Fed Faces DOJ Probe as Trump Pauses Firing Powell

Canadian Prime Minister Mark Carney is in Beijing this week for critical talks on tariffs, energy, and global security. The high-stakes visit comes just as former US President Donald Trump casts doubt on the future of the North American trade deal he helped create six years ago.

Carney met with Premier Li Qiang on Thursday and is scheduled to hold discussions with President Xi Jinping on Friday. The Prime Minister's agenda also includes meetings with key figures from both Canadian and Chinese business communities.

The Core Negotiation: EVs for Canola

A central topic of discussion is a potential trade-off involving vehicle tariffs and agricultural exports. China was reportedly prepared to propose easing its restrictions on Canadian rapeseed products, also known as canola. In return, Beijing seeks a relaxation of Canadian tariffs on Chinese-made electric vehicles (EVs).

However, these specific items were not included in a series of cooperation agreements announced Thursday, one of which focused on expanding energy trade.

The trade friction dates back to 2024, when a previous Canadian government joined the United States in levying heavy tariffs on Chinese EVs, steel, and aluminum. Beijing responded with its own duties on Canadian canola products.

Carney’s visit is part of a broader trend of international leaders re-engaging with China. South Korea's Lee Jae Myung visited earlier this month, and UK Prime Minister Keir Starmer is expected in Beijing later this month, marking the first such trip by a British leader since 2018.

Trump's Shadow: USMCA Deal Under Fire

Canada's diplomatic outreach to China is set against a backdrop of rising uncertainty in North America. Trump has recently expressed indifference toward the U.S.-Mexico-Canada Agreement (USMCA), which he signed during his first term. The three nations are expected to renegotiate the pact ahead of its six-year anniversary on July 1.

Earlier this week, Trump told reporters there is "no real advantage" to the USMCA, claiming it primarily benefits Canada. He added that the U.S. doesn't "need their product" and that the deal's existence "wouldn't matter."

Economic Forecasts Signal Rising Trade Risks

The potential for instability in North American trade has economists on alert. In a research report released Wednesday, Oxford Economics outlined several scenarios for the upcoming USMCA discussions. The firm warned that a complete breakdown of the agreement "would cause GDP in Canada and Mexico to contract in late 2026 and create long-term scarring."

In a separate analysis on Thursday, Oxford Economics projected a significant slowdown in global commerce. The forecast sees global goods trade growing by just 1.7% this year and 2.2% in 2027, a steep drop from last year's estimated 4.9% increase. The report cites "weakness in US trade" and the growing risk of protectionism as key drivers of the slowdown.

China has instructed companies in the country not to use cybersecurity products from American and Israeli firms including Palo Alto Networks Inc, Fortinet Inc and Check Point Software Technologies Ltd, according to a government directive seen by Bloomberg News.

The instructions require organisations to identify whether they use any cybersecurity products from the designated companies and to replace any of those with domestic technologies by the first half of 2026. Chinese companies' use of such products could result in sensitive data being sent overseas or create other vulnerabilities for customers, according to the advisory.

The document also accused the US and Israeli companies of having ties to intelligence agencies, though it didn't provide evidence of those claims or clarify the security issues involved.

"Recent work has found that cybersecurity products from Palo Alto Networks, a company with a US-Western intelligence background, have security issues," said a notice by the securities regulatory bureau seen by Bloomberg News and dated Dec 19, 2025. Palo Alto Networks didn't immediately respond to a request for comment.

The US government has similarly restricted the use of products from some Chinese companies among government entities, citing security concerns.

Recorded Future Inc, CrowdStrike Holdings Inc, Alphabet Inc's Mandiant, Rapid7 Inc, SentinelOne Inc, Claroty Ltd, Cato Networks Ltd, Imperva Inc, CyberArk, Wiz Inc, Broadcom Inc's VMWare, McAfee Corp and Orca Security Ltd also are included in the ban.

Recorded Future, CrowdStrike, SentinelOne and Claroty don't sell products in China, according to representatives from each company.

A McAfee spokesperson said in a statement that the company's products are designed for individuals and families, rather than government use. "We continuously monitor regulatory developments worldwide and ensure that our products comply with all applicable laws and requirements in the geographies where we operate," the spokesperson said.

"Orca Security has not been notified about this," said Gil Geron, the chief executive officer of Orca Security.

"We believe access to effective, defensive security tools is essential to supporting secure business operations around the world and this would be a step in the wrong direction to deny this level of protection," he said.

None of the other aforementioned firms immediately responded to requests for comment.

Reuters previously reported on the Chinese directive.

Source: Theedgemarkets

India's cryptocurrency industry is mounting a renewed push for significant tax reform ahead of the country's February Union Budget. Exchange executives argue that the current tax structure, established in 2022, is stifling the domestic market and driving users, capital, and innovation to offshore platforms.

The call for change comes as policymakers finalize the fiscal agenda for the upcoming financial year. The industry sees the Union Budget, expected on February 1, as a critical opportunity to recalibrate tax policy without needing entirely new legislation.

The Problem with India's Current Crypto Tax Rules

The existing framework imposes a heavy burden on crypto investors and traders. Key policies introduced in 2022 include:

• A flat 30% tax on all gains from crypto assets.

• A 1% tax deducted at source (TDS) on most transactions, regardless of profit or loss.

• A restriction on loss offsetting, meaning traders cannot use losses from one crypto trade to offset gains from another.

Industry leaders contend that this regime is outdated. They argue it fails to reflect the maturation of the global digital asset market and India's own progress in strengthening regulatory oversight. The core issue, they say, is that while compliance is now firmly in place, tax friction remains a major deterrent.

Industry Leaders Propose a Path Forward

Executives from India's top crypto exchanges believe that a more balanced approach can foster innovation while supporting the government's compliance goals. Sustained pressure on regulated platforms, they warn, only serves to undermine the very oversight regulators want to achieve.

WazirX: Aligning with Global Web3 Maturity

Nischal Shetty, founder of the exchange WazirX, stated that the upcoming budget is a chance to fine-tune a framework that supports both transparency and growth. He argued that the current rules should be reassessed to align with how Web3 has evolved globally, citing increased institutional adoption and new regulations worldwide.

Shetty specifically called for a calibrated reduction in the TDS and a review of the loss set-off rules. He believes these changes would help restore onshore liquidity, boost compliance, and ensure more economic activity stays within India.

ZebPay: A Pivotal Moment for Onshore Liquidity

Raj Karkara, Chief Operating Officer of ZebPay, described the budget as a "pivotal moment" for the sector. He emphasized that rationalizing the 1% TDS could significantly improve liquidity and encourage stronger participation in the domestic market. Karkara also suggested that a review of the flat 30% tax on gains would create a more stable and predictable environment for investors.

Binance: Moving Beyond a "Tax-and-Deter" Model

SB Seker, head of APAC at Binance, noted that the budget is an opportunity to adjust India's crypto tax policy in light of growing retail participation. He advocated for a more pragmatic system focused on realized capital gains, with provisions for limited loss set-offs and the removal of transaction-level taxes.

According to Seker, this would improve fairness for users and signal a shift away from what he termed a "tax-and-deter" regime. He added that clear operating standards for virtual digital asset (VDA) platforms, aligned with India's anti-money laundering and investor protection priorities, would encourage responsible investment, create skilled jobs, and build domestic capabilities.

A Balancing Act: Stricter Rules Amid Calls for Relief

The industry's lobbying efforts are unfolding against a backdrop of tightening regulatory enforcement. Crypto platforms in India are currently facing increasingly stringent compliance demands.

On Monday, India's Financial Intelligence Unit rolled out new Know Your Customer (KYC) rules. These require exchanges to verify users with live selfie checks, IP and geolocation tracking, bank account verification, and additional government-issued identification.

Simultaneously, tax authorities continue to express concerns about the sector. On January 8, officials from India's Income Tax Department warned lawmakers that offshore exchanges, private wallets, and decentralized finance (DeFi) tools make it difficult to track taxable crypto income effectively. This creates a complex environment where the industry is pleading for tax relief while regulators focus on closing enforcement gaps.

The Trump administration has officially approved sales of Nvidia's powerful H200 artificial intelligence chips to China, a move that immediately triggered a backlash from U.S. lawmakers and national security experts. Critics argue the decision threatens to erode America's technological edge and directly empower Beijing's military.

On Tuesday, the administration formalized a rule that effectively allows shipments of the H200 chips, reversing a previous ban implemented by the Biden administration over security concerns. The policy shift has ignited a fierce debate in Washington over the best way to manage the U.S.-China tech rivalry.

National Security vs. Market Access

Opponents of the new policy warn that providing China with advanced AI hardware is a strategic blunder. Matt Pottinger, who served as a senior White House Asia advisor during Trump's first term, labeled the administration's approach as being on the "wrong track."

Speaking at a congressional hearing, Pottinger claimed the sales "will supercharge Beijing's military modernization, enhancing capabilities in everything from nuclear weapons to cyber warfare, autonomous drones, biological warfare and intelligence and influence operations." He urged Congress to intervene, stating, "Congress needs to put guardrails in place so that this mistake can't be repeated."

Nvidia defended its position, with a spokesperson stating, "America should always want its industry to compete for vetted and approved commercial business, supporting real jobs for real Americans."

The Administration's Controversial Rationale

The Trump administration, led by White House AI czar David Sacks, argues that selling advanced AI chips to China serves a strategic purpose. The theory is that it discourages Chinese tech giants like Huawei from accelerating efforts to develop their own high-end chip designs to rival those from Nvidia and AMD.

However, Pottinger dismissed this notion as a "fantasy."

Other Republican lawmakers voiced similar concerns. "They steal so much intellectual property from this country but we don't have to sell it to them," said Congressman Michael McCaul, speaking generally about technology transfers.

New Export Rules and Lingering Doubts

The new regulations come with several conditions designed to mitigate risks:

• Third-Party Vetting: Before export, chips must be reviewed by a testing lab to confirm their AI capabilities.

• Supply Caps: China cannot receive more than 50% of the total volume of chips sold to American customers.

• Domestic Priority: Nvidia must certify that the U.S. has a sufficient supply of H200s before shipping any to China.

• End-Use Restrictions: Chinese customers must demonstrate "sufficient security procedures" and are prohibited from using the chips for military purposes.

Reaction to these guardrails is mixed. Congressman Brian Mast, who chairs the House Foreign Affairs Committee, praised the "know your customer" provisions as "significant."

In contrast, Jon Finer, a former deputy U.S. national security advisor under President Joe Biden, warned that the rules would heavily burden the Commerce Department. He also noted the policy relies on Chinese buyers providing truthful information about their own customers.

Bipartisan Criticism Mounts

Criticism of the policy change has come from both sides of the aisle. Democratic Congressman Gabe Amo offered a sharp rebuke, saying, "It's truly like Trump is handing our opponents our coordinates in the middle of a battle." He asked panelists at the hearing, "Why are we giving up our advantage?"

Despite the policy green light, it remains unclear how many chips will actually be sold. A recent Reuters report indicated that Chinese customs authorities have told agents that Nvidia's H200 chips are not permitted to enter the country, adding a layer of practical uncertainty to the ongoing debate.

The U.S. manufacturing sector closed out 2025 on a weak note, concluding a difficult year defined by contraction and uncertainty. According to the Bureau of Labor Statistics, manufacturers cut 63,000 jobs. Meanwhile, the Institute for Supply Management’s manufacturing index registered 47.9 in December, its 10th straight month in contraction territory, dragged down by particularly weak new orders and historically high costs.

This downturn isn't just a blip on a chart. The Federal Reserve's Beige Book and regional bank surveys have consistently highlighted manufacturers delaying investment and hiring due to weak demand, rising expenses, and shrinking profit margins. The "hard data" on manufacturing output and capacity also showed a decline through the fall.

This reality stands in stark contrast to the manufacturing renaissance President Donald Trump promised upon taking office for his second term. With the sector stagnant at best, administration officials have shifted their timeline, now projecting a factory boom in 2026 and beyond. However, a closer look suggests that even with favorable tax and regulatory policies, the sector will likely continue to face significant headwinds, with Trump's tariffs being a primary cause.

The Global Reality of American Factories

Modern American manufacturing is deeply intertwined with international trade. The National Association of Manufacturers (NAM) reports that 91% of U.S. manufacturers rely on imported components, which account for about half of all American goods imports each year. This dependence is especially critical in advanced sectors like semiconductors, aerospace, and medical devices, all of which are built on complex global supply chains.

The connection to global markets is a two-way street. U.S. manufacturers export over $1.6 trillion in goods annually, representing about a quarter of their total output. They are also a major destination for billions in foreign direct investment. Companies engaged in international trade employ approximately 80% of all manufacturing workers in the United States. In short, the sector is large, productive, and fundamentally global.

How Tariffs Undermine US Producers

President Trump's broad tariffs disrupt these global operations in several key ways, creating significant disadvantages for domestic companies.

Rising Costs and Squeezed Margins

The most direct impact of tariffs is an increase in production costs. Tariffs on steel, aluminum, and copper have pushed domestic prices for these essential materials to significant premiums over global benchmarks. This cost inflation extends to imported parts and equipment, raising expenses for manufacturers across the board.

These higher costs put American firms at a competitive disadvantage. They are forced to pay more for the same inputs than their foreign rivals, making U.S. investments less attractive and American-made goods harder to sell, both domestically and overseas. Retaliatory tariffs from other countries on U.S. exports only amplify these challenges.

The Myth of "Buying American"

For many manufacturers, simply switching to domestic suppliers isn't a viable option. NAM estimates that even if U.S. suppliers ran at full capacity, they could only meet 84% of domestic producers' input needs. This means at least 16% of components must be imported—a figure that is much higher for specific commodities like aluminum.

Furthermore, many of these imports are not from third-party suppliers but are intra-firm transactions. In 2024, roughly half of all U.S. goods imports occurred between related corporate parties, with high concentrations in sectors like transportation equipment, chemicals, and electronics. This means multinational companies are effectively paying a hefty tax to move components from their own overseas facilities for further processing in the United States, disrupting efficient, long-established supply chains that cannot be reconfigured easily.

Complexity and Uncertainty: The Hidden Cost of Tariffs

Beyond the direct costs, the implementation of these tariffs has created a punishing environment of complexity and uncertainty.

Manufacturers can often adapt to stable, predictable trade rules. Instead, they face a constantly changing and opaque system of import taxes enacted by executive order. In the last year alone, the U.S. tariff code was amended 50 times—a non-pandemic record that is far above pre-Trump norms.

This constant flux has fueled an unprecedented rise in trade policy uncertainty, causing companies to pause hiring, delay capital expenditures, and rethink supply chain strategies. The complexity has also imposed enormous administrative burdens. By the end of last year, 20 different tariff measures were applied to U.S. imports, up from just three in 2017. These taxes vary by product and country, making compliance a nightmare even for certified customs brokers.

According to Federal Reserve economists, the cost for domestic manufacturers to comply with this new regime is estimated to be between $39 billion and $71 billion annually. This is time and money that cannot be invested back into their businesses.

A Tough Outlook for the Industrial Sector

The damage inflicted by these tariff policies helps explain why the manufacturing sector struggled so much in 2025 and why the outlook remains cautious. Industry forecasts continue to point to headwinds from high costs, persistent uncertainty, and regulatory complexity.

Relief is unlikely to come from the courts. Even if the Supreme Court invalidates the "emergency" tariffs, administration officials have already promised to use alternative authorities to reinstate them.

Global supply chains were built over decades. Reorganizing them will take even longer and come at a great cost—if they don't break down completely in the process.

India is awaiting further details from the United States regarding President Donald Trump's threat to impose tariffs on nations conducting business with Iran, according to a statement from India's trade secretary on Thursday.

India's Stance on Its Iran Dealings

The official stressed that India's trade relationship with Iran is "limited." They characterized the existing commerce as consisting primarily of humanitarian goods, downplaying the economic scope of the ties between the two countries.

This response follows a declaration from U.S. President Donald Trump on Monday. He announced that any country engaging in business with Iran would be subject to a 25% tariff on its trade with the United States. The timing of this threat coincides with a period of significant anti-government protests within Iran.

Broader US-India Trade Context

Despite the looming tariff issue, India's trade secretary noted that U.S. exports to India are performing well. This positive trend is reportedly supported by trade in electronic goods and the existence of certain exemptions.