'Kick the Can' Is Back Again

The next big step in the tariff drama... A 'done' deal with China – for now... Trump calls Jerome Powell a 'numbskull'... The push for lower rates... Fed Chair replacement candidates... No matter what, it's not going to end well...

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Tariffs could get 'paused' for a bit longer...

While walking the red carpet yesterday at the Kennedy Center in Washington, D.C. before a performance of the musical Les Misérables, a tuxedoed President Donald Trump laid down a new guidepost in his off-Broadway drama about tariffs.

Before the show, Trump told reporters that the White House would send letters to trading partners "in about a week and a half, two weeks." As he put it, these letters will outline unilateral tariff rates... "saying this is the deal, you can take it or leave it."

This timing aligns with the end of Trump's 90-day pause on reciprocal tariffs, which is set to expire on July 8.

Now, here's Part II: Also yesterday, Treasury Secretary Scott Bessent sat before the House Ways and Means Committee in Washington. Bessent testified that the tariff "pause" could be extended for countries or trading blocs, like the European Union, "who are negotiating in good faith."

Close readers may recall that Bessent described Liberation Day from the start as a starting point for trade negotiations with the world.

Since then, though, the U.S. has reached only a framework deal with the U.K. And yesterday, Trump announced a "done" deal with China that won't include any new tariff rates (beyond 55% already in place) and will keep key rare-earth minerals coming into the U.S.

However, the China agreement might be more like 'done – for now'...

As the Wall Street Journal reported yesterday after we went to press...

China is putting a six-month limit on rare-earth export licenses for U.S. automakers and manufacturers, according to people familiar with the matter, giving Beijing leverage if trade tensions flare up again while adding to uncertainty for American industry.

Beijing's agreement to temporarily restore rare-earth licenses was one of the key breakthroughs in the latest round of intense trade talks in London, but the six-month limit illustrated how each side is retaining the tools to easily escalate tensions again.

Between this important detail and Bessent's suggestion about an extended tariff pause, I (Corey McLaughlin) expect trade-related risks and uncertainties to keep hanging over businesses and the market through the start of 2026.

On the other hand...

Trump's public complaints have mostly involved China, and the president now says the U.S. and China have an "excellent" relationship.

The White House has repeatedly said that many other countries have reached out to the U.S. to negotiate.

So if Trump's biggest pain point (China) is already resolved, and these other countries are already making progress toward appeasing his concerns, it might be wise to expect an extended tariff "pause" for more countries.

This temporary fix could juice the market in the short term.

Meanwhile, the Liberation Day tariffs' legality is still up for decision in the courts.

A decision could remove these reciprocal tariffs completely... or restart the whole process if the White House chooses to try to implement tariffs through other means.

In all, investors have decided that things aren't "as bad" as they'd feared on Liberation Day...

The benchmark S&P 500 Index is inching closer to its all-time high. But since nothing new actually happened with tariffs today besides more talk, perhaps appropriately, the major U.S. stock indexes were "mixed."

The S&P 500, the tech-heavy Nasdaq Composite Index, and the Dow Jones Industrial Averages each finished slightly higher, while the small-cap Russell 2000 Index was a little lower.

One major U.S. stock took a hit today...

Boeing (BA) shares were down nearly 5% following the tragic crash of one of its aircraft operated by Air India earlier today.

All but one of the 242 people on board died in the crash, which happened shortly after takeoff in India of a flight bound for the U.K. The lone survivor, a British national identified as Vishwash Kumar Ramesh, was seen at a local hospital, disoriented with multiple injuries. He reportedly had a seat near an emergency exit and told the Hindustan Times...

Thirty seconds after takeoff, there was a loud noise and then the plane crashed. It all happened so quickly.

The cause wasn't obvious from eyewitness video of the takeoff and crash, but the plane involved was a Boeing Dreamliner aircraft. Boeing's involvement brings criticisms of the company back into the mainstream, given its spate of safety lapses in recent years. We await more information on the crash as we mourn those who perished.

Moving on...

After the latest round of inflation data, which Nick Koziol reported on yesterday, Trump today lobbied Federal Reserve Chair Jerome Powell to lower interest rates again. He threw in some name-calling for good measure.

"We're going to spend $600 billion a year," Trump said, referring to interest on the national debt, "$600 billion because of one numbskull that sits here [and says] 'I don't see enough reason to cut the rates now.'"

While Powell does pull the string on interest rates, clearly Trump is also aware of the size of the debt and the cost to finance it. And he knows his "big, beautiful bill" sitting in Congress is projected to grow the debt by trillions of dollars.

Trump's remark also brings to our mind another use of this phrase recently. In March, Bessent called then-Canadian Prime Minister Justin Trudeau a "numbskull" during an event in New York as they were going back and forth publicly over the idea of tariffs.

Trudeau eventually resigned from office in Canada amid growing pressure from his own party and plummeting approval ratings (he'd already planned his resignation before the "numbskull" remark). Trump would very much want Powell to follow the same path and resign before his term as the central bank leader is supposed to end in May 2026.

So far, though, Powell has stonewalled Trump's push for lower rates and laughed off some of his attacks. We don't expect the Fed to suddenly change course from its methods and decide to cut rates at its next policy meeting next week, or even the one after that.

The desire to show Powell the door points to lower rates... eventually...

Last Friday, Trump said he would name a successor to replace Powell "very soon."

Bloomberg recently reported that Bessent could be Trump's choice. Previously, the leading candidate was thought to be former Fed official Kevin Warsh.

Either way, whoever Trump installs this time around (he picked Powell during his first presidential term) will likely have promised to favor lower interest rates.

Whether the economic environment easily allows for that is another matter. If inflation gets very high again, lower rates would be hard for anyone to justify. But Bessent – who has worked closely with Trump already – would certainly be inclined to follow that path.

Warsh likely would be, too. In April, Warsh gave a lengthy speech detailing his ideas about the Fed. If you're really interested in this subject, give the video a watch.

Warning: Warsh's speech is verbose – a change from the more plainspoken Powell (even if what Powell says has often been puzzling). But Warsh sounds inclined to pin blame on existing central bankers rather than current elected officials.

He questioned the Fed's purported independence, questioned the central bank's recent past actions, and challenged the "size and scope" of its influence. Warsh said...

My view is that monetary dominance rather than fiscal dominance – monetary dominance where the central bank becomes the ultimate arbiter of fiscal policy – is the clearer and more present danger...

Each time the Fed jumps into action, the more it expands its size and scope, encroaching further on other macroeconomic domains. More debt is accumulated, more capital misallocated, more institutional lines crossed, and the risks of future shocks are magnified.

I believe all of that second paragraph is true... But I'm less certain about lowering rates today simply because presidents and Congresses have racked up nearly $37 trillion in debt and counting, and because the current president wants it to be done. That isn't exactly a noble move, either, or a long-term solution.

In the shorter run, inflation could take off higher again if rates are lowered.

And in the short, medium, and longer terms, asset bubbles may grow. That might make people happy again and feel wealthier as dollar-dominated numbers go higher... But eventually, even bigger bills for the economic juice will come due (again) to future generations.

And there will be unintended consequences (again) in the meantime.

But as it goes in politics, the future is someone else's problem. And the path of least resistance here points to lower interest rates, once Powell exits. That might not be for another 11 months, however... or for as long as he ignores being called a numbskull.

Here's the thing, though...

The idea of lower interest rates doesn't mean you should expect smooth sailing for the market. Far from it, in fact.

We're reminded of something that our founder Porter Stansberry says in his latest brand-new presentation (which goes offline tonight, so watch it now if you haven't already). In his talk, Porter says...

By my calculation, the public debts in America have finally reached a point of no return...

He continued...

No matter what the Trump administration tries to do, I believe the U.S. will default on its Treasury debt within four years.

That's obviously a big prediction. But Porter details exactly why he's making it and what a U.S. default could look like. And he shares what he suggests everyday investors should do to protect their portfolios "as these risks get priced into the markets over the next four years."

Porter warns that one giant American institution is about to go broke... one that basically every American has a connection to. He says that the Department of Government Efficiency won't be able to make a big enough difference in U.S. debt (something we're seeing play out already)... and that an "epic financial crisis" is due as this situation unfolds.

Click here now for all the details. As I mentioned, the presentation will go offline tonight. This is your last chance to hear this warning and how our company's founder says you should prepare for when all of Uncle Sam's bills finally come due, all at once.

New 52-week highs (as of 6/11/25): Valterra Platinum (ANGPY), Alpha Architect 1-3 Month Box Fund (BOXX), BWX Technologies (BWXT), Disney (DIS), Dimensional International Small Cap Value Fund (DISV), Cambria Foreign Shareholder Yield Fund (FYLD), NetEase (NTES), Sprott (SII), Global X Uranium Fund (URA), Visa (V), and Telefônica Brasil (VIV).

In today's mailbag, at least one subscriber is skeptical of the announced trade deal with China, which we wrote about in yesterday's edition... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.

"Pardon me for being skeptical, but I will believe there is a trade deal with China when both countries have signed on the dotted line. Anything Trump says should be taken with about a ton of salt. I hope I'm wrong – wouldn't be the first or last time." – Subscriber Sherwin R.

All the best,

Corey McLaughlin
Baltimore, Maryland
June 12, 2025