What’s behind door No. 1?
President Trump likes a big splash, and he’s not holding back for Wednesday’s introduction of reciprocal tariffs on America’s trading partners: Expect a major announcement in the Rose Garden.
Otherwise, detail is lacking. That prompted a major stock sell-off, with the S&P 500 experiencing its worst one-month loss since 2022 as economists warn of a potential trade war that reignites inflation and dents global growth. (The futures market points to another rough open for the benchmark index on Tuesday.)
“If it is necessary, we have a strong plan to retaliate, and we will use it,” Ursula von der Leyen, the president of the European Commission, warned on Tuesday.
The White House appears unmoved by such threats. That’s even as consumer sentiment and business confidence continue to look shaky. A CBS News poll released on Monday showed that many Americans were already feeling some tariff fatigue and would prefer the president direct his efforts at fighting inflation.
White House aides have reportedly drafted a proposal to impose tariffs of roughly 20 percent on a wide range of U.S. imports, The Washington Post reports.
The president and his team have doubled down on their tariff messaging: Trump sees reciprocal tariffs — which he defines as “whatever they charge us, we charge them” — as a tool to bring jobs back to the United States and rebalance the country’s trade deficit. Meanwhile, he hasn’t refrained from introducing new ones: Last week’s announcement about levies on autos and car parts caught many in the industry off guard, setting off a rout in auto stocks.
In the Oval Office on Monday, the president struck a restrained tone. “Relatively speaking, we’re going to be very kind,” he told reporters.
But businesses have a slew of questions: Who would be targeted, at what price and when would they be put in effect? And how is the Trump administration defining “reciprocal” as it goes after trade policies deemed discriminatory?
For example, would Trump officials consider how a country’s value-added tax (VAT) or digital services taxes add to the final price tag that American businesses and consumers must pay? Trump has railed against VAT policies before, calling them “far more punitive than a Tariff.”
International leaders and industry lobbyists are bracing for a fight. Beyond the European Union, Canada, China and Mexico have either introduced retaliatory measures, or have threatened to do so.
The White House also views tariffs as a revenue driver. That argument could loom large as Republicans begin their battle to make Mr. Trump’s 2017 tax cuts permanent and present new ones. Up next: “No tax on tips, no tax on Social Security, no tax on overtime, and we’re going to make purchasing an American car tax deductible again,” Treasury Secretary Scott Bessent told Sean Hannity on Fox News on Monday.
To get those cuts through Congress, Republicans would need to find trillions of dollars in new savings, new revenue streams or both. Peter Navarro, a hawkish senior trade policy adviser, sees tariffs raising roughly $6 trillion. But that would mean a broad round of levies that lasts for years — an unnerving prospect for the party’s free-trade wing.
“We’re talking about an issue that divides Republicans rather than unifies Republicans,” Stephen Moore, an economist at the Heritage Foundation, a conservative think tank, told The Times.
HERE’S WHAT’S HAPPENING
Meta reportedly seeks the White House’s help in its case against the European Union. Executives have pressed Trump trade officials to persuade European regulators to back off on potential penalties tied to a ruling over its use of personalized ads, The Wall Street Journal reports. It would be among the first big asks by Meta since Mark Zuckerberg, its C.E.O., sought to rebuild ties with President Trump in his second term.
OpenAI’s value soars to $300 billion after its latest funding deal. The ChatGPT maker closed a $40 billion round on Monday, making it one of the world’s most valuable privately held companies as its weekly active user base swells to over 500 million. The deal also puts the spotlight on the finances of the round’s lead investor, SoftBank, which is reportedly seeking a $16.5 billion loan to finance its A.I. ambitions. Separately, the Microsoft-backed Builder.ai cut its 2024 revenues estimate and called in auditors to review its previous two years of accounts.
Johnson & Johnson suffers another big talcum powder setback. A federal bankruptcy judge on Monday threw out its $9 billion settlement that would have resolved a wave of litigation against the company over claims that the product caused cancer. The decision prolongs a dispute that has hung over the company for years; a Justice Department bankruptcy trustee and some plaintiffs’ lawyers had opposed the settlement.
The economic toll of research funding cuts
Harvard is the latest university to come under fire from the Trump administration, which is now reviewing nearly $9 billion of the university’s federal grants and contracts over what the White House says is the school’s insufficient handling of antisemitism.
The move comes as research institutions across the country are scrambling to replace funding pulled by the administration. Critics of those actions say such moves could deliver a long-term blow to the wider economy.
President Trump’s threats, by the numbers: Nearly 100 colleges under investigation by the Trump administration over accusations related to their diversity, equity and inclusion policies and their handling of antisemitism had received more than $33 billion during the 2022-2023 academic year, according to The Associated Press. That money accounted for around 10 to 13 percent of revenue at most of the schools.
The Trump administration has also effectively delayed grants from the National Institutes of Health, which funds biomedical research, and sought to fire workers at the National Science Foundation. Google began as a graduate research project at Stanford funded by the foundation.
Trump has also put a cap on “indirect funds” used for expenses like buildings, utilities and support staff.
How government funding powers American R.&D.: A 2019 analysis found that nearly a third of patents rely directly on government funding, and a recent paper by the Dallas Fed found that government funding in research accounted for at least a fifth of U.S. productivity growth since World War II.
“This is really killing the goose that lays the golden egg,” Sabrina Howell, an N.Y.U. professor who has studied the role of the federal government in supporting innovation, told The Times’s Ben Casselman.
Artificial intelligence is a particular concern. The rise of China’s DeepSeek, whose A.I. model rivals Western offerings but were created with fewer resources, shows the dominance of American tech research isn’t a given.
America’s lead in A.I. depends on “a symbiotic balance” between federal funding and private investment, two researchers at the University of Chicago argued in a recent opinion essay in Fortune. Upsetting that risks hurting the U.S., especially when “competitors are quickly gaining ground as they aggressively ramp up government-funded research programs.”
Other Trump policies may also be costing the country research talent. Trump has also tightened immigration policy, with his administration recently revoking the visas of some students involved in political protests. The overall effect could be to make the U.S. less appealing to top-tier international scientists.
Tech companies have already worried about hurdles to bringing in overseas talent: “It’s almost impossible to bring people here,” Eugenia Kuyda, the founder of the A.I. companion start-up Replika, said at the DealBook Summit in December. She added of A.I. scientists, “It’s actually much harder to get a visa if you’re coming with one of those degrees.”
The markets’ winners and losers
The first quarter of 2025 is in the books, and it was a brutal one as President Trump’s tariff moves helped drive a sell-off in the S&P 500.
Some financial assets that came out of the gates strong after Election Day in November, plummeted, including: Bitcoin (down 12.1 percent in the first quarter), the dollar (down nearly 4 percent against a basket of currencies), and Elon Musk’s Tesla (down nearly 36 percent). The so-called Magnificent Seven group of tech stocks ended the quarter down more than 20 percent from its December high.
On the flip side, stock indexes in Europe and Asia far outperformed their American counterparts. The Hang Seng soared nearly 18 percent in the quarter, a rally that went into overdrive in January after DeepSeek, the Chinese chatbot maker, jolted global markets.
And the DAX, Germany’s index of blue-chip companies, gained more than 10 percent as lawmakers approved a major stimulus plan to rearm in case Trump scales back America’s security commitment to Europe.
Remaking the CHIPS Act
President Trump has made clear that he detests the CHIPS Act, the bipartisan law passed under the Biden administration aimed at encouraging more domestic semiconductor manufacturing.
But even as Howard Lutnick, the commerce secretary, reportedly threatens to withhold federal grants promised under the law as a way to bolster investment in U.S. production — a negotiating stick — he may also be trying to expand other parts of the legislation as a carrot.
Lutnick has suggested that he may not disburse the act’s agreed-upon subsidies, Bloomberg reports. The commerce secretary is reviewing awards made under the law. While many companies haven’t hit milestones to qualify for additional money since Trump took office, Lutnick appears willing to slow-walk any such payouts in the future.
That doesn’t necessarily mean Trump and Lutnick are abandoning the CHIPS Act. On Monday, the president signed an executive order that creates the United States Investment Accelerator, an office within the Commerce Department that will administer the CHIPS Act and hopes to encourage investments of more than $1 billion in the country.
It’s meant to negotiate “much better deals than those of the previous administration” by cutting red tape and facilitating collaborations with national labs (even as the White House takes aim at the heart of America’s research institutions.)
That may involve expanding the CHIPS Act’s provision for 25 percent tax credits, according to Bloomberg. To many companies, those tax breaks are more valuable than the law’s grants, partly because they aren’t subject to the sorts of environmental or labor requirements that come with the subsidies.
“The credit is essential,” Peter Cleveland, a senior vice president at the Taiwanese chip giant TSMC, said last week, according to Bloomberg. Building up an American chip manufacturing base requires collaboration between Washington and private industry — “and the form that that collaboration should take,” he said, “should be through extension of the credit in the code.”
There’s a catch: Any significant changes to the tax credit component would require Congress’s approval.
The net effect: The CHIPS Act may live on in some form. “This rebrand gives the president a permission structure to support the underlying policy despite previously attacking the CHIPS Act,” Jim Secreto, a Commerce Department official in the Biden administration, told Bloomberg.
THE SPEED READ
Deals
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Rocket Companies, the mortgage giant, agreed to buy a rival, Mr. Cooper, for $9.4 billion in stock. (AP)
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Circle, which issues the U.S.D.C. stablecoin, is said to be working with JPMorgan Chase and Citigroup on a potential I.P.O. (Fortune)
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Hooters, the, um, colorful restaurant chain, filed for bankruptcy protection as part of a plan to sell its company-owned restaurants to a group backed by its founders. (Reuters)
Politics, policy and regulation
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Kyrsten Sinema, the former independent Arizona senator, has been hired by the law and lobbying firm Hogan Lovells to advise clients on Washington policy. (Politico)
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Several consulting firms are said to have offered billions in cost savings to the Trump administration to save their federal contracts. (FT)
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President Trump, with the musician Kid Rock by his side, signed an executive order taking aim at what he said were exploitative practices by ticket brokers. (WSJ)
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