- In today’s CEO Daily: Nicholas Gordon, Fortune’s Asia Editor, on how the U.S. may be more dependent on trade with Asia than President Trump realizes.
- The big story: Fed chair Jerome Powell warns that Trump’s tariffs could lead to “higher inflation and slower growth.”
- The markets: U.S. down, Asia up, Europe struggling, but U.S. futures look sunny.
- Analyst notes from JPMorgan on the budget, Wedbush on Nvidia, Apollo on recession, and UBS on the trade war.
- Plus: All the news and watercooler chat from Fortune.
Good morning. Trump’s “Liberation Day” tariffs spared no country: U.S. allies, emerging markets, and even those countries that ran trade deficits with the U.S. all got hit. China has garnered much of the attention. But dig deeper and you’ll find a mix of confusion and disappointment among U.S. allies.
Japanese Prime Minister Shigeru Ishiba talks about needing to understand the “emotional elements” behind Trump’s views on trade. Australia is blasting the tariffs as having “no basis in logic” as some of its exporters step up trade with China. Lawrence Wong, prime minister of Singapore—perhaps the country that benefits most from free trade—now warns of a “more arbitrary, protectionist, and dangerous” world. Here are three things U.S. CEOs can expect to see from Asia as this trade war plays out.
China has options. The White House is arguing that China needs the U.S.’s giant consumer market more than the U.S. needs cheap Chinese manufacturing. But the reverse is likely true. U.S. retailers and manufacturers rely on Chinese (and, by extension, Asian) supply chains. Steep 145% tariffs will mean massive price hikes for U.S. consumers and increased costs for U.S.-based manufacturers. China will be hurt from losing the U.S. market, but Beijing is likely betting that Trump will be hurt more. They may be right: Trump exempted smartphones, laptops and other electronics from most of his China tariffs.
Asian countries may start to work closely together. Even as Asian leaders frantically fly to Washington to start trade negotiations, they’ve started to build relationships with each other. Malaysia Prime Minister Anwar Ibrahim is calling for ASEAN to take a united front in trade negotiations with the U.S. Xi Jinping is in the middle of a three-country tour of Southeast Asia. China, Japan and South Korea are talking about promoting trade. New Zealand is calling for a new rules-based trade bloc. Europe, too, is tentatively communicating more with China. Southeast Asia may now move towards “greater economic integration that it long aspired to, but was unmotivated to swim hard towards,” says Devadas Krishnadas, founder of Future-Moves Group, a Singapore-based public policy consultancy.
Decoupling is coming—because the U.S. seems unreliable. A lot of countries in Asia really did pin their hopes on an open and stable U.S. Take Vietnam: It ran the third-largest trade surplus with the U.S. last year, behind China and Mexico, and relies on U.S.-bound exports for 30% of its GDP. Betting on the U.S. to be reasonable is a much less of a sure thing post-April 2. Even if Vietnam could get a deal, what evidence is there that Washington will stick with it? The China narrative has also changed. For years, China’s economy was slumping, its markets were uninvestable, and its “wolf warrior” diplomats undermined foreign policy. Now, China appears to be catching up in key sectors like EVs and AI. It looks like a bastion of stability in light of the U.S.’s policy flip-flops. Many countries would prefer not to choose between the U.S. and China. But if they are forced, they might not choose Washington.
More news below.
Contact CEO Daily via Diane Brady at diane.brady@fortune.com
Top news
Fed’s Powell issues warning. Fed chair Jerome Powell said on Wednesday that higher tariffs proposed by the Trump Administration could lead to “higher inflation and slower growth.”
U.S. stocks slide, again. Irina Ivanova sums it up: “The S&P 500 lost 2.2%, led by a selloff in tech. The Dow lost 1.7% while the tech-heavy Nasdaq fell 3.1%.” However, the market for futures in the S&P was up 1% this morning, pre-opening bell. Chipmakers Nvidia and Advanced Micro Devices both fell 7% on the news that new export restrictions would cost Nvidia $5.5 billion.
Asian markets were buoyant, by contrast. India’s Nifty 50 rose 1.4%. Japan’s Nikkei 225 rose 1.35%. China’s SSE Composite was up marginally at 0.13%.
The Stoxx Europe 600 and the U.K.’s FTSE 100 both lost half a point in early trading.
How tariffs will hit the Fortune 500. From Dell to Target to Hewlett Packard, Fortune 500 companies find themselves exposed to tariffs. Here are the companies on the list that are most vulnerable.
Nvidia will lose 10% of its revenues due to Trump’s ban on exporting chips to China, Wedbush estimates. The company previously announced it would suffer a $5.5 billion charge owing to the restriction.
Could the dollar lose its status as the world’s reserve currency? The fact that people are even talking about it shows how much doubt there is out there about U.S. economic policy.
Constitutional crisis brewing: U.S. District Judge James Boasberg said there may be probable cause to hold the Trump Administration in contempt of court becuse it has failed to follow court orders to stop deporting immigrants to El Salvador.
Lithia loses exec to Mercedes. Mercedes-Benz announced on Wednesday that it is poaching the COO of Lithia & Driveway (No. 140 on the Fortune 500) to run its U.S. unit. Adam Chamberlain will officially assume the role of CEO of Mercedes-Benz USA on July 1, replacing Dimitris Psillakis.
There may be life on Planet K2-18b: It’s 124 light years away but it has organic molecules that, on Earth, are only associated with the presence of living things. “Given everything we know about this planet, a world with an ocean that is teeming with life is the scenario that best fits the data,” said Nikku Madhusudhan, professor of astrophysics at Cambridge.
From the analysts
- JPMorgan on the budget: “Under this [new] scenario for the budget, the CBO estimates that debt held by the public would reach 220% of GDP in 2055, or 63%-pts higher than in their long-term baseline projections released on March 27 (or ~156% of GDP). … Our Long-term Strategy team uses a central baseline for a 10-year UST yield of 4.5% or higher in nominal terms,” per Joyce Chang et al.
- Wedbush on Nvidia: “China we believe represents slightly over 10% of NVDA revenues, an amount that was likely set to grow in FQ1 given what we believe was a significant uptick in demand from China to support Deepseek inference instances … Net, we believe it now needs to be assumed that NVDA revenues in future quarters are likely reduced by ~10%,” per Matt Bryson and Antoine Legault.
- Apollo on recession: “If the US enters a recession, long-term interest rates are likely to go down, and it would be cheaper for the US government to refinance existing government debt. However, the chart below shows that the interest payments saved if interest rates decline by two percentage points would be more than offset by the deterioration in government finances associated with a recession,” per Torsten Sløk.
- UBS on the trade war: “EU leaks suggest negotiators do not believe the US knows what it wants from trade talks,” per Paul Donovan.
Around the watercooler
Harley-Davidson slams activist investor, saying its campaign is messing up its CEO search by Phil Wahba
How do U.S. firms track and pay tariffs? A plain-English guide by Jeff John Roberts
OpenAI updated its safety framework—but no longer sees mass manipulation and disinformation as a critical risk by Sharon Goldman and Jeremy Kahn
X just revealed a glimpse of how dramatic its revenue drop was after Elon Musk’s $44 billion takeover and rebrand from Twitter by Beatrice Nolan
CEO Daily is compiled by Joey Abrams and Jim Edwards.