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A big reason the US lacks a sovereign wealth fund is that unlike, say, Norway, which has a budget surplus and can afford to save oil money, America must cover existing financial obligations, like servicing its $36 trillion debt. No matter, President Donald Trump wants one, and on Monday he signed an executive order directing the US Treasury and Commerce Departments to create a sovereign wealth fund, and even suggested a target for the new state investment vehicle: TikTok. 

Details of how the fund will be set up and operate were not announced, but Trump told reporters his administration will “stand this thing up within the next 12 months.” Of TikTok, he casually mused, “We might put that in the sovereign wealth fund.”

In the course of its nearly 250-year history, the US has taken ownership of telegraph and telephone networks, railroads, steel mills, and failed financial institutions. But imagine telling George Washington his country might one day own the app that got Zoomers interested in nu metal.

International Economics

Canada and Mexico Win Tariff Reprieves as Trade Upheaval Rattles Markets

Wall Street firms rely on a vast and sophisticated array of data points — public and proprietary — pored over by the most brilliant economic minds, backed by the most advanced technology, to make decisions every day. On Monday, they were left to rely on refreshing the CNN liveblog.

Investors spent the day scrambling to react to a hectic day of news from Washington as President Donald Trump went into the day promising to enact 25% tariffs on Mexico and Canada, only to agree to hold off for 30 days.

Trading in Spreadsheets for Tea Leaves

Mexico and Canada were both granted a reprieve from Trump after Mexican President Claudia Sheinbaum and Canadian Prime Minister Justin Trudeau held separate phone calls with the president and agreed to implement a series of measures to clamp down on drug trafficking and illegal border crossings.

Markets, which began the day in an initial panic, recovered to a more cautionary footing. The S&P 500 fell 0.7% on the day, paring most of an intraday morning loss of 2%. Canada’s blue-chip TSX Composite slipped 1.1% after earlier intraday losses neared 3%. Now, with the tariff clock restarted at 30 days, investors have been left poring over political tea leaves as much as spreadsheets:

  • “At this point, we are doubtful that the tariffs on Canada and Mexico will be long lasting, if enacted at all,” Keith Lerner and Michael Skordeles at Truist Advisory Services said in a note, hinting Trump’s actions look more and more like shock bargaining tactics. Up next on the political front: China, which Trump has threatened with 10% tariffs, said Monday that it will file a lawsuit at the World Trade Organization, whose rulings even the Biden administration ignored.
  • But if negotiations fail and if Trump isn’t bluffing, the economic fallout will sting: Goldman Sachs analysts said in a note that US stocks could slump 5% in the coming months if the tariffs are implemented, with an average 2% to 3% hit to the earnings of listed companies. Oxford Economics analysts said the tariffs could shave 0.7 points off of US GDP growth and hit Canada and Mexico “even harder.”

Stupid Economics: Wall Street banks, in particular, were hit with a cold dose of reality when Citigroup, Morgan Stanley, JPMorgan Chase, and Goldman Sachs shares dipped in morning trading. The KBW Bank Index finished the day down 1.5%, paring losses that neared 3% in intraday trading. “The annoying part about banks is they get caught up in macro trades they have nothing to do with,” Truist’s Brian Foran said in an investor note. “At first glance, it feels wrong to see banks move on trade wars, but to quote the old phrase ‘It’s the economy, stupid.’”

Together with The Motley Fool

When The Motley Fool slapped their “Ultimate Buy” recommendation on Netflix stock in June 2007, even their seasoned investing experts could never have guessed it would skyrocket by 33,097%.

(No, really. If they had, they probably would’ve bought more and would finally have that villa on Lake Como… but we digress.) 

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Because they think their latest pick might just dethrone the streaming giant

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Consumer

Shein Gets Hit with a One-Two Punch from Trump and the EU

Look elsewhere for those ultracheap charging cables that start fraying 14 seconds into your first use. And don’t forget to stock up on those bargain T-shirts sporting occasionally misaligned prints and made from who knows what.

President Donald Trump’s promised tariffs on China came with a detail that means extra pain for China-founded fast-fashion giants Shein and Temu. With his executive order, Trump nixed the de minimis rule that had let the companies ship their unsettlingly cheap products for so long. On top of that, Bloomberg reported Monday that the EU is opening a formal probe into whether Shein has broken consumer law. 

Working All Angles

Shein and Temu rode to prominence on the back of de minimis, which in the US, exempts direct shipments of items worth less than $800 from import duties. That enabled Shein’s and Temu’s business models of direct-shipping to consumers, an unbelievably individualistic approach to mass logistics and one that significantly disrupted the air freight business with the sheer volume of packages.

The writing has been on the wall for de minimis for a while now: President Biden said he planned to close the loophole in September last year, and that policy dovetailed with Trump’s hawkishness on Chinese imports. Both Shein and Temu have already started to establish more traditional logistics networks, but Europe taking a closer look at what exactly the e-commerce kings are selling could be another existential problem:

  • The Financial Times reported on Saturday that the EU is planning to make e-commerce companies including Shein, Temu, and Amazon liable for dangerous or illegal products sold on their platforms. The US Consumer Product Safety Commission (CPSC) identified Amazon as a distributor last year, holding the company responsible for products that fail to meet federal consumer safety standards. 
  • The EU’s planned change to e-commerce liability is motivated partly by China hawkishness, and has been spurred by the surge in parcels imported under de minimis exemptions. Per the FT, Europe saw its volume of low-value imports quadruple from 2022 to 2024, and 90% of those imports came from China. 

Silver Lining: Shein may be getting pummeled by the US and the EU, but this week did bring a smidgen of good news. The company relaunched in India after a five-year ban, having reached a licensing deal with local merchant Reliance Retail. Shein’s re-entry onto the subcontinent comes with lots of other conditions, including keeping Indian users’ data on Indian soil. As a reminder, five years ago, India also banned TikTok, as well as a host of other popular Chinese apps, so even the most stringent of China hawks can be won over.

Real Estate

Climate Change Could Slash Home Values By $1.5 Trillion, Report Says

Photo of wildfire damage to a house
Photo by Matthew Keys via CC BY-ND 2.0

Climate change may melt home values along with glaciers.

As last month’s fires and last year’s hurricanes continue to rock and reshape Los Angeles and North Carolina, respectively, a new study published Monday from climate-research firm First Street places an estimate on just how much equity climate disasters could strip from US home values in the coming years — a whopping $1.47 trillion.

Higher Ground

As they say: Man plans, and Mother Nature floods his semi-basement. Even in an increasingly impenetrable housing market, home ownership remains a bedrock goal. For millions of Americans, that’s meant migrating to the supposedly more-affordable (and assuredly warmer-weather) pastures of the Sun Belt. According to a report published last year by real estate investment firm Clarion Partners, the Sun Belt accounted for 80% of population growth in the US over the previous decade. Clarion also found the region is home to 50% of the US population today and may house 55% by 2040. 

But according to First Street, these are the states most prone to destructive climate events — facing an average of 7.3 major weather disasters in 2024 compared with just 4.3 in non-Sun Belt states. That means an economic storm could be brewing in the housing market:

  • First off, with the increase in climate disasters, insurance premiums are spiking. In the past decade, insurance rates have gone from about 8% of the average mortgage payment to around 20%; by 2055, First Street estimates that unrestricted risk-based insurance pricing would drive a 29.4% increase in average premiums.
  • That could lead to a mass migration out of Sun Belt regions, especially those outside highly attractive metropolitan areas. First Street estimates that 55 million Americans will voluntarily relocate to areas less prone to climate disasters by 2055; Of the roughly 84,000 census tract neighborhoods in the US, First Street says 26% are at risk of “climate abandonment” — or the sustained exodus of citizens amounting to a 38% population decline over 30 years.

Market, Go Up: It’s enough for First Street to estimate the $1.47 trillion knock to the current $50 trillion net worth of US homes. But if anything has proven more unstoppable than even climate change in the past decade, it’s home valuations. If home appreciation rates hold, the market could essentially beat, or rather diminish, the impacts of climate change by pure inertia. After all, a $1.5 trillion hit leaves a much smaller dent in $100 trillion than in $50 trillion.

Extra Upside

  • Strike One: In the first major labor action since the new U.S. administration took over, 10,000 workers at Kroger-owned grocery chain King Soopers voted to go on strike Thursday. 
  • You Know What to Do, Ponyboy: Gold was the beneficiary of Monday’s political and economic uncertainty, hitting a record high as investors sought safe haven.
  • Done With Political News? Check out our friends at Nice News, an email digest sent to over 850,000 readers with only uplifting stories. Join for free here.*

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