The US may have been able to work out a temporary deal with our allies to the north and south of the border, but sweeping 10% tariffs on China officially went into effect today.

In retaliation, the Chinese government vowed to roll out its own 15% levy on coal and natural gas imports from the US, and an additional 10% tax on a variety of US goods and commodities, including crude oil, agricultural machinery and some cars. All of these duties will be implemented starting Monday.

China’s Commerce Ministry also put an export control measure in place for key minerals necessary for building tech like semiconductors and missile systems.

And that wasn’t all: China opened up an antitrust probe into Google parent Alphabet. It also added PVH, the luxury conglomerate that owns brands such as Tommy Hilfiger and Calvin Klein, plus biotech firm Illumina to its unreliable entity list—which sounds like a list of two-timing ex-boyfriends, but actually could result in the firms being banned from operating with China. PVH and Illumina fell 1.03% and 5.26% today, respectively.

Permanent policy, or a negotiating tactic?

Crude oil sank on the news, given that the tariffs directly impact oil exports, though it eventually recovered. Bitcoin also fell, dragging ethereum and XRP down with it, given the heightened uncertainty. But overall, US stocks remained relatively unfazed by the announcement.

After all, Trump has long expressed his ire at the trade deficits between the US and China, but these tariffs look more like a first offer than a set-in-stone policy decision.

“Last-minute reprieves for Colombia, Mexico, and Canada provide some hope that President Trump is using tariffs as a negotiating tool rather than a permanent fixture of economic policy,” explained UBS CIO of Americas Solita Marcelli in a note today.

“If we can’t make a deal with China, then the tariffs would be very, very substantial,” Trump said.

Victims of the trade war

If and when the trade war really begins, smartphone and laptop sales will suffer. According to a recent study from the Consumer Technology Association, tariffs on tech products could lead to a $90 billion to $143 billion decline in US consumer spending power.

Goldman Sachs also highlighted companies with high revenue exposure to China that will be hit hard should the trade war escalate—these include Monolithic Power Systems, Las Vegas Sands, and Qualcomm, among others.

Protecting your portfolio: “More volatile markets require an increased focus on portfolio diversification and hedging approaches,” explained Marcelli. “We like high-quality government and investment-grade corporate bonds, as they offer appealing yields, some insulation against uncertainty, and can help diversify portfolios.”—LB

🟢 What’s up

• Did somebody say profit? Spotify surged 13.24% after unexpectedly swinging to a full-year profit for the first time ever.
• Ferrari zoomed 7.04% higher after reporting rising revenue and shrugging off tariff talks that are pulling other automakers down.
• Sirius XM got the Buffett bump after Berkshire Hathaway announced it is increasing its stake in the streaming business to 35%. Shares of Sirius XM rose 2.58%.
• Hopes that Super Micro Computer may finally have some good news when it provides a second-quarter business update next week helped the struggling semi stock climb 8.60%.

What’s down

• Merck may have beaten earnings expectations last quarter, but lower-than-expected guidance for the coming quarter sent shares of the pharma giant spiraling 9.07%.
• PepsiCo missed revenue guidance for a third straight quarter, and shareholders aren’t pleased. The stock dropped 4.51% today.
• PayPal sank 13.17% following what appeared to be a strong quarter at first glance, but payment volume came in below expectations.
• Pick a reason why makeup giant Estee Lauder plummeted 16.07% today: weak earnings guidance, over $1 billion in pretax charges, or the fact that it’s cutting 7,000 jobs to save money.
• Vaccine stocks stumbled after Robert F. Kennedy Jr’s nomination as Health and Human Services secretary advanced to a Senate vote. Moderna dropped 6.51%, while BioNTech fell 2.24%.

Trump’s second stint in the White House has been marked by a number of firsts.

Today, we got another unprecedented event: Trump signed an executive order to start the process of creating an American sovereign wealth fund.

Sovereign wealth funds are like regular old investment vehicles, but they’re owned by a national government. The goal of a sovereign wealth fund depends on the country, but they are usually meant to generate income for the future, stabilize revenue streams, or as a resource for economic policy.

But Trump has floated another, far more concrete, idea: using a sovereign wealth fund to purchase TikTok, which he has been trying to rescue from a ban passed by Congress a few weeks ago.

How does this work?

There are about 90 state-owned funds throughout the world that collectively manage about $8 trillion, according to the International Forum of Sovereign Wealth Funds. The largest of these is Norway’s Government Pension Global Fund, with over $1.7 trillion in assets under management, followed by China’s Investment Corp with $1.3 trillion. Other nations with wealth funds include Saudi Arabia, Abu Dhabi, and Singapore.

Many of these countries finance their funds with surplus profits from excess resources. Saudi Arabia, for instance, uses its vast oil reserves to fund public works projects, among other things.

Unfortunately, that puts the US in a difficult position, since we’re terrible at budgeting (the last time the US achieved a budget surplus was 2001). The US deficit hit $1.83 trillion in fiscal 2024, which makes funding a fund like this especially difficult.

During an Oval Office ceremony, Treasury Secretary Scott Bessent said the fund could “monetize the US balance sheet for the American people.”

As far as that balance sheet goes, the US has about $5.6 trillion in assets as of the end of the government’s fiscal year in September 2024. The majority of that is locked up in real estate (just under $1.77 trillion) and student loans ($1.37 trillion), with a measly $1.18 trillion in cash.

That means all roads inevitably lead back to tariffs, which Trump argued will create the revenue to create the fund back when he was campaigning. But beyond that, he hasn’t outlined any more details about how it will be paid for and what exactly its portfolio will look like.

Regardless, that hasn’t stopped the president and his advisors from putting a shockingly short timetable together.

“We’re going to stand this thing up within the next 12 months,” promised Bessent.

Now that the US is going to be investing, maybe it's time for America to sign up for this newsletter.—LB

• There’s only one part of the S&P 500 that’s undervalued at the moment: healthcare. Here are 10 growth stocks in that sector worth buying.
• Job openings came in lower than expected, falling from 8.1 million in November to 7.6 million in December.
• The streaming wars have arrived in New Orleans: Fox is streaming the Super Bowl on its free service, Tubi.
• The Consumer Financial Protection Bureau ground to a halt after Treasury Secretary Scott Bessent ordered an agency-wide review.
• Elon Musk has gained access to Treasury Department payment systems, raising red flags across the federal government.
• Wondering how the Wall Street Journal editorial board, a traditionally conservative bunch, feels about the tariff talks? Here are a few recent headlines:
  • The Dumbest Trade War in History
  • The Dumbest Trade War Fallout Begins
  • Pray for Surrender in Trump’s Dumb Trade War

Labor market data continues to roll in tomorrow with the ADP private payroll report, a look at private hiring and firing across the country. Last month, the US added a solid 122,000 new jobs, though that was a slowdown from the 146,000 new jobs added in November. Economists are expecting good things for the January report due to temporary seasonal employment.

As for earnings, there’s plenty to go around: Uber, Arm Holdings, MicroStrategy, Qualcomm, GSK, Ford, Toyota, Boston Scientific, Allstate, The New York Times, and Harley Davidson are all dropping their latest numbers. Here are a couple other big names to watch for:

Before the open

Disney’s transition into a streaming service has been a bumpy ride, but there are signs that things are getting smoother—especially the recently announced combination of Fubo and Hulu + Live TV. That will add over 1.6 million subscribers at a single stroke while taking litigation worries off the table. Now all shareholders need to worry about is streaming customer retention and profitability, not to mention a revenue slowdown at its Asian theme park locations. Consensus: $1.43 EPS, $24.7 billion in revenue.

Novo Nordisk suffered a rare mishap recently with the failure of its new weight-loss drug CagriSema, and shares have fallen precipitously in the last 12 months. While setbacks sting, if Novo Nordisk’s current drug offerings like Wegovy and Ozempic continue to sell well then would-be investors finally have an opportunity to buy in at a reasonable valuation. Consensus: $0.85 EPS, $11.34 billion in revenue.