Global Markets Rally on Japan Deal Euphoria

Andrew here. We have a deal. The Trump administration announced a trade agreement with Japan calling for 15 percent tariffs on imports. We’ve got all of the details below, though there is still a lot to unpack. The big question is whether the deal will serve as a model for other countries.

We also examine the pressure on the food industry coming from the White House, exemplified by Coca-Cola’s move to offer a version of its iconic drink with cane sugar in the U.S. And take a look at Mohamed El-Erian’s comment about what Jay Powell should do in the face of criticism from the president. What do you think?

A trade deal breakthrough

Stocks in Asia and Europe are rallying on Wednesday after President Trump announced a “massive” trade deal with Japan that investors hope could serve as a base line for other big countries before next week’s tariffs deadline.

The latest: Japan’s Nikkei climbed nearly 4 percent on Wednesday, and shares in two of the country’s biggest automakers — Toyota and Honda — soared to double-digit gains. That said, investors are selling Japanese bonds on concerns that Japan’s prime minister, Shigeru Ishiba, could be forced to resign. He has denied those reports, which appeared in local news media.

Meanwhile, in Europe, Volkswagen and Mercedes notched big gains, too. S&P 500 futures are also in the green, with the benchmark index a tick below a record (even as companies report that tariffs are dinging profits.)

The bottom line: Japan’s U.S. exports, including those on cars, will be hit with a 15 percent levy. That’s below the 25 percent rate that Trump had previously threatened. But it also suggests that large trading partners will fall short of a much hoped-for outcome of persuading Trump’s negotiators to settle at around 10 percent. Trump has also announced agreements with Indonesia and the Philippines, setting a 19 percent tax on their U.S. imports.

There’s more: As part of the deal, Japan has also agreed to import more rice.

Is 15 percent the new bar? Switzerland, the European Union and some Latin American countries could be next in line to reach deals, Kelly Ann Shaw, a former senior Trump administration trade adviser, told Bloomberg TV on Wednesday. But she said it was unlikely that officials in Brussels could negotiate better terms than what Japan just got.

Up next: Treasury Secretary Scott Bessent is scheduled to hold a new round of trade talks with China next week in Stockholm. A 90-day pause on some of Trump’s more onerous tariffs against the country expires on Aug. 12, and Bessent said on Tuesday that “we’ll be working out what is likely an extension.”

If anything, the recent framework deals provide much-needed clarity. Goldman Sachs now sees the overall baseline tariff rate on global imports at 15 percent, up from 10 percent. David Mericle, an economist at the bank, wrote in a research note on Tuesday that sectoral tariffs on heavy trucks, pharmaceuticals and aircraft will most likely come into effect next year.

And he warned that tariffs would ignite inflation and depress growth over the next three years.

HERE’S WHAT’S HAPPENING

Goldman Sachs is said to be seeking acquisitions. The Wall Street giant has held takeover talks with Northern Trust — an asset manager that has also been the subject of buyout speculation from Bank of New York Mellon — and had other discussions with Cliffwater, a private debt specialist and asset manager, Semafor reports. Shares in Goldman have been trading near record highs, potentially giving the firm the ammunition for deals.

Elon Musk’s xAI is reportedly seeking up to $12 billion in more funding. Musk has turned to Valor Equity Partners, an investment firm founded by a close ally, Antonio Gracias, to help raise the money, weeks after the artificial intelligence start-up landed $10 billion, according to The Wall Street Journal. It’s a sign of the high stakes and costs of competing with Google and Meta in A.I. Separately, Musk’s SpaceX has warned investors that the tech mogul could return to politics, a move that has previously roiled shares in Tesla.

Meme stock mania drives another eye-popping rally. Getting the attention this time is Kohl’s and Opendoor Technologies, whose stocks have been much discussed on social media forums by retail traders in recent days. On Tuesday, roughly one billion shares in Opendoor traded hands. But it is lower in premarket trading, a reminder of how tumultuous these swings can be. That said, shares in Krispy Kreme and GoPro are popping on Wednesday.

Coke’s MAHA move

It’s a tricky moment for Big Food.

The industry faces political and market pressures, including from the “Make America Healthy Again” (MAHA) agenda of Health Secretary Robert F. Kennedy Jr. and the Ozempic weight-loss drug craze eating into the country’s snacking habit.

Under MAHA pressure, Coca-Cola said on Tuesday that this fall it would offer U.S. consumers Coke made with cane sugar instead of high-fructose corn syrup, Danielle Kaye reports.

The company appears to be bending to Trump and Kennedy. “It’s just better,” Trump, a Diet Coke fan, wrote of cane sugar last week in a social media post in which he also said he was talking to the company about making the switch. Kennedy has pushed for the removal of high-fructose corn syrup, which is commonly used in processed foods, from American diets, and has called sugar “poison.” (While Coca-Cola said it would introduce a cane sugar Coke product, the company is unlikely to eliminate high-fructose corn syrup from its products entirely.)

Is it healthier? Nutritionists have questioned the health benefits of replacing corn syrup. “What they’re going after are side-like things in the food that aren’t really going to impact us, or will impact us adversely,” Barry Popkin, a professor of nutrition at the University of North Carolina Gillings School of Global Public Health, told DealBook.

James Quincey, Coca-Cola’s C.E.O., told analysts that bringing a cane sugar version of Coke to Americans reflected “consumer interest in differentiated experiences.” (The company makes Mexican Coke with cane sugar, but it’s typically pricier.)

But there’s a twist: sugar imports. The U.S. doesn’t produce enough sugar to meet domestic demand, suggesting that Coca-Cola would have to rely on imports, potentially from countries facing Trump’s tariffs. And the company’s latest embrace of cane sugar could hurt the country’s corn producers.

Will the Trump administration reshape Big Food? PepsiCo on Monday said that it would soon introduce a prebiotic version of its soda, in a nod to growing interest from health-conscious consumers.

Kennedy has also waged a war on synthetic food dyes, putting Jell-O snacks, Kool-Aid drinks and Lucky Charms cereals in an effort to get rid of synthetic dyes by the end of 2027.

The administration has its thumb on the scale of food giants. But Popkin stressed that none of the changes so far — whether it’s moving away from corn syrup or synthetic dyes — are “major costs” to these companies. “The only thing that will have an impact on industry is the ultraprocessed foods,” he added.

“If Chair Powell’s objective is to safeguard the Fed’s operational autonomy (which I deem vital), then he should resign.”

— Mohamed El-Erian, the economist and frequent critic of the central bank’s interest rate policy, writes on X that Jay Powell should step down to preserve the Fed’s independence amid President Trump’s repeated attacks on the Fed chair and the institution’s hold-steady interest rate policy. That said, Treasury Secretary Scott Bessent, who has called for a wide-ranging internal investigation into the Fed, said on Tuesday he saw no need for Powell to “step down right now.”

Trump’s moves at a key labor watchdog

For most of the year, the National Labor Relations Board has been unable to perform many of its functions as a key arbiter on labor disputes.

In his first week in office in January, President Trump fired a Democratic member of the board, depriving the independent agency of the three-member quorum needed to issue decisions, including those around collective bargaining and whether companies must recognize union votes.

The agency is on track to be up and running again: Trump has now named two new picks for the board. A reconstituted agency could have big implications for employers as the president seems determined to roll back Biden era protections for workers.

A recap: Gwynne Wilcox, a Democratic board member who was confirmed by the Senate in September 2023 to a second five-year term, was dismissed in January. She challenged her removal, arguing in a lawsuit that it violated federal law, which allows for removal of board members only in instances of “neglect of duty or malfeasance.”

A federal judge ordered her to be reinstated. But in a win for Trump, the Supreme Court later blocked that decision, putting her fate in limbo.

The board has been largely stagnant. The agency has issued six published decisions since Inauguration Day, compared with 60 during the same six-month period in 2024, according to Bloomberg Law. The agency hasn’t been completely idle; it has handled some unfair labor practice cases and union election petitions.

Who are Trump’s new choices?

• Scott Mayer is chief labor counsel at Boeing, a position he held during the company’s strike last year that temporarily halted production at key plants. His resume is dotted with stints at InterContinental and Aramark and management-side law firms.

• James Murphy has spent much of his career at the board, serving as chief counsel to multiple board members.

Key Biden era rulings could be in jeopardy. If the labor board reaches a quorum, it would be able to start issuing decisions again. It would also have a Republican majority and potentially fulfill Trump’s goal of rolling back rules passed under the Biden administration that were widely seen as employee-friendly. Notable ones include the Cemex framework that establishes rules for bargaining with unions, and a ban on so-called captive audience meetings.

“There really are practical, tangible implications,” Meredith Kirshenbaum, a principal in Goldberg Kohn’s labor and employment group, told DealBook.

But changes might not come swiftly. Trump’s picks still need Senate confirmation.

THE SPEED READ

Deals

• The Italian lender UniCredit has dropped its bid for Banco BPM, a rival, amid government opposition in Rome. Investors await its next move in another politically contested potential deal — growing its stake in Germany’s Commerzbank. (Bloomberg)

• “Alden Global Capital Makes a Play for The Dallas Morning News” (NYT)

Technology and artificial intelligence

• Google is reportedly seeking to cut licensing-related arrangements with news organizations as it seeks to bolster its artificial intelligence offerings. (Bloomberg)

• “McKinsey bars China practice from generative A.I. work amid geopolitical tensions” (FT)

Best of the rest

• Joe Budden offers some detailed insight into how his podcasting business is on track to make $20 million this year. (NYT)

• “Burning Man Is Burning Through Cash” (Bloomberg Businessweek)

• Britain’s Supreme Court on Wednesday overturned the conviction of Tom Hayes, a former UBS and Citigroup banker who had served prison time after being accused of rigging the Libor benchmark interest rate. (FT)

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