Will Cars, Phones and Other Goods Be Too Big to Tariff?

A dovish shift

Stocks are on a three-day winning streak as investors cheer cooling trade-war tensions. Another boost has come from the Fed and from Google, whose shares are up nearly 5 percent in premarket trading on decent first-quarter results.

But while Washington and Beijing seem to be easing off their brinkmanship, it may be too late to reverse the damage to the economy and business psychology.

The latest: China may suspend some of its most onerous levies on vital U.S. imports — including plane leases, medical equipment and industrial chemicals — Bloomberg reports. That comes as President Trump reportedly considers dialing back levies on China imports, and is open to some exceptions on key imports, like car parts. (Worth noting: Beijing and Washington can’t even agree on whether they have begun talks.)

Stocks in Asia and Europe, the dollar and U.S. Treasury bonds and notes are rebounding on those dovish trade signals. This week’s rally is the most sustained run since Trump’s introduction of reciprocal tariffs this month, pushing the S&P 500 out of correction territory.

A de-escalation would signal what C.E.O.s have been saying for months: A full-on trade war would clobber global commerce. Still, businesses are wondering whether Trump and Beijing are laying the foundation for a too-big-to-tariff trade regime in which goods like autos and tech are spared, but nonstrategic imports get heavily taxed.

Companies and households are feeling some pain. Chipotle, Procter & Gamble and several airlines have warned that consumers are worried about tariffs and have begun to pull back on spending. (More on that below.) There is pain in the real estate market, too.

“I don’t care if you call it a recession or not, in this industry that’s a recession,” Bob Jordan, the C.E.O. of Southwest Airlines, told Bloomberg. The airline plans to cut flights.

Separately, a rejiggering of global supply chains appears underway. Apple is accelerating its move to shift all iPhone production intended for shipment to the U.S. market to India from China by next year, according to The Financial Times.

That’s a potentially huge win for India, which went on a charm offensive this week with Vice President JD Vance as it seeks tariff relief.

Fed officials are watching the fallout. Christopher Waller, a Fed governor, and Beth Hammack, the Cleveland Fed’s president, both said they were open to cutting interest rates. That would please Trump and could take the heat off Jay Powell, the Fed chair. The rub: A cut would indicate that the central bank is worried about tariffs hitting growth and the labor market.

The futures market on Friday morning was penciling in three to four rate cuts this year as recession concerns grow.

DEALBOOK WANTS TO HEAR FROM YOU

We’d like to know how the tariffs are affecting your business. Have you changed suppliers? Negotiated lower prices? Paused investments or hiring? Made plans to move manufacturing to the U.S.? Or have the tariffs helped your business? Please let us know what you’re doing.

HERE’S WHAT’S HAPPENING

President Trump wants to exploit the ocean’s mineral resources. He has signed an executive order that would pave the way for mining vast tracts of the seabed in stretches of international waters, most likely leading to a showdown with American allies and marine conservationists. It comes as the Interior Department is weighing whether to allow mining and drilling in or near six national monuments, The Washington Post reports.

Elon Musk’s X sues Minnesota over a deepfake law. The social media company argues that the law, which is meant to punish platforms for failing to stamp out the use of A.I.-powered distortion tools to influence elections, would lead to the “censorship of wide swaths of valuable political speech and commentary.” The lawsuit sets up another clash between Musk and the state’s attorney general, Keith Ellison, who has sued the Trump administration over Musk’s government cost-cutting efforts.

Regulators outline concessions for Paramount ahead of its big merger. Paramount has reportedly told the F.C.C. that it will continue to pull back on diversity, equity and inclusion efforts as it seeks approval for its merger with Skydance, The Wall Street Journal reports. This comes after a CBS News executive resigned, citing interference from corporate managers. Paramount, which owns CBS, and Trump have agreed to a mediator for his $20 billion lawsuit against the news network.

Corporate crystal balls get cloudier

Stock indexes are up again, partly driven by tech giants including Google. But a slew of earnings announcements on Thursday revealed further damage from President Trump’s ever-shifting trade policies.

PepsiCo lowered its full-year profit outlook to flat from mid-single-digit growth. “Relative to where we were three months ago, we probably aren’t feeling as good about the consumer now,” Jamie Caulfield, its C.F.O., told analysts.

Procter & Gamble cut its earnings forecast for the current quarter and said that consumers should likely expect higher prices starting this summer.

“The consumer has been hit with a lot, and that’s a lot to process,” Andre Schulten, P&G’s chief financial officer, told analysts, citing tariff uncertainty and “divisiveness and nationalistic rhetoric.”

“What we’re seeing, I think, is a logical response from the consumer to pause,” he added.

American Airlines withdrew its full-year guidance after domestic travel demand declined in the first three months of the year. The company also said that the tariffs had affected its ability to absorb costs in buying new planes.

“Aircraft cost too much already,” Robert Isom, American’s C.E.O., told analysts. “This is not something we would intend to absorb. And I’ll tell you, it’s not something that I would expect our customers to welcome,” he added.

Intel announced lower-than-expected guidance for the current quarter, citing the uncertain economic environment. The company is already seeking to turn itself around under its new C.E.O., Lip-Bu Tan, and said it plans to cut 20 percent of its work force.

Merck, the pharma giant, lowered its full-year profit guidance, saying the tariff fights between the United States and China, where it has a large presence, will add costs of $200 million. The outlook doesn’t account for planned levies on U.S. drug imports.

“As we look at the environment, I mean, clearly, what’s happening does make it more complex to get things done, because of the uncertainty everyone is wrestling with,” Robert Davis, Merck’s C.E.O., told analysts. (That said, the company is near a deal to buy SpringWorks Therapeutics, a biotech start-up, for $3.5 billion, according to The Wall Street Journal.)

Google did better than expected, partly because a wider campaign of artificial intelligence responses to search queries helped ad sales. (That may be short-lived, as executives fear A.I. responses will eventually cannibalize their search business, according to testimony at a recent antitrust hearing.) But its advertising and cloud business slowed down compared with the previous quarter, with executives offering a clue about why.

“We’re obviously not immune to the macro environment,” Philipp Schindler, Google’s chief business officer, told analysts about ad sales this quarter. Schindler didn’t offer more specifics beyond noting that the end of the de minimis exemption for small imports could hurt ad sales. The Chinese e-commerce giants Shein and Temu, which the change will affect significantly, are major buyers of Google ads.

Trump takes on a once-favored lawyer over Harvard

When Harvard prepared to clash with the White House, one of the lawyers it hired was a legal counselor well known to Trump world: Bill Burck of Quinn Emanuel Urquhart & Sullivan, perhaps in the hopes that he could broker a truce.

That doesn’t seem to have worked, with President Trump having publicly ordered his family business to fire Burck as an outside ethics adviser. It’s another sign of the messiness involved in the president’s fight against elite institutions.

Burck should be “forced to resign, immediately, or be fired,” Trump wrote on Truth Social on Thursday, after calling Harvard “a threat to Democracy” and an “Anti-Semitic, Far Left Institution.”

Shortly after, Eric Trump, one of the president’s sons who helps run the Trump Organization, said in a statement that the company intended to cut ties with Burck: “I view it as a conflict, and I will be moving in a different direction.”

Burck has advised on both sides of Trump-related matters. The former federal prosecutor represented several Trump administration officials in the president’s first term. In January, he was hired to advise Trump Organization executives on potential ethics dilemmas. (Eric Trump said then that Burck was “one of the most respected attorneys in the country.”)

But Burck also represented the law firm Paul Weiss in its settlement talks with the administration, including its agreeing to provide free legal services to causes that Trump favors. Quinn Emanuel is also representing Kilmar Armando Abrego Garcia, a Maryland man whom the Justice Department has acknowledged was mistakenly deported to a notorious prison in El Salvador.

Harvard is still pressing its fight against the administration, even as some backers urge the school to settle instead. Lawyers for the university asked a federal judge this week to expedite its lawsuit over Trump’s freezing of billions of dollars in funding.

Separately, Harvard is reportedly in talks to sell about $1 billion worth of stakes in private equity funds, according to Bloomberg. The move comes amid the pressure from Trump, as well as financial stress from sluggish markets.

In other education news: Mark Zuckerberg and his wife, Dr. Priscilla Chan, are shutting two Bay Area schools they founded, with parents questioning whether it was tied to the Meta chief’s retrenchment from D.E.I. (A school official denied that was the case.)