• Should failed tariff negotiations lead to a trade war, the global economy is likely headed toward a recession, “The Big Short” investor Steve Eisman told CNBC this week. Eisman said the tariffs were the “only real risk” to the markets and warned the U.S. should be especially concerned with negotiating with the European Union ahead of the approaching July 9 trade-deal deadline.

Global markets will enter dire economic straits if President Donald Trump’s ongoing tariff stance leads to an all-out trade war, warns billionaire investor Steve Eisman.

The former managing director of Neuberger Berman—who successfully anticipated and profited from the 2008 stock market crash, and whose profile served as the basis for Michael Lewis’ book (and later, the 2015 film) “The Big Short”—said in a CNBC interview on Tuesday the U.S. economy and markets will flourish if the Trump administration is able to facilitate truces with the various nations on which he has imposed tariffs. But if that doesn’t happen, “chances are, we go into a global recession.”

“The tariffs and the potential for a trade war, I think, is really the only risk to the market right now,” Eisman said. “It’s completely binary, and I really have no way of handicapping it.” 

Trump’s whipsaw tariff decisions have rattled both consumers—who have sharply cut back on spending as a result of the levies—and investors, who, like Eisman, see tariffs as a threat to the global economy. A Bank of America Global Fund Manager Survey published this week found 47% of the 222 fund managers surveyed said they believed a global recession as a result of a trade war was the biggest “tail risk” to markets.

Trade deals, such as with the UK and a tentative truce with China, have tempered these concerns. JPMorgan Research lowered its probability of U.S. and global recessions from 60% to 40% at the end of May, citing decreased trade tensions as a result of Trump slashing Chinese tariffs. The U.S., however, has yet to resolve its trade issues with the European Union ahead of a crucial July 9 deadline.

Eisman drew similarities between the rocky trade environment and lead-up to World War I, likely referring to a series of treaties forged in the decades before the war designed to settle regional skirmishes that, in reality, created two massive, and eventually opposing, alliances.

“Nobody wanted World War I, and yet, because of all the reciprocal treaties that existed between countries, they somehow ended up there,” he said. “I don’t think anybody wants a trade war, but it’s certainly possible.”

Not just China

Though trade talks with China have taken center stage, Eisman argued the process of solidifying trade relations with Europe is “more interesting,” given the EU’s concerns with regulations, as well as value-added tax (VAT). With 27 member states, the EU has to balance myriad agendas, complicating a potential trade deal.

“Negotiating with Europe is like trying to herd cats given the way they’re structured,” Eisman said.

Trump has claimed the EU was created to “screw” the U.S., threatening to impose, then later pausing, a 50% tariff on the union. As part of negotiations, the administration has tried to pressure the EU to loosen tech regulations he claims are inhibiting growth of U.S. companies. Trump also opposes VAT, essentially a sales tax that accumulates through each stage in a product’s supply chain. The president has interpreted VAT as another trade barrier, arguing the tax puts undue financial pressure on U.S. businesses trying to export to Europe. 

Trump has signalled that the U.S. is not yet satisfied with provisions of the agreement, telling reporters on Tuesday, “We’re talking, but I don’t feel that they’re offering a fair deal yet.”

Trump’s former commerce secretary Wilbur Ross warned that after successful negotiations with China and the UK, the Trump administration may become overconfident in negotiations with the EU, pushing away European allies.

“One fear is that if our government feels too chesty with their progress, they may overplay the hand and get to levels that are hard—maybe even impossible—for the other countries to give in,” Ross told Fortune last week.

“This is going to be hard, but our country’s goal should be to help make European nations stronger and keep them close,” he added.

This story was originally featured on Fortune.com

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• The Trump Organization announced a $499 smartphone “built in the United States” but analysts believe will likely be manufactured in China. Experts have long warned the U.S. is incapable of creating its own manufacturing infrastructure quickly and cost-effectively. More likely, the Trump Organization will import phone components made in China to the U.S. to be assembled domestically.

Analysts and supply chain experts are not sold on the Trump Organization touting its new smartphone as being “built in the United States,” saying it’s far more likely the $499 device will actually be produced in China.

The Trump Organization, the Trump family’s real estate, hospitality, and entertainment conglomerate, announced on Monday it would license its name to a wireless service called Trump Mobile and its gold-colored “T1” smartphone slated for an August release. The device will use a wireless provider dubbed Liberty Wireless and will operate on the Google Android operating system.

The Trump Organization’s announcement touted the phones as “proudly designed and built in the United States,” but analysts said it’s more likely the conglomerate is outsourcing manufacturing capabilities to an original device manufacturer (ODM) overseas, as least in the short term, as the U.S. does not have the manufacturing capabilities to build the phone.

“Despite being advertised as an American-made phone, it is likely that this device will be initially produced by a Chinese ODM,” Blake Przesmicki, an analyst at Counterpoint Research, said in a note published Monday.

Even if the U.S. did have smartphone production capabilities, he said, the company would have to rely on components imported from overseas.

The Trump Organization did not respond to Fortune’s request for comment.

Trump Organization executive vice president Eric Trump, for his part, admitted Trump Mobile would not initially be an entirely domestic endeavor.

“Eventually, all the phones can be built in the United States of America,” Trump said on The Benny Show podcast on Monday, suggesting the device is being produced or assembled overseas before its August launch.

Manufacturing limitations

President Donald Trump has tried to jumpstart domestic manufacturing by imposing sweeping tariffs, but experts have long warned of the U.S.’s production limitations. Apple, for example, set up its supply chain in China in the 1990s, and moving it would require extensive sourcing substitutions and increased labor costs that would drive the cost of a U.S.-made iPhone to more than $3,000, Wedbush Securities analyst Dan Ives previously said.

These barriers to expanding U.S. production are nearly universal in the industry, according to Przesmicki.

“Generally, no phones have been manufactured in the U.S. since the 2G era in over a decade,” Przesmicki told Fortune. “We have weaker supply chains, fewer capable employees in the smartphone sector, lower margins.”

Przesmicki suggested if any manufacturing of Trump-branded phones were to take place on American soil, it would be on a small scale, about 1,000 phones or fewer. Leo Gebbie, principal analyst at CCS Insight, told Fortune there’s “no serious chance” the Trump Organization has arranged for U.S. production of the T1 phones, especially before the August launch.

“The idea that this could be replicated in the U.S. in any sort of short- to medium-term timescale is fanciful,” Gebbie said. “It is an absolute pipe dream.” 

Instead, according to Gebbie, the T1 phones will likely have their final assembly stage in the U.S., which would allow the company to avoid steep investments in domestic manufacturing by simply importing all components. This strategy, he said, could be closer to what the Trump Organization intended when it hailed phones “built” in the U.S.

Trump not immune to his own tariffs

The importing of phone components, the majority of which are made in China, would provide another supply chain hiccup for the Trump Organization by making it susceptible to tariffs Trump imposed for the express purpose of discouraging trade with China.

“This absolutely does raise the specter of the Trump Organization mobile falling foul of the tariffs that have been instigated by the Trump administration,” Gebbie said.

“Ultimately, whether we’re talking about screens, whether we’re talking about camera technologies, whether we’re talking about chipsets and processors and smartphones, almost all of this comes from the same manufacturing hubs in Asia,” he added.

The president last month threatened a 25% tariff on smartphones not produced in the U.S. and lambasted Apple for producing its iPhone in India—where it makes about 20% of its total output. Trump warned he would impose a 25% levy on Apple products if the company does not move manufacturing to the U.S. 

Apple announced in February it would invest $500 billion in expanding U.S. plants over the next four years.

Gebbie suggested the Trump Organization’s emphasis on building its phone in the U.S—despite domestic manufacturing being unlikely—is to send a message to big companies that U.S. smartphone assembly is possible.

“Maybe it provides leverage for the Trump administration to go out to device-makers like Apple and Samsung and say, ‘Hey, we are marking smartphones in the U.S. Why aren’t you?’” Gebbie said.

This story was originally featured on Fortune.com

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• As peak trade season approaches, import volumes at the Port of Los Angeles fell 19% in May compared to April and 9% from a year ago as a result of President Donald Trump’s tariffs. The Port of LA’s executive director warns fewer shipments may mean higher prices on fewer available goods, starting for back-to-school shopping and impacting even winter holiday products.

Steep tariffs have continued to slash the volume of U.S. imports, and consumers have yet to see the brunt of their impacts, according to new data from the Port of Los Angeles and Yale Budget Lab.

Import volumes through the Port of Los Angeles, the country’s latest trade center, fell 19% in May compared to the month before and 9% from a year ago as a result of President Donald Trump’s trade policy. 

Port of Los Angeles Executive Director Gene Seroka told reporters on Friday the higher prices as a result of tariffs will likely mean fewer, and more expensive, goods for consumers toward the end of the year.

“Buying products out of China right now still costs one-and-a-half times more than it did earlier this year, making products of all types extremely expensive and creating a decision platform for companies that not necessarily is going to be in our best interest as consumers will likely see lower inventories, fewer selections on store shelves, and higher prices in some cases,” he said.

Last month’s import declines came despite Trump backing off some of his highest tariff rates.

In April, many of the goods leaving China for the U.S. were taxed at 145% before a May trade deal lowered tariffs by 115%. But economists have said that even returning the levies to pre-“Liberation Day” levels is still high enough to wipe out trade between the U.S. and China. 

The summer marks the beginning of peak trade season, a bustle of shipment activity in preparation for major shopping events later in the year. But as back-to-school and Halloween shipment periods come and go, Seroka said the port has been “very slow,” and warned of fewer goods and higher prices for not just the fall, but the winter as well.

“That cargo for those micro seasons needs to be here on the ground right now,” he said. “I don’t necessarily see that in inventory levels.”

He added: “Retailers are not telling me that they’re boosting inventory levels to have wide selections on products beginning that Thanksgiving week and running to the end of the year.”

Emptier shelves, higher prices

Beyond consumers facing emptier shelves in stores, they will feel the impact of tariffs on their wallets. Prices on items like shoes have jumped 31% in the short term as a result of 2025 tariffs, according to June data from the Yale Budget Lab. Apparel prices more broadly have increased 28% for consumers in the short-run.

For consumers, more expensive goods means an average 1.5% increase in price levels that cost a household on average $2,500 in disposable income, per the data. While most consumers will see steeper prices, lower-income shoppers will be feeling the biggest stretch: Consumers at the bottom end of the income scale will see a 2.5% increase in price levels.

Ernie Tedeschi, director of economics at the Budget Lab at Yale, argued the uncertainty surrounding tariffs, not just higher prices, has contributed to a consumer pullback.

“Consumers and businesses who don’t know what tariff policy will be at the end of this press conference—let alone a week, a month, an hour from now—[are] sitting on their hands and not making all of the long-run purchasing investment and hiring decisions that they would otherwise make if they had certainty about what policy would be,” he told reporters.

As shoppers raced to get ahead of tariffs, consumer spending rose in March, and first-quarter spending on durable goods increased 2.3% from the prior year to $2.2 trillion. 

“It’s very clear that the main thing driving that shift in durables was anticipation of tariffs,” Tedeschi said. In April, when tariffs increased, spending slowed.

If tariffs level off, he warned price increases will likely stick around as a result of businesses adapting to and making substitutions in their supply chains. Yale Budget Lab calculated a 15% increase in apparel prices and 10% increase in textile prices in the long run, for example.

“Even after the economy, consumers, and businesses have a chance to react,” Tedeschi said, “that is not going to be able to mitigate all of the price increase.”

This story was originally featured on Fortune.com

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