What’s Next as the Latest U.S.-China Trade Talks Conclude-OxBig News Network

We are hearing that the trade talks with China may be bearing fruit — or at least aren’t at an impasse. We’ve heard positive spin before, so we will wait to hear whether both sides say the same thing before any sort of victory can be declared.

We’re also watching key C.P.I. data on Wednesday. And we’re examining new challenges to the latest trend in finance: funds sponsored by private equity that target retail investors. Good luck!

But will Trump and Xi approve?

For the second time in recent weeks, U.S. negotiators are hailing a truce in the Trump administration’s trade clash with China after marathon talks in London wrapped up on Tuesday.

Still, jittery business leaders and investors have plenty of questions: What’s been gained? (The full details haven’t been released.) Did the talks break new ground, or is this just a reset to what was agreed at the last meeting, in Switzerland? Perhaps most important, will this détente hold — and result in more deals?

The latest:

• Commerce Secretary Howard Lutnick, one of the U.S. negotiators, said progress was made in getting Beijing to relax export controls on vital rare earth minerals. “We do absolutely expect that the topic” will be resolved, he told reporters. (Hours later, a major Chinese rare earths magnet producer said it had received approval to begin some exports, including to the United States.)

• Lutnick added that some of the retaliatory trade measures that Washington had imposed on Beijing would be dialed back “in a balanced way.”

• President Trump and Xi Jinping, China’s leader, will now be briefed on the discussions: “Once the presidents approve it, we will then seek to implement it,” Lutnick said.

Is a breakthrough possible? Both countries face challenges. The trade war has already begun to affect China’s exports, while a variety of American industries have been hit hard by the rare earth export limits.

And fears are growing that the longer tariffs remain in place, the higher the risk of inflation accelerating (more on that below) and growth being hobbled. The World Bank has projected a rapidly slowing global economy amid the trade fight, and Bloomberg reports on Wednesday that some Hong Kong pension fund managers could sell their Treasuries holdings if the U.S. credit rating deteriorates further.

There’s plenty of reason for caution. A reminder: At the conclusion of last month’s talks, Treasury Secretary Scott Bessent, one of the chief U.S. negotiators, said “substantial progress” had been made in the negotiations. That momentum quickly faded after both sides accused each other of violating the terms of that agreement.

Among those likely to stay cautious amid the uncertainty is the Fed. The futures market on Wednesday was pricing in just one rate cut this year, down from nearly four in April.

Are there other trade deals in the pipeline? The U.S. and Mexico are reportedly close to a deal to cap some of the tariffs placed on Mexican steel imports, according to Bloomberg. Separately, talks between Brussels and Washington are said to be moving slower than expected.

HERE’S WHAT’S HAPPENING

Congress moves closer to passing major crypto legislation. The GENIUS Act, a stablecoin bill that has the Trump administration’s support, is up for a key procedural vote in the Senate as soon as Wednesday. That comes as the CLARITY Act, another crypto-focused bill, cleared a similar hurdle in the House, helping drive a rally in digital assets on Wednesday.

Mike Bloomberg endorses Andrew Cuomo for New York City mayor. The billionaire former mayor called Cuomo a “candidate whose management experience and government know-how stand above the others.” A prominent donor to Democratic candidates and causes, Bloomberg had been reluctant to endorse mayoral candidates at the primary level. A Democratic primary vote — in which Cuomo faces strong competition from Zohran Mamdani, a democratic socialist — is set for June 24.

Scott Bessent emerges as a potential Fed chair. Advisers have been pushing the White House to tap Bessent, the Treasury secretary, to succeed Jay Powell as the central bank’s leader when his term ends next year, according to Bloomberg. That could put him up against Kevin Warsh, a former Fed official long considered a front-runner for the post; President Trump said last week that he would name a successor to Powell “very soon.”

Medicare could be spared major cuts, Republican senators suggest. They appear to be backing away from significant changes to the program as they hunt for savings to prepare Republicans’ domestic policy bill, key to Trump’s domestic agenda, for a wider vote. But 38 House Republicans have warned Senator John Thune, the majority leader, that they want to see “enforceable spending reductions” to match any new tax cut pledges.

An exception to inflation

New inflation data from the Bureau of Labor Statistics on Wednesday will be the latest test of how quickly, and by how much, President Trump’s trade war is bolstering consumer prices. Economists have warned that a lull in recent months is likely to give way to a surge, though it might still take several more months for the full fallout to appear in the data.

But there’s one area where Trump’s policies have contributed to a dip in prices: airfares, Danielle Kaye writes.

Airline prices have fallen for three consecutive months. In April, fares fell 2.8 percent from the previous month — the biggest drop of any category within the Consumer Price Index that month. The decline is partly a result of sluggish demand; economic anxiety and concern about tariff-driven price increases have prompted many Americans to rethink their travel plans.

“It’s certainly the tariffs and the uncertainty of the larger economic environment,” Henry Harteveldt, a travel industry analyst at Atmosphere Research Group, told DealBook.

He added that Americans’ concerns about job security were also playing a role: Consumers whose household incomes are below $150,000 are being hit particularly hard, and are the most prone to pulling back on travel plans.

“This is not recessionary by any means, but a little more caution,” Samuel Tombs, the chief U.S. economist at Pantheon Macroeconomics, told DealBook. He pointed to falling hotel room prices as another sign of a drop-off in tourism.

International travelers are wary, too. Fear of detentions at the border and deportations are most likely contributing to an “elevated level of anxiety” among foreigners who might otherwise travel to the country, said Torsten Slok, the chief economist at Apollo Global Management.

Soft airfares can offset some inflation. But their relatively small weight in the broader C.P.I. index means the dip probably won’t have a meaningful effect on overall inflation rates, Slok said. Economists largely expect prices to inch higher over the next six months.

Pantheon analysts predict that a modest 0.5 percent uptick in airfares took place in May. But Tombs said they could fall again if tariff-fueled price increases arrive in earnest later this summer.

Airlines have been reeling. As Trump began his trade war, Delta Air Lines, Southwest Airlines and American Airlines all downgraded their revenue forecasts for the first quarter.

“I regret some of my posts about President @realDonaldTrump last week. They went too far.”

— Elon Musk on X. The billionaire appears to be continuing to back down from his explosive flame war with President Trump last week, in which he claimed credit for getting the president re-elected and suggested that Trump was in files related to Jeffrey Epstein. Supporters of Musk’s businesses have worried about potential retribution from the Trump administration.

Warning signs grow for private funds

The hottest pitch among big institutional investors in recent years has been retail: opening up the world of sophisticated private equity, debt and real estate investing to individual investors, with the promise of better returns than public markets.

But new reports underscore the potential risks — just as one of the oldest and most sophisticated investors in the industry is trying to pare back its exposure.

Private market funds have been underperforming, according to State Street’s latest private equity index, The Financial Times reports. The index, which tracks cash flows from private equity, private debt and venture capital funds, returned 7.08 percent last year, versus the S&P 500’s total return of 25 percent.

This was no blip. The public stock index has bested the State Street index every year since 2022, The F.T. notes.

That adds to the risks of retail investors jumping into private funds, according to a new report by Moody’s. Unlike traditional funds, which ask for money from their investors only when it’s needed, vehicles aimed at individual investors are already holding huge sums of cash, potentially driving their managers to rush into deals to put that money to work.

Moreover, individual investors probably aren’t prepared for the increased risks that come with investing in private equity or debt, as well as other features of these funds, including opaque ways of valuing their assets and limits on withdrawals. That could lead to problems for the industry, Moody’s analysts write:

If that happens, and consumers are hurt, this could lead to reputation loss, heightened regulatory scrutiny and higher costs. In addition, any misalignment of liabilities and assets can jump to the surface during times of market stress — with systemic implications when this stress spreads across multiple funds with similar strategies. In such a situation, there would be more limited liquidity access across the system — further hurting asset prices.

Meanwhile, Yale is trying to shed up to $6 billion worth of stakes in private funds, The Times reports. That’s driven in part by uncertainty over federal grants under the Trump administration. But Yale (and other universities and endowments) have also been stung by investment firms’ struggles to sell their holdings, yielding cash for their backers.

A representative for the Yale endowment told The Times that the school remained committed in the long term to private equity. But it may be telling that while Wall Street is courting Main Street to buy in, the university — which was among the first schools to bet heavily on the industry — is seeking to step back, at least for now.

THE SPEED READ

Deals

• Disney’s Bob Iger says the entertainment giant is unlikely to follow moves by Comcast and Warner Bros. Discovery in separating content, streaming and television channel businesses. (CNBC)

• Brown & Brown agreed to buy rival Accession Risk Management Group for $9.8 billion in a sign of further consolidation among insurance brokerages. (Bloomberg)

• Blackstone’s Steve Schwarzman said that his firm planned to invest $500 billion in Europe over the next decade. (Bloomberg)

Politics, policy and regulation

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