Unadorned Notes: April 8-12, 2025

Consumer Sentiment Falls, Inflation Fears Rise; U.S. Deficit Shrinks, Tariff Revenue Rises; Wall Street Gains Amid Volatility; House GOP Advances Budget Plan; EU Pauses Planned Tariffs

Economics, Finance, and Business

U.S. Inflation Falls Before Tariffs: U.S. consumer prices fell 0.1% in March 2025, marking the first monthly decline in nearly five years, driven largely by a 6% drop in gasoline prices. Year-over-year inflation cooled to 2.4%, below expectations, while core inflation excluding food and energy rose 2.8%, the smallest increase since March 2021. Economists cautioned that the data may be short-lived as new tariffs announced by President Donald Trump in early April are expected to raise prices in coming months. Travel-related spending weakened in March, with declines in hotel rates and airline fares, while food prices, particularly eggs, continued to climb.¹

Jobless Claims Edge Up Slightly: Initial U.S. unemployment claims rose by 4,000 to a seasonally adjusted 223,000 for the week ending April 5, 2025, matching economists’ forecasts. The increase comes amid growing concerns that President Donald Trump’s escalating tariffs could weaken business confidence, investment, and labor demand. While the economy added 228,000 jobs in March, the unemployment rate rose to 4.2%, and hiring has remained subdued. Continuing claims fell by 43,000 to 1.85 million, indicating that layoffs remain historically low despite rising economic uncertainty.²

Consumer Sentiment Falls, Inflation Fears Rise: U.S. consumer sentiment dropped sharply in April 2025 to 50.8, its lowest level since June 2022, as escalating trade tensions fueled economic uncertainty. The University of Michigan survey showed 12-month inflation expectations surged to 6.7%, the highest since 1981, while five-year expectations rose to 4.4%. Despite a 0.4% decline in the March producer price index, falling goods and energy prices are expected to be temporary amid tariff-driven supply shocks. There are growing expectations that the Federal Reserve will delay interest rate cuts until late 2025.³

U.S. Deficit Shrinks, Tariff Revenue Rises: The U.S. budget deficit fell to $161 billion in March 2025, down 32% from a year earlier, largely due to a calendar shift in benefit payments, according to the Treasury Department. Net customs duties rose to $8.2 billion in March, the highest since September 2022, driven by President Donald Trump’s recent tariff increases on Chinese, Canadian, and Mexican imports. For the first six months of fiscal 2025, the deficit totaled $1.307 trillion, the second-largest on record, as receipts grew 3% year-over-year to $2.260 trillion, while outlays rose 10% to $3.567 trillion. Spending increases were led by higher interest payments on government debt, Social Security, and healthcare programs, while tax receipts were boosted by higher payroll and corporate tax collections.⁴

WTO Warns of U.S.-China Trade Collapse: The World Trade Organization (WTO) warned that goods trade between the United States and China could fall by as much as 80% amid escalating tariff disputes. WTO Director General Ngozi Okonjo-Iweala stated that further escalation risks a full decoupling of the two economies, with global economic impacts extending beyond both countries. The WTO projected that fragmentation of global trade along geopolitical lines could reduce global real GDP by nearly 7% over the long term.⁵

Wall Street Gains Amid Volatility: U.S. stocks ended higher on Friday, capping a turbulent week marked by trade tensions and strong bank earnings. The S&P 500 and Dow recorded their largest weekly percentage gains since November 2023, while the Nasdaq posted its best performance since November 2022. First-quarter earnings season began with better-than-expected results from JPMorgan Chase, Morgan Stanley, and Wells Fargo, though concerns about an economic slowdown persisted. Federal Reserve officials reassured markets of their readiness to act, while investors remained focused on inflation dynamics and the evolving trade landscape.⁶

Banks Beat Estimates, Signal Uncertainty: Several major U.S. banks and BlackRock reported Q1 2025 earnings that exceeded analysts’ expectations. JPMorgan Chase posted a 9% increase in profit, while Wells Fargo’s earnings rose 6%, and Morgan Stanley’s results also surpassed forecasts. BlackRock reported record assets under management of $11.58 trillion, although its profit declined. Despite the strong financial results, bank executives expressed uncertainty over the U.S. economic outlook, citing trade policy and geopolitical risks. Morgan Stanley CEO Ted Pick and BlackRock CEO Larry Fink both emphasized the heightened unpredictability facing global markets and client sentiment.⁷

Bond Funds See Record Outflows: U.S. bond funds experienced $15.64 billion in net outflows in the week ending April 9, 2025, the largest weekly withdrawal since December 2022, according to LSEG Lipper data. While taxable fixed-income and loan participation funds saw heavy outflows, short-to-intermediate government and Treasury funds attracted $8.89 billion in inflows. U.S. equity funds reversed recent trends, gaining $6.44 billion in net inflows, largely driven by investor dip-buying in large-cap stocks. Money market funds recorded $26.67 billion in outflows, while sectoral funds saw $4.73 billion in net withdrawals, led by financial sector outflows of $2.05 billion.⁸

Airlines Cut Outlook Amid Uncertainty: Delta Air Lines withdrew its 2025 financial guidance, citing stalled growth and weakening travel demand driven by economic uncertainty and rising prices. The airline plans to reduce capacity in the second half of the year as domestic leisure, business, and government travel bookings soften. Analysts expect other carriers to revise forecasts as consumers delay travel plans and international travel faces headwinds from U.S. trade policies. Despite near-term pressures, Delta projected solid profitability for 2025, supported by resilient premium and long-haul international travel demand.⁹

Prada Acquires Versace for $1.36B: Prada Group announced it will acquire Versace in a $1.36 billion deal, uniting two of Italy’s most prominent luxury fashion houses. The acquisition, significantly lower than the $2.15 billion paid by Capri Holdings in 2018, includes Versace’s existing debt and comes amid weakening global demand for luxury goods. Prada plans to leverage its platform to revitalize Versace, which has been operating at a loss, positioning the combined group to better compete with industry leaders LVMH and Kering. Donatella Versace stepped down as creative director in March 2025 after nearly 30 years, transitioning to the role of chief brand ambassador. Dario Vitale, formerly of Miu Miu, has been appointed chief creative officer to lead the brand’s next phase.¹⁰

U.S. Politics, Policies, and Geopolitics

House GOP Advances Budget Plan: House Republicans narrowly approved a budget resolution allowing the use of reconciliation to advance President Donald Trump’s agenda on taxes, energy, and immigration without Democratic support. The resolution passed 216-214 after securing commitments for at least $1.5 trillion in spending cuts over ten years, including reductions to Medicaid subsidies and funds from the 2022 Inflation Reduction Act. The plan sets the stage for renewing Trump’s 2017 tax cuts, estimated to cost $5.5 trillion, while divisions remain between House fiscal hawks and the more cautious Senate over deficit reduction strategies. Revenue measures include expanding energy leases and spectrum auctions, though analysts warn the expected economic growth may not offset the tax cut costs, especially amid Trump’s escalating trade war. Final legislation must reconcile differences within the Republican Party, with moderates and conservatives clashing over potential cuts to social safety net programs.¹¹

Supreme Court Clears Federal Worker Firings: The U.S. Supreme Court and the Fourth Circuit Court of Appeals ruled that the Trump administration could proceed with terminating 16,000 federal probationary employees, finding challengers lacked legal standing. The rulings paused earlier injunctions that had temporarily reinstated the fired workers across 20 federal agencies. The courts will continue to hear arguments on the merits of the cases, but the administration argued that maintaining the injunctions imposed financial burdens without clear justification. Critics, including state officials and unions, argued the mass terminations resembled unlawful reductions in force without proper notification or procedures.¹²

Trump Pauses Tariffs, Escalates China Fight: President Donald Trump announced a 90-day pause on most country-specific tariffs after initial implementation, citing global negotiations and market concerns. The pause excluded China, where Trump raised tariffs to an effective 145%, prompting China to retaliate with a tariff capping at 125% on U.S. goods. Baseline 10% tariffs on all imports and existing 25% tariffs on steel, aluminum, and automobiles remain in effect. The Trump administration plans individualized trade talks with over 75 countries while maintaining a hardline stance against China amid escalating economic and political disputes.¹³

Trump Exempts Electronics From Tariffs: The Trump administration announced it will exempt smartphones, laptops, and other consumer electronics from its 145% tariffs on Chinese imports, aiming to avoid price hikes on essential devices. The exemption benefits major technology companies such as Apple, Samsung, and Nvidia, which had faced steep market losses amid the trade war escalation. The move reflects the administration’s recognition that shifting electronics manufacturing from China to the U.S. is not feasible in the near term due to cost and supply chain complexity. Tech stocks are expected to rally following the announcement, after a $2.1 trillion drop in market value for the sector’s largest companies since early April. The White House stated it remains committed to encouraging domestic manufacturing of critical technologies despite the tariff relief.¹⁴

Trump Seeks Allies Against China: The Trump administration is seeking to rebuild ties with U.S. allies to strengthen its position against China amid an escalating trade conflict. Treasury Secretary Scott Bessent said upcoming trade talks with Japan, South Korea, India, and Vietnam aim to coordinate pressure on China to reform its trade practices. Critics argue Trump’s withdrawal from multilateral trade agreements like the Trans-Pacific Partnership weakened U.S. leverage and alienated allies. Despite skepticism over U.S. reliability, administration officials say foreign leaders are eager to re-engage due to their dependence on American markets.¹⁵

EU Pauses Planned Tariffs: The European Union announced a 90-day pause on its planned counter-tariffs on $21 billion of U.S. imports following President Donald Trump’s decision to temporarily lower newly imposed duties. European Commission President Ursula von der Leyen said the pause allows for negotiations but warned that tariffs could be reinstated if talks fail. The suspension affects U.S. products including maize, wheat, motorcycles, and clothing, while existing U.S. tariffs on steel, aluminum, and automobiles remain in place. The move follows Trump’s abrupt pause on most tariffs outside of China, while maintaining a 10% baseline duty on imports. The Trump administration is now engaged in negotiations with over a dozen countries, while China continues to resist U.S. pressure.¹⁶

U.S., Iran Continue Nuclear Talks: The United States and Iran concluded their first direct contact under the Trump administration during nuclear talks in Oman, agreeing to hold follow-up negotiations on April 19, 2025. Both sides described the initial meeting as constructive, with the U.S. aiming for a stronger agreement than the 2015 Joint Comprehensive Plan of Action. President Donald Trump has set a two-month deadline for Iran to accept a deal limiting its nuclear program, while also warning of possible military action if talks fail. Iran has insisted negotiations focus solely on nuclear issues, rejecting demands to dismantle its civilian nuclear program or curb its defense capabilities. The talks come amid heightened regional tensions, with Iran facing economic pressure from U.S. sanctions and Israeli military actions targeting its proxies.¹⁷

Xi Purges Top General, Investigates Princeling: Chinese leader Xi Jinping has removed General He Weidong, the second-ranked officer in the People’s Liberation Army, in the most senior military purge in decades, citing alleged corruption. He’s removal follows a broader anti-corruption campaign targeting China’s military leadership, including previous dismissals of Rocket Force commanders and defense ministers.¹⁸ Separately, Chinese authorities are investigating Liu Tianran, son of former Vice Premier Liu He, over suspected financial corruption linked to fundraising and investment activities. The investigation into Liu Tianran reflects Xi’s intensified scrutiny of China’s finance sector and efforts to recover illicit gains from associates of senior officials. Analysts suggest Liu He’s diminished political influence has left his son vulnerable amid Xi’s expanding anti-corruption drive.¹⁹

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1. Inflation Eased in March, but Tariffs Threaten to Stoke Price Pressures - WSJ

2. US weekly jobless claims rise marginally | Reuters

3. US consumer sentiment tanks; inflation expectations surge amid tariff woes | Reuters (msn.com)

4. US March deficit falls to $161 billion, customs revenue grows but still small | Reuters

5. US-China trade could decrease by as much as 80%, WTO chief warns | Reuters (yahoo.com)

6. Wall Street ends whipsaw week sharply higher as Fed comments soothe market | Reuters

7. Wells Fargo, JPMorgan Chase, Morgan Stanley Report Quarterly Results; What Bank Earnings Mean for the Economy (barrons.com)

8. US bond funds hit by heavy outflows as recession, inflation fears mount | Reuters

9. Airlines’ Dreams of a Banner Year Are Clouded by Trade Battle - WSJ

10. Prada buying rival fashion brand Versace in $1.36bn deal (bbc.com)

11. Congress approves agreement to implement Trump’s legislative agenda - The Washington Post

12. Agencies can once again fire all probationary employees following new court ruling - Government Executive

13. Where tariffs stand after Trump's partial pause : NPR

14. Trump exempts smartphones, laptops from tariffs | AP News

15. Why Trump wants allies to take on China in a trade war | CNN

16. European Union hits pause on planned retaliatory tariffs for U.S. | CBC News

17. US-Iran negotiators hold ‘constructive’ nuclear talks, will meet again next week | CNN Politics

18. Top Chinese general removed in Xi Jinping’s latest purge (ft.com)

19. China investigates ‘princeling’ amid crackdown on finance industry (ft.com)