Unadorned Notes: April 30 – May 4, 2025

GDP Contracts Amid Trade Uncertainty; Stocks Rally on Strong Jobs; Trump Budget Proposes Deep Cuts; CIA Recruits Chinese With Videos; China Weighs Fentanyl Talks Concession

Economics, Finance, and Business

Job Growth Slows, Risks Rise: U.S. job growth slowed slightly in April 2025, with nonfarm payrolls increasing by 177,000 and the unemployment rate holding at 4.2%, as employers remained cautious amid trade-related uncertainty. The Labor Department’s report indicated ongoing resilience in sectors such as healthcare, warehousing, and hospitality, while federal government and manufacturing employment declined, partly due to new tariffs and administrative cutbacks. Wage growth remained steady at 3.8% year-over-year, supporting consumer spending, though average hours worked were unchanged and long-term unemployment rose. Economists warned that recent protectionist trade measures, including sharply increased tariffs on Chinese imports, could lead to significant labor market deterioration by summer. Despite market gains, business sentiment has weakened, and forecasts suggest the full impact of trade policy will emerge in the coming months.¹

GDP Contracts Amid Trade Uncertainty: The U.S. economy contracted by 0.3% in the first quarter of 2025, marking the first broad measure of economic performance under President Donald Trump, according to the Bureau of Economic Analysis. The decline was largely attributed to a surge in imports ahead of proposed tariffs and a reduction in government spending, partially offset by gains in consumer spending, investment, and exports. The economic data arrives as the administration faces mounting public disapproval over tariffs, falling approval ratings, and growing recession concerns, despite White House claims of significant progress in trade policy.²

Trump Downplays Recession Concerns: President Donald Trump described the U.S. economy as being in a “transition period” and expressed optimism about future performance despite recent signs of slowing growth. In an interview with NBC News, Trump said it would be acceptable to experience a short-term recession, echoing similar remarks posted on social media earlier in the day. His comments followed the release of April 2025 employment data showing a slight slowdown in job growth and a GDP report indicating the first quarterly contraction in three years. Economists have warned that recent tariff measures could raise inflation and dampen economic expansion. A Reuters/Ipsos poll showed Trump’s approval rating declined to 42%, down five points since his inauguration.³

Manufacturing Slumps Amid Tariff Strain: U.S. manufacturing activity contracted for a second consecutive month in April 2025, with the ISM manufacturing PMI falling to 48.7, as tariffs disrupted supply chains and elevated input costs. Widespread reports of delivery delays, inventory build-ups, and pricing pressures reflected the impact of President Donald Trump’s April 2 “Liberation Day” tariffs, which included sweeping duties on Chinese imports. Although some sectors, including electronics and machinery, posted growth, many others cited severe operational challenges and layoffs linked to tariff uncertainty. Weekly jobless claims rose sharply to 241,000, with continuing claims reaching their highest level since late 2021, and major employers such as UPS announced large-scale layoffs. Economists expect further labor market weakening, with forecasts showing nonfarm payroll growth slowing and recession risks increasing.⁴

Stocks Rally on Strong Jobs: U.S. stocks rebounded sharply on Friday, with the S&P 500 rising 1.5%, erasing losses sustained after President Donald Trump’s “Liberation Day” tariff announcement, as April 2025 job gains exceeded expectations. The Bureau of Labor Statistics reported 177,000 new jobs, surpassing forecasts, though March’s figure was revised downward and the unemployment rate held steady at 4.2%. The data prompted a rise in Treasury yields, reflecting reduced expectations for imminent interest rate cuts, with Goldman Sachs delaying its forecast for the next cut to July. Despite the rally, analysts warned that the economic impact of tariffs may not yet be visible in labor market figures. Global equities also advanced, though the U.S. dollar remains down nearly 4% since the announcement of the “reciprocal tariffs”.⁵

Buffett Announces Retirement at 94: Warren Buffett announced he will step down as CEO of Berkshire Hathaway at the end of the year, concluding a nearly six-decade tenure that transformed the company into a global conglomerate. Greg Abel, long designated as Buffett’s successor, will assume the role. The announcement came during Berkshire’s annual shareholder meeting in Omaha, where Buffett, 94, received a prolonged standing ovation. Known for turning the event into a major gathering of investors and fans, Buffett reflected on his legacy and praised America’s economic system. He briefly criticized the use of tariffs, suggesting they contribute to uncertainty in business.⁶

U.S. Politics, Policies, and Geopolitics

Waltz Reassigned to U.N. Role: President Donald Trump nominated National Security Adviser Mike Waltz as U.S. ambassador to the United Nations, addressing internal dissatisfaction with Waltz’s leadership and filling a key diplomatic vacancy. Chief of Staff Susie Wiles had reportedly ceased communication with Waltz, prompting plans for his removal amid growing concerns within the administration. Secretary of State Marco Rubio will temporarily lead the National Security Council, and speculation has begun over whether he will assume the role permanently. While Waltz faced internal challenges, Republican lawmakers expressed strong support for him, citing his contributions to U.S. strategy against China, Russia, and Iran. The reassignment follows a tumultuous history for Trump’s national security advisers, with Waltz departing more favorably than many of his predecessors.⁷

Trump Budget Proposes Deep Cuts: President Donald Trump’s administration proposed a $163 billion cut to the federal budget, sharply reducing funding for education, housing, medical research, and several federal agencies while increasing spending on defense and border security. The plan would lower non-defense discretionary spending by 23% and reduce budgets for the IRS, NIH, CDC, and Department of Education, while allocating additional funds for immigration enforcement and military programs. Critics, including Democrats and some Republicans, raised concerns over the severity of domestic cuts and the late timing of the proposal, which also outlines a $50 billion reduction to the State Department. The administration argues the budget reflects its priorities to streamline government operations and strengthen national security, though fiscal experts warn it could expand the deficit, especially if Trump’s 2017 tax cuts are extended. Congressional leaders are expected to make significant revisions, though Trump’s influence within the GOP may allow substantial parts of the proposal to advance.⁸

U.S. Army Launches Drone Overhaul: The U.S. Army is undertaking its most extensive modernization effort since the Cold War, allocating $36 billion over five years to upgrade weapon systems and dramatically expand its use of drones. Each of the Army’s 10 active-duty combat divisions will be equipped with around 1,000 drones, reflecting lessons from the Ukraine conflict and the evolving nature of warfare. The overhaul, directed by Secretary of Defense Pete Hegseth under President Donald Trump’s administration, emphasizes long-range precision fires, missile defense, cyber, and electronic warfare capabilities. The plan includes divesting outdated systems and was developed through extensive testing at training sites such as Grafenwöhr in Germany. Critics argue the scale of investment may outpace actual threats, while the Pentagon frames the initiative as necessary to deter China and modernize U.S. military readiness.⁹

Trump Targets Harvard’s Tax Status: President Donald Trump announced plans to revoke Harvard University’s tax-exempt status, escalating tensions over campus free speech, antisemitism policies, and federal oversight of higher education. Harvard President Alan Garber condemned the move as “highly illegal” and warned of severe impacts on education, research, and financial aid. Legal experts noted that the IRS cannot revoke tax exemption at the president’s direction without due process, and critics, including Sen. Ed Markey, accused Trump of unconstitutional political retaliation. The administration has already frozen over $2 billion in federal research funds to Harvard and issued demands related to campus policies and international student records. While Harvard has made limited changes, it has vowed to defend its independence and constitutional rights against federal overreach.¹⁰

Trump Moves to Defund NPR, PBS: President Donald Trump signed an executive order directing the Corporation for Public Broadcasting (CPB) to halt federal funding to NPR and PBS, citing perceived ideological bias. The order has been challenged as unlawful by CPB and PBS leadership, who argue the CPB operates independently under congressional charter and is not subject to presidential control. Trump’s directive follows ongoing disputes over public media’s content and governance, including a CPB lawsuit against the administration’s attempt to remove board members. Congressional appropriations currently fund CPB through 2027, with the majority of support directed to local stations, which rely heavily on federal subsidies for operations. Public media leaders and legal experts warn the order threatens First Amendment protections and essential services.¹¹

Judge Blocks Trump Deportation Order: A federal judge in Texas ruled that President Donald Trump’s use of the Alien Enemies Act to detain and deport Venezuelan immigrants was unlawful and exceeded the statute’s scope. U.S. District Judge Fernando Rodriguez, Jr. held that the criminal activity attributed to the alleged gang Tren de Aragua did not meet the Act’s requirement of a military “invasion” or “predatory incursion”. The ruling applies to the Southern District of Texas and is the first to directly reject the use of the Act against individuals accused of non-military threats. The case may be appealed to the conservative-leaning 5th U.S. Circuit Court and could reach the Supreme Court, which has previously ruled that detainees must be given a reasonable opportunity to challenge removal. Civil liberties advocates hailed the decision as a major check on executive power during peacetime.¹²

CIA Recruits Chinese With Videos: The CIA released Mandarin-language videos aimed at encouraging Chinese officials to share intelligence, portraying disillusionment with corruption and repression inside the Chinese Communist Party. The videos, posted on multiple platforms, follow earlier Russian-language campaigns the agency says were effective in gaining information from foreign sources. CIA Director John Ratcliffe emphasized that China remains the agency’s top intelligence priority, citing the need for innovation in confronting Beijing’s strategic threat. The videos dramatize the inner frustrations of fictional Chinese officials who choose to contact the CIA through secure dark web channels, a method promoted by the agency in a prior campaign. U.S. officials warn that Chinese and Russian intelligence services are also attempting to exploit recent reductions in the U.S. federal workforce to recruit American operatives.¹³

QZ’s Comment: Historically, there are four primary motivations used in the recruitment of HUMINT assets—money, ideology, coercion, ego (MICE). A slick video is just icing on the cake—effective only when the target is already aligned with one or more of the MICE factors.

Vance Saves Trump Tariff Powers: Vice President JD Vance cast a tie-breaking vote in the Senate to table a bipartisan resolution that would have canceled President Donald Trump’s national emergency declaration used to impose global tariffs. The resolution initially failed by a 49–49 vote due to several senators’ absences, including Republicans and Democrats, with Vance intervening during a procedural vote. Trump’s tariff strategy has faced backlash from lawmakers and market analysts, with critics warning of recession risks and tax burdens on consumers. Following criticism, Trump announced a 90-day pause and reduced the proposed tariff to a 10% baseline rate, leading to a stock market rebound. Despite continued controversy, the administration plans to pursue trade deals while asserting the tariffs are necessary for long-term U.S. economic growth.¹⁴

China Weighs Fentanyl Talks Concession: China is considering measures to address U.S. concerns over fentanyl precursor chemicals as a potential opening for renewed trade talks with the Trump administration, according to the Wall Street Journal. Chinese Public Security Minister Wang Xiaohong has reportedly explored options to engage directly with U.S. officials, either in the United States or at a neutral location. The discussions remain preliminary, with Beijing also seeking some easing of the Trump administration’s aggressive trade stance, including 145% tariffs on Chinese goods. The Trump administration has linked the fentanyl crisis to Chinese chemical exports and recently revoked duty-free shipping exemptions widely used by e-commerce firms and illicit drug traffickers. While both sides have engaged in low-level talks, progress has stalled amid mutual accusations of bad faith negotiations.¹⁵

QZ’s Comment: As I predicted last month, it should be pretty clear by now that there will be a symbolic deal similar to the “Phase One” deal in 2019. The deal can be spun domestically in both countries as a win, but the underlying strategic balance continues to shift as decoupling entrenches and China’s vulnerabilities force it to be more defensive. People should start talking more about a “siege economy” in the coming months and years.

U.S., Ukraine Sign Minerals Deal: The United States and Ukraine signed a bilateral economic partnership agreement granting U.S. access to Ukraine’s critical mineral resources in exchange for establishing a joint investment fund. The deal, finalized after months of tense negotiations, excludes retroactive aid reimbursement and allows new U.S. military assistance to count as investment. Ukrainian officials emphasized that subsoil ownership and extraction rights remain under Ukraine’s full control. The agreement targets Ukraine’s 22 critical mineral deposits, viewed as a strategic alternative to China’s dominance in rare earths, and aligns with broader Western reconstruction and security goals. U.S. officials described the agreement as a step toward long-term economic cooperation and a deterrent to Russian aggression.¹⁶

Albanese Wins Historic Second Term: Australian Prime Minister Anthony Albanese secured a second consecutive three-year term, the first such victory for a sitting prime minister in 21 years. Opposition leader Peter Dutton conceded defeat, as projections showed Labor winning or nearing a majority in the 150-seat House of Representatives. The campaign focused heavily on inflation, energy policy, and cost-of-living pressures, with Labor opposing Dutton’s proposed public service cuts and nuclear energy expansion. U.S. Secretary of State Marco Rubio congratulated Albanese, reaffirming the strength of the U.S.-Australia alliance.¹⁷

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1. US labor market resilient ahead of tariff turbulence | Reuters

2. Economy Shrank in First Quarter as Imports Surged Ahead of Tariffs | Economy | U.S. News

3. Trump says US in transition period, downplays impact of short-term recession | Reuters

4. Tariffs squeeze US manufacturing in April, lift input prices | Reuters

5. US stocks wipe out steep losses that followed Trump’s ‘liberation day’ (ft.com)

6. Warren Buffett to retire, warns trade war will hurt U.S. : NPR

7. Waltz’s golden demotion, Rubio’s surprise - POLITICO

8. Trump proposes $163 billion cut to US budget that slashes domestic spending | Reuters

9. US Army Plans $36 Billion Overhaul, Largest in Nearly 50 Years - Newsweek

10. Trump says the government will revoke Harvard’s tax-exempt status. The university’s president says that would be illegal | CNN

11. Trump seeks to end federal funding for NPR and PBS : NPR

12. Trump-appointed federal judge blocks use of Alien Enemies Act for Venezuelans in South Texas : NPR

13. CIA hopes cinematic videos will persuade Chinese to spy for U.S. (nbcnews.com)

14. JD Vance Casts Tiebreaking Vote to Defeat Democrats on Trump Tariff Plan - Newsweek

15. Beijing weighs fentanyl offer to US to start trade talks, WSJ reports | Reuters

16. US and Ukraine sign critical minerals deal after months of tense negotiations | CNN

17. Australian Prime Minister Anthony Albanese wins re-election amid concerns over "American-style politics" - CBS News