The Crisis Behind the Tariff Chaos

'Possible landing zone' ahead... The U.S. wants to hear best trade offers... No movement on the 'big, beautiful' bill... Uncle Sam's debt snowball... Porter Stansberry's warning: The crisis behind the tariff chaos... As the world turns...

Best offers, please...

We wrote yesterday about the fast-approaching end of President Donald Trump's 90-day pause on reciprocal tariffs. A July 8 deadline nears for the Liberation Day tariff rates to be restarted on trading partners.

The "clock is ticking," we wrote. The White House feels the same way.

Global news service Reuters obtained a draft letter put together by the Trump administration to foreign trading partners, which states that the U.S. wants to hear "best offers" on trade negotiations by tomorrow.

In the letter by U.S. Trade Representative Jamieson Greer's office, the administration is seeking proposed quotas to purchase U.S. industrial and agricultural products... along with ways to amend non-tariff trade barriers. It also says the U.S. will evaluate responses within days and offer a "possible landing zone" that could include a reciprocal tariff rate, according to Reuters.

The White House had been saying weeks ago that deals with Japan and India were imminent. For folks who think major tariff concerns are off the table, this could be concerning. Recall that right after Liberation Day, Vietnam offered to cut its tariff rate on U.S. goods to zero as part of a new trade deal. Yet the only arrangement reached so far has been with the U.K.

China does have until August to avoid much higher tariff rates. However, as we wrote yesterday, U.S.-China talks have reportedly stalled since representatives from both countries met in Switzerland last month.

It's not clear which nations are receiving Greer's letter... But if this is a "best and final offer" request, the deals may not be closing for a while.

Right now, the market has comforted itself with the "TACO" theory that tariffs are empty threats. Further hiccups could shake things up again. Alternatively, a monster trade deal rollout – like Liberation Day, but "better" – may be a positive surprise. We'll see soon enough.

A 'big, beautiful' slowdown...

The other narrative dominating the market conversation lately is Trump's "big, beautiful bill." In the time since it narrowly passed the House, this bill's path hasn't been promising.

The biggest news has been reports that some Republican congressmen, like Rand Paul and Thomas Massie, want to see more spending cuts.

That follows Elon Musk's criticism last week that the size of the bill "undermines" the work that the Department of Government Efficiency ("DOGE") was doing.

Musk, who has left his formal post as a "special government employee" with DOGE and had a goodbye media event with Trump at the White House on Friday, publicly ripped the bill again today on X...

DOGE is projecting about $175 billion in savings. And tariff duties will bring in billions more. But as Musk and other critics note, such numbers pale in comparison with the economic impact of Congress raising the debt limit by another $4 trillion.

If that doesn't happen, though, the Treasury Department can't fund the government's liabilities, and the U.S. government would have to default on its debt. Yes, that's as significant as it sounds, and Congress has proved over history that nobody wants a default on their watch.

Congresses have raised, extended, or changed the definition of the debt limit 78 times since 1960, and it doesn't look like this situation will be any different. Still, it may take some time and more negotiating (around Medicaid and other issues) before it happens.

The 'status quo' is a concern, of course...

The U.S. debt is higher than ever and growing fast, thanks to interest rates that are higher than they've been in 15 years. As the government keeps issuing Treasurys to "pay" for everything and investors weigh inflation and/or growth expectations, they've demanded a higher interest rate. That's driving up debt costs even more.

It's a debt snowball, the kind of compounding effect you don't want to be a part of, and it's not without consequences. The government always searches for "answers" without addressing the root causes of the issue. So generally, either taxes go higher or costs rise (including for big-ticket, financed items like homes and cars), or both.

And then we have the effects on the financial system itself, which is where the "surprises" tend to come from. Picture Wall Street panicking... leveraged hedge-fund trades unwinding... or banks failing.

As we discussed yesterday and over the past few weeks, it seems like every time interest rates rise (and bond prices fall) these days, a dose of panic enters the market.

Last year, it happened with the yen "carry trade." In April, it was larger-than-expected Liberation Day tariffs.

After Liberation Day, the 10-year Treasury yield had its highest one-week move higher since 2001, which was quickly followed by Trump's 90-day reciprocal tariff pause.

Here's what many people haven't noticed, though: Weeks later, after a brief dip, this benchmark Treasury yield is just about back where it was before Trump relented.

The bond market is flashing red...

That's what our founder, Porter Stansberry, is saying right now.

As we shared yesterday, bonds are falling in value... Gold has risen by more than 60% since the start of 2024... DOGE's cuts aren't making up for new government spending... And Moody's has become the third major ratings agency to downgrade U.S. credit...

The combination has Porter warning that we're not in a normal economic situation. Rather, he says the financial system is reaching a breaking point that few Americans and investors are prepared for.

If you've followed Porter's work over the years, you know it pays to listen.

He may be most famous for his May 2008 prediction that the world's largest mortgage brokers, government-backed Fannie Mae and Freddie Mac, were going to zero. He also predicted General Motors' bankruptcy in January 2007.

He says this prediction is bigger... and that one of America's biggest institutions is about to go broke.

This Thursday, June 5, Porter is sharing the details about this warning. He's returning for one day only to explain why headlines about tariffs are distracting investors from a much bigger threat that could cause dramatic losses.

You'll want to hear this message.

Sign up here now. It's totally free.

And here's one more thing to know as you do...

Be sure to set aside about two hours of your time to hear the full discussion on Thursday. Porter's going to cover a lot of high-level economic ideas – plus the name of what he calls "America's most dangerous investment today" – and he doesn't want to rush anything.

Meanwhile, here's an update on another story we've been tracking...

Forward-thinking businesses aren't sitting around waiting to see what's going to happen in Washington next. Another area we've been keeping an eye on is developments in nuclear energy, as it relates to artificial intelligence and the growing demand for electricity...

This morning, utility giant Constellation Energy (CEG) and Meta Platforms (META) announced a 20-year partnership for 1.1 gigawatts of nuclear power. For context, that's roughly enough energy to power about 750,000 homes per year.

The agreement with Meta keeps Constellation's Clinton Clean Energy Center in Illinois open and operating. The power plant was originally set to close in 2027.

And with the plant's future secured, Constellation is now looking into providing even more nuclear power through small modular reactors at the site. The agreement will provide power to the grid, rather than directly to Meta. But that doesn't mean Meta isn't benefiting...

In 2020, Meta broke ground on its DeKalb, Illinois data center. And in total, the social media giant has invested more than $1 billion in data centers in the state. Terms of the deal weren't released, but this partnership will ensure that all these data centers can keep running.

We're not surprised...

As we told you last week, AI data centers require incredible amounts of energy. The largest ones can use as much power as 50,000 homes. And the U.S. Department of Energy estimates that data centers could triple their share of America's total power usage by the end of the decade.

California utility PG&E is already seeing this power demand show up. From last Thursday's Digest...

In an interview with Reuters, PG&E executive Mike Medeiros said that the utility company has seen a 40% jump in requests from companies looking to power their data centers.

So companies like Meta need to lock up energy supply. Keeping Constellation's Clinton nuclear plant open will provide the grid (and the company) with clean and reliable power.

Meta is just the latest in a long line of big tech companies to lock up nuclear power agreements for its AI plans. As we wrote in the November 12 Digest...

Multiple Big Tech companies have invested heavily in locking in nuclear-energy sources to power their AI data centers. Here are a few of the deals...

• Amazon (AMZN) paid $650 million for a nuclear-powered data center from Talen Energy (TLN).

• Microsoft (MSFT) locked in 20 years of power from Constellation Energy's (CEG) Three Mile Island nuclear power plant for its data centers.

• Alphabet (GOOGL) will pay to develop and construct several reactors to provide 500 megawatts of power.

The Commodity Supercycles team told us first...

In May 2024, Commodity Supercycles editor Whitney Tilson and his team unveiled their top recommendations for the coming "nuclear renaissance."

In short, the Commodity Supercycles team says that nuclear power is more efficient and more reliable than other energy sources. That makes it a perfect source for the 24/7 power demands from AI and data centers.

And Constellation Energy, being one of the largest nuclear energy utilities in the country, was one of those picks. Since that special report, Constellation shares are up more than 45%.

The rest of the portfolio isn't doing too bad, either...

Three of the other four picks are up big since the report went live on May 14, and the entire group has an average gain of almost 35% in 13 months. That's nearly triple the broader market's 13% return, as measured by the S&P 500 Index.

Even so, the Commodity Supercycles team believes this trend still has lots of room to run... Existing Supercycles subscribers and Stansberry Alliance members can find the report here.

New 52-week highs (as of 6/2/25): Automatic Data Processing (ADP), Agnico Eagle Mines (AEM), Alpha Architect 1-3 Month Box Fund (BOXX), CME Group (CME), Cintas (CTAS), WisdomTree Japan SmallCap Dividend Fund (DFJ), Dimensional International Small Cap Value Fund (DISV), Enel (ENLAY), EQT (EQT), iShares MSCI Germany Fund (EWG), iShares MSCI Italy Fund (EWI), iShares MSCI Spain Fund (EWP), SPDR Euro STOXX 50 Fund (FEZ), Franklin FTSE Japan Fund (FLJP), Franco-Nevada (FNV), Cambria Foreign Shareholder Yield Fund (FYLD), VanEck Gold Miners Fund (GDX), VanEck Junior Gold Miners Fund (GDXJ), GE Vernova (GEV), Intercontinental Exchange (ICE), iShares U.S. Aerospace & Defense Fund (ITA), Kinross Gold (KGC), K+S (KPLUY), Grand Canyon Education (LOPE), New Gold (NGD), Rubrik (RBRK), Royal Gold (RGLD), Republic Services (RSG), Sandstorm Gold (SAND), Sprouts Farmers Market (SFM), Sprott (SII), Skeena Resources (SKE), Spotify Technology (SPOT), Travelers (TRV), UGI (UGI), Vanguard FTSE Europe Fund (VGK), Verisk Analytics (VRSK), Wheaton Precious Metals (WPM), and W.R. Berkley (WRB).

In today's mailbag, thoughts on inflation, which we discussed in yesterday's edition... and the idea of tariffs... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.

"The only [inflation] numbers that count are the prices for ordinary Americans and they have gone up while wages have not. Insurance on home, auto, and health have all gone up substantially higher this year and a 12 pack of Coke now costs $7.99 almost double what it was 4 years ago. Add to this the reduced incomes caused by resuming student debt payments and households financing groceries just to get by and the future does not look positive." – Subscriber Ted B.

"Corey, Having been in the retail and import business for over 50 years, I can honestly say that when prices on an item go up, people buy less. That's one reason we strive to innovate and create new items – to give the consumer more for the higher prices they are being asked to pay. But tariffs don't accomplish that – they simply raise the price, with no added value. So, people buy less, and importers stop importing. Then, that so-called 'tariff income offset' doesn't happen...

"That's why everyone who is in or has ever done retail business knew that these Liberation Day tariffs were either bluffs, or idiocy, or maybe both. There are ways to use tariff threats already put in place by Congress, and they have always been a forceful negotiating tool to deal with trade imbalances too..." – Subscriber M.C.

All the best,

Corey McLaughlin with Nick Koziol
Baltimore, Maryland
June 3, 2025