Stocks climbed yesterday as investors assessed the impact of recent tariff disputes and determined the damage was minimal. Palantir surged following stellar earnings and an optimistic forecast, fueled by its AI-driven software solutions.

China Retaliates with Softer Tariffs

Despite diplomatic progress with Mexico and Canada, the US and China remain locked in a tariff battle. After President Trump imposed a sweeping 10% tariff on all Chinese imports, China countered with its own set of import taxes, effective February 10.

Key Details:

• China plans a 15% tariff on coal and liquefied natural gas, alongside a 10% tariff on approximately 80 products, including crude oil, agricultural machinery, and large vehicles.
• China will enforce stricter export controls on minerals essential to US defense and technology sectors, such as tungsten, tellurium, and bismuth.
• Shortly after announcing the tariffs, Chinese regulators launched an antitrust probe into Google.
• The Chinese Commerce Ministry added PVH Group (Calvin Klein, Tommy Hilfiger) and biotech firm Illumina to its “unreliable entities” list.

While the response may seem significant, China’s tariffs affect just $14 billion of US imports, compared to the US-imposed tariffs impacting $525 billion worth of Chinese exports. Experts believe this strategic move allows President Xi Jinping to exert trade pressure while leaving room for negotiation. Meanwhile, China’s economy remains vulnerable, struggling with an export slowdown and a real estate bubble.

Amazon Could Benefit

Alongside the tariffs, Trump eliminated the de minimis rule, which previously allowed some low-cost imports, mainly through Chinese e-commerce giants like Shein and Temu, to enter the US tax-free.

The escalation of the trade war remains uncertain, with major factors still at play, including Trump’s request for Xi’s intervention in the Russia-Ukraine conflict and the looming sale of TikTok’s US operations.

Headlines in Focus

Trump Proposes US Control of Gaza In a press conference with Israeli Prime Minister Benjamin Netanyahu, Trump suggested the US should take a long-term role in Gaza’s redevelopment, envisioning it as the “Riviera of the Middle East.” He proposed relocating Palestinians temporarily while rebuilding efforts take place.

Google’s Cloud Growth Slows, Worrying Investors Alphabet’s latest earnings report revealed a slowdown in cloud revenue growth, missing Wall Street’s expectations. Despite plans to invest $75 billion in AI and data centers, investor concerns caused Google’s stock to drop 9% in after-hours trading.

Job Market Shifts: Job-Hopping Declines

The trend of frequent job-switching is fading, as fewer employees resign amid a cooler job market:

• Job quits dropped 11% last year compared to 2023, and 22% from 2022’s peak.
• US job openings declined to 7.6 million in December from 8.16 million in November, a sharp contrast to the 12.2 million peak in 2022.
• Hiring slowed most in white-collar sectors like finance and tech but remains strong in healthcare and hospitality.
• Layoff rates remain low, but upcoming job data could reveal a weaker labor market.

Federal Workforce Shrinks Under Trump’s Buyout Offer

At least 20,000 federal employees accepted voluntary buyouts offered by the Trump administration in an effort to reduce government spending. This represents about 1% of the federal workforce, though far short of the administration’s goal of a 5–10% reduction. Unions and former officials have raised legal and financial concerns about the buyout program.

Other Notable Events

• A mass shooting in Sweden claimed at least 10 lives, including the perpetrator, in what authorities call the country’s worst such incident.
• RFK Jr. and Tulsi Gabbard advanced in their confirmation processes for health secretary and director of national intelligence, respectively.
• The Trump administration deported migrants to Guantánamo Bay for the first time, while a deal with El Salvador was reached to send deported migrants and convicted US citizens to its mega-prison.
• State Farm, California’s largest home insurer, proposed a 22% rate increase following devastating LA wildfires.
• McDonald’s announced the return of its Shamrock Shake, reviving its viral marketing success with a new campaign featuring Grimace’s uncle.