Unadorned Notes: June 12-18, 2025
Fed Holds Rates Steady; U.S. Consumer Sentiment Rebounds; China Struggles With Industrial Overcapacity; USG Takes Stake in U.S. Steel; China Demands Western Data for Exports
Economics, Finance, and Business
Fed Holds Rates Steady: The Federal Reserve held its benchmark interest rate at 4.25%–4.50% on June 18, 2025, while maintaining projections for two cuts later this year amid persistent inflation and slowing growth. Revised economic forecasts showed lower expected GDP growth at 1.4% in 2025 and higher inflation, with core PCE now projected at 3.1%. The dot plot revealed increased division among policymakers, with seven of 19 officials expecting no rate cuts in 2025. Chair Jerome Powell emphasized caution due to tariff-related inflation risks, energy price volatility from the Israel–Iran conflict, and uncertainty over the labor market and consumer spending. President Donald Trump continued to pressure the Fed for deeper cuts, citing debt service costs and economic softness, but Fed officials remained focused on balancing inflation control with downside growth risks.1
U.S. Retail Sales Drop: U.S. retail sales fell 0.9% in May 2025, marking the steepest monthly decline this year, as post-tariff front-loading faded and vehicle sales dropped 3.5%. Core retail sales, excluding autos, gasoline, building materials, and food services, rose 0.4%, suggesting consumer spending remains supported by wage growth despite economic headwinds. Broader indicators point to softening domestic demand, with factory output excluding motor vehicles down 0.3% and rising import prices signaling inflation risks ahead. Analysts cited resumed student loan payments, slowing job gains, and tariff uncertainty as mounting pressures on household finances. Financial markets reacted with lower Treasury yields and equities, while the dollar strengthened amid concerns over inflation and weak consumer momentum.2
U.S. Consumer Sentiment Rebounds: U.S. consumer sentiment rose in June 2025 for the first time in six months, with the University of Michigan’s index increasing to 60.5 from 52.2, supported by easing U.S.–China trade tensions. Despite the improvement, sentiment remained well below pre-election levels, and households continued to express concerns over economic stability and inflation. One-year inflation expectations fell to 5.1% from 6.6%, though they remain historically elevated due to lingering uncertainty around tariffs and fuel prices. The geopolitical escalation between Israel and Iran pushed oil prices higher, casting doubt on the durability of the sentiment rebound.3
CEO Outlook Hits Four-Year Low: The Business Roundtable’s CEO Economic Outlook Index declined 15 points to 69 in Q2 2025, marking its lowest level since 2020 and falling below the historical average of 83. The drop reflects broad-based caution among CEOs, with hiring expectations seeing the steepest decline—41% of respondents now anticipate workforce reductions over the next six months. Capital expenditure plans fell 15 points, while sales expectations declined by 11 points, highlighting increased uncertainty amid trade policy instability. CEOs cited tariff volatility and lack of clarity on long-term policy direction as primary challenges to investment and hiring decisions. Despite the downturn, the index remains above the contraction threshold of 50, indicating slowed but still positive growth expectations.4
U.S. Housing Starts Plunge: U.S. housing starts declined 10% in May 2025 to a 1.26 million annualized rate, marking the slowest pace since 2020 and missing economists’ expectations. Single-family building permits fell to 898,000, reflecting weakened builder confidence and persistently high input costs. Tariffs on steel, aluminum, and lumber, along with labor shortages due to immigration policy, have raised construction expenses and limited supply growth. Homebuilders, including Lennar, report increasing use of buyer incentives and shrinking profit margins amid elevated mortgage rates, which averaged 6.81% for 30-year fixed loans. Analysts warned that construction remains far below the estimated 2 million homes annually needed to alleviate the nation’s housing shortage.5
Oil Prices Surge on Middle East Tensions: U.S. oil prices rose over 20% in June 2025, with West Texas Intermediate reaching $74.84 per barrel, driven by escalating Israel–Iran hostilities and potential U.S. involvement. The conflict has raised concerns about disruption to oil flows through the Strait of Hormuz, a vital route for 20% of global oil trade. National gasoline prices increased to $3.19 per gallon, with analysts warning of a potential spike to over $5 if the strait is impeded or Iranian infrastructure is hit. Despite no current supply disruption, markets have priced in a geopolitical risk premium across energy, defense, and inflation-sensitive assets. Experts caution that further escalation could drive oil toward $120 per barrel, though some anticipate only a temporary rise if tensions de-escalate.6
Tariffs Slow U.S. Port Volumes: Cargo volume at the Port of Long Beach fell 8.2% year-over-year in May 2025, with imports and exports declining 13.4% and 18.6%, respectively, due to U.S. tariffs and foreign retaliatory measures. Port officials anticipate a rebound beginning late June as a temporary tariff pause boosts pre-holiday shipments. The Port of Los Angeles also reported a 5% decline in May cargo volume but expects moderate recovery through late June. Despite recent monthly declines, year-to-date volumes at Long Beach are up 17.2% from 2024, aided by earlier inventory restocking and tariff-related front-loading. Broader shipping activity reflects strong demand, with global fleet utilization near full capacity and spot freight rates rising amid supply chain disruptions.7
Retail Giants Explore Stablecoins: Walmart and Amazon are exploring the use of stablecoins for customer payments, aiming to reduce reliance on traditional credit card networks and associated fees. Stablecoins, typically pegged to the U.S. dollar, offer price stability and could allow retailers to bypass intermediaries like Visa and Mastercard. Broader corporate interest includes companies such as Expedia and several airlines, as reported by The Wall Street Journal. Legislative progress is underway with the proposed Genius Act, which would establish a regulatory framework for private issuance of stablecoins. Following the news, shares of Visa and Mastercard declined 5% and 4%, respectively, amid concerns over competitive disruption.8
Microsoft Plans More Job Cuts: Microsoft is preparing to lay off thousands of employees, primarily in sales and product roles, as it accelerates investments in artificial intelligence, according to Bloomberg News. The layoffs are expected to be announced in early July, following the end of the company's fiscal year, and come after a previous reduction of 6,000 jobs in May. Microsoft has allocated $80 billion in capital expenditures this fiscal year, largely to expand data center capacity for AI services. The company’s shift reflects a broader industry trend, with Amazon also signaling long-term workforce reductions driven by generative AI adoption. U.S. public companies have cut white-collar positions by 3.5% over three years, with AI cited as a principal factor.9
AMD Expands AI Chip Push: Advanced Micro Devices (AMD) unveiled its MI400 series AI chips, scheduled for 2026, alongside the Helios rack-scale system designed to rival Nvidia’s data center solutions. The MI355X, AMD’s current flagship AI GPU, began shipping in Q2 2025 and is optimized for inference workloads, with adoption from major clients including OpenAI, Microsoft, Meta, and Oracle. AMD claims its chips deliver significant energy efficiency and cost advantages, offering up to 40% more AI tokens per dollar than Nvidia’s, supported by open software and the UALink interconnect. The company is pairing its GPUs with CPUs and networking hardware to create integrated AI systems and expects AI chip revenue to grow 60% in 2025 from $5 billion in 2024. Despite Nvidia’s dominant 80%+ market share and broader ecosystem, AMD is targeting hyperscalers seeking price-performance alternatives as global AI infrastructure spending accelerates.10
Huawei Develops Quad-Chiplet AI GPU: Huawei has filed a patent for a quad-chiplet design likely linked to its upcoming Ascend 910D AI accelerator, signaling efforts to rival Nvidia’s high-end GPU architecture. The patent outlines advanced chiplet interconnects resembling TSMC’s CoWoS-L and Intel’s EMIB, suggesting Huawei is pursuing cutting-edge packaging to overcome lithography constraints under U.S. export controls. This packaging approach may allow Huawei to assemble competitive processors using mature nodes, with a total silicon footprint potentially exceeding 4,000 mm²—comparable to advanced multi-reticle solutions in development at TSMC. The 910D is rumored to outperform Nvidia’s H100 in certain configurations, though production feasibility remains uncertain. Huawei is also developing an Ascend 920 chip and has demonstrated its capability to train large language models using domestic hardware, reinforcing China’s parallel track in AI chip development.11
China Struggles With Industrial Overcapacity: China is facing a resurgence of unprofitable industrial firms as local governments sustain “zombie” enterprises to prevent mass unemployment and social unrest amid slowing economic growth. Despite previous reform eras marked by widespread closures, today’s central authorities face resistance due to heightened political sensitivity around job losses and the strategic prioritization of domestic manufacturing. Firms like Dayun Automobile and Qinyang Changsheng Brewing illustrate how local subsidies and regulatory forbearance are preserving inefficient production, especially in overcapacity sectors such as autos, steel, and chemicals. Structural obstacles, including limited bankruptcy enforcement and incentives for local officials to prioritize short-term growth, have further delayed necessary market exits. The resulting domestic deflation and export redirection are drawing international scrutiny, contributing to global trade tensions and anti-dumping measures from the U.S. and Europe.12
U.S. Politics, Policies, and Geopolitics
Senate Tax Bill Hits Poor: The Senate version of President Donald Trump’s tax bill includes deeper Medicaid cuts and stricter eligibility rules, particularly affecting low-income families with older children. The bill makes permanent several tax breaks for businesses and high-income earners, while letting enhanced Affordable Care Act subsidies expire, which the Congressional Budget Office estimates could leave 4.2 million uninsured. Lower-income families would also face new paperwork requirements to access the Earned Income Tax Credit and would benefit less from a modest increase in the Child Tax Credit due to its design. Analysis of the House version suggests households in the bottom 10% would lose $1,600 annually, while top earners gain $12,000, a dynamic not meaningfully altered in the Senate plan. Republicans defend the bill as fiscally responsible and pro-growth, but critics argue it redistributes resources away from the poor in favor of wealthier Americans.13
ICE Raids Disrupt Key Industries: U.S. Immigration and Customs Enforcement (ICE) has resumed aggressive worksite raids, causing widespread labor shortages across agriculture, construction, food processing, and hospitality sectors. Farms in Texas and California report operating at 30% capacity, and restaurants in major cities are closing early or cutting service due to missing staff. Fear of raids has led immigrants to avoid work, with business owners citing economic damage and reduced productivity. A major enforcement operation in Nebraska recently led to the detention of up to 80 workers, as ICE expands its reach to construction sites and retail locations. Despite public criticism and protests, the administration maintains that the actions are necessary to uphold federal law.14
Supreme Court Urged to Review Tariffs: Learning Resources, a U.S. educational toy company, has petitioned the Supreme Court to expedite review of President Donald Trump’s use of emergency powers to impose tariffs, bypassing the usual appeals process. The company previously won a lower court ruling declaring Trump’s tariffs unlawful under the International Emergency Economic Powers Act (IEEPA), though enforcement is paused pending appeal. Critics argue the tariffs function as a concealed tax on businesses and consumers, potentially raising $300–$660 billion annually, according to estimates from Treasury and JPMorgan. The Trump administration defends the measures as constitutional and necessary to address national emergencies, including trade deficits and drug trafficking. While awaiting a key appellate hearing in July, the administration is also expanding tariff actions under Section 232 authority, seen as more legally durable.15
USG Takes Stake in U.S. Steel: The Trump administration approved Nippon Steel’s $14.1 billion acquisition of U.S. Steel on the condition that the U.S. government receive a “golden share” granting veto power over key decisions, including plant closures and investment delays. The arrangement, while not involving equity ownership, effectively grants Washington strategic control over the company’s operations, raising concerns among dealmakers about its implications for future foreign investment. The unprecedented move follows national security concerns raised under the Biden administration and includes Nippon’s $14 billion capital commitment and promise to maintain jobs and headquarters in Pittsburgh. Legal experts and former officials warn the mechanism could set a precedent, despite White House claims that it will be reserved for exceptional cases. The use of golden shares, rare in the U.S., adds uncertainty for multinational investors and signals a shift toward more interventionist industrial policy.16
China Demands Western Data for Exports: Western companies report that China’s export licensing process for rare earths and magnets now requires submission of sensitive business data, including customer lists, product images, and end-use details. The policy, introduced as part of broader export controls in April 2025, has raised concerns about intellectual property risks and trade secret exposure. Firms from Europe and the U.S. say compliance is often mandatory to secure critical materials essential for electronics, EVs, wind turbines, and defense systems. Chinese authorities have reportedly requested information beyond official guidelines, with export rejections issued for insufficient detail on end-users. Despite these concerns, many companies continue to comply to ensure supply continuity amid persistent trade tensions and strategic material shortages.17
EU Halts Trade Talks With China: The European Union has canceled its High-Level Economic and Trade Dialogue with China, citing insufficient progress on key trade disputes, including rare earth export controls and industrial subsidies. The decision marks a setback for Beijing’s efforts to present itself as a stable global partner amid ongoing tensions with the United States. Fresh strains emerged after China imposed export restrictions on critical minerals, a move impacting Europe’s auto industry. European Commission President Ursula von der Leyen criticized China’s trade practices at a recent G7 summit, accusing it of disregarding global trade rules. While China expressed willingness to maintain dialogue, Premier Li Qiang will attend the upcoming EU-China summit in place of leader Xi Jinping, signaling diplomatic friction.18
Israel Gains Air Superiority Against Iran: Israel has established full aerial dominance over Iranian skies following a multi-day campaign targeting Iran’s nuclear and military infrastructure, killing key Islamic Revolutionary Guard Corps and missile program leaders. In response, Iran launched over 400 ballistic missiles, but Israeli strikes on missile launchers and radar systems have sharply reduced Iran’s launch capacity and effectiveness. With 120 launchers destroyed and Iran increasingly relying on slower, more vulnerable liquid-fuel missiles, Israel has intercepted nearly all recent missile attacks with no casualties reported since Tuesday.19 Tehran has signaled interest in renewed nuclear talks, but continues limited retaliation while seeking to avoid U.S. military involvement. Despite international calls for de-escalation, Israeli leadership has vowed to continue operations until Iran’s nuclear and missile capabilities are significantly degraded.20