Executive summary

• Shortages of some goods expected in the US starting later this month, because of tariffs.
• The power outage on the Iberian Peninsula was the worst in Europe since 2003, and Europe may have been close to a more widespread blackout.
• Trump wants to involve the military in policing within the US.
• Negotiations between the US and Iran over its nuclear weapons program have stalled.
• Microsoft will host xAI’s Grok model in its cloud service, in a move to reduce Microsoft’s dependency on OpenAI.
• Gaza is running out of food, and the UN warns of famine.
• India-Pakistan tensions remain high.

Geopolitics

United States

US economy

A recommendation for those in the US: Because imports are slowing, especially from China, shortages of some imported goods are expected to become noticeable in the coming weeks and to become substantial around August. If tariffs continue, some of these shortages may become pronounced; prices will increase dramatically for other goods. We recommend that those in the US consider buying imported goods before shortages and large price increases arrive.

Forecasters also discussed the possibility of shortages caused merely by self-fulfilling prophecy. For instance, the majority of toilet paper for US consumption is produced domestically, and so, one might naïvely think that as shelves start to empty of other products, toilet paper inventories will not be affected. However, shelves might empty of some products simply because people expect them to, even of products that are not substantially affected by tariffs.

Ocean shipping volumes arriving in the US are expected to start falling off this week. Volumes arriving at the Port of Los Angeles from Asia are expected to be 35% lower this week, and total volumes arriving at New York ports are expected to be 40% lower. Subsequent weeks are expected to see 60% lower volumes than normal, as companies have halted or reduced imports. These reductions in arriving port volumes will be felt in stores over the coming weeks and months.

We also wonder whether tariffs might affect the US food supply to a limited extent. The US imports about 15% of its food, by value, and a lot of these exports aren’t luxuries. Food prices fell by 0.1% in March, compared to February, but we expect to see food prices increase over the coming months.

Tariffs and business uncertainty have dampened US economic growth. The US economy shrank by 0.3% in the first quarter of 2025, and as of May 1, the Atlanta Fed projects 1.1% growth in GDP for the second quarter. US consumer confidence plunged in April to nearly a Covid-level low. In a sign of the times, McDonald’s store traffic fell by 3.6% in the first quarter of this year, the biggest decline since 2020. The US government spent $200B more (about 10% more) in Trump’s first 100 days than in the corresponding period in 2024, driven primarily by fundamentals (Social Security, Medicaid/Medicare, spending on military personnel and veterans, and interest payments).

Apollo Global Management predicts that the impact of tariffs on consumers and businesses will lead to a recession in the US this summer. Apollo predicts that the trucking industry will be particularly hard hit; Craig Fuller of Freightwaves expects “a large number” of trucking companies to go bankrupt.

However, the stock market ended last week extremely well, with the S&P 500 recovering losses since tariffs were announced on April 2 on news that the US had robust job growth in April and that China might be open to trade talks. The stock market is also doing as well as it is at least in part because individual retail investors have bought into the market, even as institutional investors have sold off a lot of their holdings. However, while the stock market recovered, the dollar fell 9.5% in the first 100 days of Trump’s presidency against a basket of foreign currencies. The dollar’s fall may reflect the beginning of a global shift away from the dollar as the world’s reserve currency.

The Trump administration imposed tariffs to help US manufacturing, but any such help is not being felt in the short term, as tariffs affect the prices of imported parts, intermediate goods and equipment paid by US manufacturers, and uncertainty dampens business investments in manufactured goods. New manufacturing orders, production and employment remained depressed in April; General Motors forecasts $4–5B lower profits in 2025 because of tariffs.

Farmers are also being hurt by the trade war, as export orders are being canceled. The executive director of an export trade group for farmers reports that the situation is “a full-blown crisis”.

You can read the rest of the post here.