First Thing: Markets brace for trade war as Trump prepares reciprocal tariffs
Good morning.
As Donald Trump prepared to unveil a swathe of reciprocal tariffs, global markets braced themselves and some Republican senators voiced their opposition to a strategy that critics warn risks a global trade war, provoking retaliation by major trading partners such as China, Canada and the EU.
The US president said on Monday he would be 'very kind' to trading partners when he unveils further tariffs this week, possibly as early as Tuesday night.
The Republican billionaire insists that reciprocal action is needed because the world's biggest economy has been 'ripped off by every country in the world', promising 'Liberation Day' for the US.
What do Europeans think of the plans? A large majority of western Europeans support retaliatory tariffs against the US, a survey has shown, if Trump introduces sweeping import duties for major trading partners as expected this week.
Members of Elon Musk's 'department of government efficiency' (Doge) reportedly gained access to a payroll system over the weekend that processes the salaries of about 276,000 federal employees across various government agencies, despite warnings from senior staff about the potential risks.
According to two people familiar with the situation who spoke to the New York Times, Doge employees had spent about two weeks trying to obtain administrative access to the program, known as the Federal Personnel and Payroll System.
Then, toward the end of last week, senior career officials at the interior department reportedly issued a memo highlighting the unusual nature of the request and the associated risks with granting it.
What did the memo say? The memo, reviewed by the Times, stated that 'such elevated access to critical high-value asset systems is rare with respect to individual systems and no single [Department of Interior] official presently has access to all HR, payroll and credentialing systems'.
The president of France's far-right the National Rally (RN) party has described a court's decision to ban Marine Le Pen from public office for five years as 'disproportionate, political and partisan'.
Myanmar's military faces criticism over continued airstrikes and claims it is blocking aid to earthquake survivors, as international agencies urged 'unfettered access' to humanitarian aid in the conflict-riven nation.
Donald Trump's executive order seeking to overhaul US elections faced its first legal challenges yesterday as the Democratic National Committee and a pair of nonprofits filed two separate lawsuits calling it unconstitutional.
At least three people have been killed and seven injured in an Israeli airstrike on Beirut's southern suburbs early on Tuesday, the Lebanese health ministry said.
OpenAI said it had raised $40bn in a funding round that valued the ChatGPT maker at $300bn – the biggest capital-raising session ever for a startup. It comes in a partnership with the Japanese investment group SoftBank and 'enables us to push the frontiers of AI research even further', OpenAI announced, adding it would 'pave the way toward AGI (artificial general intelligence)' for which 'massive computing power is essential'.
The fear that artificial intelligence (AI) will replace millions of jobs is widespread. But equally, in today's tough job market, not using AI wisely as part of your search could mean you miss out, Harriet Meyer writes. It's a tricky balancing act to harness the technology's power without losing the human touch. Here are some tips for supercharging your search and beating the screening, sharpening your speaking skills and boosting your negotiating position.
Economic models have systematically underestimated how global heating will affect people's wealth, according to a new study that finds 4C warming will make the average person 40% poorer – an almost four-fold increase on some estimates. The study, by Australian scientists, says average global GDP per person will be reduced by 16% even if warming is kept to 2C higher. This is much higher than previous estimates of a drop of about 1.4%.
In the end, whatever Elon Musk and Donald Trump liked to insist, the astronauts Barry 'Butch' Wilmore and Sunita Williams have said they were never stuck, nor stranded in space, and definitely not abandoned or marooned. The world heard on Monday, for the first time since their return to Earth two weeks ago, from the two Nasa astronauts whose 10-day flight to the International Space Station (ISS) last summer turned into a nine-month stay. And their story was markedly at odds with the narrative that came from the White House.
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NBC News
41 minutes ago
- NBC News
Some Los Angeles officials fear Marines' 'rules of force'
WASHINGTON — President Trump's deployment of thousands of troops to Los Angeles to quell protests, including 700 active-duty Marines, is fueling concern that the Marines have not been properly trained for interacting with civilians, including children, during potentially tense law enforcement operations. One of the duties of the Marines and National Guard troops will be to provide security for ICE personnel as they conduct immigration raids in the Los Angeles area, according to officials with knowledge of the operation and court filings. National Guard troops and Marines will transport ICE agents to and from raids and secure neighborhood perimeters while ICE agents conduct operations. California Democrats argue that this violates the Posse Comitatus Act, an 1878 law that bars federal troops from participating in civilian law enforcement efforts. California Attorney General Rob Bonta argued in a court motion on Tuesday that the Trump administration's deployment violates that law. 'The federalized National Guard and active-duty Marines deployed in Los Angeles will engage in quintessential law enforcement activity in violation of the PCA,' the motion said, referring to the Posse Comitatus Act. 'Defendants will create a substantial likelihood that the military will physically confront, detain, or search civilians whom they perceive are posing a security threat, thereby actively executing civil laws.' A military official with knowledge of the operation told NBC News that the Marines would not conduct arrests and would only transport and guard ICE agents. They said that these activities would not violate the Posse Comitatus Act. As with many other political battles since Trump took office, the issue will be decided in court. On Thursday afternoon, U.S. District Judge Charles Breyer will hold a hearing in San Francisco to hear arguments from both sides regarding Trump's use of the National Guard and Marines in L.A. Breyer could accept or reject Bonta's request that he issue a court order blocking the Trump Administration from using National Guard troops and Marines during ICE operations. Some local law enforcement officials and state Democrats say that Trump is stoking tensions rather than calming them. The National Guard is often used to respond to riots or violence on American streets. And active-duty Marines are not typically trained for domestic law enforcement and lack the tools or the training to respond to civil disturbances. Mike Hillman, a law enforcement consultant, military veteran and former Los Angeles Police Department Deputy Chief who served more than 40 years in the department, said there is a big difference between what law enforcement does and what Marines do. 'The Marines are warfighters and they come with rules of engagement and tools and equipment that they would normally use under those circumstances,' Hillman told NBC News. 'This situation has serious consequences. It puts the United States Marine Corps and the warfighters in the position where they are having to deal with domestic incidents on domestic soil.' Concerns about Marine 'rules of force' Some of the Marines deployed to Los Angeles will provide security and transportation for ICE personnel as they conduct operations. This includes driving ICE agents in military vehicles to arrest locations, according to two sources familiar with the plans. The Marines have been issued small cards that list 'rules of force' — terminology used for domestic military operations, the two sources said. The cards describe what Marines are allowed to do during a deployment. Two sources familiar with the planning say that ICE agents, as well as local officials in Los Angeles, have expressed concern about those rules of engagement. The sources said ICE agents worry that the Marines have not been properly trained and could be pulled into law enforcement operations for which local police or the National Guard is better suited. Jim McDonnell, the Los Angeles police chief, said in a statement on Monday that he was not notified of the Marine deployment and urged federal officials to maintain continuous communications with local law enforcement officials. 'The arrival of federal military forces in Los Angeles — absent clear coordination — presents a significant logistical and operational challenge for those of us charged with safeguarding this city,' he said. 'We are urging open and continuous lines of communication between all agencies to prevent confusion, avoid escalation, and ensure a coordinated, lawful, and orderly response during this critical time.' Warning from Rodney King riots An incident in Los Angeles during the 1992 riots following the police beating of Rodney King serves as a cautionary tale. According to the book, 'Fires and Furies,' by Maj. Gen. James Delk, who oversaw National Guard operations in California at the time, Marines caused an incident when they accompanied police officers to a domestic disturbance in the wake of the riots. A police officer asked the Marines to 'cover me' as he tried to enter the residence, according to the book. Instead of simply pointing their weapons at it to deter the people inside, the Marines opened fire on the house. 'The officer had not meant shoot when he yelled 'cover me' to the Marines,' Delk wrote. The officer meant, 'point your weapon and be prepared to respond if necessary. However, the Marines responded instantly in the way they had been trained, where 'cover me' means 'provide me with cover using firepower.'' California legal battle California Attorney General Bonta's motion asked Judge Breyer, the federal judge in San Francisco, to issue a temporary restraining order blocking the Trump Administration from using National Guard troops or Marines during ICE operations. 'Defendants, including President Trump and Secretary of Defense Hegseth have sought to bring military personnel and a 'warrior culture' to the streets of cities and towns where Americans work, go to school and raise their families,' Bonta wrote. On Tuesday, Department of Justice lawyers rebuffed Bonta's motion. 'Plaintiffs' motion is legally meritless,' they wrote in a filing. 'It seeks an extraordinary, unprecedented and dangerous court order.' Bonta's motion argued that the administration's actions, in fact, were dangerous. 'There is no invasion or rebellion in Los Angeles," it said, "only the kind of civil unrest that occurs from time to time that is typically the purview of local law enforcement.'
NBC News
an hour ago
- NBC News
From a 'day of love' to 'if they spit, we will hit': Trump's about-face on violence against police
President Donald Trump has promised swift retribution for any violence against law enforcement by protesters in Los Angeles. 'IF THEY SPIT, WE WILL HIT, and I promise you they will be hit harder than they have ever been hit before,' he wrote on his social media platform after making a similar statement a day earlier to reporters. 'Such disrespect will not be tolerated!' It is an about-face for the president. On Jan. 6, 2021, Peter Stager assaulted an officer with a flagpole during the riot on the U.S. Capitol. Another, Daniel 'D.J.' Rodriguez, drove a stun gun into the neck of a Capitol police officer and pleaded guilty to the crime. And a third, Julian Khater, pepper-sprayed Capitol Police Officer Brian Sicknick in the face. Sicknick later died. Trump pardoned them all. Trump's tolerance for violence against law enforcement during the Jan. 6 Capitol riot is facing renewed scrutiny in the wake of his remarks and actions in Los Angeles, where his administration is taking a hard line against protesters. He federalized thousands of National Guard members and sent 700 U.S. Marines to the country's second-largest city — against the wishes of state and local officials — after protesters blocked immigration enforcement actions. It's a sea change from how Trump treated the Jan. 6 riot, when his supporters attacked the Capitol in an attempt to block Congress' certification of Joe Biden's 2020 election win. In an address Tuesday evening about events in his state, California Gov. Gavin Newsom addressed the disparity. 'By the way, Trump, he's not opposed to lawlessness and violence, as long as it serves him. What more evidence do we need than Jan. 6?' Newsom said. Harry Dunn, a former U.S. Capitol police officer who was serving in the Capitol during the attack, told NBC News that he sees Trump's actions then and now as hypocritical. 'Donald Trump is OK with violence, as long as it's done in his name. That's the message that he's sending right now,' Dunn said. 'That's why he pardoned the people on Jan. 6: They did it in his name … what about the officers on Jan. 6? Just put an asterisk by those officers and say, 'Not them. They stopped Donald Trump from succeeding.'' The White House says Trump is fulfilling his mandate. 'President Trump was elected to secure the border, equip federal officials with the tools to execute this plan, and restore law and order. This also underscores the need to pass the OBBB, which would provide record funding and resources to those on the front lines in Los Angeles,' White House spokesman Harrison Fields said in a statement, referring to Trump's push for his 'One big beautiful bill,' the legislative vehicle for his agenda currently before Congress. On Wednesday, NBC News also asked Attorney General Pam Bondi about how the Trump administration is handling California versus Jan. 6, 2021. 'Well, this is very different,' she said. 'These are people out there hurting people in California right now. This is ongoing. No longer. We're going to protect them. We're going to do everything we can to prosecute violent criminals in California. California is burning. These people are waving Mexican flags, yet they don't want anyone to go back to Mexico. They're burning American flags. This is the United States of America, and we're going to protect Americans. We're going to protect all citizens out there.' During the riot at the Capitol, no National Guard help arrived for hours, despite pleas from those inside the building. Then-acting Defense Secretary Christopher Miller testified before a House panel that Trump never gave a formal deployment order, and other testimony described then-Vice President Mike Pence taking the lead in attempting to get the National Guard out to help control the mob. Meanwhile, rioters violently broke through barriers, smashed windows, brutalized officers and chanted threats to Pence. In all, at least 140 police officers were injured. Trump later called it ' a day of love ' and has referred to the rioters as ' hostages,' ' warriors ' and 'victims.' 'What they've done to some people that are so innocent, you ought to be ashamed of yourself,' Trump said to former President Joe Biden at last year's first presidential debate, referring to the rioters. 'What you have done, how you've destroyed the lives of so many people. Michael Fanone, a former D.C. police officer who was attacked by Rodriguez on Jan. 6, took issue with Trump's posture in California. Fanone called the president 'a hypocrite,' and 'a liar.' 'Had those people storming the Capitol been illegal f--- immigrants or Black people or any other group that … his base found to be displeasing, then they would have said 'open fire,'' Fanone said in an interview. The Los Angeles clashes began Friday as federal immigration agents attempted to carry out arrests in the city. Some protesters tried to stop vehicles carrying detained immigrants and the confrontations soon turned violent, with officers using pepper spray and batons. By Sunday, National Guard troops, outfitted with heavy military equipment, moved into downtown Los Angeles. Some demonstrators pelted law enforcement vehicles with rocks and debris, and set numerous vehicles on fire. Dozens of people were arrested over the weekend, and the L.A. Police Department reported five officers suffering minor injuries and two others treated and released from the hospital in recent days. By Monday, Trump had deployed the U.S. Marines into the state. At a news conference on Tuesday, Speaker Emerita Nancy Pelosi, D-Calif., and Rep. Jimmy Gomez, D-Calif., both brought up comparisons to Jan. 6. 'We begged the President of the United States to send in the National Guard. He would not do it,' Pelosi said. 'That day he didn't do it. He forgave those people.' Gomez spoke of the furor with which the events unfolded that day. 'There was 50,000 people outside,' Gomez said. 'They were scaling the walls, scaling the walls. They were bashing in, breaking in, with members of Congress, members of Congress, trapped in the gallery, including myself, including a lot of the people here.' Earlier this year, Trump issued more than 1,500 pardons or commutations for the Jan. 6 rioters on his first day in office. Among the crimes Trump dissolved was that of Stager, a 44-year-old truck driver from Arkansas who was sentenced to four years in prison for the flagpole assault. According to prosecutors, Stager was caught on a Jan. 6 video saying, 'Every single one of those Capitol law enforcement officers, death is the remedy, that is the only remedy they get.' Dunn, the former U.S. Capitol police officer, noted that the same Republicans who are in lockstep with Trump at this moment in California are the same ones who have refused to display a plaque commemorating those who died and were injured on Jan. 6. 'What about the blue from Jan. 6th? They don't even want to put the plaque up! Back the blue that way then,' Dunn added. 'It's hypocritical and they're aware that it's all about appeasing their base and appeasing the leader of their party, which is Donald Trump.'
Reuters
an hour ago
- Reuters
TRADING DAY Good vibrations turn sour
ORLANDO, Florida, June 11 (Reuters) - TRADING DAY Making sense of the forces driving global markets By Jamie McGeever, Markets Columnist I'm excited to announce that I'm now part of Reuters Open Interest (ROI), an essential new source for data-driven, expert commentary on market and economic trends. You can find ROI on the Reuters website, and you can follow us on LinkedIn and X. The US and China have reached a trade deal, or at least agreed on the framework of a deal, which together with surprisingly soft U.S. inflation data, gave markets a lift on Wednesday. But Wall Street's gains were mild, and they were later wiped out by rising tensions in the Middle East. In my column today I look at the 'equity risk premium' and other metrics that suggest relative U.S. equity and bond valuations are getting very stretched. More on that below, but first, a roundup of the main market moves. If you have more time to read, here are a few articles I recommend to help you make sense of what happened in markets today. Today's Key Market Moves Good vibrations turn sour It's a "done" deal, according to U.S. President Donald Trump, although the he and Chinese leader Xi Jinping still have to finalize the wording of the trade agreement between the two superpowers and sign off on it. The main points of the deal appear to be: China will remove export restrictions on rare earth minerals and other key industrial components; U.S. tariffs on Chinese goods will total 55%; Chinese tariffs on U.S. goods will total 10%. Trump could not have been more enthusiastic in his praise for the agreement on Wednesday, and Commerce Secretary Howard Lutnick said 'deal after deal' with other countries will follow in the weeks ahead. Yet, judging by the relatively muted market reaction, investors are less enthused. And given the chaotic and unpredictable nature of the Trump administration's tariff announcements thus far, the irony of Treasury Secretary Scott Bessent calling on China to be a "reliable partner" in trade negotiations will not be lost on some observers. Especially, one suspects, in Beijing. Based on these proposed China levies, and with the US expected to conclude more trade deals in the coming weeks, the overall U.S. effective tariff rate will be lower than feared a couple of months ago. That's a relief. But the effective tariff rate of around 15% that many economists expect will still be significantly higher than the 2.5% rate at the end of last year, and would be the highest since the 1930s. Also, as the May inflation figures showed, tariffs have yet to be felt on prices. Investors - and Fed policymakers, who meet next week - are in a state of limbo. How will corporate profits and consumer spending be affected? What proportion of the tariffs will companies "swallow", and how much will they pass on to their customers? Zooming out, inflation appears to be cooling around the world, although this trend is expected to reverse once tariffs start to fuel higher goods price inflation. Figures on Wednesday showed that U.S. consumer inflation and Japanese wholesale inflation were lower than expected in May. These reports follow similar numbers from Europe recently, and China remains stuck in its battle against deflation. Next up is India, which releases consumer inflation figures on Thursday, which are expected to show annual inflation slowed to 3.0% in May, the lowest in more than six years. Another focus for investors on Thursday will be the auction of 30-year U.S. Treasury bonds. US stocks-bonds warnings flash amber again Calm has descended on U.S. markets following the 'Liberation Day' tariff turmoil of early April. But Wall Street's rally has revived questions about U.S. equity valuations, as stocks once again look super pricey compared to bonds. Since the chaotic days of early April, U.S. equities have rebounded fiercely, with the S&P 500 up 25%, putting the Shiller cyclically adjusted price-earnings (CAPE) ratio for the index in the 94th percentile going back to the 1950s, according to bond giant PIMCO. Stocks are looking expensive in absolute terms, and in relation to bonds. The equity risk premium (ERP), the difference between equity yields and bond yields, is near historically low levels. According to analysts at PIMCO, the ERP is now zero. The previous two times it fell to zero or below were in 1987 and 1996–2001. In both instances, the ultra-low ERP precipitated a steep equity drawdown and sharp fall in long-dated bond yields. "The U.S. equity risk premium ... is exceptionally low by historical standards," they wrote in their five-year outlook on Tuesday. "A mean reversion to a higher equity risk premium typically involves a bond rally, an equity sell-off, or both." But reversion to the mean doesn't just happen by magic. A catalyst is needed. Equities have recovered largely because they were oversold in April, trade tensions have been dialed down, and investors remain confident that Big Tech will drive solid AI-led earnings growth. So even though huge economic, trade, and policy risks continue to hang over markets, there is no sign of an imminent catalyst that would cause an equity market selloff. The flip side of equities looking expensive is that bonds look like a bargain. Indeed, the relative divergence between stocks and bonds is such that, by one measure, U.S. fixed income assets are the cheapest relative to equities in over half a century. Using national flow of funds data from the Federal Reserve, retired strategist Jim Paulsen calculates that the total market value of U.S. bonds as a percentage share of the total market value of U.S. equities is the lowest since the early 1970s. "Since the aggregate U.S. portfolio is currently aggressively positioned, investors may have far more capacity and desire to boost bond holdings in the coming years than most appreciate," Paulsen wrote last week. But bonds are 'cheap' for a reason. Washington's profligacy – the reason ratings agency Moody's recently stripped the U.S. of its triple-A credit rating – and inflation worries have kept yields stubbornly high. The term premium - the risk premium investors demand for holding long-term debt rather than rolling over short-dated loans - is the highest in over a decade, reflecting concerns about Uncle Sam's long-term fiscal health. And the diagnosis here shows no signs of improving. Trump's 'Big Beautiful Bill' is expected to add $2.4 trillion to the U.S. debt over the next decade, according to the nonpartisan Congressional Budget Office, likely putting more upward pressure on yields. Of course, equity investors do seem to be pricing in a very rosy scenario, and the past few months have shown how quickly the market landscape can change. The U.S. economy could weaken more than expected, the trade war could escalate, or there could be a geopolitical surprise that causes bond yields and equity prices to fall. Investors should therefore be mindful of the warnings being sent by ERPs and other absolute and relative valuation metrics. However, they should also remember that stretched valuations can get even more stretched. As the famous saying goes, markets can stay irrational longer than investors can remain solvent. What could move markets tomorrow? Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, opens new tab, is committed to integrity, independence, and freedom from bias.
