President Donald Trump pulled a rabbit out of his trade war hat this week, announcing a trade deal with Japan putting 15% tariffs on most Japanese imports.
The news came just as U.S. companies put out their second-quarter results, and stocks rose a percentage point to record highs, albeit with help from companies like Alphabet $GOOGL which rose 3% as it beat investors’ expectations.
Under the terms of the trade deal with Japan, the Asian country will cut its own tariffs on U.S. made cars and allow the importation of U.S. rice, a major culture shock in Japan, where subsidies to small farmers keep a key countryside constituency happy. Stocks rose because the deal eased months of uncertainty, sending Japan-related stocks higher — Toyota $TM rose 35%.
The deal also boosted confidence that Trump’s threats of sky-high tariffs will end with something more manageable in other areas. Crucially, investors think the deal with Japan could be a template for Trump’s talks with China and the European Union over the next few weeks.
Still, not every industrial sector was able to shrug off Q2 disruptions from tariffs. General Motors $GM profits fell 35% in the second quarter, as tariffs cut more than $1 billion from its net income. The company warned tariffs will take an even bigger bite next quarter. GM imports roughly half the vehicles it sells in the U.S. Shares dropped 8% on the news. GM, which has risen to the number two electric vehicle seller in the U.S., says it has an “inherent advantage” over Tesla $TSLA because its large variety of models (12 EVs to Tesla’s five) will help it weather changing consumer tastes. Still, GM shares did recover nearly all their losses on the Japan trade deal news.
Meanwhile across the automotive sector, Chrysler parent Stellantis $STLA said Monday tariffs cost it $350 million in profits, but the Japan news helped shares rise over 2%. Volvo, the one-time Swedish carmaker now owned by China’s Zhejiang Geely Holding Group $GELYF said it faced a one-off $1.2 billion charge from tariffs. Volvo $VLVOF says U.S. car tariffs mean it can’t sell the Chinese-made Volvo ES90 EV sedan at a profit here.
Jeffries economist Mohit Kumar put a brave face on the apparent result in a comment to Reuters. “While negative from a macro point of view, the world can live with 15% or so tariffs,” he said, in a remark which may throw light on the ultimate goal or strategy behind the Trump administration’s broader trade talks.
—Peter S. Green
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The usual suspects
- On track: Union Pacific Railroad $UNP (whose market cap is $140 billion) is in talks to buy smaller rival Norfolk Southern $NSC (which is only worth a lowly $60 billion), to create the country’s largest railroad. A combined railroad would be the only U.S. railroad today to have a network of track and trains spanning the U.S. from coast to coast. That could cut delays and lower freight costs. If the deal wins nods from regulators and unions, it could be the largest M&A deal in the U.S. this year.
- From big oil to bigger oil: Chevron $CVX says it’s completed its $53 billion purchase of smaller oil major Hess $HES after prevailing against ExxonMobil $XOM in a dispute over offshore oil assets in South America. Exxon, which owns 45% of the oil rights off Guyana, to Hess’ 30%, said it had first refusal rights when Hess decided to sell. But an international arbitration ruled in Chevron’s favor.
- Steel sticker shock: Tariffs on U.S. markets are having one effect economists predicted they might: Seeing higher prices on imported goods like steel, U.S. manufacturers of those goods have raised their own prices. Two of the largest U.S. steelmakers, Cleveland-Cliffs $CLF and Steel Dynamics $STLD said they’d raised prices in the second quarter, as tariffs on imported steel jumped from 25% to 50%. “You always see that as one of the traps of a tariff,” John O’Leary, CEO of Daimler Truck North America told the New York Times. American steel makers, he said, now have “more headroom to be able to raise the price.”
- Softbank’s AI troubles: Six months after Softbank chair Masayoshi Son and OpenAI’s Sam Altman stood with President Trump to announce Stargate, a $500 billion AI effort, the group has yet to complete a deal for building an AI data center.
- Amazon’s price hikes: A deep dive by the Wall Street Journal found that Amazon $AMZN has been hiking prices on thousands of low-cost products, like canned soup and deodorant, even before the tariffs kick in. A can of Campbell’s Chunky Clam Chowder rose 30% on Amazon, and a dispenser of Visine eye drops rose 73% between Jan. 20 and July 1, the paper found. “Amazon cut prices on expensive items while raising them on cheap goods — small increases that could add up,” the Journal reported. Amazon said the Journal was wrong.
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The short stack
- Meme stocks are back: Debt-ridden, Amazon-challenged, fading mall anchor Kohl’s $KSS , whose stock is down 40% in the past 12 months, shot up an astonishing 85% in the wee hours earlier this week, as meme stock buyers focused on the company. Other meme stocks are rising, too, despite challenging market fundamentals.
- Time to join Chocaholics Anonymous? Hershey $HSY says it’s raising the cost of candy bars as bad weather, plant disease, and climate change push up the price of cocoa. Prices for the processed bean hit $12,000 a ton in December, and have now dropped back to $8,100, but poor conditions in West Africa, source of 70% of the world’s cocoa, mean prices are going back up again. Hershey’s wholesale prices will rise as much as 20%, but the company promises to keep the retail price of that sweet, brown, sticky stuff below $4 a bar.
- Even death doesn’t wipe out your debts: That’s the sad news for the family of the late Mike Lynch, the British tech tycoon who tragically died with his 18-year-old daughter when Lynch’s refitted super yacht capsized and sank last year in a freak storm off the coast of Sicily. Lynch had been celebrating his acquittal in a U.S. fraud trial for allegedly hoodwinking Hewlett-Packard Enterprise $HPE out of billions of dollars with inaccurate financials when he sold it for $11 billion in 2011. But now a British court says Lynch and a former business partner do in fact owe HPE more than 700 million pounds ($945 million) for cooking the books. That would wipe out Lynch’s family fortune.
- Smoothie operator: Generous Brands, a low-profile private equity group that owns smoothie-maker Sambazon and Evolution Fresh juices, says it’s following its gut and has agreed to buy canned Kombucha brand Health-Ade for a healthy $500 million from PE investors First Bev and Manna Tree Partners. Consumers are increasingly turning to healthier beverages and big food has been getting in on the game. In March, Pepsico $PEP agreed to buy Poppi, a brand of probiotic sodas, for $2 billion.
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Elon’s world
- TESLA’s income drops 16% — In yet another quarter of steep decline, Tesla $TSLA saw net income drop to $1.17 billion from $1.4 billion a year earlier. Revenue fell 12%. Tesla’s income from selling clean energy credits to other carmakers fell by more than half from a year earlier to $439 million. Musk’s flagship business is facing a triple hurdle: Tesla still has no new models, former ally Donald Trump’s bill cut the $7,500 tax credit for new EV sales, and Elon’s support of right-wing politicians is driving away the eco-friendly drivers most likely to buy EVs. The company’s shares are now down 21% since Trump’s inauguration.
- AI is expensive: That’s what Musk is finding out as his xAI project struggles to keep up with its well-funded rivals. As Microsoft $MSFT, Facebook parent Meta $META and OpenAI announce plans to spend tens of billions of dollars on AI systems, Musk is rushing to raise similar amounts. Just weeks after raising $10 billion through sales of debt and a private stock issue, Musk is working with Antonio Gracias and his Valor Equity Partners to raise $12 billion, theWall Street Journal reports. The money would go to buy more Nvidia chips that would be leased to xAI.
Trumplandia
- AI and fraud risks for banks: With crypto and AI firms hoping to get into the financial services, and existing big banks and trading houses hoping to wind down some of the rules meant to prevent a repeat of the 2008 market meltdown, Fed chair Jerome Powell convened a conference this week to chew it all over. No decisions have been made yet, but one surprise came from OpenAI founder Sam Altman, who warned the bankers that AI could supercharge fraud.
- Powell keeps his job: Trump seems to have backed off his threat to fire Powell, apparently after Treasury Secretary Scott Bessent warned Trump that pink-slipping Powell would only cause turmoil and raise rates. Powell has already said it’s likely he will cut rates this year, and in any case his term ends next year, so why rush it. “I think he’s done a bad job, but he’s going to be out pretty soon anyway,” Trump told reporters on Tuesday. “Eight months, he’ll be out.” It probably didn’t hurt that America’s most important financier, JP Morgan Chase $JPM CEO Jamie Dimon, warned publicly against messing with Powell: “I think the independence of the Fed is absolutely critical,” Dimon told journalists last week. “Playing around with the Fed can have adverse consequences, the absolute opposite of what you might be hoping for.”
- On air, or out of thin air? After winning a $16 million settlement from CBS owner Paramount $PARA A for alleged harm he claimed he suffered from a 60 Minutes interview with Kamala Harris (who lost the 2024 presidential election to him), Trump now claims he has secured another $20 million in free ads and public service messages from CBS. Paramount, which is hoping to win government approval for a sale to Skydance, a movie studio owned by the son of Trump ally and Oracle $ORCL L founder Larry Ellison. Showbiz news site Variety reports that CBS, Skydance, and Trump’s own lawyers have all said there’s no side deal with free ads for Trump. Meanwhile, CBS cancelled Colbert’s late night show last week, much to Trump’s delight.
- Murdoch feud deepens over the Journal’s Epstein reporting: Trump has filed a $10 billion lawsuit against media mogul Rupert Murdoch and the Murdoch-owned Wall Street Journal, after the paper published a story about a licentious letter allegedly written by Trump to his then-friend, convicted sex-trafficker Jeffrey Epstein. Trump denies writing the illustrated letter and says he never makes drawings, although some of Trump’s artwork has been sold at charity auctions. Lawyers say it’s unlikely Trump could win such a huge verdict, but Murdoch entities have a history of settling charges for large payouts: Fox News paid the Dominion voting machine company $787.5 million in 2023 for alleging the machines had switched votes from Trump to Joe Biden in 2020. Fox also paid tens of millions of dollars over sexual harassment claims against former host Bill O’Reilly. But the bigger question here is whether taking on Trump will shake one of Murdoch’s biggest revenue streams: the eyeballs of MAGA supporters on Fox News. Shares of Murdoch’s News Corp $NWSA have dropped about 1% since Trump’s lawsuit was filed. The Wall Street Journal has said it stands by its reporting and dropped another bombshell on Wednesday afternoon, reporting that Attorney General Pam Bondi had told Trump his name was in the Epstein Files in the spring — something Trump later denied to reporters.
- Astra-nomical: British-Swedish drugmaker AstraZeneca $AZN says it will invest $50 billion in the U.S. by 2030, as it joins other pharma firms hoping to block President Trump’s threat of 200% percent tariffs on imported drugs.
- Netflix and Zoom! Revenue at everyone’s favorite streamer rose 16% from a year earlier in the second quarter to $11 billion, and profits jumped 46% to $3.1 billion. Netflix $NFLX credited a growing number of subscribers, higher subscription prices, and more ad sales.
- Switcheroo: Juul got FDA approval to keep selling its e-cigarettes, having convinced the Trump Administration’s FDA that more adults switching from cigarettes to e-cigs (mini-vapers) outweighed the concern that its smokeless, flavored vapes are luring kids into lifelong nicotine habits. Some surveys show vaping by high schoolers has dropped from 27% in 2019 to 8% in 2024. Altria $MO , the company once known as Philip Morris, bought a 35% stake in Juul, and later swapped it for the rights to Juul’s smokeless tobacco patents.
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Peter S. Green is a veteran reporter and editor who has spent more than two decades covering business and finance from Eastern Europe to New York City, and has worked for Bloomberg News, The New York Post, The New York Times and The Messenger. He lives in New York City and is always looking for the next big story.
