👀 China and America's tariff talks

What’s going on here?

China’s central bank announced sweeping measures to cushion the economy on Wednesday, as one of the country’s top officials prepares to spend the weekend talking tariffs.

What does this mean?

Chinese consumers’ financial confidence is low, the economy is stuttering, and US tariffs are set to make everything worse. So the People’s Bank of China has rolled out a new stimulus plan to support both consumers and businesses. The central bank cut a key interest rate used for short-term lending by a tenth of a percentage point, while reducing the amount of cash that banks are required to keep aside by half a percentage point. Together, that should push one trillion yuan ($138 billion) into the banking system, beginning next week. The plan also covers lower rates on mortgages and car loans, credits for small businesses, new ways to handle bad loans, and looser stock investment rules.

Why should I care?

Zooming in: China’s preparing for the worst but hoping for the best.

Chinese trade officials will meet with American representatives this weekend, in the first formal talk since the US president ramped tariffs up to 145%. Neither side is expecting to sign a big deal, but both seem cautiously optimistic about bringing tensions down a notch or two. Traders are hoping for a 90-day pause on tariffs – something that’s already been granted to other US trade partners.

The bigger picture: Vroom vroom, indeed.

American tariffs might be sweeping, but their impact isn’t. Just look at Ferrari: despite 25% levies, the Italian carmaker hasn’t seen any change in US demand. In fact, its order book is already full for next year – even though Ferrari has increased its prices by as much as 10%. Makes sense: the brand targets the world’s wealthiest drivers, and they’re less likely to be put off by (or even notice) a more luxurious price tag.

What’s going on here?

The US president wants Americans’ meds to be made on home turf – and he’s saddling up to tax any that aren’t.

What does this mean?

The president has just signed an executive order to lasso drug manufacturing back to American soil. Right now, about three-quarters of the country’s meds are made in Europe, with key ingredients sourced from China – and that, the White House says, is a national security risk. So the FDA and other agencies are now aiming to fast-track approvals for US-based drugmaking plants, while foreign ones will face surprise inspections along with tighter regulations and higher fees.

Why should I care?

For markets: A list of side effects as long as your arm.

US-based pharma giants like Eli Lilly, Johnson & Johnson, and AbbVie have already begun pumping billions into new stateside factories, hoping to stay in the White House’s good graces. That’ll likely give a shot of adrenaline to the construction, manufacturing, and life sciences industries. But for every up, there’s a down. American labor and compliance costs are high, which could squeeze margins for the drugmakers that can’t just pass the bill on to their customers, like smaller biotech firms. For investors, this is a cue to check which firms already have infrastructure in the US – they’ll be in a healthier spot.

Zooming out: Industry headaches.

The White House is also weighing up a new regimen to control drug costs, with a plan that would tie Medicaid prices to cheaper overseas benchmarks. That’d be – ahem – a tough pill to swallow for the industry. Trade group PhRMA says it could erase $1 trillion in revenue over a decade, so it’s busy pressing Congress to block any such proposal. Meanwhile, European pharma giants are sounding a warning of their own: if US policies keep rewarding local production and competitive pricing, they could be tempted to jump ship.