Shipping plunges

Flexport CEO Ryan Petersen reports that ocean-container bookings from China to the United States have collapsed 64 percent in the three weeks since President Trump’s latest tariff package. The sharp pullback comes against a tariff wall that now averages 134.7 percent on Chinese goods, according to a Peterson Institute calculation highlighted by Axios.  On many cargoes, the headline rate is even higher—the White House’s 125 percent “reciprocal” levy layered on top of an earlier 20 percent fentanyl-related duty brings the effective charge to 145 percent.  With both sides imposing triple-digit duties, logistics analysts warn that Petersen’s 64 percent booking slump could deepen into a protracted trade freeze that ripples through ports, trucking fleets, and retail inventories over the summer.

• The current tariff regime with China is effectively an embargo
• It takes ships between 2-3 weeks to cross the ocean from China to the US and then another 1-2 weeks before goods make it onto store shelves
• With bookings plunging by more than 60% in just three weeks, we can extrapolate massive goods shortages in the months to come
• This will disproportionately affect small businesses, who are left with few other options
• Treasury Secretary Bessent cited the figure this week, while making the point that the administration does not intend to “decouple” from China
• However, there has been little progress made thus far

Google tops, Tesla misses, both stocks rally

Alphabet’s (Google's parent) Q1 2025 results showed revenue of $90.23 billion and diluted EPS of $2.81. Advertising revenue rose 8.5 % year-on-year to $66.89 billion, Google Cloud contributed $12.26 billion, and the board authorized a $70 billion share-repurchase program.  Tesla’s Q1 2025 revenue was $21.3 billion, down from $23.33 billion a year earlier, with net income of $1.13 billion, a 71 % year-on-year decline. Automotive revenue fell 20 %, and the company reiterated plans to launch new lower-cost models by early 2025.

• With Google delivering strong results, and Tesla showing weakness, it was notable that both stocks were higher post-earnings
• Even more relevant, Google beat estimates, while Tesla missed
• The explanation likely lies in the sentiment for each stock going into earnings
• While Google was down about 25% from its recent peak, Tesla’s stock was down almost 50%
• Tesla’s stock also benefited from Elon Musk announcing that he will be decreasing his DOGE efforts next month to pay more attention to the company
• Regardless, the first quarter results need to be viewed through the rear-view mirror, even more so than usual, given the significant change in climate post Trump’s tariff announcements

India-Pakistan conflict escalates

Tensions between India and Pakistan have escalated sharply this week following a devastating terrorist attack in Kashmir that left 26 civilians dead, including 25 Indian tourists and one Nepalese national. India attributed the attack to Pakistan-based Islamic militants, prompting a series of retaliatory diplomatic and military measures. In response, India suspended the Indus Waters Treaty, a key water-sharing agreement, and downgraded diplomatic relations, while Pakistan expelled Indian diplomats, suspended visas, and closed its airspace and borders to Indian interests . The situation has further deteriorated with both countries exchanging threats, raising fears of renewed conflict in the region.

• India and Pakistan have had tension since they were separated in 1947
• While there have been wars and flare-ups since then, this seems to be the most significant recent escalation, particularly since Pakistan stated the suspension of the Indus Waters Treaty was tantamount to an act of war
• China, which borders both countries, has historically backed Pakistan and is its largest weapons supplier
• If the conflict escalates further, it will be important to understand China’s stance and whether it draws in the rest of the world
• In an environment defined by geopolitical conflict, this adds yet another dynamic fueling further uncertainty

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