Strong Bank Earnings Overshadow Escalating Trade War

The escalating trade tensions between the U.S. and China are taking a new turn as the U.S. Treasury Secretary Scott Bessent, in an exclusive interview, accused China of leveraging its dominance in rare earth elements to implement predatory pricing strategies. Bessent labeled China’s economic model as “non-market,” raising concerns about fair competition and the long-term viability of Western rare earth producers.

In response to what it perceives as unfair trade practices, the U.S. administration is considering employing industrial policy tools, including the establishment of price floors across key industries. This interventionist approach aims to protect domestic industries from artificially suppressed prices, essentially setting a minimum allowable price for certain goods and services. Experts warn, however, that such measures could distort market signals, potentially leading to inefficiencies and unintended consequences for consumers.

Adding further complexity to the economic landscape, major U.S. financial institutions, including Bank of America and Morgan Stanley, have reported exceptional second-quarter earnings, significantly surpassing analysts’ forecasts. This performance mirrors that of other leading banks like JPMorgan Chase and Goldman Sachs, which also delivered robust results fueled by a surge in dealmaking activity and record-high stock market valuations. This financial sector strength provides a counterpoint to concerns about economic headwinds stemming from trade uncertainties.

Despite President Trump’s continued assertive stance on trade with China, equity markets have shown remarkable resilience. The S&P 500 and Nasdaq Composite both registered gains on Wednesday, while the Russell 2000 index achieved a new all-time high. This bullish sentiment suggests that investors are currently factoring in a degree of trade risk, buoyed by encouraging earnings reports that indicate the overall economy remains robust, despite the increasing costs associated with tariffs, as highlighted in the U.S. Federal Reserve’s Beige Book. The question remains whether this optimism can be sustained in the face of prolonged trade frictions.

Looking ahead, the trajectory of equity markets will largely depend on the upcoming earnings releases from major technology companies, notably Tesla and Intel. Their performance will provide critical insights into the broader impact of trade disputes on the technology sector and the resilience of corporate profitability in a challenging global environment. Investors will be closely scrutinizing these reports for signs of sustained growth or emerging vulnerabilities.

The Abu Dhabi investor that’s funding AI while trying to save TikTok — with help from Trump

Backed by Abu Dhabi’s sovereign wealth fund and launched in March 2024, MGX has emerged as a key source of capital as companies race to build out the enormous computing power needed to meet expected AI demand.

Certain transactions suggest a level of coziness with Trump.

Earlier this year, MGX reportedly provided $2 billion in funding to the crypto exchange Binance, using a cryptocurrency purchased from the Trump family’s World Liberty Financial. Its chairman Tahnoon bin Zayed Al Nahyan also visited Trump in the White House this spring to announce a $1.4 trillion investment in the U.S. over the next decade.

— Steve Kovach

Clarification: This story has been updated to reflect that the S&P 500 and Nasdaq Composite rose on Wednesday stateside. An earlier version did not specify which indexes rose.