“A lot of checks”
Business leaders who had high hopes for the second Trump administration hadn’t signed up for the turmoil of his trade war. President Trump’s deals-focused visit to Saudi Arabia is more of what they had in mind.
Leaving aside questions of how many of the multibillion-dollar agreements the administration announced on Tuesday were actually new, the first leg of Trump’s trip to the Middle East underscores that his transactional instincts are what corporate leaders have been betting on.
Here are highlights of what was announced on Tuesday:
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A nearly $142 billion defense agreement involving over a dozen American companies and covering air force and space abilities, border security, communications and more
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A deal for Nvidia to sell about 18,000 of its latest chips to the Saudi artificial intelligence start-up Humain to power new data centers, and for AMD to sell about $10 billion worth of processors to Humain as well — with shares of both chipmakers soaring on Tuesday
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About $80 billion worth of investments by Google, Oracle, Uber and others in “cutting-edge transformative technologies in both countries”
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About $19 billion worth in total of gas turbine by GE Vernova and plane exports by Boeing
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A commitment by DataVolt, a Saudi company, to invest $20 billion in artificial intelligence data centers and energy infrastructure in the U.S.
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Saudi Arabia’s approval of Starlink use in the region, according to Elon Musk
The deal flow is why top corporate leaders were in Riyadh on Tuesday. Consider who was at a U.S.-Saudi investment lunch: Musk; Jensen Huang of Nvidia (whom Trump gave a shout-out to, while noting that Tim Cook of Apple wasn’t present); Sam Altman of OpenAI, who is raising billions to build data centers as well as selling A.I. services; Larry Fink of BlackRock, who has assiduously courted Saudi wealth; Andy Jassy of Amazon; Dara Khosrowshahi of Uber; Alex Karp of the data consulting firm Palantir; Kelly Ortberg of Boeing; and more.
It’s also an environment — décor-wise, sure, but also focused on deals — that Trump appeared to enjoy. “We have the biggest business leaders in the world here,” he said. “They’re going to walk away with a lot of checks.”
Never mind that the announced deals are falling far short of Trump’s goal. The White House said it had secured $600 billion worth of investment commitments from Saudi Arabia. But the announced total so far is about $283 billion, and organizers of the investment forum said that 145 deals were signed for a total of a bit over $300 billion. And several of the deals have been in the works before Trump’s second term.
The president has pressed Saudi officials to commit to more than $1 trillion (and bring down the price of oil, to boot). But that figure exceeds the assets held by the Saudi sovereign wealth fund, the Public Investment Fund — which has already said it wants to invest less abroad and instead focus on the domestic economy.
All of this is a reminder that deals are the way to Trump’s heart. Promises of big investments were how Crown Prince Mohammed bin Salman, Saudi Arabia’s de facto ruler, forged ties with the president during his first term.
And it’s a lesson that Qatar and the United Arab Emirates have also learned, almost certainly meaning that billions more in commitments will be announced when Trump heads there next.
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Speaking of Qatar, even Republicans are wary of the country’s potential gift of a Boeing 747 for use as an Air Force One: Senator Ted Cruz of Texas told CNBC that “the plane poses significant espionage and surveillance problems.”
HERE’S WHAT’S HAPPENING
A trade court hears a lawsuit over President Trump’s tariffs. A three-judge panel for the U.S. Court of International Trade in Manhattan listened to arguments from a group of small businesses arguing for blocking the levies and to a defense from administration lawyers. Separately, The Washington Post reports that electoral concerns helped persuade the White House to ease up on its Chinese tariffs.
Tesla’s board is said to weigh a new pay package for Elon Musk. A committee of two directors — Robyn Denholm, the carmaker’s chair, and Kathleen Wilson-Thompson, an independent board member — has been formed to consider ways to compensate Musk, especially if Delaware’s Supreme Court upholds the overturning of a multibillion-dollar payday, The Financial Times reports. Separately, Denholm sold $198 million worth of Tesla stock over the past six months via a prearranged trading plan.
Musk’s DOGE no longer claims credit for cutting more federal contracts. The Department of Government Efficiency withdrew claims from its website that it had canceled dozens of contracts, after The Times reported that they had already been reinstated. The move underscores bigger questions about what the Musk-formed group has actually achieved, and whether it is losing influence on Capitol Hill.
Microsoft again swings the ax on its work force. The tech giant said that it planned to lay off about 3 percent of its employees, or roughly 6,000 people, as it aims to reduce layers of management. The move — coming despite better-than-expected quarterly earnings — is the latest reminder that tech companies still see benefits from cutting expenses, with Amazon and CrowdStrike among those having announced layoffs this year.
Back to square one
Calm has returned to the bond market, and S&P 500 futures are pointing upward on Wednesday as investors grow bullish that President Trump’s trade war will be replaced by trade deals.
The speed of the market bounce is reminiscent of the Covid-era V-shape market recovery in April 2020, according to Deutsche Bank data. That surge bolstered investor portfolios and led to a deals boom, but there were plenty of hiccups along the way.
This one could be choppy, too. Investors on Tuesday cheered the latest Consumer Price Index report, which showed the annualized headline inflation rate inching up 2.3 percent, its lowest level in more than four years. But economists expect to see the effects of tariffs on price increases in future reports. A string of companies have warned that the levies have upended their supply chains, forcing them to consider passing those costs on to consumers.
Here’s how things might play out:
The bull case: There have now been three consecutive tame C.P.I. reports; even egg prices are falling. If it weren’t for tariff uncertainty, the narrative hanging over markets today might be about the Fed having largely stamped out the inflation menace, analysts say.
Could a string of trade deals keep the inflation genie in the bottle? Would that be enough to persuade the Fed to resume cutting interest rates, which could spur borrowing and motivate investors to buy stocks?
On social media Tuesday, Trump again beseeched the central bank and its chair, Jay Powell, to act: “THE FED must lower the RATE, like Europe and China have done. What is wrong with Too Late Powell? Not fair to America, which is ready to blossom? Just let it all happen, it will be a beautiful thing!”
(That said, futures traders on Wednesday actually lowered their odds slightly for just two rate cuts this year.)
The bear case: Tuesday’s C.P.I. report, was a mirage. “Higher tariffs threaten to derail this trend, and our expectation is that prices for goods including vehicles and apparel will rise in the coming months,” Sarah House, a senior economist at Wells Fargo, wrote in a research note on Tuesday. Other economists flagged the rising prices for household furnishings, toys and audio equipment as a sign that tariffs may still squeeze consumers.
The question is whether tariffs result in entrenched inflation, which could sap consumer buying power and erode economic growth. That could put more pressure on the Fed to intervene — but that could take months. “It will be a quiet summer for the Fed,” Becky Qin, a multi-asset portfolio manager for Fidelity International, told Bloomberg TV this morning.
DEALBOOK WANTS TO HEAR FROM YOU
We’d like to know how the tariffs are affecting your business. Have you changed suppliers? Negotiated lower prices? Paused investments or hiring? Made plans to move manufacturing to the U.S.? Or have the tariffs helped your business? Please let us know what you’re doing.
“He needs to leave.”
— Eric Holder, the former U.S. attorney general who led an inquiry into the World Economic Forum founder Klaus Schwab over whistle-blower accusations of financial impropriety and discrimination, to trustees of the organization, according to The Wall Street Journal.
How donors missed Biden warning signs
The fallout from the presidential election has set off soul-searching within the Democratic Party and its backers — especially before next year’s midterms. A new book is poised to force them to reflect on what went wrong.
“Original Sin: President Biden’s Decline, Its Cover-Up, and His Disastrous Choice to Run Again,” by Jake Tapper of CNN and Alex Thompson of Axios, dives into whether President Joe Biden’s decision to remain atop the Democratic ticket for so long doomed the party’s chances in November.
A main focus of the book is how Democratic power players and major donors missed the signs that Biden’s mental acuity was apparently slipping even as they poured huge sums into his re-election campaign. Were these just bad days, or the sign of entrenched decline? Were aides and party leaders in denial, the book suggests, or were they willfully deceiving others about Biden’s mental state and capabilities?
Tapper and Thompson detail what went down backstage at a major Los Angeles fund-raiser, organized by Jeffrey Katzenberg, the Hollywood mogul who was a chair of Biden’s campaign, with assistance from the actor George Clooney, two weeks before the fateful debate that spelled the end of Biden’s run. From an excerpt in The New Yorker:
It seemed clear that the President had not recognized Clooney.
“It was not O.K.,” recalled the Hollywood V.I.P. who had witnessed this moment. … “It was uncomfortable.”
“George Clooney,” the aide clarified for the President.
“Oh, yeah!” Biden said. “Hi, George!”
Clooney was shaken to his core. The President hadn’t recognized him, a man he had known for years. Clooney had expressed concern about Biden’s health before — a White House aide had told him a few months before that they were working on getting the President to take longer steps when he walked — but obviously the problem went far beyond his gait. This was much graver.
This was the President of the United States?
Clooney was certainly not the only one concerned. Other high-dollar attendees who posed for photographs with Obama and Biden described Biden as slow and almost catatonic. Though they saw pockets of clarity while watching him on television, and onstage later that night, there were obvious brain freezes and clear signs of a mental slide. It was, to some of them, terrifying.
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