Week Ahead: China Deal, Qatar Gifting Air Force One, Habeas Corpus, Birthright Citizenship, and Markets
With a focus on the Middle East as Trump begins a trip to Saudi Arabia, Qatar and the UAE
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We have a deal.
The United States and China have agreed to a major tariff rollback for 90 days. Stocks are soaring this morning on the news. I’m still uncertain on a few issues which we’ll get to, but here’s a summary of the deal:
President Trump's "reciprocal" tariff on China will fall to 10% from 125%.
A separate 20% tariff the president imposed over what he described as China's role in the fentanyl trade will remain.
Beijing will cut its retaliatory levies on U.S. goods to 10% from 125%.
The U.S. said the reductions would last for 90 days while talks continue.
Treasury Secretary Scott Bessent said meetings over a fuller deal would likely start in the next few weeks, but it would be implausible for reciprocal tariffs on China to fall below 10%.
This is a major thawing of the biggest trade war the United States has, but I’m left wondering — I thought tariffs were supposed to replace income taxes? That was the justification at least at times. A 10% tariff on all Chinese imports will not be enough to cover revenue generated from income taxes unless the U.S. increases tariffs substantially on the rest of the world.
So what is the point? Fairer free trade?
If that was the goal all along, this looks like a better deal for everyone, assuming of course we can enforce better intellectual property controls on many Chinese products that blatantly steal IP rights from American companies. Not to mention China’s long history of currency manipulation.
I’ve long applauded Trump’s tough stance on China, but the communication around his tariff strategy has been unclear at best and often terribly contradictory.
Are we using a tariff-centric strategy to generate revenue or are we looking to create free trade agreements that appropriately check economic power and protect significant U.S. industries? Because it can’t be both. And a middle ground is not going to work because it won’t guarantee sufficient revenue or fair trade.
So while many are running around celebrating this deal, many investors like myself are wondering about the overall strategy. This deal is a temporary reprieve, but it still leaves open many uncertain possibilities of what might come next, especially given Trump’s intense love for tariffs.
One economic reality that made this China deal possible is the state of the Chinese consumer — they’re relatively weak, especially compared to America. China’s economy is organized around manufacturing and exports, while America is organized around services and consumption.
In the past I’ve written about China’s real estate troubles and how their domestic real estate market is structured like a Ponzi scheme. When Trump’s tariffs hit China, real estate prices plummeted. And unlike many Americans who invest in financial assets like stocks and bonds, the Chinese typically invest excess cash in real estate.
China needed this deal. They simply don’t have consumers domestically or globally that match the wealth of the average American consumer. And with tariffs at around 145%, Americans were not buying nearly as many products from China, as evidenced from the few ships from China entering U.S. ports.
This slowed down manufacturing considerably in China, leading to potentially 5-10 million Chinese job losses. The Chinese real estate market, where much of their excess cash is invested, responded in kind with April 2025 home price declines at 0.7% and year-on-year declines at 7.2%.
The real estate market is pivotal to China’s economic growth, and unless it keeps rising, there are few ways for average Chinese consumers to invest. Their capital markets are not nearly as sophisticated as those in the U.S. (with numerous fraudulent companies trading publicly), taxes are high, and currency controls restrict other investment opportunities.
Treasury Secretary Scott Bessent undoubtedly used these economic factors to his advantage when striking this deal. But it’s still unclear how it will be finalized and what the Trump administration long-term strategy is here — tariff revenue, free trade, or some haphazard combination of both?
Trump is getting a $400 million jet from Qatar for free
Do you know what is a haphazard shakeup of the U.S. legal system? The President being able to accept a $400 million jet from Qatar for free to use as Air Force One. Apparently it’s fine, however, because Attorney General Pam Bondi approved it and because it’s going to Trump’s Presidential Library when he’s done with his term.
But is it really legally fine? As I explained in this video, I couldn’t even accept a cup of coffee from someone or do any side work that might even appear to unduly influence me when I worked for a U.S. Congressman. And when I worked in finance, we had a strict policy that no gifts or anything of value could be given to U.S. government officials.
There are good reasons for all of this and the U.S. Constitution even addresses it:
"[N]o Person holding any Office of Profit or Trust under them, shall, without the Consent of the Congress, accept of any present, Emolument, Office, or Title, of any kind whatever, from any King, Prince, or foreign State."
Notice the keywords, “without the Consent of the Congress”? Sorry, Pam, but your approval isn’t all that’s required for Trump to accept this present from the Qatari government. It doesn’t matter if it’s going to his future Presidential Library because he will be enjoying it for the next 3+ years.
This is blatant corruption out in the open. If it’s permitted, what will Qatar get in return? We’d be naive to think they expect nothing in exchange for this $400 million gift.
I know there will probably be some other crazy news story soon to distract us from addressing this one with the appropriate attention, but folks — this is NOT normal. No U.S. President has ever accepted a gift like this for his own personal benefit.
Poor Jimmy Carter had to put his peanut farm in a blind trust while he was President while Trump’s family directly manages and profits from the family business.
And while Trump is traveling around the Middle East this week on official U.S. government business, including to Qatar, you can guarantee that he’ll be meeting with some of the same people who invest in Donald Trump Jr., Eric Trump, and Jared Kushner. As the WSJ reported, the Trump family businesses are striking Middle East business deals at a rapid clip, mixing public and private life in ways that are unprecedented in the history of the American presidency.
How the many average Americans who voted for this guy whose family businesses reportedly made over $2.4 billion in his first term alone is baffling. The U.S. presidency has not only kept Trump out of prison. It has made him richer than ever.
On the backs of many Americans who struggle financially.
Habeas corpus and other major legal cases to watch this week.
As I discussed in this video over the weekend, pay attention to any additional threats made by Stephen Miller or others in the Trump administration on removing habeas corpus rights. The removal of these restrictions on executive power, which force the Executive Branch to present anyone they’ve detained or arrested before a court, are a fast track to a fascist police state.
We are not in a war. The only other times we have removed habeas corpus rights in U.S. history have been during wars. The Trump administration is trying to argue that the invasion of migrants constitutes a war, but they simultaneously argue that border crossings are way down because they want the political win on immigration.
They can’t have both. Any attempt to justify the removal of habeas corpus is a serious escalation against a fundamental democratic protection that has historically been reserved for war time. And that’s for a reason — so the government can’t simply “disappear” people without any due process.
Another case to watch this week is birthright citizenship. The Supreme Court hears oral arguments on a technical matter related to this case on Thursday. The issue is whether a district judge can issue an injunction that takes effect nationwide or whether that injunction only affects their limited district (or even just the parties in front of that judge). This is yet another attempt by the Trump administration to assert executive power is supreme over the courts. The administration argument is effectively that no one judge can stop us from implementing policies our voters put us here to implement.
Unfortunately, the Constitution has a few things to say about that perspective. But we’ll see how the Supreme Court rules as we get closer to the substantive debate over birthright citizenship, which based on a plain textual reading of the 14th Amendment appears to be a big loser for Trump, but who knows what could happen with the conservative SCOTUS majority.
The final big case I’m watching this week is one of the deportation cases — VML v. Harper. There’s a hearing on Friday before a Trump-appointed judge in Louisiana. VML is a two-year-old American citizen who was detained by ICE with her mother and sister. ICE has claimed the mother agreed to take her with her when she was deported, but VML’s custodian has brought a habeas petition (see habeas discussion above) seeking to release her from unlawful detention. Keep an eye on this one as it relates to removing habeas corpus protections against U.S. and non-U.S. citizens alike.
Markets this week
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Much of the reason markets are up to start the week is because of Treasury Secretary Scott Bessent. There’s a broader feeling that the “adults are back in the room.” That Bessent is in full control of U.S. trade policy and that he’s safely steering the ship.
I wouldn’t be too comforted by this initial favorable reaction. Remember, Trump is traveling to the Middle East this week and is therefore preoccupied and likely less prone to send out a tweet or Truth post that might roil Bessent’s recent China deal success. So I would expect fairly stable markets for the remainder of this week so long as Trump stays out of the fray and focuses on Middle East priorities.
There are two big economic announcements this week with the U.S. reporting CPI (a good gauge of inflation) on Tuesday and retail sales on Thursday. Both will be a good indication of the effect tariffs have had to date.
Overall, I would not expect the tariff situation to change much further. We are not returning to a pre-Trump era of minimal tariffs, but at least with Bessent in the drivers seat (for now) we can hopefully push China and other export-heavy countries like Germany into more of a consumer position. The ideal situation is for the U.S. to continue to import at nearly the same levels but also increase our exports to these types of countries, which would achieve more balanced trade results.
The consequences of such a drastic financial shift are significant. If Chinese and German consumers spend more, that means they will send less of their savings in the purchase of American financial products. Which means Americans will either need to save more or run lower fiscal deficits.
So keep an eye on any agreements for China or other export-centric countries like Germany to become bigger consumers of American products. I think this is ultimately the goal of someone like Bessent, but it’s unclear whether it’s the ultimate goal for Trump. This scenario is more of a free trade environment that has reasonable controls in place to balance trade across the board, but Trump consistently seems to prefer tariffs for the revenue they generate and the security they provide on strategic industries like semiconductors and defense.
If you start to see more consumer shifts in China, Germany, and elsewhere, however, be prepared to save more of your income as financial asset prices in America will likely go down (meaning bond yields will go up). There simply won’t be enough foreign investment to go around. But the manufacturing base in America will be happier.
So overall, I would expect steadier financial markets this week, but don’t count out the possibility of Trump wading into the trade deal fray and disrupting markets. Most importantly, keep an eye on how China, Germany, and other major exporters plan to change their consumer behavior, if at all. This will indicate longer term trends at a macro level.
I hope all of this was thought-provoking and informative. Please leave a comment and let me know your thoughts! Have a good week.