by Louis Navellier
April 29, 2025
Last week, Japan was negotiating with the Trump Administration, and this week may be South Korea’s turn. Regarding China, Treasury Secretary Scott Bessent told a closed-door JP Morgan investor summit on Tuesday that the tariff standoff with China cannot be sustained, and the world’s two largest economies will find ways to de-escalate, and Bessent said that this de-escalation will come in the very near future.
Furthermore, President Trump, in a Tuesday news conference, said that the final tariffs on China will be lower than they are currently, adding that if China and the U.S. cannot agree, he may still lower key tariffs, adding that, “We’re going to be very nice.” He was also “very nice” to the Fed Chair, saying during a Tuesday press conference, “I have no intuition of firing him,” referring to Fed Chair Jerome Powell.
Until the tariff situation normalizes, China said it will “fully prepare” emergency plans to ward off any new external shocks, signaling that it is now feeling the effects of higher U.S. tariffs. These new monetary tools and policy financing instruments include plans to boost domestic technology, consumption and regional trade. It also appears that China is getting closer to potentially devaluing their currency, the yuan.
This is a good time to remind investors that China’s interest rates have fallen below Japan’s interest rates, and China is expected to have ultra-low rates for a very long time due to its demographic challenges. As a result, a devaluation of the yuan may be one of China’s “emergency options’ to fight tariffs and boost its exports, especially if talks with the Trump Administration don’t resolve this tariff impasse very soon.
China told the U.S. to “completely cancel all unilateral tariff measures” if it wants trade talks, signaling that China is digging in and being uncooperative. Treasury Secretary Bessent said that the U.S. will not do that. President Trump said the White House is in contact with China “every day,” so there is some dialogue. A May meeting between Trump and Xi was planned, but there is no confirmation of any details.
Is the Fed Still Worried About Inflation – Despite Deflationary Trends?
In the meantime, many investors, including Fed Chairman Powell, have been needlessly worried about inflation and stagflation – neither of which has materialized. The reality is that deflation has arrived in the wake of the lowest crude oil prices in the past four years, so investors, the Fed and our allies have been unnecessarily worried over the wrong threats, as many key commodity prices have been falling lately.
President Trump is using deflation to urge rate cuts. In Truth Social, Trump said, “With Energy Costs way down, food prices (including Biden’s egg disaster!) substantially lower, and most other ‘things’ trending down, there is virtually No Inflation. With these costs trending so nicely downward, just what I predicted they would do, there can almost be no inflation, but there can be a SLOWING of the economy unless Mr. Too Late, a major loser, lowers interest rates, NOW. Europe has already ‘lowered’ 7 times.”
In preparation for next week’s Federal Open Market Committee (FOMC) meeting (on May 7th), the Fed’s Beige Book was released last Wednesday. It contained some key words of warning, like “pervasive” uncertainty. The Beige Book also said, “Economic activity was little changed since the previous report, but uncertainty around international trade policy was pervasive across reports.”
More downbeat phrases from the latest Beige Book, like this: “The outlook in several (regions) worsened considerably as economic uncertainty, particularly surrounding tariffs, rose.” Finally, the Beige Book said, “Several districts reported that firms were taking a wait-and-see approach to employment, pausing or slowing hiring until there is more clarity on economic conditions.”
Translated from Fedspeak, the Beige Book has cited several reasons for cutting key rates on May 7th.
Jerome Powell’s term expires in May 2026. Essentially, if the economy sinks into a recession, President Trump will likely blame Fed Chairman Powell for failing to cut key interest rates fast enough.
In meantime, all this recession rhetoric is undermining the U.S. dollar, but I expect a big rebound in the U.S. dollar soon, since most alternative currencies, like the British Pound and the euro, are in the midst of their own recessions. Furthermore, the Chinese yuan has ultra-low interest rates and devaluation threats as well. The only real foreign exchange alternative to the dollar is gold, which continues to steadily rise.
Other distractions out there include: (1) Russia’s lack of cooperation in ending the Ukraine war and (2) the impending tax reform bill. The news media, especially foreign media, are expected to continue to dream up many hysterical articles designed to disturb investors. However, we need to think rather than just react.
President Trump Watches the Market – And He Won’t Let it Sink for Too Long
President Trump watches the stock market. I was talking with Fox News host Charles Payne at the recent MoneyShow in Dallas and he told me that during Trump’s first term, he contacted his economic advisor Larry Kudlow multiple times during the day to check on the stock market. The notion that President Trump does not care about the stock market is false. That is one reason why President Trump’s April 9th tip on Truth Social triggered the biggest one-day rally most of us will see in a long time. The Trump family is now in both the money management business (via Truth Social) and the investment newsletter business (via Salem Media Group), so they have a vested interest to propel the stock market higher.
The stock market is a manic crowd that likes to react first and think second. It is now time to follow the best stocks and prosper during another spectacular earnings announcement season. Spring has arrived and consumers are increasingly getting out and about, which has delivered the strongest retail sales in two years, so I want you to be like our Treasury Secretary, Scott Bessent, and “Don’t Worry, Be Happy.”
Elon Musk has been chased out of the DOGE cost-cutting team by all the activists attacking his Tesla cars and dealerships, so he is back to tending more to his company business. At the quarterly earnings call, he certainly charmed investors, despite Tesla’s big earnings miss. Although Tesla’s energy storage business successfully helped to mask automotive problems, Musk convinced shareholders that Tesla’s FSD (Full Self Driving) software would add to earnings in 2026, and the Robo-taxi service would launch soon with Model Ys. Elon criticized Waymo’s lidar self-driving vehicles and made the case that FSD is superior.
Uber will be rolling out its autonomous cars in VW ID.Buzz vans in Austin, Texas, so the Tesla Robo-taxi will have some competition. Also, VW Group is now selling more EVs in Europe than Tesla is. The ID.Buzz is a big hit in Europe and is a very practical EV, especially for folks that have to haul cargo.
We’re still in the early days of first-quarter earnings season, so stay tuned as we cover our great stocks reporting their first-quarter earnings and revenues, along with future guidance, which should turn more positive as we see stability return, with lower tariffs ahead, perhaps even zero or near-zero tariff levels.
Navellier & Associates; a few accounts own Tesla (TSLA), per client request only in managed accounts. We do not own Volkswagen (VWAGY). Louis Navellier does not personally own Volkswagen (VWAGY) or Tesla (TSLA).
All content above represents the opinion of Louis Navellier of Navellier & Associates, Inc.
Also In This Issue
A Look Ahead by Louis Navellier
Tariffs Are Melting Away, But China Remains Stubborn
Income Mail by Bryan Perry
The Fed Should Act Next Week, With a Preemptive Rate Cut
Growth Mail by Gary Alexander
Downbeat Sentiment (and Magazine Covers) are Contrarian Buy Signals
Global Mail by Ivan Martchev
The Stock Market is Sniffing Out More Trade Deals
Sector Spotlight by Jason Bodner
Survival Techniques in a Confusing Market Year
View Full Archive
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