‘Uncomfortable rally’

More numbers came in Friday that show how the US economy slowed down last month. Consumers hit the brakes while goods imports plummeted by a record as companies adjusted to higher tariffs. Inflation-adjusted personal spending rose just 0.1% after rising 0.7% a month earlier, Bureau of Economic Analysis data showed. Separate data showed an almost 20% slump in imports.

Meanwhile, the Federal Reserve’s preferred price gauge remained tame. The personal consumption expenditures price index, excluding food and energy, increased 0.1% from a month earlier. Compared with a year earlier, the so-called core inflation gauge rose 2.5% from April 2024—the smallest annual advance in more than four years. So in that respect the widely predicted spike in inflation tied to President Donald Trump’s trade war has yet to manifest, in the data anyway.

Still, it’s not much of a surprise that, in this volatile and uncertain atmosphere, Morgan Stanley strategists would warn that emerging-market gains are likely to be limited the rest of the year. Developing currencies will modestly appreciate against the increasingly troubled US dollar by year-end, while lagging some other G-10 currencies. A gauge of emerging-market currencies is up more than 5% this year, the best performance through May since 2017.

“It’s an uncomfortable rally,” strategists including James Lord wrote in a note Friday. “Investors will need to hold their nerve.” —David E. Rovella

What You Need to Know Today

Mayors in states that border Canada are calling for an end to Trump’s trade war with the country, saying it has harmed businesses and workers in their communities and upended one of the world’s most successful economic relationships. Andrew Ginther, mayor of Columbus, Ohio, and Bryan Barnett, mayor of Rochester Hills, Michigan, said in an interview Friday that the countries should continue to build things together and trade with each other because the partnership has been working for decades.

“We don’t think that growth and prosperity for American cities comes through a prolonged, unstable, irrational and emotionally charged trade war,” said Ginther, a Democrat who is also president of the US Conference of Mayors. “Our metro economies are based on trade and being able to export what we produce in the United States.”

A startup that uses artificial intelligence to transcribe medical conversations is said to be raising $300 million in a new funding round led by Andresseen Horowitz. The round values Pittsburgh-based Abridge AI at $5.3 billion including the investment, which will nearly double its valuation from only a few months ago. The move underscores the tech industry’s interest in AI software that can make industries like health care more efficient (while potentially endangering more jobs). In February, the company announced it raised $250 million at a $2.75 billion valuation. Khosla Ventures is also said to be participating in the new financing.

China plans to allocate 500 billion yuan ($70 billion) that could be used to fast-track new infrastructure projects, a move that’s seen as bulwark against US tariffs. Under the so-called “new financing policy tool,” the nation’s three policy banks will raise funds and buy stakes in projects. The policy lenders may issue bonds or use other methods to tap financing.
The capital injection could amplify total investments by multiple times the initial amount, since it allows the projects to raise additional bank loans or other forms of financing. Trade tensions have risen again in recent days, just weeks after the US and China agreed to a 90-day tariff truce. By raising more funds for investment, the new mechanism would help China offset the drag from an uncertain export outlook by increasing domestic demand.

The Supreme Court gave another boost to Trump’s effort to deport millions of people. The Republican supermajority again used its emergency docket to remove protections from hundreds of thousands of migrants, many fearing persecution or violence in their native lands. Though ostensibly a temporary ruling made as underlying litigation moves forward, the court effectively freed the administration to strip people from Cuba, Haiti, Nicaragua and Venezuela of the legal right to temporarily live and work in the US under a Biden administration program. Moves by the Trump administration to swiftly deport affected immigrants may moot any final ruling by the courts in their favor, which wouldn’t come for months or longer.

The decision marks the second time in less than two weeks the Supreme Court placed hundreds of thousands of migrants at risk of possible deportation, including those who came to the US legally. On May 19, the court let Trump end legal protections for 350,000 Venezuelans under a different program. The high court’s decisions are bolstering the Republican’s efforts to aggressively evict migrants, moves that in several cases have been ruled unlawful or unconstitutional by lower courts.

What You’ll Need to Know Tomorrow

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