How Big Tech is paying its way out of Trump’s tariffs

Economic

Summary:

Big Tech is striking deals with Trump to ease tariff pressures. Nvidia and AMD secured China chip sales by giving the U.S. 15% of revenues, while Apple pledged $600B U.S. investment to avoid tariffs.

Top tech executives are at the forefront of a recent swathe of unprecedented deals with U.S. President Donald Trump.

In just the last few days, the White House confirmed that two U.S. chipmakers, Nvidia and AMD , would be allowed to sell advanced chips to China in exchange for the U.S. government receiving a 15% cut of their revenues in the Asian country.

Apple CEO Tim Cook, meanwhile, recently announced plans to increase the firm’s U.S. investment commitment to $600 billion over the next four years. The move was widely seen as a bid to get the tech giant out of Trump’s crosshairs on tariffs — and appears to have worked for now.

Altogether, analysts say the deals show just how important it is for the world’s largest companies to find some tariff relief.

“The flurry of deal-making is an effort to secure lighter treatment from tariffs,” Paolo Pescatore, technology analyst at PP Foresight, told CNBC by email.

“In some shape or form, all of the big tech companies have been negatively impacted by tariffs. They can ill afford to fork out on millions of dollars in additional fees that will further dent profits as underlined by recent quarterly earnings,” Pescatore said.

While the devil will be in the detail of these agreements, Pescatore said that Apple leading the way with its accelerated U.S. investment will likely trigger “a domino effect” within the industry.

Apple, for its part, has long been regarded as one of the Big Tech firms most vulnerable to simmering trade tensions between the U.S. and China.

Earlier this month, Trump announced plans to impose a 100% tariff on imports of semiconductors and chips, albeit with an exemption for firms that are “building in the United States.”

Apple, which relies on hundreds of different chips for its devices and incurred $800 million in tariff costs in the June quarter, is among the firms exempt from the proposed tariffs.

A ‘hands-on’ approach

The Nvidia and AMD deal with the Trump administration has meanwhile sparked intense debate over the potential impact on the chip giants’ businesses and whether the U.S. government may seek out similar agreements with other firms.

Some strategists described the arrangement as a “shakedown,” while others suggested it may even be unconstitutional and comparing it to a tax on exports.

White House Spokesperson Karoline Leavitt said Tuesday that the legality and mechanics of the 15% export tax on Nvidia and AMD were “still being ironed out.” She also hinted deals of this kind could expand to other companies in future.

Ray Wang, founder and chairman of Constellation Research, described the Nvidia and AMD deal to pay 15% of China chip sales revenues to the U.S. government as “bizarre.”

Speaking to CNBC’s “Squawk Box” on Monday, Wang said what is “really weird” is there is still some uncertainty over whether these chips represent a national security issue.

“If the answer is no, fine OK. The government is taking a cut out of it,” Wang said. “Both Nvidia’s Jensen Huang and Lisa Su at AMD both decided that OK, we’ve got a way to get our chips into China and maybe there is something good coming out of it.”

Investor concerns

While investors initially welcomed the deal as broadly positive for both Nvidia and AMD, which once more secure access to the Chinese market, Wang said some in the industry will nevertheless be concerned.

“As an investor, you’re worried because then, is this an arbitrary decision by the government? Does every president get to play kingmaker in terms of these deals?” Wang said.

“So, I think that’s really what the concern is, and we still have additional tariffs and trade deals to come from the China negotiations,” he added.

Looking ahead, Dan Niles, founder and portfolio manager at Niles Investment Management, said the question for investors is whether the Trump administration’s “hands-on” approach is positive or negative for U.S. companies.

“I think for each company, it is very different. So, it certainly it is something I take into account. The bigger thing for me is do you have some stability of policy? Do you have a policy one week and then it flips the next?” Niles told CNBC’s “Closing Bell: Overtime” on Monday. “Right now, that is what concerns me a little bit more.”

Source: cnbc

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Michelle

Economic

Forex

The likelihood of a Federal Reserve rate cut in September is now seen near 100% after new data showed U.S. inflation increasing at a moderate pace in July and Treasury Secretary Scott Bessent said he thought an aggressive half-point cut was possible given recent weak employment numbers.

Traders in contracts tied to the benchmark federal funds rate on Wednesday put the odds of a quarter-percentage point cut at the Fed's September 16-17 meeting at 99.9%, according to estimates calculated by the CME Group's FedWatch tool that followed the release of July Consumer Price Index data on Tuesday and later comments by Bessent noting that the Fed used fears of a weakening job market as justification for a larger cut last September.

Trump has slammed that cut as politically motivated given the proximity to the November presidential election.

Bessent rooted his argument in recent Bureau of Labor Statistics revisions showing job growth had slowed to a crawl in May, June and July, though initial estimates for May and June showed stronger employment growth that Fed officials used to argue that the labor market remained in good shape.

"If we'd seen those numbers in May, in June, I suspect we could have had rate cuts in June and July. So that tells me that there's a very good chance of a 50 basis-point rate cut," in September, Bessent said in an interview on Bloomberg television.

Source: Reuters

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Adam

Cryptocurrency

Riding high from a series of legislative wins and a wave of new financial initiatives, crypto investors are on the up and up. Another blast of positive catalysts has given the crypto world even more room to run this week.

And most notably, the big news items don't really involve bitcoin.

Circle (CRCL), the issuer of the second-largest stablecoin, posted better-than-expected quarterly revenue for the first time since going public.

Bitmine (BMNR), an Ethereum treasury company, announced plans to sell up to another $20 billion worth of stock to boost its holdings of the cryptocurrency.

And an array of popular altcoins are gaining ground.

The moves collectively reflect the warm embrace of the Trump administration, which has championed the crypto industry and shifted the regulatory environment long seen as an obstacle to the adoption and growth of digital currency.

But the success of Wall Street's crypto hedges also underscores rising institutional interest. Despite the risks, and perhaps because of them, more investors are growing comfortable with crypto exposure. And companies are chasing the returns of amassing tokens in a feedback loop that, however fleeting and precarious, seems to be paying off.

Home to the fastest-growing major stablecoin over the past year, Circle shares are up more than 400% from its IPO price of $31 per share. As our colleague Ines Ferré reported, the company has been at the center of optimism over the stablecoin market following the passage of the GENIUS Act, legislation that creates a framework for digital tokens backed by assets such as the US dollar.

Circle makes much of its money from interest income, specifically from short-term Treasury bills backing its stablecoin, USDC. After announcing a new blockchain network for stablecoin finance on Tuesday, shares rose another 3%. It's a play that could deliver some of crypto's promise for innovation to the financial services industry, and Wall Street and investors are paying attention — and making sure they're involved.

Bitmine's surge highlights another pillar of crypto's ascendance in the financial world: the rise of crypto treasury companies. Riffing off the playbook of Strategy (MSTR), which sells new shares and debt to buy and hold more bitcoin, other players are finding success by accumulating other currencies, like ethereum.

Bitmine, whose board is led by investor Tom Lee, announced this week that its holdings of ETH now account for roughly 1% of all tokens in circulation, sending the stock up more than 14%. The company's goal is to eventually reach 5% of the world's outstanding ETH tokens. Shares have surged over 600% this year.

As this newsletter has written recently, the crypto accumulation strategy isn't working for every imitator, but it does work, as bitcoin continues to climb.

But it's not just the dominant tokens that are gaining steam. Over the past week, the 10 largest digital currencies, according to data from CoinMarketCap, have gained. As our colleague Jake Conley reported, Ripple (RIPL.PVT) and Chainlink (LINK-USD) are among the altcoins rallying, fueled by an acquisition of a payment platform and the launch of a token reserve, respectively.

The heady action seems far removed from the crypto winters of the past. But if this is the dawn of a new financial system, as crypto bulls like to profess, this summer is making it a lot easier to make that case.

Source: finance.yahoo

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Glendon

Economic

Political

US President Donald Trump said he would be speaking to European leaders shortly as he prepares for his summit later this week with Russian counterpart Vladimir Putin.

“Will be speaking to European Leaders in a short while. They are great people who want to see a deal done,” Trump wrote on social media Wednesday.

The call comes as Trump ramps up diplomatic efforts to end Russia’s war in Ukraine — now well into its fourth year — with a face—to-face meeting with Putin on American soil.

The sitdown slated for Friday in Alaska has raised worries among Kyiv’s allies that the US and Russian presidents may negotiate a deal that swaps land for peace without Ukraine’s input or leaves Ukrainian President Volodymyr Zelenskiy sidelined or without the security assurances needed to deter further aggression.

Earlier: European Leaders Want to Speak to Trump Before He Meets Putin

Trump has said that there may be “some changes” in land, but has also sought to downplay expectations for the summit, casting it as a “feel-out meeting” and saying that he would confer with Ukrainian and European leaders after his gathering with Putin.

“I’m going to be telling him, ‘You got to end this war. You got to end it,’” Trump said Monday at a White House press conference. “I may leave and say, ‘Good luck,’ and that’ll be the end. I may say this is not going to be settled.”

Trump lashed out at what he said was “very unfair media” ahead of the Putin summit in a subsequent social media post on Wednesday.

“If I got Moscow and Leningrad free, as part of the deal with Russia, the Fake News would say that I made a bad deal!,” Trump wrote.

Zelenskiy has ruled out Putin’s demand for territory that Moscow does not control as a pre-condition for a ceasefire, saying that he would need to seek constitutional approval for such a move. That explanation appeared to rankle Trump earlier this week.

Trump has indicated that he did not plan to invite Zelenskiy to the summit, saying the next step after the bilateral meeting would be for Putin and the Ukrainian president to meet directly. Trump offered to mediate that conversation, if necessary.

The call with European leaders follows a weekend of diplomacy between US, Ukrainian and European officials. European leaders have said that any peace agreement must “respect international law, including the principles of independence, sovereignty, territorial integrity.”

Source: Yahoo Finance

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Glendon

Economic

Forex

A largely benign US inflation report is bolstering the case for traders wagering that the Federal Reserve will soon cut interest rates, with some seeing an increased possibility of an outsize reduction.

Bets that the Fed will start bringing down borrowing costs next month accelerated on Wednesday, with interest-rates swaps lifting the odds of a cut in September to around 95%. Treasuries gained across the maturities, with the yield on the 10-year note falling four basis points to 4.25%.

Treasury Secretary Scott Bessent urged policymakers to use the September meeting to kick off a cutting cycle.

“We could go into a series of rate cuts here, starting with a 50 basis point rate cut in September,” Bessent said in a television interview on Bloomberg Surveillance Wednesday. “We should probably be 150, 175 basis points lower.”

For weeks, investors have piled into swaps, options and outright Treasury longs to wager that subdued inflation and weakness in the labor market will allow the Fed to start cutting.

It’s a view that has gained momentum from recent economic releases showing July consumer prices were largely in line with expectations while the US labor market showed surprise weakness in recent month.

That’s also helped fuel bets that the Fed will reduce rates by more than 25 basis points in September. Traders added some $2 million in premium on Tuesday to a position in the Secured Overnight Financing Rate (SOFR) that would benefit from such a move.

The inflation report “was a bit stronger than we have seen over the prior few months, but lower than many have feared,” said Rick Rieder, chief investment officer of global fixed income at BlackRock, in a note. “As a result, we expect the Fed to begin cutting rates in September, and it could be justified cutting the Funds rate by 50 basis points.”

Tuesday’s report was far from an all-clear for the Fed. Though a tepid rise in the costs of goods tempered concerns about tariff-driven price pressures, underlying US inflation accelerated in July by the most since the start of the year.

With more than a month remaining until the central bank’s September 16-17 meeting, Treasury bulls will also need to weather another major inflation report as well as key employment data.

“September is not a done deal,” Claudia Sahm, chief economist at New Century Advisors, said on Bloomberg TV. “We do not have the data that puts this one in the bag yet.”

For now, however, bets on a dovish Fed are taking the spotlight. The options trade linked to SOFR September contracts — where premium now stands at roughly $5 million — could pay off as much as $40 million should they price in a 50 basis point rate cut for that month, Bloomberg calculations showed.

Meanwhile in the cash market, investors unwound long positions in the build-up to the inflation data, shown by a survey of JPMorgan Treasury clients covering the week up to Aug. 11.

Source: Bloomberg Europe

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Warren Takunda

Economic

The US federal deficit surged to $291 billion (€248bn) in July, marking a 19% increase from the same month last year and one of the biggest jumps in recent years, according to Treasury Department data.

It’s the largest spending total ever recorded for the month of July, though some other months—particularly during the peak of COVID-19 stimulus—saw even higher outlays overall.

Even though the country is now earning more from tariffs—customs receipts were multiplied by four, going from about $7.1 billion (€6.06bn) in July 2024 to roughly $27.7 billion (€23.7bn) this year—this was not enough to offset a sharp rise in spending.

Why is the US federal deficit increasing?

Spending rose as bigger Social Security checks, increased Medicare and Medicaid costs, and higher interest payments on the national debt combined with pricier defence, education and healthcare programs, pushing the July deficit to a record high.

The July figure follows a volatile stretch in the federal government’s monthly balances, driven in part by new import duties and the quirks of the fiscal calendar.

In May, the deficit narrowed to $316 billion (€269.8bn), or $219 billion (€187bn) when adjusted for timing differences, as tariff revenue from newly imposed import taxes provided an early windfall. June appeared at first to show a rare surplus, but this was largely an illusion—when adjusted for payment shifts, the month actually posted a $71 billion (€60.6bn) deficit.

July’s return to a deep shortfall underscores a broader fiscal reality. Namely, while tariffs have injected tens of billions into the Treasury in recent months, they have not changed the structural imbalance between revenue and expenditure. Spending has continued to outpace receipts, even amid healthy customs income.

June’s brief surplus aside, the government’s shortfall remains substantial, with one-off revenue boosts from tariffs unable to contain the impact of persistent, broad-based spending growth. As the Treasury’s figures show, even months of record customs collections have done little to slow the pace of red ink.

Source: Euronews

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Adam

Commodity

Gold prices are firmer and silver prices solidly up in early U.S. trading Wednesday, supported by a lower U.S. dollar index that hit a three-week low today, and by a dip in U.S. Treasury yields at mid-week. December gold was last up $12.20 at $3,411.10. September silver prices were up $0.593 at $38.595.

Asian and European stock markets were mixed overnight. U.S. stock indexes are set to open modestly up when the New York day session begins.

More Wall Street firms are forecasting the Federal Reserve will begin cutting U.S. interest rates in September as the labor market weakens and inflation remains relatively tame. The Fed will likely lower the main interest rate by 25 basis points at the September FOMC meeting, followed by two more cuts in December and March, Nomura economists forecast. Markets are also pricing in Fed rate cuts, indicating a September cut and positioning for another reduction in December. U.S. consumer price data Tuesday showed the core reading (minus food and energy) increased 3.1% in July, year-on-year, which was just above market expectations but not considered problematic.

Global oil markets are on track for a record crude oil supply surplus next year as demand growth slows and supplies rise, the International Energy Agency reported today. Oil inventories will accumulate at a rate of 2.96 million barrels a day, surpassing even the average buildup during the pandemic year of 2020, data from the IEA’s monthly report showed. The IEA said "Oil-market balances look ever more bloated as forecast supply far eclipses demand towards year-end and in 2026," and said "It is clear that something will have to give for the market to balance."

China’s credit expansion rebounded less than expected in July from a year ago, with a key loan gauge falling to the lowest since 2007, despite a boost from a rise in Chinese government bond sales. Aggregate financing, a measure of credit, increased 1.2 trillion yuan ($167 billion) in July, according to Bloomberg calculations based on data released by the People’s Bank of China on Wednesday. Banks are usually in no rush to meet their quarterly loan targets in July, putting the brakes on financing activity. A year ago, bank credit to the real economy contracted for the first time since 2005, as domestic demand slumped with the economy caught in a deflationary cycle. Policymakers aren’t close to injecting more stimulus any time soon, given China’s solid economic growth in the first half of this year. Analysts generally expect the PBOC to roll out monetary easing in the fourth quarter, following cuts to interest rates and banks’ reserve requirement ratio in May.

U.S. Treasury Secretary Scott Bessent said Tuesday that U.S. trade officials will reconvene with their Chinese counterparts within two to three months to discuss the future of bilateral trade between the world’s two largest economies. His comments followed this week’s extension of a 90-day tariff truce between the two nations, which temporarily averts more duties on each other's goods. Bessent also said the U.S. would require “months, if not quarters, if not a year” of sustained progress in curbing fentanyl flows from China before considering any tariff reductions.

The Bank of Thailand cut its key interest rate and signaled it will remain accommodative as higher U.S. tariffs risk setting off a prolonged period of economic weakness. The central bank’s Monetary Policy Committee voted unanimously Wednesday to cut the one-day repurchase rate by 25 basis points to 1.5%. The move was not a surprise. The BOT has now delivered a total of 100 basis points in rate cuts in an easing cycle that began last October.

The key outside markets today see the U.S. dollar index lower, with crude oil prices down a bit and trading around $62.75 a barrel. The yield on the benchmark 10-year U.S. Treasury note is presently 4.25%.

U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey and the weekly DOE liquid energy stocks report.

Gold price modestly up as USDX down, U.S. bond yields dip_1

Technically, December gold futures bulls have the firm overall near-term technical advantage. Bulls’ next upside price objective is to produce a close above solid resistance at $3,500.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at the July low of $3,319.20. First resistance is seen at $3,425.00 and then at $3,450.00. First support is seen at this week’s low of $3,379.10 and then at $3,350.00. Wyckoff's Market Rating: 7.0.

Gold price modestly up as USDX down, U.S. bond yields dip_2

September silver futures bulls have the firm overall near-term technical advantage. Silver bulls' next upside price objective is closing prices above solid technical resistance at the July high of $39.91. The next downside price objective for the bears is closing prices below solid support at the July low of $36.28. First resistance is seen at last week’s high of $38.875 and then at $39.00. Next support is seen at $38.00 and then at this week’s low of $37.515. Wyckoff's Market Rating: 7.0.