Good morning. Andrew here. Tariffs are back. The Trump administration put new levies into effect around midnight in Washington. But unlike last time, businesses saw these coming, so don’t expect the same frantic scramble to shore up global trade and supply chains. While these new measures appear more legally defensible, court challenges are still inevitable. More important, let’s be honest about what the tariffs are: the administration’s primary tool for negotiating leverage — even as the levies raise fresh questions about the future of U.S. relationships with trade partners. (Was this newsletter forwarded to you? Sign up here.)
One-two punchMarkets are rebounding today, despite growing worries that a new front in the Middle East war could drag down the global economy. Now, President Trump has added to the turmoil by stepping up his trade war. New U.S. tariffs of at least 10 percent went into effect overnight for over 80 countries. Trading partners, including Japan, Australia and Brazil, have criticized the levies. The duties have been issued under Section 301 of the Trade Act of 1974 and are meant to target allegations of lax enforcement of forced labor bans. They appear more durable than previous ones, experts say. (A reminder: The Supreme Court in February struck down Trump’s most bruising tariffs, justified under a 1977 law called the International Emergency Economic Powers Act. The administration responded with temporary 10 percent levies, under a different trade law, that expired at midnight.) Tariffs could exacerbate the affordability crunch, a chief concern for voters heading into the midterm elections. The Section 301 duties, which cover 99.4 percent of U.S. imports, are expected to raise the effective tariff rate paid by U.S. importers, according to the Yale Budget Lab, and sap the spending power of households and companies. Exemptions on imports of certain foods, fuel and fertilizer could ease the burden somewhat. But the new tariffs, plus the return of $100-a-barrel oil (more on that below), risk reigniting inflation fears. That could put central banks in a bind. The Fed meets next week and is expected to keep interest rates on hold. But traders now see a September hike as highly probable, a move that would most likely rankle Trump. The bond market looks spooked. The yield on the 10-year Treasury note, a rate that underpins most commercial loans, topped 4.7 percent yesterday. That’s helped push the 30-year fixed rate mortgage rate to its highest level of the year, a move that could chill the housing market.
The new tariffs are raising uncertainty for businesses. Trump is expected to unveil new duties on countries in Europe and Asia in the coming months, arguing that they are necessary to combat unfair trade practices. War was already weakening the global economy. Now, a new tariff barrage “will pile on the misery,” Olu Sonola, the head of U.S. economics at Fitch Ratings, told The Times.
Paramount’s bid for Warner Bros. Discovery hits another snag. A federal judge in California extended the temporary block on Paramount’s $110 billion deal by two weeks, to Aug. 17, as legal challenges by states and the Writers Guild of America grind on. Delays could be costly: Paramount agreed to pay Warner Bros. shareholders $650 million for each quarter the deal doesn’t close, starting Oct. 1. Tech stocks are falling again. Shares of the chipmakers SK Hynix and Samsung each tumbled around 8 percent in South Korea this morning, a day after the so-called Magnificent Seven of U.S. tech heavyweights suffered their worst daily decline since the Liberation Day turmoil of April 2025, Deutsche Bank analysts said. Investors are growing worried that tech giants’ big investments in artificial intelligence might not pay off, putting a major focus on next week’s results from Amazon, Meta and Microsoft. A bipartisan bill demands an A.I. “kill switch.” Representatives Ted Lieu, Democrat of California, and Nathaniel Moran, Republican of Texas, introduced the “A.I. Kill Switch Act,” a bill that would compel A.I. companies to shut or slow down their models if ordered to do so by the Department of Homeland Security. The move comes after OpenAI said two of its models had gone rogue and hacked an A.I. platform.
Higher for longerOil prices have eased slightly this morning, but the economic fallout appears set to grow. President Trump told Axios yesterday that he was “considering a massive attack on Iran.” He also warned on social media that if the Houthis, an Iranian-backed militant group in Yemen, step up attacks on ships in the Red Sea, “the U.S. will hold Iran responsible.” That’s after the 13th consecutive day of U.S. military strikes on Iran and reports that Iranian officials have rejected a new U.S. cease-fire proposal. The latest:
How high could oil climb? Michelle Brouhard, the head of policy and geopolitical risk at Kpler, told Vivienne Walt that the analytics firm’s worst-case scenario involves the Houthis fully disrupting Saudi oil shipments out of the Red Sea, and Brent going as high as $150 per barrel. Since the start of the war in Iran, Saudi Arabia has diverted some oil exports to the Red Sea from the bottlenecked Strait of Hormuz, but Houthi forces have declared a blockade on tankers intending to cross that waterway. Oil reserves are running low. The U.S. is rapidly drawing down its strategic petroleum reserve in an effort to ease gas prices. That buffer, however, has limits and is at risk, Brouhard said. China is a wild card. The country is the world’s biggest oil importer and has drastically cut its purchases since the start of the war. But now China looks set to ramp up buying again, threatening to exacerbate the global energy crisis. A new market reality about the war is sinking in. “I don’t think we can put this genie back in the bottle under any circumstances,” said Helima Croft, the global head of commodity strategy at RBC Capital Markets. Croft has long argued that oil traders have grown too complacent with the assumption that fighting would wind down, and criticized them for thinking that market conditions would quickly return to prewar levels.
Little Tech takes aim at Big TechA coalition of start-ups, midsize tech companies and their allies gathered this week over glasses of rosé and spicy beef salami bites at a Balkan restaurant 10 blocks from the U.S. Capitol. They were there, reports Nancy Scola, to declare that Washington has too long ignored them in favor of problematic Big Tech giants — and to celebrate banding together to do something about it. The occasion: the launch party of the Little Tech Association, which is led by the start-up success stories Y Combinator, a Silicon Valley incubator; Proton, which provides privacy tools; Replit, an artificial intelligence platform; and Yelp, a longtime Google antagonist. “There hasn’t been a voice in Washington for founders, builders and early-stage companies,” said Harry Godfrey, the group’s executive director. The crowd of about 60 reflected bipartisan angst: The chairman of the Federal Communications Commission, Brendan Carr, who has been critical of Big Tech, dropped in briefly. The group has already picked legislation to support: the American Innovation and Choice Online Act, an antitrust bill that would limit the biggest online platforms from favoring their own products. Little Tech sent a letter signed by more than 200 companies to members of Congress last week urging them to pass the bill. The legislation was introduced in 2021 and was resurrected in June by Senators Chuck Grassley, Republican of Iowa, and Amy Klobuchar, Democrat of Minnesota. “I’m glad to see American tech entrepreneurs join forces to fight for increased competition in their industry,” Grassley wrote in an email to DealBook. Some close to Big Tech say they aren’t worried. “AICOA is now a zombie bill at this point,” said Adam Kovacevich, who leads the center-left Chamber of Progress. “I just think we’re past that.” It’s true that the bill’s biggest proponents in Congress may be on their way out. Klobuchar is running for governor of Minnesota. It’s unclear whether Grassley, 92, will run again in 2028. The key to minting new allies, Godfrey argues, is getting start-ups in front of policymakers. “‘Let me tell you about the app that never got there because Apple decided it wanted to build its own product,’” he told DealBook. “When you’re one small company, you have to work through collective action.” DealBook asked Representative Becca Balint, a Vermont Democrat and member of the House antitrust subcommittee, if she was hopeful about checking the power of Big Tech. “You can’t give up the fight, man,” she said.
Talking A.I. with the top executive of Kirkland & EllisEvery week, we’re asking a leader how he or she uses artificial intelligence. This week, Jon A. Ballis, who leads the law firm Kirkland & Ellis, talked with DealBook’s Sarah Kessler about the firm’s $500 million investment in A.I. The interview has been condensed and edited. How do you personally use A.I.? I’m really into longevity stuff, functional medicine. It helps me understand things like what supplements might be beneficial. What have you told your employees about how you want them to use A.I.? A lot of what we’re trying to do is use A.I. to harness the collective gray-haired knowledge of our senior lawyers and infuse it across the platform to our younger attorneys. What does that look like? We take third-party legal software off the shelf. We then enhance that software by having senior people give input like, “OK, if I am looking at a merger agreement, how would I, as someone who’s been doing this for 35 years, think about this particular issue?” So when a fourth-year lawyer goes into our customized A.I. tool, the list that pops up of what to think about has the benefit of all the senior attorneys’ thinking. And then we’re also building our own A.I. tools from the ground up. Are you thinking about how your pricing model might evolve? Will things in large law firms go to more fixed-price, project-based pricing models? Sure. I think that is already happening, and I think it will continue. We hope you’ve enjoyed this newsletter, which is made possible through subscriber support. Subscribe to The New York Times.
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