Dear valued client,
Markets slid into negative territory this week as the U.S. inflation rate came in at 2.4% in May (compared to 2.3% in April and 2.4% in March), marking the first increase in four months but remaining below expectations of 2.5%. Energy costs continued to decline, with gasoline and fuel oil dropping 12% and 8.6%, respectively. Despite this relatively tame inflation report, analysts caution that potential tariff-driven price increases may not yet be reflected in the data, suggesting a cautious outlook for future inflation trends.In May 2025, Chinese exports to the U.S. plummeted by 34.5%, the largest decline since February 2020, despite a temporary trade agreement on May 12 that reduced tariffs for 90 days. This week, U.S. and Chinese representatives met in London to negotiate a trade war truce, with China seeking reduced U.S. tariffs and greater access to technology, while the U.S. pushed for increased exports of Chinese rare earth minerals. Following two days of talks, a preliminary framework was agreed upon to ease trade tensions, building on a prior truce reached in Geneva. The deal, which includes China resuming exports of high-tech magnets and rare earths and the U.S. maintaining a 55% tariff on Chinese imports (compared to China’s 10% on U.S. goods), awaits approval from Presidents Trump and Xi. While progress was made, details on broader issues like market access and technological competition remain unresolved.
The ArriveCan scandal, centered on a $60 million smartphone app briefly mandatory for travelers entering Canada during the COVID-19 pandemic, has escalated with new findings from Auditor General Karen Hogan. Her investigation revealed that GC Strategies, a two-person consulting firm that served as a middleman without designing the app, was awarded $100 million in various contracts under the current Liberal government, despite most failing to meet procurement standards. Hogan highlighted a broader issue of “hinky” contracting practices, noting that recent audits, including one into McKinsey & Company contracts, uncovered problems in nearly every contract examined, indicating systemic issues in federal procurement processes.
India experienced one of its deadliest plane crashes in decades yesterday when a London-bound Air India Boeing 787 Dreamliner crashed shortly after takeoff into a medical college in Ahmedabad, killing 241 passengers and crew, along with dozens on the ground. A single passenger survived, reporting that the plane split in two before exploding, a scene corroborated by a pedestrian video showing the aircraft descending into a fireball. This marks the first crash of a 787 Dreamliner since its 2011 debut, intensifying scrutiny on Boeing, already grappling with issues surrounding its 737 Max and recent whistleblower allegations of 787 production flaws. The U.S. and UK are sending officials to assist India’s investigation, while Boeing faces renewed questions about its safety standards following a $1.1 billion settlement to avoid criminal charges related to earlier 737 Max crashes.
Israel launched extensive airstrikes on Iran last night, targeting over 100 sites, including the Natanz nuclear enrichment facility, the Islamic Revolutionary Guard Corps headquarters, and residential compounds, killing Iran’s top three military officials, two nuclear scientists, and at least 12 civilians in Tehran. Prime Minister Benjamin Netanyahu described the operation as aimed at dismantling Iran’s ballistic missile program, with strikes continuing into the afternoon and potentially marking the start of a prolonged campaign. Iran’s Supreme Leader, Ayatollah Ali Khamenei, vowed a “harsh” response, launching 100 drones at Israel, though no significant damage was reported. The U.S. denied involvement but evacuated nonessential embassy staff in Baghdad amid fears of a wider conflict. Iran suspended planned nuclear talks with the U.S.. At the same time, analysts suggest its weakened regional proxies and damaged military capabilities limit its retaliation options, potentially escalating tensions further in the Middle East.
“The best defense is a good offense.” – Jack Dempsey
Have a great weekend,
PW
