Good morning. Andrew here. Would it be an overstatement to suggest that some semblance of U.S. economic credibility hangs in the balance this week? Between Canadian tariffs, Treasury Secretary Scott Bessent calling today “D-Day” for Iran, and an upcoming address by Kevin Warsh, the Fed chairman, on interest rates and bond buybacks, markets have a lot to consider in deciding how much faith to maintain in the U.S. economy. Also: Nvidia is reportedly negotiating an investment in the A.I. start-up Perplexity at a $30 billion valuation, according to The Information. The potential deal by Nvidia — now often dubbed the “central bank of A.I.” — raises questions about whether the chipmaker is artificially inflating tech valuations to keep the industry’s momentum alive. (Was this newsletter forwarded to you? Sign up here.)
‘At war’Trade wars are back atop the agenda. Following the collapse of trade talks on Friday, Canada is digging in for a protracted standoff with the U.S. It is readying retaliatory levies, set to take effect Sept. 8, as Prime Minister Mark Carney paints cross-border relations as being at a new low. “You’re at war when you’re attacked, and we got attacked,” Carney said on Saturday. Canada’s move to stand up to the Trump administration is already reverberating. A government-linked newspaper in China praised the pushback as a “Chinese-style counterattack.” That raises the question of whether Trump’s trade war has hit an inflection point at which major U.S. trade partners retaliate, rather than negotiate. Recap: New 50-percent tariffs on about $20 billion worth of Canadian exports went into effect this weekend after talks failed between the two countries. Carney vowed that Canada would match the levies “dollar for dollar,” with its own duties. The big question: Would Canada use the bazooka, leveraging its energy and critical minerals exports? New tariffs could hurt both countries. The U.S. levies on Canada could rattle the U.S. economy, with American consumers seeing higher prices for certain goods, like winter jackets and plywood. That doesn’t bode well for President Trump, who is polling poorly, especially on his handling of the economy. Canada’s retaliation is still unknown. Carney said Canada’s duties would focus on American “steel, dairy, appliances, agricultural equipment, pulp and paper, electronics.” But Doug Ford, the premier of Ontario, has urged Carney to consider also using electricity, energy and critical minerals as leverage and to focus on states that form Trump’s base, such as Texas and Florida. The collapse of the trade talks may have exposed a rift inside the Trump administration. Commerce Secretary Howard Lutnick got more involved in the negotiations late in the process, Politico reported, after feeling that the framework of the deal negotiated by Jamieson Greer, the U.S. trade representative, infringed on duties Lutnick oversees like those on cars, steel and aluminum. Who will blink first? Ottawa sees dim prospects for the resumption of talks ahead of the midterm elections in the U.S. With the cost of living crunch top of mind for U.S. voters, playing hardball with the Trump administration may become an increasingly common negotiating tactic.
California cancels talks with Paramount today on its deal to buy Warner Bros. Discovery. The move by Rob Bonta, the state’s attorney general, came after details of the meeting emerged; Bonta accused Paramount of leaking them and acting in bad faith. The now-canceled meeting had been seen as a potential breakthrough in resolving a lawsuit by 12 states, including California, seeking to block the $111 billion transaction. Hakeem Jeffries and Jared Kushner meet privately. Jeffries, the House minority leader, and Kushner, a son-in-law of President Trump and a top outside adviser, held a discussion recently about topics of mutual interest, The Times reports. The meeting reflects the Trump administration’s concerns that Democrats may retake the House in November and its desire for a better working relationship. Consumers, central bankers and tech earnings are in the spotlight this week. The July readout for the Personal Consumption Expenditures price index, the Fed’s favored inflation gauge, will publish on Wednesday. The Fed’s confab of central bankers at Jackson Hole, Wyo., starts on Thursday. Nvidia and Salesforce report quarterly results on Wednesday and the chipmaker Marvell Technology on Thursday. Bonds, Bessent and IranThe global bond market is quiet this morning. But investors are bracing for another test today with Treasury Secretary Scott Bessent scheduled to hold a news conference at 2 p.m. Eastern to announce “D-Day” sanctions on Iran. Writing in The Financial Times this weekend, Bessent urged all countries to cut business ties with Tehran, which he called a “pariah” with “nuclear ambitions.” But traders are concerned that new measures to punish Iran — and its trading allies — will prolong the war and bring fresh turmoil to the bond market. The latest:
Bessent has acknowledged that Iran and oil are key to restoring calm to the bond markets. In an interview with CNBC on Thursday, he said “a one-two punch” of a blockade against Iranian ships and “the toughest sanctions in history” would bring Tehran to heel, reopening the strait and lowering energy prices. But sanctions could backfire, analysts warn. Unless Washington gets support from China and Russia, two of Iran’s biggest trading partners, the measures would be “unlikely to work,” Mohit Kumar, an economist at Jefferies, wrote to investors this morning.
Iran may stand to gain by continuing its strategy of disrupting markets, Kumar wrote. If it were to play hard ball with the administration until “just before the mid-terms,” it could then seek to “gain maximum concessions,” he added. Grading BessentWall Street is still buzzing over the Treasury Department’s move to restore some calm to the bond market. The timing of the intervention — the effort to at least double repurchases of longer-dated Treasury bonds and notes is set to last at least until the day after Election Day in the U.S. — and the buyback’s lackluster effect on markets has invited plenty of second-guessing. “People have bad information. I have asymmetric information,” Treasury Secretary Scott Bessent told CNBC last week, suggesting that investors were misinterpreting the administration’s efforts to bring down bond yields. That has puzzled some market watchers, who are again looking to Bessent’s hedge fund days for clues to his next move. Several observers, including Gordon Johnson, founder of GLJ Research, a markets research firm, were taken aback by Bessent’s suggestion that the markets were getting it all wrong. Johnson noted how the hedge funds that Bessent had run, including Key Square Group, had some rocky years. Johnson wrote on X on Friday: “Is the man now confidently dictating where oil, the dollar, Treasury yields, and stocks ought to trade a macro mastermind the market tragically failed to appreciate? Or did the market spend two decades doing its due diligence on him — and sell?” Brian Jacobsen, chief economic strategist at Annex Wealth Management, told The Wall Street Journal that Bessent’s trading instincts might not serve him well in fighting the turmoil in the bond market: “The problem is that when you’re thinking from that trader perspective, it’s about the short-term moves, and these are long-term issues that need to be dealt with.” But Nicholas Mugalli, an investor and the C.E.O. of World Trade Securities, evoked a don’t-fight-Washington view: “If you’re bearish, I get why you’d be but please know that Scott & Trump aren’t ideological they will never allow it to fail. The printer is on…you don’t want to be on the wrong side of the printer.” PICTURE OF THE DAY
A robot sprinter being carried off the track at the World Humanoid Robot Games in Beijing this weekend. One of the robots beat Usain Bolt’s 100-meter dash record — before running into a wall.
Anthropic’s sky-high I.P.O. targetAnthropic is already the world’s most valuable privately held company, valued at $900 billion. More signs are emerging that it’s now aiming for the biggest-ever I.P.O. But the artificial intelligence giant’s mega-deal is coming at an increasingly fraught time for A.I., in and out of Silicon Valley. Anthropic is aiming to raise more than $100 billion in its initial offering, Sri Muppidi, Lauren Hirsch and Erin Griffith of The Times scooped this past weekend, valuing the company at $2 trillion. That would make the A.I. lab the seventh-biggest company in the world by market value — and beat out SpaceX, whose current valuation is $1.8 trillion. The I.P.O.’s prospectus is expected to be filed publicly within weeks, The Times reports. Anthropic has been sharing information with potential investors, via “testing the waters” conversations that pre-I.P.O. companies can hold with potential backers, The Times reports: In their early pitch to potential investors, Anthropic’s executives said they believed that its A.I. models would continue to improve, which would enable the company to keep charging a premium for its services as competitors tried to undercut it on price. Investors have questioned how the firm plans to keep charging high fees and how it will handle the rise of open-weight models, which make the calculations governing their systems public and which can be cheaper than Anthropic’s offerings. Anthropic has also shared that its annualized revenue hit $65 billion last month, up from $9 billion at the end of 2025. That growth has driven some existing investors to expect the market for the company’s services to be in the trillions of dollars, The Times reports. But the Anthropic offering may face headwinds, including:
In other A.I. deal news: Hugging Face, a digital library for A.I. tools, is reportedly exploring a sale valuing it at $13 billion or more, according to Business Insider. We hope you’ve enjoyed this newsletter, which is made possible through subscriber support. Subscribe to The New York Times.
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