Trump Clashes With Dimon Over Fed Probe and Rate Caps

The Trump administration has officially approved the sale of Nvidia’s H200 artificial intelligence chips to China, implementing a new rule that greenlights the exports despite significant pushback from national security hawks in Washington.

This move allows shipments of the company's second most powerful AI chips to proceed under a strict set of conditions designed to manage technology transfer.

New Rules for Chip Exports

To manage the flow of advanced technology, the administration has established several key requirements for any China-bound sales of the H200 chips:

• Third-Party Vetting: All chips must be reviewed by an independent testing lab to verify their technical AI capabilities before shipment.

• Volume Cap: China cannot receive more than 50% of the total volume of H200 chips sold to American customers.

• Supply Certification: Nvidia is required to certify that there is a sufficient supply of H200 chips available within the United States.

• End-User Security: Chinese customers must demonstrate they have adequate security procedures in place.

• Military Use Prohibited: The chips are explicitly banned from being used for any military purposes.

Policy Reversal Sparks Debate

The decision formalizes President Donald Trump's announcement last month to permit the chip sales, which will also be subject to a 25% fee. This policy has drawn sharp criticism from China hawks across the U.S. political landscape, who argue that providing Beijing with powerful AI chips could accelerate its military modernization and erode America's technological edge.

These concerns had previously led the Biden administration to block sales of advanced AI chips to China. The Trump administration, however, is pursuing a different strategy.

A Strategy to Outpace Competitors

The new policy, championed by White House AI czar David Sacks, is based on a specific strategic calculation. The administration argues that allowing controlled sales of advanced American AI chips to China discourages domestic competitors like Huawei from aggressively accelerating their own research and development.

According to this view, supplying the market with top-tier chips from Nvidia and AMD disincentivizes Chinese firms from redoubling efforts to match or surpass the most advanced U.S. chip designs, thereby helping to manage the long-term competitive landscape.

U.S. President Donald Trump has declared his intention to impose a 25% tariff on any country conducting business with Iran, dramatically increasing economic pressure on Tehran. The move comes as the Iranian government contends with significant domestic protests fueled by years of economic hardship.

Western sanctions have already taken a heavy toll on the OPEC member's economy, leading to high inflation, unemployment, and a collapse in its currency, the rial. The current wave of protests is a direct result of these persistent economic troubles, which Iran has struggled to manage amid its international isolation.

This new tariff threat directly targets Iran's primary sources of revenue, which come from exports to key partners including China, Turkiye, Iraq, the United Arab Emirates, and India. The central questions are how this will impact Iran's global trade and how nations like China, which buys 80% of Iran's oil, will react.

The Tariff Announcement: A Direct Threat

The policy was announced via a post on Trump's Truth Social platform.

"Effective immediately, any country doing business with the Islamic Republic of Iran will pay a Tariff of 25% on any and all business being done with the United States of America," Trump stated, adding, "This Order is final and conclusive."

Notably, the announcement was not accompanied by any official documentation from the White House, leaving the legal authority for such a sweeping tariff unclear.

The threat marks a significant escalation in Trump's pressure campaign against Iran's leadership. In response, Iranian Foreign Minister Abbas Araghchi issued a stark warning in an interview with Al Jazeera Arabic, stating that Iran is prepared for war if the U.S. wants to "test" its military capabilities. "If Washington wants to test the military option it has tested before, we are ready for it," Araghchi said, expressing hope that the U.S. would choose dialogue instead.

China on High Alert as Top Trading Partner

China stands to be the most affected by the new policy. As Iran's largest trading partner, the two nations officially conducted over $13 billion in trade in 2024, according to U.N. Comtrade data. However, the actual figure is likely much higher, with 2022 World Bank data suggesting a trade volume of $37 billion, much of it conducted through unofficial channels to bypass sanctions.

Last year, China imported 80% of Iran's oil, providing a crucial economic lifeline as other major buyers like India scaled back purchases following U.S. sanctions during Trump's first term. Chinese imports from Iran are not limited to oil; they also include plastics, iron ore, chemicals, and methanol.

For Chinese manufacturers, this potential 25% tariff would be applied on top of an existing 35% tariff on goods sold to the U.S. The development threatens a recent trade truce between Washington and Beijing, which saw tariffs on Chinese goods reduced from over 100%. It could also jeopardize Trump's planned visit to Beijing in April.

Chinese officials have condemned the move. The Chinese embassy in Washington warned that Beijing would take "all necessary measures" to protect its interests and rejected the use of "illicit unilateral sanctions." Foreign Ministry spokeswoman Mao Ning reiterated that "there are no winners in a trade war" and affirmed that "China will resolutely safeguard its legitimate rights and interests."

Ripple Effects for Other Key Trading Partners

Several other countries maintain significant trade relationships with Iran and now face potential U.S. tariffs.

• Turkiye: As Iran's second-largest trading partner, Turkiye's bilateral trade was valued at approximately $5.7 billion in 2024. The country already faces a baseline U.S. tariff of 15%, with tariffs on steel and aluminum recently doubled to 50%.

• Pakistan: A top destination for Iranian exports, trade with Pakistan totaled about $1.2 billion in 2024. Pakistani exports to the U.S. are currently subject to a 19% tariff.

• India: Another key export market for Iran, India's trade value exceeded $1.05 billion in 2024. India already contends with 50% U.S. duties on its steel and aluminum, along with a 50% tariff on a range of other exports.

The Sanctions Playbook: A History of Pressure

The U.S. has long used sanctions to target Tehran's nuclear program, which Washington alleges is aimed at developing a nuclear weapon—a claim Iran denies.

Most sanctions were lifted under the 2015 nuclear deal brokered by the Obama administration. However, Trump withdrew the U.S. from the agreement in 2018 and launched a "maximum pressure" campaign, reimposing sanctions and adding new ones targeting Iran's petrochemical, metals, and senior officials.

This campaign has severely restricted Iran's oil exports and its access to the global financial system.

Gauging the Damage to Iran's Economy

The economic consequences of past sanctions have been severe. Iran's oil exports, its primary revenue source, fell by 60% to 80%, costing the government tens of billions of dollars annually.

• GDP Per Capita: Dropped from over $8,000 in 2012 to just over $5,000 in 2024, according to World Bank data.

• Oil Exports: Plummeted from 2.2 million barrels per day (bpd) in 2011 to a low of just over 400,000 bpd in 2020. While exports have since recovered to around 1.5 million bpd in 2025, they remain well below pre-2018 levels.

Despite the pressure, foreign trade remains vital. In 2024, Iran's exports were worth approximately $22.9 billion, accounting for about 5% of its total GDP of $475.3 billion. Trump's latest threat aims to squeeze this remaining economic activity even further.

DOJ Referral

Source: Bloomberg

U.S. oil production is set to decline by 1% this year as lower prices curb drilling activity, according to a forecast from the Energy Information Administration (EIA). The government agency also warned that a potential increase in oil supply from Venezuela could exert even more downward pressure on the market.

This analysis from the EIA, the statistical arm of the Department of Energy, reflects concerns already voiced by American shale producers. They argue that President Donald Trump's push for U.S. companies to help restart Venezuelan output following the capture of President Nicolas Maduro would further harm their businesses, which are already struggling with low oil prices.

Lower Prices Expected to Curb Drilling

In its monthly Short Term Energy Outlook, the EIA projected that Brent crude prices will average $56 a barrel this year, a significant drop from last year's average of $69. The agency attributes this decline to global liquid fuels production outpacing demand, leading to a buildup in inventories.

This environment of sustained lower prices is expected to trigger a slowdown in U.S. operations. "Over the next two years, we expect sustained lower crude oil prices will result in a pullback in drilling and completion activity that is enough to outweigh ongoing increases in productivity," the EIA stated.

As a result, U.S. oil output is forecast to slip from a record 13.61 million barrels per day (bpd) in 2025 to an average of 13.59 million bpd this year. The EIA sees a further decline to 13.25 million bpd next year.

The Venezuela Wildcard

The EIA's current outlook was finalized under the assumption that U.S. sanctions against Venezuela will remain in effect through 2027. However, the agency noted that any policy changes could significantly alter the forecast.

If sanctions are eased, allowing more Venezuelan oil to enter the global market, prices could fall more steeply than currently projected. "Any change in sanctions or other U.S. government policy related to Venezuela that could result in more oil production than we assumed in this forecast would put additional downward pressure on oil prices," the report explained.

This possibility was highlighted by U.S. Treasury Secretary Scott Bessent, who recently told Reuters that more sanctions on Venezuela could be lifted as soon as this week to facilitate oil sales.

The head of BNY Mellon, a $2.2 trillion asset management firm, has issued a stark warning that challenges the market's consensus: the Federal Reserve might be forced to raise interest rates again, not cut them. This cautionary note comes as investors widely anticipate a shift toward easier monetary policy.

The CEO expressed concern that the central bank could be pushed into a corner by mounting economic and political pressure. If inflation remains a persistent threat, the Fed may have to tighten its policy further, a move that could slow economic growth or even trigger a recession.

Market Optimism vs. Economic Reality

Many investors have been positioning for interest rate cuts in 2024, fueled by signs that inflation is beginning to cool. However, the BNY Mellon chief suggests this optimism might be premature and that market expectations may be outpacing reality.

Several key factors could force the Fed’s hand:

• A Strong Labor Market: Resilient employment data continues to support the economy.

• Robust Consumer Spending: Consumers have continued to spend, which can keep upward pressure on prices.

• Sticky Inflation: If these elements prevent inflation from falling to the Fed's target, the case for rate cuts weakens significantly.

This analysis stands in sharp contrast to the more optimistic forecasts from analysts who predict the Fed could begin easing as early as mid-2024. If BNY Mellon's assessment is correct, markets could be unprepared for the jolt of another hike.

What Another Hike Means for Investors

The underlying message is clear: investors should not get too comfortable. A surprise rate hike from the Federal Reserve would send shockwaves through global markets, triggering significant volatility.

Such a move would have broad implications for nearly every asset class, from equities and bonds to real estate and cryptocurrencies. For now, all eyes remain fixed on Fed Chair Jerome Powell and the upcoming FOMC meetings, where the central bank's next steps will be scrutinized more closely than ever.

A key group of House Republicans is advancing a plan to allocate up to $1.1 billion to buy discounted Venezuelan crude oil to refill the U.S. Strategic Petroleum Reserve (SPR).

The proposal is a central component of a larger budget framework released Tuesday by the Republican Study Committee, a caucus representing 190 of the 218 Republicans in the House of Representatives.

A Trillion-Dollar Budget Push

The committee’s plan aims to use a filibuster-proof budget reconciliation process to achieve $1 trillion in savings over the next decade. This is the same legislative tool Republicans used last year for major tax cuts and energy policy reforms.

"President Trump has supercharged our economy, and now it's our time in Congress to act to codify what he has done," said Republican Study Committee chairman August Pfluger of Texas.

Beyond the SPR provision, the framework calls for significant cuts to social programs, new limits on regulations, and "royalty-style fees" on environmental lawsuits. It also seeks to streamline permitting and make President Trump's deregulatory actions permanent.

The Details of the Oil Purchase

The plan earmarks $1.1 billion to partially refill the SPR with what it calls "discounted Venezuelan oil made available by Operation Absolute Resolve," a U.S. military operation that took place in the South American country on January 3.

At a potential discounted price of $50 per barrel, the funding would purchase approximately 22 million barrels of crude. The SPR currently has 300 million barrels of available storage capacity.

U.S. Energy Secretary Chris Wright suggested that an increase in Venezuelan oil production could help fill the reserve by lowering global oil prices. "That makes it easier to fill our Strategic Petroleum Reserve back up, which the president is committed to do and we'll get done," Wright said in a January 11 interview on Fox News.

Technical Hurdles and Industry Concerns

However, U.S. oil industry leaders have raised concerns about the technical suitability of Venezuelan crude for the SPR. The reserve stores oil in vast underground salt caverns, and the extra-heavy, high-sulfur crude produced in Venezuela may not be a good fit for long-term storage in this system.

"The grade of Venezuelan crude does have a higher sulfur content than the current SPR can take," noted Mike Sommers, president of the American Petroleum Institute. "There are some logistical issues about the SPR that make it difficult for it to just take in Venezuelan crude."

Industry officials suggest the oil could instead be stored at the Louisiana Offshore Oil Port or sent directly to refineries.

Political Realities and Alternatives

Passing a second major reconciliation bill could prove difficult. House Republicans hold a very narrow majority, and moderate members face a challenging political climate leading up to the November midterm elections.

The Trump administration has signaled it is exploring other options to replenish the reserve. On January 8, Secretary Wright stated he was looking at "creative" methods to refill the SPR that would not require additional appropriations from Congress.