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Economic Revitalization Minister Ryosei Akazawa heads to the United States for negotiations from Tokyo's Haneda airport on April 16, 2025.
Two “Guinea pigs” come to Washington
As much of the world scrambles to figure out how to avoid Donald Trump’s expansive “reciprocal tariffs,” two big players are in Washington this week to try their hands at negotiating with the self-styled Deal Artist™ himself.
First, Japan. For decades, the world’s fourth-largest economy has run a big trade surplus with the US while also benefiting from American military protection. Trump has been upset about this arrangement for 40 years, and Japan’s import restrictions on US cars and agricultural goods are a particular focus for him. His 25% global tariff on car and steel imports will hit Japan hard, as will the overall 24% “reciprocal” levy against Tokyo that is slated to go into effect in July.
But Japan is also a top foreign investor in the US economy and a key East Asian ally amid Trump’s deepening confrontation with China. Japan’s Economic Revitalization Minister Ryosei Akazawa is looking to reduce tariffs to zero. Observers have already called his case a “guinea pig” for how countries with long-standing ties to the US can work deals with the America First president.
Late on Wednesday, Trump hailed “big progress” in the talks, which he attended personally, but neither he nor Akazawa gave further details. The two sides will meet again later this month.
Second, Italy. Prime Minister Giorgia Meloni, who visits the White House on Thursday, is a pragmatic right-winger whom the US president has described as a “fantastic woman.” She shares Trump’s hardline views on immigration and social issues, and even defended US Vice President JD Vance’s recent blistering attack on the EU’s approach to free speech.
But Meloni also leads a highly export-dependent economy that runs a $40bn surplus with the US. Trump’s “reciprocal tariffs” of 20% on the EU could therefore be a 🤌catastrophe🤌 for Italy.
The EU is warily watching. Can Meloni parlay her good graces with Trump into a deal that avoids a wider transatlantic trade war? Or will her solo visit enable the US president to weaken the overall unity of the bloc?
US President Donald Trump alongside Federal Reserve Chairman Jerome Powell, back when the latter was the nominee for his current position, in Washington, D.C., USA, on November 2, 2017.
Could the Fed’s independent streak be over?
The United States’ judicial branch is set to reexamine an old decision that could have huge new consequences for the credibility and stability of the world’s largest economy.
The Supreme Court has requested briefs in a case that concerns the so-called “Humphrey’s Executor” precedent, a 90-year-old ruling that stops presidents from firing the leaders of quasi-governmental institutions without cause.
The Trump administration, which wants more power to sack appointees,says the precedent wrongly limits executive authority, and should be reversed.
What this is really about. Though the case concerns members of the National Labor Relations Board and the Merit Systems Protection Board, the Supreme Court’s decision could allow the president to fire a much more important figure: Fed Chairman Jerome Powell. That’s because the Federal Reserve, like the NLRB and MSPB, is also a quasi-governmental organization, meaning that it works for the public interest but is independent of the executive branch.
With Donald Trump’s trade war already putting US financial and bond markets on edge, the last thing the central bank wants is a loss of independence, which would compromise markets’ confidence that the regulator is acting based on its economic mandates rather than Trump’s political whims.
Carveout possible. The top US court is reportedly skeptical of the Humphrey’s Executor precedent, but there is a world where it overturns this 1935 ruling while explicitly safeguarding the Federal Reserve’s independence.
There’ll be a new sheriff. Whatever happens, Powell’s term ends in May 2026, giving Trump the chance to nominate a successor. We’ll be keeping an eye on whether Treasury Secretary Scott Bessent, who has emerged as a leading voice in the White House, starts interviewing potential candidates sooner than that...UK Prime Minister Keir Starmer meets with US President Donald Trump alongside US Vice President JD Vance and UK Foreign Secretary David Lammy in the Oval Office at the White House on February 27, 2025, in Washington, D.C., USA.
Vance ignites hope of much-coveted US-UK trade deal
The US trade deal that London has been chasing for years is closer to reality now, after US Vice President JD Vance told UnHerd on Monday that there is a “good chance” that an agreement is possible.
UK Business and Trade Minister Sarah Jones alsosaid the negotiations are in a “good position,” but refused to divulge any timeline.
One major reported focus of the talks is the UK cutting its “tech tax” on the revenues of major digital firms in return for lower tariffs, although the sides are reportedly negotiating terms that go beyond this.
Back to being “special.” The United Kingdom escaped Trump’s “liberation day” with only the Administration’s general 10% tariff, albeit only because the UK doesn’t have a trade surplus with the US. A free trade deal would leave few or no tariffs on its US-bound exports.
A win for a Remainer and the Brexiteers. A trade pact would mark a big victory for UK Prime Minister Keir Starmer — his predecessors have failed to land a deal ever since Britain voted to leave the European Union in 2016. The idea was to replace the UK’s continental trade partners with the US, the world’s largest consumer market. Pro-Brexit politicians like Nigel Farage had long promised that Brexit would result in just such a US trade accord.
The irony: it’s finally within sight, thanks, no less, to Starmer, a prominent Remainer.US President Donald Trump attends a Cabinet meeting at the White House in Washington, D.C., on April 10, 2025.
China strikes back at the US with massive tariffs of its own
Wednesday’s tariff respite is firmly in the rearview mirror, as China announced on Friday it was raising its duty on US imports to an astronomical 125%, taking effect Saturday. The announcement came less than 24 hours after the White House clarified that the new levy on Chinese imports would be 145%.
With US President Donald Trump’s collision course with the rest of the world on hold — the EU delayed its planned retaliatory levies Thursday — his fully-fledged trade war with China now has the spotlight to itself. Whereas he dropped tariffs on other countries on Wednesday, the commander-in-chief raised them on Beijing three times within one week, with the White House clarifying on Thursday that the rate is now 145%. After a brief delay, China has now responded in kind.
And just like that. These extraordinary levies are already affecting businesses. US firms have started canceling orders and some Chinese companies are putting staff on temporary leave. Trans-pacific shipping bookings have plunged. The March inflation figures released Thursday suggested that US price growth was easing, but the data was taken before the new China tariffs were implemented. With the levies accelerating skyward, it’s only a matter of time before US prices follow suit.
Markets suffer again. The laws of gravity applied to the markets Thursday — before China announced its latest retaliation — with stocks reversing again as the reality of Trump’s new world trade order set in for investors. The S&P 500 dropped 3.5%, the Dow Jones Industrial Average fell 1,000 points, and the dollar lost ground against the major Asian currencies. On top of all this, Democrats are now questioning whether the president and his allies engaged in insider trading this week. Wednesday’s comeback looks like a fever dream.
The dust won’t settle. Trump acknowledged Thursday that there would be “transition problems” with the markets, while retaining his unfailing optimism that stock would turn around. The former “Apprentice” star added that he was open to extending the 90-day tariff pause on countries that aren’t China, but with Beijing further escalating the trade war, investors will remain unsettled.
Map of the US-Canada border.
The Captain Canuck effect: How a new nationalism is helping Canada
But that special relationship is now being tested by Donald Trump’s tariffs and his unprecedented threats to annex Canada by “economic force.”
As a result, nationalism is surging in Canada. And Canadians aren’t just booing the “Star Spangled Banner” at hockey matches, they’re avoiding US products, canceling travel plans, and ditching retirement homes. Even the 1970s comic-book character Captain Canuck is back!
Could this pushback, combined with Americans’ fears about the political climate at home, lead to new opportunities for Canada?
Canadians are already buying fewer American products. Instead, they are buying Canadian where possible. Sales of made-in-Canada goods were up 10% last month at Canadian grocers, and some local businesses in the country reported an overall sales jump of as much as 35%.
Meanwhile, US retailers are complaining about falling revenue from Canada, which buys about $350 billion a year in consumer products from American companies.
Canadians are canceling US travel plans. So far this year, the average number of travelers entering the US from Canada by car has dropped by nearly 15% — from 92,983 per day to 79,407 — compared to last year. In February, cross-border return car trips from Canada into the US fell 23%. In March, the Globe and Mail reported on some American tour operators reporting an 85% decline in bookings, and summer flight bookings to the US are down over 70%.
That sharp drop could hit the US tourism sector hard – Canadian visits translate to roughly $20 billion a year – and it could cost the American economy over $4 billion this year alone. According to travel lobbying groups, Canadian tourism supports 140,000 US jobs.
Even some snowbirds — the 1 million or so Canadian retirees who spend the winter in warmer locations south of the border – are looking for new perches: Rebookings have declined for next year, and some regular visitors are even selling their US homes.
But the drop in US visits is not only about patriotism. There are also growing concerns about the safety of crossing the border as the US expands its use of existing powers to search travelers’ devices and detain people on suspicion of links to illegal activity.
Jamie Liew, a law professor at the University of Ottawa and a migration expert, says the US was always allowed to screen at the border, but the practice has now broadened.
“Before, the US was doing this by targeting certain racialized communities ... What’s different is that it’s now being applied in broad strokes and to a greater number of people no matter who you are.” This, she notes, makes the risk and concern “serious.”
Brain gain for Canada? Since Trump’s return to the White House, American interest in applying for Canadian citizenship has grown, based on increased traffic to websites that provide this information.
Some Canadian provinces and institutions hope to take advantage of these trends as they seek to reverse the long-maligned north-to-south “brain drain.”
And they may have a willing audience: American researchers and public intellectuals, concerned by the political environment or the Trump administration’s cuts in research funding, are looking to leave.
In a recent poll by Nature magazine, for example, 75% of the 1,608 science researchers surveyed said they would consider leaving the US in response to Trump disrupting the science community. One recruiter noted a 63% jump in immigration inquiries from US physicians since he returned to the Oval Office.
There have already been a few notable defections. In late March, Jason Stanley, a Yale University professor and fascism scholar who has sharply criticized the Trump administration, made headlines when he announced he was leaving the US to join the University of Toronto.
Asked by NPRabout his decision, Stanley highlighted the administration’s moves to shutter DEI initiatives and to cut funding for universities over perceptions of antisemitism:
“I have Black Jewish children, and the attacks on DEI are attacks on Black people. … And they’re creating mass popular anger against Jewish people by … setting us up and saying we’re the excuse for taking down democracy. Personally, I’m not going to risk my kids’ safety for a political point.”
Meanwhile, Jen Gunter, a renowned Canadian gynecologistborn in Winnipeg, is returning to Canada after decades in the US, citing “rank misogyny” and the political climate.
Some Canadian institutions are rolling out the red carpet. The University Health Network in Toronto wants to attract at least 100 young scientists from the US. Still, there are questions about whether the Canadian government is adequately funding the sciences: Last year fewer than 1 in 5 scientists were approved for Canadian federal research funding.
Hold your horses, Americans. Canada has begun to retreat from its pro-immigration stance amid a housing crisis.
“I don’t think a mass migration is possible,” says Liew. “It’s only possible for people who might have status in Canada already, such as temporary permanent residence, citizenship, or dual citizenship, for example.”
And while Canada may stand to gain from American migrants, Liew wonders about the costs of those moves, for both countries.
“We have a lot of different expertise and diverse skills within our own borders,” she says. “Why is it that those experts can’t stay in the United States to maybe resist or provide some expertise within their own communities, to educate people about what is actually happening in their government?”
Line graphs comparing inflation to wages in the US and Canada.
Graphic Truth: Canada is winning the real wage war
But north of the border, it’s been a different story in the last few years, as Canadian wages have started to outpace inflation — helped, in part, by Ottawa’s decision to reestablish a federal minimum wage and index it to price growth. That hourly wage currently stands at $17.75. The US federal minimum wage, meanwhile, has been stuck at $7.25 per hour since 2009, though some states have set wages higher than that.
With Canada’s unemployment at 6.7%, the country’s labor market is far from perfect, but the recent real-wage growth there is bound to make some of its southern neighbors envious. These charts take a look at the recent relationship between nominal wages and inflation in both the US and Canada.
A general view outside Exchange Square in Hong Kong's financial district. Asian stock markets have plummeted amid growing fears of a global trade war, as Donald Trump described his tariffs as ''medicine'' and showed no indication of backing down.
Don’t call it a trade war
In the latest twist of the United States’ trade war with China and the world, US President Donald Trump declared Monday that he would impose an additional 50% levy on Chinese imports on April 9 if Beijing refuses to drop its retaliatory tariff. The Middle Kingdom announced a 34% duty on US imports last week, matching the White House’s new excise on Chinese products.
The US follows through. Treasury Secretary Scott Bessent said the tariffs revealed on “Liberation Day” last Wednesday would be a ceiling on other countries, “as long as you don't retaliate.” China’s response forced Trump’s hand and now puts the two superpowers firmly in a trade war — one that is unlikely to benefit either country economically. The 100% tariff that Trump proposed last year is closer to becoming a reality.
No escape in Asia. China isn’t the only major Asian power that is suffering from these tariffs. Several major exporters to the United States — including South Korea, Taiwan, and Vietnam — were slapped with high levies. The world’s largest continent has been a hub for cheap production for the American market, so these countries have high trade surpluses with the United States — and high tariffs to boot.
The Asian markets have reacted accordingly to the tariffs. Before its rebound on Tuesday, Japan’s Nikkei had lost more than any other major stock index worldwide since the US president’s second inauguration. Indices in Shanghai and Hong Kong suffered one of their worst days on record Monday — both recovered some of the losses Tuesday, but remain far behind where they were. Samsung Electronics, by far the biggest firm in South Korea, has lost nearly 10% of its value since April 2.
Will Trump budge? Despite the wholesale market downturn — US stocks also continued their freefall on Monday — Trump hasn’t pulled back yet. The president has dropped occasional hints that he’s flexible to changes and he opened negotiations with Japan yesterday, but that he seems unlikely to moderate his stance with China, according to Eurasia Group’s China Research Director Lauren Gloudeman.
“US-China relations are deteriorating quickly toward unmanaged decoupling, as both sides are engaged in a game of chicken and neither President Trump nor President Xi are likely to blink soon,” said Gloudeman. “We expect China to retaliate in kind, as the leadership has pledged to ‘fight til the end’ against Trump's measures.”
Trump and Khamenei staring at eachother across an Iranian flag.
Will Trump’s Iran strategy actually prevent war?
The United States is ramping up its “maximum pressure” campaign against Iran.
In a letter sent to Iran’s Supreme Leader Ali Khamenei in early March, President Donald Trump gave Tehran an ultimatum: reach a new nuclear deal with the US within two months or face direct military action – “bombing the likes of which they have never seen before,” as he told NBC News’ Kristen Welker on Sunday.
The letter proposed mediation by the United Arab Emirates (whose emissaries delivered the missive in question) and expressed Trump’s preference for a diplomatic solution. “I would rather have a peace deal than the other option, but the other option will solve the problem,” the president said.
In the three weeks it took the Iranian leadership to figure out how to respond, the US turned up the temperature.
First came intense airstrikes (of Signalgate fame) against Iran’s last remaining functional ally in the region, the Houthis in Yemen, starting on March 15 and continuing to this day. Then, the US issued its first-ever sanctions against Chinese entities for buying Iranian crude oil, including a “teapot” refinery in Shandong and an import and storage terminal in Guangzhou. And in recent days, the US military deployed a fleet of B-2 stealth bombers – capable of carrying the 30,000-lb. bunker-busting bombs needed to blast through Iran’s hardened enrichment sites – to its Diego Garcia base in the Indian Ocean, in range of both Yemen and Iran. This move was “not unrelated” to Trump’s ultimatum, according to a senior US official.
Iran finally rejected direct negotiations with the US in a formal response to Trump’s letter delivered last Thursday via Oman, its preferred mediator. President Masoud Pezeshkian stated on Sunday that although the Islamic Republic won’t speak directly with the Trump administration while maximum pressure is in place, Tehran is willing to engage with Washington indirectly through the Omanis.
Whether Trump’s two-month deadline was to strike a deal or to begin negotiations remains unclear. Either way, there’s no chance that two sides that deeply mistrust each other – especially after Trump unilaterally withdrew from the original nuclear deal in 2018 – could reach an agreement over issues as complex as Iran’s nuclear program and support for regional proxies in just a couple, or a few, months (let alone a single one).
But does that mean that Trump’s ultimatum is doomed to end in confrontation? Not necessarily. In fact, his “escalate to de-escalate” strategy could be the best hope to avoid a crisis this year.
A ticking time bomb
While US intelligence assesses that Iran is not building a nuclear weapon, it has become a threshold nuclear state with enough 60% enriched uranium to produce six nuclear weapons (if enriched to 90%) and the ability to “dash to a bomb” in about six months (though weaponizing a device would probably take it 1-2 years).
European governments have long made it clear that unless Iran reins in its enrichment activities by this summer, they will “snap back” the UN sanctions that were lifted as part of the 2015 nuclear deal before the agreement expires in October and they can no longer do so.
Iran has vowed to respond to snapback sanctions by withdrawing from the Nuclear Non-Proliferation Treaty. Given the precedent set by North Korea – whose NPT exit in 2003 was followed by ever-greater steps toward weaponization – and the already advanced state of Tehran’s nuclear program, NPT withdrawal could be the action-forcing event Israel needs to convince Trump to support a joint strike on Iran’s underground nuclear facilities.
Which means that the US and Iran were likely headed for a collision later this year even if Trump hadn’t issued his ultimatum.
Strange bedfellows
And yet, both Trump and Iran’s leadership would much prefer to avoid a military confrontation in the near term.
Trump’s political coalition includes both traditional Republican war hawks and “America First” isolationists who are averse to US involvement in new forever wars. Whereas cabinet officials like Secretary of State Marco Rubio, National Security Advisor Mike Waltz, and Defense Secretary Pete Hegseth advocate for a more combative approach toward the Islamic Republic, none of these prominent national security hawks are in charge of the Iran file – Middle East Special Envoy Steve Witkoff, a Washington outsider and a restrainer, is.
Most importantly, Trump ran as a peacemaker and has repeatedly stated his preference for a deal, believing that bombing Iran could mire the US in an unpopular war that’d divert precious resources from his domestic priorities and endanger his friends in the Gulf for little political upside. The solidly MAGA Vice President JD Vance echoed this concern when, in the leaked Signal group chat, he flagged the risk to oil prices from striking the Houthis for the sake of “bailing out” the Europeans.
For its part, Iran is historically vulnerable and eager to negotiate a deal that brings sanctions relief to its battered economy. While capitulating to Trump’s demands is politically dangerous for Khamenei and would weaken the regime’s domestic position, neither he nor other hardliners would welcome a military showdown with the US and Israel.
Take it or leave it
The threat of a crisis later this year creates an opening for Trump to pressure Tehran into offering concessions that allow the US president to claim progress and avoid triggering snapback sanctions.
Last year’s effective destruction of Iran’s regional proxy network – Hamas in Gaza, Hezbollah in Lebanon, Bashar al Assad’s regime in Syria – dealt a blow to the country’s conventional deterrence and heightened the importance of its nuclear program. Iran will therefore resist making any meaningful concessions on this front. If there’s one piece of the nuclear file it could cede ground on, it’s its stockpile of 60% enriched uranium, which Tehran could conceivably agree to freeze.
Where Iran could potentially offer more is in backing away from its proxies, at least temporarily. Though it doesn’t have operational control over the Houthis (unlike the decimated Hezbollah), the Islamic Republic could deprive them of the bulk of the weapons systems and intelligence they rely on to attack Red Sea shipping lanes. It could also instruct Shia militias in Iraq to refrain from targeting US troops.
The regime would find these choices politically and ideologically unpalatable. But with its so-called Axis of Resistance already in shambles and little Tehran can do to rebuild it in the near term, its strategic value is nowhere near what it was a year ago. A chance at avoiding a snapback and US bombing could accordingly be seen as a worthwhile trade.
Less for less
While a breakthrough agreement is highly unlikely to be reached before the summer (or at all), the two sides’ mutual desire to avoid escalation suggests that Trump would be receptive to the relatively minor concessions Tehran could be willing to make – the most it can conceivably offer under the circumstances.
But those concessions would need to come soon, before snapback is triggered. And even this best-case scenario wouldn’t buy Iran any sanctions relief. Instead, they’d get to kick the can on snapback sanctions and possible US military action while negotiations on a more comprehensive – and aspirational – deal are underway.
If, however, Iran’s modest concessions fall short of what Trump deems acceptable, the risk of military escalation this year will rise sharply – either when Trump’s ultimatum comes to a head or when snapback gets triggered, Iran exits the NPT, and Israel considers a strike (whether solo or joint with the US).
Iran has not yet made the decision to build a nuclear weapon. And unless it’s attacked, it remains unlikely to do so, knowing full well that any overt steps toward weaponization would invite certain, immediate, and devastating retaliation. But nothing would make the Islamic Republic dash for a bomb more than getting bombed.