Even so, those countries face much higher tariffs than were in effect before Trump took office. And other large trading partners — most notably China and Mexico — received an extension to keep negotiating and won’t be hit with new duties Friday, but they will likely end up paying more.

President Donald Trump intends the duties to bring back manufacturing to the United States, while also forcing other countries to reduce their trade barriers to U.S. exports. Trump argues that foreign exporters will pay the cost of the tariffs, but so far economists have found that most are being paid by U.S. companies. And measures of U.S. inflation have started to tick higher as prices of imported goods, such as furniture, appliances, and toys rise.

For those countries without an agreement, they could face duties of as much as 50%, including on large economies such as Brazil, Canada, Taiwan, and India. Many smaller countries are also on track to pay more, including South Africa, Sri Lanka, Bangladesh, and even tiny Lesotho.

The duties originated from Trump’s April 2 “Liberation Day” announcement that the United States would impose import taxes of up to 50% on nearly 60 countries and economies, including the 27-nation European Union. Those duties, originally scheduled for April 9, were then postponed twice, first to July 9 and then Aug. 1.

Will the deadline hold this time?

As of Thursday afternoon, White House representatives — and Trump himself — insisted that no more delays were possible.

White House press secretary Karoline Leavitt said Thursday that Trump “at some point this afternoon or later this evening” will sign an order to impose new tariff rates starting midnight on Friday.

Countries that have not received a prior letter on tariffs from Trump or negotiated a trade framework will be notified of their likely tariff rates, Leavitt said, either in the form of a letter or Trump’s executive order. At least two dozen countries were sent letters setting out their tariff rates.

On Wednesday, Trump said on his social media platform Truth Social, “THE AUGUST FIRST DEADLINE IS THE AUGUST FIRST DEADLINE — IT STANDS STRONG, AND WILL NOT BE EXTENDED.”

Which countries have a trade agreement?

In a flurry of last minute deal-making, the Trump has been announcing agreements as late as Thursday, but they are largely short on details.

On Thursday, the U.S. and Pakistan reached a trade agreement expected to allow Washington to help develop Pakistan’s largely untapped oil reserves and lower tariffs for the South Asian country.

And on Wednesday, Trump announced a deal with South Korea that would impose 15% tariffs on goods from that country. That is below the 25% duties that Trump threatened in April.

Agreements have also been reached with the European Union, Pakistan, Indonesia, Vietnam, the Philippines, and the United Kingdom. The agreement with the Philippines barely reduced the tariff it will pay, from 20% to 19%.

And which countries don’t?

The exact number of countries facing higher duties isn’t clear, but the majority of the 200 have not made deals. Trump has already slapped large duties on Brazil and India even before the deadline was reached.

In the case of Brazil, Trump signed an executive order late Wednesday imposing a 50% duty on imports, though he exempted several large categories, including aircraft, aluminum, and energy products. Trump is angry at Brazil’s government because it is prosecuting its former president, Jair Bolsonaro, for attempting to overturn his election loss in 2022. Trump was indicted on a similar charge in 2023.

While Trump has sought to justify the widespread tariffs as an effort to combat the United States’ chronic trade deficits, the U.S. actually has a trade surplus with Brazil — meaning it sells more goods and services to Brazil than it buys from that country.

Negotiations between the U.S. and Canada have been complicated by the Canadian government’s announcement that it will recognize a Palestinian state in September. Trump said early Thursday that the announcement “will make it very hard” for the U.S. to reach a trade deal with Canada.

Late Wednesday, Trump said that India would pay a 25% duty on all its exports, in part because it has continued to purchase oil from Russia.

On Thursday, the White House said it had extended the deadline to reach a deal with Mexico for another 90 days, citing the complexity of the trade relationship, which is governed by the trade agreement Trump reached when he updated NAFTA in his first term.

For smaller countries caught in Trump’s cross hairs, the Aug. 1 deadline is particularly difficult because the White House has acknowledged they aren’t able to negotiate with every country facing tariff threats. Lesotho, for example, a small country in southern Africa, was hit with a 50% duty on April 2, and even though it was postponed, the threat has already devastated its apparel industry, costing thousands of jobs.

“There’s 200 countries,’’ the president acknowledged earlier this month. “You can’t talk to all of them.’’

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AP Writers Josh Boak and Wyatte Grantham-Philipps contributed to this report.

This story was originally featured on Fortune.com

The tariffs planned by President Donald Trump on Friday touched off a feverish bout of activity among trade partners as key details remained unclear and nations didn’t know the taxes their goods could face — keeping an element of surprise to an event long hyped by the U.S. leader.

Just hours before the deadline, Trump on Thursday said he would enter a 90-day negotiating period with Mexico over trade as 25% tariff rates stay in place, providing a bit of clarity to a massive rewiring of the global economy that will require the president to sign a new executive order.

Trump posted on his Truth Social platform that his phone conversation with Mexican leader Claudia Sheinbaum was “very successful in that, more and more, we are getting to know and understand each other.”

The Republican president had threatened tariffs of 30% on goods from Mexico in a July letter, something that Sheinbaum said Mexico gets to stave off for the next three months.

“We avoided the tariff increase announced for tomorrow and we got 90 days to build a long-term agreement through dialogue,” Sheinbaum wrote on X.

The leaders’ morning call came at a moment of pressure and uncertainty for the world economy. As Trump’s deadline loomed, nations were scrambling to finalize the outlines of trade frameworks so he would not simply impose higher tariff rates that could upend economies and governments.

Trump reached a deal with South Korea on Wednesday, and earlier with the European Union, Japan, Indonesia and the Philippines. His commerce secretary, Howard Lutnick, said on Fox News Channel’s “Hannity” that there were agreements with Cambodia and Thailand after they had agreed to a ceasefire to their border conflict.

White House press secretary Karoline Leavitt said Trump “at some point this afternoon or later this evening” will sign an order to impose new rates starting at 12:01 a.m. EDT Friday. Countries that have not received a prior letter from Trump or negotiated a framework will be notified of their likely tariff rates, either by letter or executive order, she said.

Among those uncertain about their trade status were wealthy Switzerland and Norway.

Norwegian Finance Minister Jens Stoltenberg said it was “completely uncertain” whether a deal would be completed before Trump’s deadline.

But even the public announcement of a deal can offer scant reassurance for an American trading partner.

EU officials are waiting to complete a crucial document outlining how the framework to tax imported autos and other goods from the 27-member state bloc would operate. Trump had announced a deal Sunday while he was in Scotland.

“The U.S. has made these commitments. Now it’s up to the U.S. to implement them. The ball is in their court,” EU commission spokesman Olof Gill said. The document would not be legally binding.

Trump said as part of the agreement with Mexico that goods imported into the U.S. would continue to face a 25% tariff that he has ostensibly linked to fentanyl trafficking. He said autos would face a 25% tariff, while copper, aluminum and steel would be taxed at 50% during the negotiating period.

He said Mexico would end its “Non Tariff Trade Barriers,” but he didn’t provide specifics.

Some goods continue to be protected from the tariffs by the 2020 U.S.-Mexico-Canada Agreement, or USMCA, which Trump negotiated during his first term.

But Trump appeared to have soured on that deal, which is up for renegotiation next year. One of his first significant moves as president was to tariff goods from both Mexico and Canada earlier this year.

U.S. Census Bureau figures show that the U.S. ran a $171.5 billion trade imbalance with Mexico last year. That means the U.S. bought more goods from Mexico than it sold to the country.

The imbalance with Mexico has grown in the aftermath of the USMCA as it was only $63.3 billion in 2016, the year before Trump started his first term in office.

Besides addressing fentanyl trafficking, Trump has made it a goal to close the trade gap.

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Associated Press writers Lorne Cook in Brussels and Jamey Keaten in Geneva contributed to this report.

This story was originally featured on Fortune.com

• Mortgage rates have remained stubbornly high: hovering near 7%, well above the sub-3% rates during the pandemic. That makes homeownership increasingly unaffordable for many Americans, as home prices have risen over 50% since 2020.

During the pandemic, home buyers got accustomed to sub-3% mortgage rates, which made purchasing a house feel more achievable. But in the past couple of years, buyers have had no such luck.

In late 2023, mortgage rates peaked at 8%. While they’ve let up some, today’s 30-year fixed mortgage rate is 6.75%, according to Mortgage News Daily. Economists and real-estate groups have warned they don’t see that figure budging much in the near future. And to make matters worse, some have said the mortgage rate it would take to make homes feel affordable again isn’t achievable. 

On Tuesday, Zillow economic analyst Anushna Prakash reported mortgage rates would need to drop to 4.43% for a typical home to be affordable to an average buyer. But “that kind of a rate decline is currently unrealistic,” Prakash wrote. Meanwhile, not even a 0% interest rate would make a typical home affordable in New York, Los Angeles, Miami, San Francisco, San Diego, or San Jose, she added. 

Warren Buffett’s Berkshire Hathaway HomeServices also said in an early July report that mortgage rates are one of the main deterrents for both home buyers and sellers.

“Many homeowners are reluctant [to] put their homes on the market and give up the low mortgage rates they already have,” according to Berkshire Hathaway HomeServices. “To them, high price gains won’t mitigate their ability to pay more for another home at significantly higher interest rates.”

This issue is also referred to as golden handcuffs—or the locked-in mortgage rate effect. The idea is that current homeowners have no incentive to put their homes on the market, even if they want to move, because they’d forgo a much lower mortgage rate they had locked in years ago. 

This causes a litany of other problems in the housing market, namely inventory.

The number of unsold existing homes for sale rose 9% month-over-month in April, according to Berkshire Hathaway HomeServices, to 1.45 million; that’s equal to 4.4 months’ supply on hand at the current sales pace and the highest level in five years. That’s shown itself in more sellers delisting their properties after sitting on the market for longer than expected.

“Homes are sitting on the market nearly three weeks longer than last year,” Realtor.com Senior Economist Jake Krimmel recently told Fortune. “That’s a sign of sellers still anchored to pandemic-era prices even though the market is telling them otherwise.” 

That doesn’t mean there’s an influx of housing in the U.S.; in fact, we’re still short millions of units. It just means there aren’t enough people who can actually afford to buy a home.

The factors influencing housing affordability

Although inventory levels are increasing, home prices and mortgage rates continue to be a roadblock for potential home buyers. Mortgage rates have remained “stubbornly high,” Berkshire Hathaway HomeServices said, deterring new buyers from the market.

According to a Realtor.com report published Thursday, the typical home spent 58 days on the market in July, which is 7 days longer than the same time last year. 

Mortgage rates are certainly a factor among buyers when deciding to make an offer, and home prices are also up more than 50% since the onset of the pandemic, according to the U.S. Case-Shiller Home Price Index.

All the while, wages haven’t grown at the same pace as home appreciation, making buying a house feel even more unaffordable. And if nothing changes like mortgage rates, inventory, or wage growth, it’s likely the housing affordability crisis in the U.S. will persist, Alexandra Gupta, a real-estate broker with The Corcoran Group, told Fortune.

“Some first-time buyers are turning to long-term renting or even co-living models because the idea of owning a home has become so out of reach. Others are relying more on family support to get into the market,” Gupta said. “We’re seeing a reshaping of the housing ladder.”

The small glimmer of hope, though, is home price growth appears to be slowing, according to the Case-Shiller indices.

“With affordability still stretched and inventory constrained, national home prices are holding steady, but barely,” Nicholas Godec, head of fixed-income tradables and commodities at S&P Dow Jones Indices, said in a statement.

This story was originally featured on Fortune.com

IBM Vice Chairman Gary Cohn, the former Director of the National Economic Council under President Trump, sounded a cautious note on the state of the U.S. economy in his July 30 interview with CNBC’s Money Movers, warning that despite upbeat surface indicators, troubling signs are brewing beneath the headline numbers.

Cohn’s assessment came in the aftermath of a surprisingly robust GDP report showing 3% growth, which he acknowledged looked positive on its face. He said if you take a “big, wide aperture snapshot of the economy, the headline looks really good,” before arguing that a deeper analysis, even a “half-step back,” reveals important red flags. Notably, he highlighted a 15% drop in investment and concerning labor market statistics, including a significant decline in voluntary quits—a traditional signal of worker confidence in the job market. Cohn cited the latest JOLTS report, which showed 280,000 jobs lost and 150,000 fewer voluntary quits, suggesting Americans are growing more cautious about leaving their jobs for better opportunities. “People quit their job when they believe the next job is better and higher-paying,” he said, calling that a “bold statement on individuals’ view on the economy.”

Who eats the tariffs and who drinks the coffee?

“A snapshot of the economy right now is, ‘we’re fine, we’re good,’” Cohn said, referencing both the strong labor market and inflation measures that have moderated closer to the Federal Reserve’s 2% target. In fact, he argued the Fed is fulfilling its dual mandate of full employment and price stability, as the jobs market looks close to full employment, in his view. However, he warned about softer data such as consumer sentiment and in specific segments of the economy. Cohn noted that several soft retail earnings, such as Starbucks, show that “consumers are not out there willfully spending money.”

One of the interview’s major themes was the effect of tariffs and trade uncertainty. Cohn, who famously resigned from the Trump White House in 2018, seemingly after internal disagreements over tariffs, argued that tariffs should be applied carefully and strategically. He has clarified in 2024 and onwards that he supports tariffs on products the U.S. also produces, such as electric vehicles, but warned that indiscriminate tariffs risk inflaming inflation, especially on goods the U.S. does not manufacture domestically. Cohn has been saying for months that tariffs are “highly regressive” and essentially function as a tax on all Americans, with a greater impact on poorer people.

Cohn told Money Movers on July 30 that initially, U.S. companies may absorb some tariff-related costs, but said this was unsustainable in the long term due to shareholder and debt obligations. Ultimately, he argued, “companies are going to pass these costs along” to the consumer, squeezing household budgets and creating “one-time price shocks” that erode purchasing power if wages do not rise accordingly. Host Sara Eisen pushed back, arguing corporate balance sheets are healthy, companies are incorporating AI to boost efficiency, and companies may not want to anger the Trump administration, which has famously instructed companies to “eat the tariffs.”

Cohn’s consistent warnings about tariffs through the years have not come to fruition so far, but he’s far from alone in seeing a massive hit coming—at some point—from tariffs. The entire economics establishment has warned about the delayed impact of tariffs for months; as of July, though, the Trump administration has collected $100 billion in tariff revenue with seemingly little impact on inflation. Fortune‘s Irina Ivanova reported on how economists explain that, ranging from “it’s too soon” to “consumers won’t stand for it.” At the same time, Trump is increasingly winning trade deals on favorable terms to the United States, such as the EU’s agreement to a 15% tariff, with carve-outs on pharmaceuticals and metals, while U.S. imports to the EU will be duty-free.

Cohn’s question remains: Who will ultimately eat the tariffs, and who will buy the coffee? The American consumer is waiting for the economic dust to settle.

IBM did not immediately respond to a request for comment.

For this story, Fortune used generative AI to help with an initial draft. An editor verified the accuracy of the information before publishing. 

This story was originally featured on Fortune.com

Danish drugmaker Novo Nordisk, known for its blockbuster diabetes and weight-loss treatments Ozempic and Wegovy, on Tuesday lowered its full-year earnings forecasts again as it unveiled a new chief executive to tackle “recent market challenges”.

The company has faced growing headwinds in the key US pharmaceutical market, where the two drugs, known as GLP-1 injections, have seen their dominance challenged by rivals including Eli Lilly.

A rule by the US Food and Drug Administration allowing pharmacies to create so-called “compound” copycat versions of the drug after high demand led to shortages has also weighed on earnings, Novo said.

“Despite the expiry of the FDA grace period for mass compounding on May 22, 2025, Novo Nordisk market research shows that unsafe and unlawful mass compounding has continued,” it said in a statement.

It now expects full-year sales growth overall of eight to 14 percent, down from the 13 to 21 percent expected after a first forecast downgrade earlier this year.

Operating margins are seen reaching 10 to 16 percent, instead of the forecast of 16 to 24 percent.

The lower forecasts came as Novo reported Tuesday an 18 percent sales increase for the first half of the year, while operating profit growth fell to 29 percent after growth of 40 percent in the same period last year.

The “market challenges” prompted Novo to announce in May the departure of its chief executive Lars Fruergaard Jorgensen, who will be replaced by Maziar Mike Doustdar, currently its vice president for international operations.

“We are confident that he is the best person to lead Novo Nordisk through its next growth phase,” board chairman Helge Lund said in a statement.

“This is an important moment for Novo Nordisk,” Lund said. “The market is developing rapidly, and the company needs to address recent market challenges with speed and ambition.”

Novo Nordisk’s full first-half results will be published August 6.

This story was originally featured on Fortune.com

By the time you read this article, there’s a chance that President Donald Trump will have changed his policy on tariffs yet again. Since his first day in office this term, Trump has been making plans to tax imported goods from other countries into the U.S., but with each passing day, his plans continue to change.

For example, the tariffs Trump has imposed on imports from China have jumped from 10% to 34%, then up to 104%, 125% and finally 145%, before dropping back down to 30%, all over the course of five months.

After announcing his plan for tariffs back in April—on a day he called “Liberation Day”—Trump put a 90-day delay on the upcoming tariffs in order to encourage other countries to make trade deals, or reciprocal tariff deals, with the U.S. The tariff pause is set to expire Aug. 1.

As Trump goes back and forth about tariffs, businesses across the world brace themselves for impact.

Cristopher Rogel Blanquet—Getty Images

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This story was originally featured on Fortune.com

• Markets in Europe and Asia are broadly up this morning with the exception of China, where stocks fell on news of an unexpected deterioration in manufacturing. S&P 500 futures are up nearly a full percentage point, premarket, suggesting that Wall Street very much liked Fed chair Jerome Powell’s rate-setting speech yesterday. The fly in the ointment? “Downside risks” to the labor market.

U.S. Federal Reserve Chairman delivered an entirely predictable press conference yesterday as he kept interest rates on hold at the 4.25% level and said he would await for more data before considering a possible move downward.

Markets liked it: Europe and Asia are broadly up this morning with the exception of China, where stocks fell on news of an unexpected deterioration in manufacturing. More importantly, S&P 500 futures are up nearly a full percentage point, premarket.

But there was one theme that Powell kept returning to, which isn’t so positive: “Downside risks” to the labor market. Powell referenced this phrase no fewer than six times in his press conference.

“We do see downside risk in the labor market,” he told reporters. “The labor market looks solid. Inflation is above target. And even if you look through the tariff effects, we think it’s still a bit above target. And that’s why our stance is where it is. But, as I mentioned, you know, downside risks to the labor market are certainly apparent.”

That’s actually a pretty good summation of what economists are seeing in the employment data right now. There is close to full employment, but the hiring market is sluggish and some of the good headline numbers are masked by one-off moves in government and education hiring.

Some analysts see U.S. employment getting weaker, not stronger, in the coming months.

“Chair Powell’s reading of the economic data was similar to ours—he highlighted the softer growth pace in the first half of the year, noted that the labor market remains solid but said six times that it faces ‘downside risks,’ and said that inflation is most of the way back to 2% and that a ‘reasonable base case’ is that tariffs will have only a one-time impact on the price level. This suggests that lowering rates soon could be reasonable but is not yet essential,” Goldman Sachs’ Jan Hatzius and his team told clients in a note this morning.

Lawrence Werther and Brendan Stuart at Daiwa Capital Markets noticed the same thing: “We found it interesting that he returned several times to the idea that officials are attentive to risks to the employment side of the dual mandate. He noted that unemployment remained low and that deceleration in hiring and growth of labor force participation suggest that the labor market is in balance, but we did read his comments as pointing to increased concern versus previous statements.” 

The jobs number (nonfarm payrolls, to give its technical name) is due out tomorrow. If it comes in weak, expect stocks to react strongly.

“Our forecast is for job growth to weaken in July and for the unemployment rate to tick higher. This will probably increase Federal Reserve concerns about the risks to the labor market, potentially throwing more support behind an earlier rate cut than is in our baseline,” Oxford Economics’ Nancy Vanden Houten told clients.

UBS’s Paul Donovan has a typically pithy observation on why it might be that U.S. companies are moving factories back to America but not actually creating jobs: The new factories are full of robots, not humans: “Several advanced economies, including the US and the UK, have experienced a boom in factory building in recent years. Increasing the size of factory buildings implies more manufacturing activity is taking place inside those buildings. [But] manufacturing employment is not increasing—this investment appears to represent capital for labor substitution,” he said.

Here’s a snapshot of the action prior to the opening bell in New York:

• S&P 500 futures were up 1% this morning, premarket, after the index closed down 0.12% yesterday. 
• STOXX Europe 600 was up 0.14% in early trading. 
• The U.K.’s FTSE 100 was up 0.52% in early trading. 
• Japan’s Nikkei 225 was up 1.02%. 
• China’s CSI 300 Index was down 1.82%. 
• The South Korea KOSPI was down 0.28%. 
• India’s Nifty 50 was up 0.08%. 
• Bitcoin is still above $118K.

This story was originally featured on Fortune.com

• Fed Chair Jerome Powell held interest rates steady yesterday and signaled a cautious approach to cutting, despite growing dissent within the Fed and market hopes for a September move downward. While acknowledging tariff-driven inflation, Powell emphasized that more data is needed before adjusting policy.

In a move that everyone was expecting, U.S. Federal Reserve Chairman Jerome Powell disappointed Donald Trump again yesterday by refusing to cut the base interest rate.

Indeed, a hawkish Powell even used the dreaded r-word (“raise”)—having suggested he is responsive enough to calls to “look through” tariff-induced inflation by not increasing interest rates, a notion which likely would have sent the Oval Office into a fury.

While rates held steady at 4.25% to 4.5%, a split among the Federal Open Market Committee (FOMC) is growing, with two members dissenting. This represents the highest level of friction within the FOMC for more than 30 years.

But despite the pressure—both from within the Fed and externally—Powell struck a cautious tone on cutting. For some time analysts have pencilled in a cut in September, the next meeting of the FOMC.

“Higher tariffs have begun to show through more clearly to prices of some goods, but their overall effects on economic activity and inflation remain to be seen,” Powell told reporters in a news conference following the meeting. “A reasonable base case is that the effects on inflation could be short-lived—reflecting a one-time shift in the price level. But it is also possible that the inflationary effects could instead be more persistent, and that is a risk to be assessed and managed.”

To the point of a one-time price shift, Powell said the FOMC is heeding advice to not letting tariff-related inflation cloud the picture of the fundamentals of the economy.

But while investors had used this argument to lobby for a cut, Powell said the fact he is holding rate steady is evidence of this pragmatism, saying the FOMC is “a bit looking through goods inflation by not raising rates.”

Tabling a rate rise is quite the opposite of what many investors and economists are hoping for, but Powell doubled down: “The economy is not performing as though restrictive policy were holding it back inappropriately.” Investors, therefore, have been left wondering what it will take for the FOMC to cut.

“Fed Chair Powell was much more hawkish than we were expecting at his press conference,” Bank of America’s macroeconomics team wrote in a note seen by Fortune. “He was asked several questions on what it would take for the Fed to cut in September. In response, Powell made it clear that the onus is on the data to justify a September cut.“

They added: “To be clear, hikes are still very unlikely, but Powell argued that the ‘efficient’ way of balancing risks to the dual mandate is to stay on hold because cutting too early introduces the risk of having to raise rates again later.”

Markets were minded to agree with BofA on its take of a hawkish Powell. Equity markets fell following the announcement while treasury yields rose.

Elsewhere, UBS’s Paul Donovan said markets may be seeing through the FOMC dissenters, explaining in a note this morning: “Fed Chair Powell tried to present the two dissenting views as being rationally based, but investors are bound to suspect that the rationale amounted to little more than an excited jumping up and down and shouting ‘pick me, pick me’ in the general direction of the White House. The press conference gave a slightly hawkish tone in anticipating the trade tax inflation yet to come.”

Holding on for September

Despite Powell’s speech eroding some of the confidence in a September cut, analysts are tending to hold on to the hope that a cut will come at the next meeting the month after next.

The Fed chairman gave them some reason to hope, for example saying: “We are also attentive to risks on the employment side of our mandate.”

“The expectation for this meeting wasn’t a rate cut, and I don’t think there would have been much upside to Powell signaling that one was imminent,” wrote Elyse Ausenbaugh, Head of Investment Strategy at J.P. Morgan Wealth Managemen, adding: “The data, as it stands today, isn’t yet calling for one, and a lot could change between now and the FOMC’s next decision point in September.”

Likewise, Goldman Sachs’s chief U.S. economist David Mericle wrote in a note to clients seen by Fortune: “Neither [Powell’s] statement nor the press conference provided any direct hints about the likelihood of a cut in September. In response to a question about the two-cut baseline in the June dots, Powell acknowledged but declined to endorse it, saying that he would not want to substitute his own judgment for the views of other participants, especially with two more rounds of employment and inflation data still to come before the September meeting.”

That being said, Goldman continues to forecast three cuts in 2025: In September, October and December, followed by two more in 2026 to bring the rate down to 3% to 3.25%.

Mericle added: “Powell’s comments today suggest to us that a September cut is certainly still up for debate but not that labor market softening over the next two months is necessarily required, and we continue to see multiple paths to a cut.”

UBS’s global wealth management chief investment officer, Mark Haefele, is minded to agree with a September rate cut—citing the Job Openings and Labor Turnover Survey (JOLTS)revealing declines in both openings and hires, as well as a lower quits rate. 

The Conference Board’s consumer confidence survey also noted 18.9% of respondents felt jobs were hard to get in July, suggesting the alarms for labor market weakening may be beginning to chime.

Haefele wrote: “We continue to expect Fed to resume policy easing in September, cutting rates by 100 basis points over the next 12 months. Investors should consider medium-duration high grade and investment grade bonds for more durable portfolio income.”

This story was originally featured on Fortune.com

• The Federal Reserve will hold interest rates steady, aligning with market expectations.
• Strong job growth and rising inflation likely influenced the Fed's decision to maintain rates.
• Two Fed governors dissented from the decision, preferring lower rates.

America's central bank is once again holding interest rates steady, although two Fed governors disagreed with the move in a rare departure from the committee's typical unanimity.

The Federal Open Market Committee announced Wednesday that it will not cut its benchmark rate, holding for the fifth time this year. It's a decision in line with forecasts: CME FedWatch, which anticipates interest-rate changes based on market moves, had projected a 96.9% chance of a hold in July. The Fed said in its July 30 statement that strong jobs numbers and a recent uptick in inflation contributed to the call.

Fed Governors Christopher Waller and Michelle W. Bowman dissented from the hold decision, saying they preferred a rate cut.

"What you want from everybody, and also from a dissenter, is a clear explanation of what you're thinking and what your argument is, and we had that today," Chair Jerome Powell said at the press conference. "It was a good meeting, and people really thought about this."

Powell added that "the majority of the committee" believes that current inflation and employment markers call for "moderately restrictive policy for now."

The chair said that the US is in a "solid position" economically, and the labor market is in balance. There's a slowing supply of jobs and demand for workers, contributing to a historically-low unemployment rate, he said. And, while Powell said the full impact of President Donald Trump's tariffs "remain to be seen," he said the price of many consumer goods are rising, which is a contrast from easing inflation on service prices.

"If we cut rates too soon, maybe we didn't finish the job with inflation. History is dotted with examples of that," Powell said. "And if we cut too late, maybe we're doing unnecessary damage to the labor market. We're trying to get that timing right."

Fed policy has gotten pushback from the Trump administration

While there's still time for the Fed's two penciled-in cuts in 2025, some economists and Trump administration leaders hoped for a change sooner rather than later. They've put the central bank — and Powell — in the hot seat.

President Donald Trump has consistently pushed for Powell to cut rates, writing in a July 8 Truth Social post that "'Too Late' Jerome Powell," "has been whining like a baby about non-existent Inflation for months, and refusing to do the right thing. CUT INTEREST RATES JEROME — NOW IS THE TIME!" Trump has also suggested removing and replacing Powell before the end of his tenure next year, though Wall Street leaders and top CEOs have warned that changing the Fed's leadership could have significant market consequences.

Trump's cabinet members have echoed his criticisms. Treasury Secretary Scott Bessent said in an interview last week that the Fed is "fear-mongering over tariffs," and "I think that what we need to do is examine the entire Federal Reserve institution and whether they have been successful." Commerce Secretary Howard Lutnick added that Powell is "doing the worst job" and "I don't know why he's torturing America this way. Our rates should be lower."

Waller, the dissenting Fed governor, also pushed for a rate cut ahead of Wednesday's meeting: "With inflation near target and the upside risks to inflation limited, we should not wait until the labor market deteriorates before we cut the policy rate."

The Fed's play to keep rates steady is a response to key indicators of economic health. The US labor market exceeded expectations by adding 147,000 jobs in June — due mostly to growth in the healthcare and hospitality sectors — and unemployment cooled to 4.1%. Consumer sentiment and retail spending are making a small recovery from early summer dips, and GDP rose more than expected this month. Inflation climbed to 2.7% in June from 2.4% in May, moving further from the Fed's 2% goal. Keeping rates unchanged is a strategy to curb further inflation while the Fed still sees positive momentum in the job market, Powell said.

Powell has also said that he's watching Trump's tariff agenda closely. The White House's next planned tariff deadline is August 1, which could place new levies on top trade partners. The president struck a deal with the European Union earlier this week, which sets a 15% tariff on most imported European goods, a reduction from Trump's planned 30% tariff.

The Fed chair emphasized at Wednesday's press conference that his top priorities are to promote maximum US employment and stable prices, regardless of politics and policy.

"The credibility of the Fed on price stability is very, very important. People believe that we will bring inflation down," he told Congress last month, adding, "That credibility once lost is very expensive to regain."

Going forward, Powell said he is thinking about the reliability of the economic data. These concerns come as the White House's DOGE office continues to cut staff and agency budgets across the federal government.

"The government data really is the gold standard in data," he said. "We need it to be good and to be able to rely on it. We're not going to able to substitute that. We'll have to make due what what we have, but I really hope we have what we need."

Federal Reserve Chair Jerome Powell gave little indication on Wednesday of bowing anytime soon to President Donald Trump’s frequent demands that he cut interest rates, even as signs of dissent emerged on the Fed’s governing board.

The Fed left its key short-term interest rate unchanged for the fifth time this year, at about 4.3%, as was expected. But Powell also signaled that it could take months for the Fed to determine whether Trump’s sweeping tariffs will push up inflation temporarily or lead to a more persistent bout of higher prices. His comments suggest that a rate cut in September, which had been expected by some economists and investors, is now less likely.

“We’ve learned that the process will probably be slower than expected,” Powell said. “We think we have a long way to go to really understand exactly how” the tariffs will affect inflation and the economy.

There were some signs of splits in the Fed’s ranks: Governors Christopher Waller and Michelle Bowman voted to reduce borrowing costs, while nine officials, including Powell, favored standing pat. It is the first time in more than three decades that two of the seven Washington-based governors have dissented. One official, Governor Adriana Kugler, was absent and didn’t vote.

The choice to hold off on a rate cut will almost certainly result in further conflict between the Fed and White House, as Trump has repeatedly demanded that the central bank reduce borrowing costs as part of his effort to assert control over one of the few remaining independent federal agencies.

Powell has in the past signaled during a news conference that a rate move might be on the table for an upcoming meeting, but he gave no such hints this time. The odds of a rate cut in September, according to futures pricing, fell from nearly 60% before the meeting to just 45% after the press conference, the equivalent of a coin flip, according to CME Fedwatch.

“We have made no decisions about September,” Powell said. The chair acknowledged that if the Fed cut its rate too soon, inflation could move higher, and if it cut too late, then the job market could suffer.

Major U.S. stock indexes, which had been trading slightly higher Wednesday, went negative after Powell’s comments.

“The markets seem to think that Powell pushed back on a September rate cut,” said Lauren Goodwin, chief market strategist at New York Life Investments.

Powell also underscored that the vast majority of the committee agreed with a basic framework: Inflation is still above the Fed’s target of 2%, while the job market is still mostly healthy, so the Fed should keep rates elevated. On Thursday, the government will release the latest reading of the Fed’s preferred inflation gauge, and it is expected to show that core prices, excluding energy and food, rose 2.7% from a year earlier.

Gus Faucher, chief economist at PNC Financial, says he expects the tariffs will only temporarily raise inflation, but that it will take most of the rest of this year for that to become apparent. He doesn’t expect the Fed to cut until December.

Trump argues that because the U.S. economy is doing well, rates should be lowered. But unlike a blue-chip company that usually pays lower rates than a troubled startup, it’s different for an entire economy. The Fed adjusts rates to either slow or speed growth, and would be more likely to keep them high if the economy is strong to prevent an inflationary outbreak.

Earlier Wednesday, the government said the economy expanded at a healthy 3% annual rate in the second quarter, though that figure followed a negative reading for the first three months of the year, when the economy shrank 0.5% at an annual rate. Most economists averaged the two figures to get a growth rate of about 1.2% for the first half of this year.

The dissents from Waller and Bowman likely reflect jockeying to replace Powell, whose term ends in May 2026. Waller in particular has been mentioned as a potential future Fed chair.

Michael Feroli, an economist at JPMorgan Chase, said in a note to clients this week if the pair were to dissent, “it would say more about auditioning for the Fed chair appointment than about economic conditions.”

Bowman, meanwhile, last dissented in September 2024, when the Fed cut its key rate by a half-point. She said she preferred a quarter point cut instead, and cited the fact that inflation was still above 2.5% as a reason for caution.

Waller said earlier this month that he favored cutting rates, but for very different reasons than Trump has cited: Waller thinks that growth and hiring are slowing, and that the Fed should reduce borrowing costs to forestall a rise in unemployment.

There are other camps on the Fed’s 19-member rate-setting committee — only 12 of the 19 actually vote on rate decisions. In June, seven members signaled that they supported leaving rates unchanged through the end of this year, while two suggested they preferred a single rate cut. The other half supported more reductions, with eight officials backing two cuts, and two — widely thought to be Waller and Bowman — supporting three reductions.

The dissents could be a preview of what might happen after Powell steps down, if Trump appoints a replacement who pushes for the much lower interest rates the White House desires. Other Fed officials could push back if a future chair sought to cut rates by more than economic conditions would otherwise support.

Overall, the committee’s quarterly forecasts in June suggested the Fed would cut twice this year. There are only three more Fed policy meetings — in September, October, and December.

When the Fed cuts its rate, it often — but not always — results in lower borrowing costs for mortgages, auto loans and credit cards.

Some economists agree with Waller’s concerns about the job market. Excluding government hiring, the economy added just 74,000 jobs in June, with most of those gains occurring in health care.

“We are in a much slower job hiring backdrop than most people appreciate,” said Tom Porcelli, chief U.S. economist at PGIM Fixed Income.

This story was originally featured on Fortune.com

Treasury Secretary Scott Bessent said Wednesday that the Trump administration was committed to protecting Social Security hours after he said in an interview that a new children’s savings program President Donald Trump signed into law “is a back door for privatizing Social Security.”

Bessent said Wednesday evening that the accounts created under Trump’s tax break-and-spending cut law “will supplement the sanctity of Social Security’s guaranteed payments.”

“This is not an either-or question: our Administration is committed to protecting Social Security and to making sure seniors have more money,” Bessent said in a post on X.

Bessent’s remarks about privatizing Social Security, which he made at a forum hosted by Breitbart News, were striking after Trump’s repeated promises on the campaign trail and in office that he would not touch Social Security. It also reignited an issue that has dogged Republicans for years.

The White House did not respond to a request for comment.

Democrats quickly seized on the comment as a sign the GOP wants to revive a dormant but unpopular push to privatize the long-running retirement program.

“A stunning admission,” Senate Democratic leader Chuck Schumer said in a Senate speech. “Bessent actually slipped, told the truth: Donald Trump and government want to privatize Social Security.”

The idea of privatizing Social Security has been raised by Republicans before, but quickly abandoned. Millions of Americans have come to rely on the certainty of the federal program in which they pay into the system during their working years and then receive guaranteed monthly checks in their older age.

Privatization proposals would shift the responsibility for the retirement savings system away from the government and onto Americans themselves. Through personal savings accounts, people would need to manage their own funds, which may or may not be enough to live on as they age.

Under the GOP’s “big, beautiful bill,” as the law is called, Republicans launched a new children’s savings program, Trump Accounts, which can be created for babies born in the U.S. and come with a potential $1,000 deposit from the Treasury.

Much like an individual retirement account, the Trump Accounts can grow over time, with a post-tax contribution limit of $5,000 a year, and are expected to be treated similarly to the rules for an IRA, and can eventually be tapped for distribution in adulthood.

But Bessent on Wednesday allowed for another rationale for the accounts, suggesting they could eventually be the way Americans save for retirement.

“In a way, it is a back door for privatizing Social Security,” Bessent said while speaking about the program.

The Treasury Department later issued a statement that said, “Trump Accounts are an additive government program that work in conjunction with Social Security to broaden and increase the savings and wealth of Americans. Social Security is a critical safety net for Americans and always will be.”

Ever since the George W. Bush administration considered proposals to privatize Social Security more than 20 years ago, Republicans have publicly moved away from talking about the issue that proved politically unpopular and was swiftly abandoned.

In the run-up to the 2006 midterms, Democrats capitalized on GOP plans to privatize Social Security, warning it would decimate the program that millions of Americans have come to rely on in older age. They won back control of both the House and the Senate in Congress.

The Democrats warned Wednesday that Bessent’s comments showed that Republicans want to shift the government-run program to a private one and are again trying to dismantle the retirement program that millions of Americans depend on.

“Donald Trump’s Treasury Secretary Scott Bessent just said the quiet part out loud: The administration is scheming to privatize Social Security,” Tim Hogan, a spokesperson for the Democratic National Committee, said in a statement.

“It wasn’t enough to kick millions of people off their health care and take food away from hungry kids. Trump is now coming after American seniors with a ‘backdoor’ scam to take away the benefits they earned,” Hogan said.

The Social Security program has faced dire financial projections for decades, but changes have long been politically unpopular.

Social Security’s trust funds, which cover old age and disability recipients, will be unable to pay full benefits beginning in 2034, according to the most recent report from the program’s trustees.

Those officials have said those findings underline the urgency of making changes to programs.

Trump, attuned to Social Security’s popularity, has repeatedly said he would protect it.

Throughout his 2024 presidential campaign, Trump repeatedly said he would “always protect Social Security” and said his Democratic opponents, President Joe Biden and Vice President Kamala Harris, would destroy the program.

During the 2024 primary, he accused other Republicans who have expressed support for raising the age for Social Security of being threats to the program.

Trump said in an interview with NBC’s “Meet the Press” in December after he won the presidential election that “we’re not touching Social Security, other than we might make it more efficient.”

His White House this year said Trump “will always protect Social Security.”

Social Security Administration Commissioner Frank Bisignano, a Wall Street veteran, was asked at his confirmation hearing in March about whether Social Security should be privatized. He said he’d “never heard a word of it” and “never thought about it.”

This story was originally featured on Fortune.com

• The Federal Reserve kept interest rates unchanged at between 4.25% and 4.5% following the most recent Federal Open Market Committee meeting Wednesday. The Fed’s decision could be felt by President Trump as a rebuke after Trump continuously called for the Fed and Chairman Jerome Powell to cut rates.

The Federal Reserve maintained rates on Wednesday, holding up against the pressure of President Donald Trump and his recently escalated rhetoric.

The Fed, while it brought down rates several times last fall, has stayed the course following the past four Federal Open Market Committee meetings. On Wednesday, the Fed did the same, holding interest rates between 4.25% and 4.5%, down from their peak over the past two years but still higher than pre-COVID levels of between 1.5% and 1.75%. In its decision, the Fed cited low unemployment and a solid labor market in its decision to hold rates steady.

Wednesday’s decision included two dissenting votes from the majority, Fed governors Michelle
Bowman and Christopher Waller. It is the first time in more than 30 years that two governors have dissented in a single meeting.

The U.S. economy has maintained some resilience despite analyst warnings about impending financial turmoil partly caused by Trump’s tariffs. The unemployment rate fell slightly to 4.1% in June and has remained basically stable over the past 12 months. Meanwhile, annualized second quarter GDP growth increased 3%, bouncing back from the 0.5% contraction in the first quarter. 

This combination of stable unemployment and a return to GDP growth likely played into the Fed’s preference for keeping rates unchanged, despite recent skepticism over data published by the Bureau of Labor Statistics, said Luke Tilley, a former Philadelphia fed adviser and chief economist at Wilmington Trust.

“When they see the unemployment rate remaining low, when GDP has bounced back to a positive, when they don’t see any imminent problems, then they’re really reluctant to start cutting, or even say that they’re going to be cutting, because it’s much harder to unring that bell once they say markets are sort of off to the races,” Tilley told Fortune.

At the same time, the most recent GDP number shows weakness when stripped down to the core components of  consumer spending and business investment, Van Hesser, chief strategist at the Kroll Bond Rating Agency, told Fortune. Core inflation, which excludes volatile food and energy prices, also increased to 2.9% in June, up from 2.8% the prior month.

While concerns about unemployment have been at the forefront for the Fed in recent months, potential signs of lagging growth are bringing more equilibrium than before to the Fed’s dual mandate, said Hesser.

Trump’s tariff policies are likely to weigh on consumers and businesses in the second half of the year, and the Fed is likely waiting for more data to assess these effects. Still, Hesser said despite Wednesday’s rate cuts, he believes the Fed will cut rates later in the year, possibly at its last meeting of the year in December. 

“I would expect to hear some commentary today acknowledging that the risks of inflation and the risks of to the labor market, which is really growth, are coming into better balance, and so it kind of sets up for what we’ve expected, which is, fourth quarter rate cuts—two cuts of 50 basis points,” he said.

As the Trump administration continues to negotiate trade deals with its allies, including, most recently, with the EU, the threat of tariffs and their effects on inflation has worried market onlookers. On Wednesday, Trump said he would impose a 25% tariff on imports from India because of the country’s high tariffs on U.S. goods. Trump also claimed India buys much of its military equipment and energy from Russia, which warranted an unspecified “penalty.” 

Since before he was elected President in November, Trump has continuously criticized Powell and the Fed for not dropping interest rates as fast as he would like. Trump has ramped up his rhetoric recently by repeatedly wishing for Powell to resign and insulting him as “Mr. Late” and “one of my worst appointees,” among others. The president has also seized upon a previously scheduled remodel of the Federal Reserve’s headquarters in Washington D.C. to publicly shame Powell and hint at his possible dismissal.

This story was originally featured on Fortune.com

• Real GDP increased at an annualized rate of 3% in the second quarter, more than expected.
• That reverses the shrinking economy in the first quarter, but tariffs cloud future performance.
• The report is just one of several this week that highlight how the economy is doing.

US real gross domestic product grew at an annualized rate of 3% in the second quarter, surpassing the forecast of 2.5% and a sharp rebound from the first quarter's decline.

"Compared to the first quarter, the upturn in real GDP in the second quarter primarily reflected a downturn in imports and an acceleration in consumer spending that were partly offset by a downturn in investment," the Bureau of Economic Analysis said.

Real personal consumer spending rose 1.4% in the second quarter, surpassing the 0.5% increase in the first. Fixed investment rose just 0.4% in the second quarter after a 7.6% increase in the first quarter.

After a 37.9% increase in the first quarter, imports fell 30.3% in the second quarter as President Donald Trump's tariff push heated up. Imports are subtracted in the GDP calculation. Exports fell 1.8% in the second quarter, after a 0.4% rise in the first.

"The consumer has been resilient despite recent volatility and policy uncertainty, and any employment weakness will be viewed as a bellwether for weakening consumption, which would likely push the Fed to resume cutting rates sooner," said Ryan Weldon, investment director and portfolio manager at IFM Investors.

Other releases beyond Wednesday's Bureau of Economic Analysis report indicate how the economy is doing. The Federal Reserve's Beige Book covering economic conditions between late May and early July said five of the 12 Fed districts had slight or modest economic gains and another five reported flat activity, compared to three with slight economic growth and three with no change in activity in the previous report.

The Beige Book also said there was a slight improvement in employment. Analysts and economists told Business Insider that the labor market is good if you have a job, and is not so great if you're a job seeker.

Trump's widespread tariffs are supposed to start on August 1 after a few pauses. The US and EU announced a trade deal on Sunday, including a 15% tariff rate on goods imported from the EU with some exceptions, Europe purchasing billions of dollars in US energy, and eliminating tariffs on US industrial goods.

On Wednesday afternoon, the Federal Reserve will announce its newest decision on interest rates, which economists and analysts expect to be held steady for the fifth straight decision. More data will be out this week, including the jobs report from the Bureau of Labor Statistics and monthly consumer spending from the Bureau of Economic Analysis.

In a market landscape still fixated on fears of stagflation and modest recoveries, Bank of America is sounding a contrarian—and decidedly bullish—note.

According to new note from BofA Research analysts, the next phase for the U.S. economy and equities might not be a routine recovery, but an outright boom.

“Today a confluence of factors argue that the key tail risk that may not be priced in is not just a cyclical recovery, but a boom,” they said.

5 reasons for a boom

BofA analysts cited five pillars supporting this more bullish case.

First is political will, arguing that with U.S. midterm elections a few quarters away, policymakers have strong incentive for near-term, pro-growth initiatives.

Second is Washington’s “One Big Beautiful Bill Act” (OBBBA) targeting domestic manufacturing.

Third is the massive overseas jolt gathering, with Germany recently enacting the largest stimulus package in EU history, while global reflationary forces are building elsewhere.

Fourth, BofA sees a broad expansion of capital expenditures, with hyperscalers such as Amazon, Meta, Microsoft, and Alphabet set for nearly $700 billion in capital expenditures between 2025 and 2026. In addition, more non-U.S. companies plan to expand manufacturing capacity in the U.S., while municipalities are focused on updating aging infrastructure.

Fifth, BofA cited its proprietary “Regime Indicator,” a blend of macro signals including corporate revisions to earnings per share, GDP forecasts, and other emerging signals. It’s on the verge of flipping from a “Downturn” to a “Recovery”—a change that historically presages a rally in value stocks.

The dominant narrative in this indicator remains conservative, according to the BofA team, led by Savita Subramanian. In June, 70% of fund managers still predicted stagflation, with only 10% foreseeing a “boom” of above-trend growth and inflation. Yet, BofA argues, the catalyst for an upside breakout is real and imminent. If the Regime Indicator does indeed flip to “Recovery” in early August, historical precedent suggests a rapid rotation is likely.

So how healthy are these five factors actually looking?

Will there be enough spending?

Top economies have already pledged massive stimulus. In March, China unveiled plans to issue 1.3 trillion yuan ($179 billion) in special treasury bonds this year, plus 4.4 trillion yuan of local government special-purpose bonds.

Meanwhile, much of the EU’s stimulus still flowing from the earlier NextGenerationEU package is worth up to €806.9 billion (about $880 billion) through 2026. Major European economies have supplemented this with additional investments and, in some cases, targeted fiscal expansion.

Japan, South Korea, Canada, and Australia have adopted smaller-scale but still significant fiscal measures in 2025 to address sector-specific slowdowns, energy security, and household purchasing power. Most are focusing on targeted transfers, green investments, and industrial support.

Meanwhile, American companies have announced billions in new U.S. manufacturing, infrastructure, and technology investments since Trump took office, but these initiatives were announced before passage of the OBBBA.

Many investments are phased and slated for completion over the next decade, and it’s unclear how much can come online soon enough to play a role in the boom that BofA Research is projecting. Some of them, such as OpenAI’s $500 billion Stargate project, are reportedly struggling to raise funding to match the big numbers initially announced.

For this story, Fortune used generative AI to help with an initial draft. An editor verified the accuracy of the information before publishing. 

This story was originally featured on Fortune.com

• The U.S.-EU trade deal has been blasted as too lopsided in favor of President Donald Trump, as it sets tariffs higher than Europe wanted and pledges hundreds of billions of dollars to be spent in America. But according to an analyst at the Brookings Institution, that ignores a crucial geopolitical angle: The EU needs U.S. weapons to help Ukraine fight Russia.

The trade deal President Donald Trump announced Sunday with European Commission President Ursula von der Leyen didn’t go over well in some parts of Europe.

One French executive said Trump “humiliated us,” and French Prime Minister François Bayrou described the deal as “submission.” Economist Olivier Blanchard blasted it as “completely unequal” and a defeat for the EU.

That’s as the U.S. sets a 15% tariff rate for most EU products, less than the 30% Trump threatened but more than the 10% Europe sought. The EU also pledged to invest $600 billion in the U.S., buy $750 billion of American energy products, and load up on “vast amounts” of U.S. weapons.

But according to Robin Brooks, a senior fellow at the Brookings Institution, the deal isn’t a defeat if you look at it from a different point of view.

“Instead, it’s recognition of economic and geopolitical realities whereby the EU needs the U.S. more than the other way around,” he wrote in a Substack post. “At the end of the day, the EU needs U.S. weapons to keep Ukraine afloat into its struggle for survival against Russia. That just isn’t a setting where you escalate a trade conflict.”

In fact, Trump has warmed up considerably toward the European view on Ukraine, which has been fighting off Russia’s invasion for more than three years.

After expressing deep skepticism on U.S. support for Kyiv, berating Ukrainian President Volodymyr Zelensky in the White House, and temporarily cutting off military aid, Trump has helped reinforce Ukraine.

Earlier this month, he vowed to send more Patriot missile-defense systems to Ukraine and agreed to a plan where European nations buy American weapons, then transfer them to Ukraine.

Trump has also indicated he’s fed up with Russian President Vladimir Putin’s lack of progress in peace talks. And on Monday, Trump gave Moscow less than two weeks to reach a deal or else face steep sanctions.

Meanwhile, analysts at Macquarie also noted that after markets previously saw the U.S. abandoning its global security obligations, the recent deals with the EU, the U.K., and Japan signal an effort to heal those relationships.

“In the background has been a renewed commitment to U.S. geopolitical engagement, too, of course—a recommitment to Ukraine’s security, taking out Iran’s nuclear assets, etc.,” they said in a note.

To be sure, Europe has also committed to rearming its own military forces and has pledged massive spending increases, including money for homegrown defense contractors.

But that will take time, as NATO forces are already highly reliant on and integrated with American weapons systems.

Despite recent transatlantic tensions, there is greater urgency in Europe to rearm as the Russia threat looms over the entire continent, not just Ukraine.

In February, the Danish Defense Intelligence Service assessed the risk from Russia once its Ukraine war stops or freezes in place.

Russia could launch a local war against a bordering country within six months, a regional war in the Baltics within two years, and a large-scale attack on Europe within five years if the U.S. does not get involved, according to a translation of the report from Politico.

“Russia is likely to be more willing to use military force in a regional war against one or more European NATO countries if it perceives NATO as militarily weakened or politically divided,” the report said. “This is particularly true if Russia assesses that the U.S. cannot or will not support the European NATO countries in a war with Russia.”

This story was originally featured on Fortune.com

In just seven years, Social Security will reach a fiscal cliff that could leave millions of American retirees with drastically reduced benefits, according to a recent analysis by the Committee for a Responsible Federal Budget (CRFB). The think tank’s new report projects that, unless Congress acts, Social Security’s main trust fund will be insolvent by the end of 2032, triggering automatic and painful benefit cuts for everyone relying on the program.

How painful? Around $18,000 less-per-year for retirees who depend on the program. This is not the first time the CRFB has warned about this, and it’s a common refrain from no less than the Oracle of Omaha himself: famed investor Warren Buffett.

The ticking clock

Social Security and Medicare, the two bedrock programs supporting older Americans, are drawing closer to insolvency than many might realize. The most recent data, compiled from the programs’ own trustees and enhanced by CRFB calculations, forecasts that by late 2032, Social Security’s retirement program will no longer be able to pay out promised benefits in full. At that point, the law dictates that payments must be limited to the amount coming in from payroll taxes—resulting in an immediate, across-the-board benefit reduction.

The scope of the cut: $18,100 shortfall for typical couples

For millions of future retirees, the numbers are stark. CRFB’s estimate reveals that a typical dual-earning couple retiring at the start of 2033 would see their annual Social Security benefit drop by approximately $18,100. The percentage cut is projected to be 24% for that year, instantly slashing retirement incomes for over 62 million Americans who depend on the program.

The pain would be widespread but would vary by income and household type. For example, Single-earner couples could see a $13,600 cut, low-income, dual-earner couples face an $11,000 shortfall, and high-income couples might lose up to $24,000 a year.

Committee for a Responsible Federal Budget

While the dollar cut is smaller for lower-income households, the relative burden is even more severe, devouring a larger share of retirement income and past earnings. Also, these cuts are in nominal dollars; adjusted to 2025 dollars, the actual cut would be about 15% less.

What’s causing the crisis?

Social Security is funded by a dedicated payroll tax, but the gap between what goes out in benefits and what comes in through taxes is growing. The newly enacted One Big Beautiful Bill Act (OBBBA) has accelerated the timeline by reducing Social Security’s revenue through tax rate cuts and an expanded senior standard deduction. According to CRFB, these policies increase the necessary benefit reduction by about one percentage point; if the changes become permanent, the benefit cuts would be even deeper.

Over time, the gap is expected to worsen: by the end of the century, CRFB adds, Social Security could face required benefit cuts of over 30%, unless lawmakers shore up the program’s finances. Despite these dire projections, many policymakers have pledged not to alter Social Security, promising to keep benefits untouched. But if nothing changes, the law automatically enforces cuts when the trust fund runs dry.

The CRFB report urges policymakers to be candid about the situation and to work towards bipartisan solutions that secure Social Security’s future. Ideas could include new revenue sources, adjusting benefits, or a combination—anything to avoid the “steep and sudden” cut that looms for tens of millions. Without meaningful congressional action before 2032, the Social Security safety net will be abruptly—and dramatically—shrunk, so Americans approaching retirement will at least want to pay close attention to Congressional action on the looming cliff.

Buffett’s bugbear

Warren Buffett has been vocal about the dangers of Social Security insolvency and the looming benefit cuts that millions of retirees could face if action is not taken soon. The retiring Berkshire Hathaway CEO has stated that reducing Social Security payments below their current guaranteed levels would be a grave mistake, and urged prompt Congressional action.

Buffett, who has signed the Giving Pledge and has advocated for higher taxes on higher earners, has criticized the cap on income subject to Social Security taxes, arguing that higher earners—including himself—should contribute more. He’s also suggested that Social Security’s finances could partially be eased by raising the retirement age, with the 95-year-old investing legend himself working well beyond the standard end of most careers.

CRFB background

The CRFB is not just any think tank, either, it’s a respected bipartisan institution that stretches back to 1981. Its board has consistently included former members and directors of key budgetary, fiscal, and policy institutions, such as the Congressional Budget Office, the House and Senate Budget Committees, the Office of Management and Budget, and the Federal Reserve. The CRFB regularly produces analyses of government spending, tax proposals, debt and deficit trends, and trust fund solvency (such as Social Security and Medicare), as well as recommendations and scorecards for major fiscal legislation.

The CRFB has consistently advanced a centrist position on budgetary matters, regularly advocating for reducing federal deficits and controlling the growth of national debt. The organization has often criticized large spending bills that are not offset by reductions elsewhere, as well as tax cuts that are not revenue-neutral.

The think tank favors reforms to federal “entitlement” programs, especially Social Security and Medicare, aiming to make them fiscally sustainable, an emphasis that has drawn criticism from the left. For example, Paul Krugman characterized it as a “deficit scold” when he was still with The New York Times.

In the Social Security sphere, the CRFB has supported or proposed ideas like raising the retirement age, adjusting cost-of-living increases (using the chained CPI), increasing the amount of wages subject to payroll tax, and progressive indexing (where benefits grow more slowly for higher earners). They have also weighed proposals for new revenue streams and some means-testing of benefits. On the right wing, the CRFB’s proposed reforms to Social Security have drawn criticism for, as Charles Blahous of the Manhattan Institute put it, creating a structure more like “welfare” than an earned income benefit.

Still, the CRFB is widely respected in policy circles as a knowledgeable, data-driven budget watchdog, with a long track record of analysis and advocacy for sustainable fiscal policy.

For this story, Fortune used generative AI to help with an initial draft. An editor verified the accuracy of the information before publishing. 

This story was originally featured on Fortune.com

U.S. existing home sales fell sharply in June 2025, dropping to their lowest level in nine months as elevated mortgage rates and record-high prices continued to sideline many prospective buyers. According to the National Association of Realtors (NAR), existing home sales slipped 2.7% from May to a seasonally adjusted annual rate of 3.93 million transactions, exceeding analysts’ expectations for a more modest decline. Compared with last year, sales were flat overall, with concentrated declines in several regions.

The housing market is traditionally busiest in spring, but this year’s key buying season proved lackluster. The month-over-month decline largely reflected affordability challenges: Mortgage rates hovered close to 7% throughout April and May, when most June closings would have entered contract.

“Existing home sales have been in purgatory since mortgage rates spiked in 2022,” Lance Lambert, editor-in-chief of ResiClub, told Fortune Intelligence. “Some of that’s because strained affordability in many markets is making it harder for sellers to find a buyer at their asking price—which is also why active inventory is rising. And some of it is because many would-be home sellers, who’d like to sell and buy something else, either can’t afford that next payment or don’t want to part with their lower mortgage rate and payment. No matter how you look at it, this is an unhealthy housing market.”

Sky-high prices

On a nationwide basis, home prices climbed to an all-time high, underpinning the market’s affordability squeeze. The median price for existing homes reached $435,300 in June, up 2% from the same month a year earlier and marking the 24th consecutive month of yearly price gains. NAR chief economist Lawrence Yun sounded an optimistic tone about this staggering climb: “The record-high median home price highlights how American homeowners’ wealth continues to grow—a benefit of homeownership. The average homeowner’s wealth has expanded by $140,900 over the past five years.”

Despite weak sales, inventory is slowly rebuilding: 1.53 million homes were listed for sale at the end of June, up nearly 16% from a year ago—the highest level in years—though still 0.6% lower than in May owing to seasonal factors. This puts the market’s unsold inventory at a 4.7-month supply, matching pre-pandemic norms and up from 4.0 months a year prior.

Regional dynamics varied. Sales dropped in the Northeast, Midwest, and South, but edged higher in the West, with year-over-year changes mirroring these splits. Single-family home sales slipped 3%, while sales of condominiums and co-ops were stable compared with May but down 5.3% against June 2024.

One positive for buyers: more supply and slightly longer time on market. Realtor.com reported that active inventory for June rose for the 20th straight month, climbing nearly 29% year over year to 1.08 million homes, and the average home spent 53 days on market, five days longer than a year earlier. However, these gains are offset by persistent undersupply when compared with the pre-pandemic market, and price cuts became more common, with nearly 21% of listings experiencing downward adjustments—the highest June share since 2016.

“Multiple years of undersupply are driving the record-high home price,” Yun said, noting that construction continues to lag population growth and is holding back first-time buyers. “If the average mortgage rates were to decline to 6%, our scenario analysis suggests an additional 160,000 renters would become first-time homeowners and a boost in activity from existing homeowners,” Yun added.

If mortgage rates decrease in the second half of this year, Yun said, he expects home sales to increase across the country owing to strong income growth, healthy inventory, and a record-high number of jobs. For now, though, it’s a familiar story of peak prices and affordability as the main obstacles for would-be homebuyers in the U.S.

For this story, Fortune used generative AI to help with an initial draft. An editor verified the accuracy of the information before publishing. 

This story was originally featured on Fortune.com

When Amrita Bhasin, 24, learned that products from South Korea might be subject to a new tax when they entered the United States, she decided to stock up on the sheet masks from Korean brands like U-Need and MediHeal she uses a few times a week.

“I did a recent haul to stockpile,” she said. “I bought 50 in bulk, which should last me a few months.”

South Korea is one of the countries that hopes to secure a trade deal before the Aug. 1 date President Donald Trump set for enforcing nation-specific tariffs. A not-insignificant slice of the U.S. population has skin in the game when it comes to Seoul avoiding a 25% duty on its exports.

Asian skin care has been a booming global business for a more than a decade, with consumers in Europe, North and South America, and increasingly the Middle East, snapping up creams, serums and balms from South Korea, Japan and China.

In the United States and elsewhere, Korean cosmetics, or K-beauty for short, have dominated the trend. A craze for all-in-one “BB creams” — a combination of moisturizer, foundation and sunscreen — morphed into a fascination with 10-step rituals and ingredients like snail mucin, heartleaf and rice water.

Vehicles and electronics may be South Korea’s top exports to the U.S. by value, but the country shipped more skin care and cosmetics to the U.S. than any other last year, according to data from market research company Euromonitor. France, with storied beauty brands like L’Oreal and Chanel, was second, Euromonitor said.

Statistics compiled by the U.S. International Trade Commission, an independent federal agency, show the U.S. imported $1.7 billion worth of South Korean cosmetics in 2024, a 54% increase from a year earlier.

“Korean beauty products not only add a lot of variety and choice for Americans, they really embraced them because they were offering something different for American consumers,” Mary Lovely, a senior fellow at the Peterson Institute for International Economics, said.

Along with media offerings such as “Parasite” and “Squid Games,” and the popularity of K-pop bands like BTS, K-beauty has helped boost South Korea’s profile globally, she said.

“It’s all part and parcel really of the same thing,” Lovely said. “And it can’t be completely stopped by a 25% tariff, but it’s hard to see how it won’t influence how much is sold in the U.S. And I think what we’re hearing from producers is that it also really decreases the number of products they want to offer in this market.”

Senti Senti, a retailer that sells international beauty products at two New York boutiques and through an e-commerce site, saw a bit of “panic buying” by customers when Trump first imposed punitive tariffs on goods from specific countries, manager Winnie Zhong said.

The rush slowed down after the president paused the new duties for 90 days and hasn’t picked up again, Zhong said, even with Trump saying on July 7 that a 25% tax on imports from Japan and South Korea would go into effect on Aug. 1.

Japan, the Philippines and Indonesia subsequently reached agreements with the Trump administration that lowered the tariff rates their exported goods faced — in Japan’s case, from 25% to 15% — still higher than the current baseline of 10% tariff.

But South Korea has yet to clinch an agreement, despite having a free trade agreement since 2012 that allowed cosmetics and most other consumer goods to enter the U.S. tax-free.

Since the first store owned by Senti Senti opened 16 years ago, beauty products from Japan and South Korea became more of a focus and now account for 90% of the stock. The business hasn’t had to pass on any tariff-related costs to customers yet, but that won’t be possible if the products are subject to a 25% import tax, Zhong said.

“I’m not really sure where the direction of K-beauty will go to with the tariffs in place, because one of the things with K-beauty or Asian beauty is that it’s supposed to be accessible pricing,” she said.

Devoted fans of Asian cosmetics will often buy direct from Asia and wait weeks for their packages to arrive because the products typically cost less than they do in American stores. Rather than stocking up on their favorite sunscreens, lip tints and toners, some shoppers are taking a pause due to the tariff uncertainty.

Los Angeles resident Jen Chae, a content creator with over 1.2 million YouTube subscribers, has explored Korean and Japanese beauty products and became personally intrigued by Chinese beauty brands over the last year.

When the tariffs were first announced, Chae temporarily paused ordering from sites such as YesStyle.com, a shopping platform owned by an e-commerce company based in Hong Kong. She did not know if she would have to pay customs duties on the products she bought or the ones brands sent to her as a creator.

“I wasn’t sure if those would automatically charge the entire package with a blanket tariff cost, or if it was just on certain items,” Chae said. On its website, YesStyle says it will give customers store credit to reimburse them for import charges.

At Ohlolly, an online store focused on Korean products, owners Sue Greene and Herra Namhie are taking a similar pause.

They purchase direct from South Korea and from licensed wholesalers in the U.S., and store their inventory in a warehouse in Ontario, California. After years of no duties, a 25% import tax would create a “huge increase in costs to us,” Namhie said.

She and Greene made two recent orders to replenish their stock when the tariffs were at 10%. But they have put further restocks on hold “because I don’t think we can handle 25%,” Namhie said. They’d have to raise prices, and then shoppers might go elsewhere.

The business owners and sisters are holding out on hope the U.S. and Korea settle on a lower tariff or carve out exceptions for smaller ticket items like beauty products. But they only have two to four months of inventory in their warehouse. They say that in a month they’ll have to make a decision on what products to order, what to discontinue and what prices will have to increase.

Rachel Weingarten, a former makeup artist who writes a daily beauty newsletter called “Hello Gorgeous!,” said while she’s devoted to K-beauty products like lip masks and toner pads, she doesn’t think stockpiling is a sound practice.

“Maybe one or two products, but natural oils, vulnerable packaging and expiration dates mean that your products could go rancid before you can get to them,” she said.

Weingarten said she’ll still buy Korean products if prices go up, but that the beauty world is bigger than one country. “I’d still indulge in my favorites, but am always looking for great products in general,” she said.

Bhasin, in Menlo Park, California, plans to keep buying her face masks too, even if the price goes up, because she likes the quality of Korean masks.

“If prices will go up, I will not shift to U.S. products,” she said. “For face masks, I feel there are not a ton of solid and reliable substitutes in the U.S.”

___

AP audience engagement editor Karena Phan in Los Angeles contributed to this report.

This story was originally featured on Fortune.com

The Trump administration’s decision to impose a 17% duty on fresh tomatoes imported from Mexico has created a dilemma for the country providing more tomatoes to U.S. consumers than any other.

The import tax that began July 14 is just the latest protectionist move by an administration that has threatened dozens of countries with tariffs, including its critical trading partner Mexico. It comes as the Mexican government tries to also negotiate its way out of a 30% general tariff scheduled to take effect Aug. 1.

While the impacts of the tomato tariff are still in their infancy, a major grower and exporter in central Mexico shows how a tariff targeting a single product can destabilize the sector.

Surviving in times of uncertainty

Green tomato plants stretch upward row after row in sprawling high-tech greenhouses covering nearly six acres in the central state of Queretaro, among the top 10 tomato producing states in Mexico.

Climate controlled and pest free, Veggie Prime’s greenhouses in Ajuchitlan send some 100 tons of fresh tomatoes every week to Mastronardi Produce. The Canadian company is the leading distributor of fresh tomatoes in the U.S. with clients that include Costco and Walmart.

Moisés Atri, Veggie Prime’s export director, says they’ve been exporting tomatoes to the U.S. for 13 years and their substantial investment and the cost to produce their tomatoes won’t allow them to make any immediate changes. They’re also contractually obligated to sell everything they produce to Mastronardi until 2026.

“None of us (producers) can afford it,” Atri said. “We have to approach our client to adjust the prices because we’re nowhere near making that kind of profit.”

In the tariff’s first week, Veggie Prime ate the entire charge. In the second, its share of the new cost lowered when its client agreed to increase the price of their tomatoes by 10%. The 56-year-old Atri hopes that Mastronardi will eventually pass all of the tariff’s cost onto its retail clients.

Mexican tomato exports brought in $3 billion last year

Experts say the tariff could cause a 5% to 10% drop in tomato exports, which last year amounted to more than $3 billion for Mexico.

The Mexican Association of Tomato Producers says the industry generates some 500,000 jobs.

Juan Carlos Anaya, director general of the consulting firm Grupo Consultor de Mercados Agrícolas, said a drop in tomato exports, which last year amounted to more than 2 billion tons, could lead to the loss of some 200,000 jobs

Experts: U.S. will have difficulty replacing fresh Mexican tomatoes

When the Trump administration announced the tariff, the Commerce Department justified it as a measure to protect U.S. producers from artificially cheap Mexican imports.

California and Florida growers that produce about 11 million tons would stand to benefit most, though most of that production is for processed tomatoes. Experts believe the U.S. would find it difficult to replace Mexico’s fresh tomato imports.

Atri and other producers are waiting for a scheduled review of the measure in two months, when the U.S. heads into fall and fresh tomato production there begins to decline.

In reaction to the tariff, the Mexican government has floated the idea of looking for other, more stable, international markets.

Mexican Agriculture Secretary Julio Berdegué said Thursday that the government is looking at possibilities like Japan, but producers quickly cast doubt on that idea, noting the tomatoes would have to be sent by plane, raising the cost even more.

Atri said the company is starting to experiment with peppers, to see if they would provide an option at scale.

President Claudia Sheinbaum said recently her administration would survey tomato growers to figure out what support they need, especially small producers who are already feeling the effects of a drop of more than 10% in the price of tomatoes domestically over fears there will be a glut in Mexico.

This story was originally featured on Fortune.com