What you need to know

The U.S. economy is facing mounting headwinds as financial markets respond to a confluence of geopolitical tensions, trade restrictions and signs of structural slowdown.

After gaining 2,400 points from its 7 April low, the Nasdaq has since shed nearly 900 points, dragged down by steep losses in major technology stocks—Apple, Microsoft, Meta, Amazon and Tesla all fell between 4% and 7%. Nvidia declined 7% after disclosing that U.S. authorities had indefinitely banned sales of its H20 chips to China, prompting a $5.5 billion writedown in its first-quarter earnings and exacerbating the sector’s retreat.

Broader markets followed suit: the S&P 500 fell 2.2%, the Dow Jones Industrial Average dropped 700 points, and the Nasdaq Composite declined more than 3%.

While futures markets had shown early signs of optimism, sentiment turned sharply following remarks by Federal Reserve Chair Jerome Powell. Speaking in Chicago, Powell stated unequivocally that the Fed does not intend to intervene in equity markets, arguing that they are functioning “as they should” despite mounting uncertainty. He warned of a “strong likelihood” that tariffs would result in higher consumer prices and rising unemployment in the short term, underscoring the inflationary risks of the administration’s protectionist tilt.

Meanwhile, White House policy remains focused on bond markets as the principal mechanism for managing the tremendous national debt (which is the administration’s primary concern). With bond yields largely stable over the past 24 hours, no shift in strategy appears imminent. A change in policy will probably not come unless the bond yields begin to spike again.

Beneath the surface, the economic deceleration is becoming more apparent. This year, there has been a moderate but significant increase in bankruptcies. Averaged over 2024, there were about 173 large bankruptcies a quarter. Large bankruptcies in Q1 2025 have reached 188, the highest quarterly count since 2010. The industrial sector recorded the highest number of bankruptcies in Q1 2025, at 32. This was followed by consumer businesses and healthcare, at 24 and 13. Overall U.S. imports over the past month are down 64%.

Yet tariff enforcement is increasingly serving as a fiscal lever, generating $21 billion in revenue since Donald Trump returned to office.

As part of its broader strategy to counter China, the U.S. is now lobbying more than 70 countries to prohibit the transshipment of Chinese goods through their territories—a move aimed at tightening economic pressure on Beijing. The policy is being reinforced symbolically as well: Google Maps has begun labelling the contested waters near the Philippines as the “West Philippine Sea,” replacing the “South China Sea”—a subtle but pointed gesture of alignment with Manila’s maritime claims and a signal of Washington’s shifting posture in the Indo-Pacific.

Birth pangs in the birthplace of civilization

Israeli Defense Minister Israel Katz said on Wednesday that the Israel Defense Forces will remain indefinitely in “security zones” across Gaza, southern Lebanon and parts of Syria.

In Lebanon, President Joseph Aoun stated that Israel’s continued presence was obstructing the Lebanese army’s full deployment, a requirement under the terms of the Hezbollah ceasefire.

In recent weeks Lebanon has taken serious measures to reduce Hezbollah’s role in political life. Staff at Beirut airport affiliated with Hezbollah have been removed; posters of Hezbollah and Iranian leaders have been removed from the airport road; banners celebrating former Prime Minister Rafic Hariri (assassinated by Hezbollah in 2005) have been put up at Beirut Airport; Hezbollah flags have been banned from display in public places; and the government on Tuesday declared that Hezbollah must give up its weapons while offering Hezbollah members the opportunity to enroll in the Army as individuals provided they meet requirements, undergo training, and submit to military discipline. At least 200 senior Hezbollah leaders are believed to have relocated to Venezuela in the last few weeks.

It’s now the U.S. vs China, everyone else needs to pick a side

Kremlin spokesperson Dmitry Peskov said on Tuesday that Russia was politically open to a ceasefire agreement with Ukraine, though no clear framework yet exists.

Top U.S. officials, including Secretary of State Marco Rubio and White House envoy Steve Witkoff, are traveling to Europe this week for high-level talks on the conflict. They are expected to meet European counterparts in Paris on Wednesday and Thursday.

Russian President Vladimir Putin is also set to meet with Qatar’s Emir Sheikh Tamim bin Hamad Al-Thani on Thursday in Moscow. The Kremlin has indicated that Ukraine will be on the agenda. Qatar has previously played a mediating role in the conflict and has helped reunite children separated during the war. U.S. and European officials will also discuss ongoing nuclear negotiations with Iran, which are due to resume on Saturday.

Chinese President Xi Jinping said on Wednesday that Asian nations should unite to resist geopolitical shocks and defend multilateralism against rising protectionism. Speaking during a visit to Malaysia as part of a wider Southeast Asia tour, Xi emphasized China’s commitment to regional cooperation.

While he did not mention the United States directly, his remarks appeared aimed at the administration of Donald Trump, which has imposed tariffs of 145% on Chinese imports.

Malaysian Prime Minister Anwar Ibrahim warned that the current geopolitical climate was pushing countries toward “economic tribalism.”

China is Malaysia’s largest trading partner, with two-way trade totaling $110 billion last year, and is involved in several Belt and Road Initiative projects, including an $11.2 billion railway. During his three-day visit, Xi is expected to advance negotiations for a free-trade agreement between China and the ten-member Association of Southeast Asian Nations.

Europe's center of gravity shifts east, politics moves right, & hostility to migrants from the south rises

Zelensky holds Black Sea security talks with UK, France, & Türkiye

Ukrainian President Volodymyr Zelensky said on Tuesday that officials from Ukraine, Türkiye, the United Kingdom, and France held a “military” meeting in Ankara focused on Black Sea security. He made the announcement alongside NATO Secretary General Mark Rutte in the Ukrainian port city of Odesa. Türkiye, which borders the Black Sea and controls its access via the Dardanelles Strait, had previously brokered a ceasefire under the 2022 grain export deal between Russia and Ukraine, though the agreement has since collapsed following Moscow’s withdrawal. Zelensky emphasized that the meeting was not about ending the war but focused instead on post-ceasefire security guarantees.

Turkish officials have expressed support for a ceasefire and are likely to play a central role in future security arrangements, given that Türkiye possesses NATO’s second-largest military after the U.S. Ankara has supplied Ukraine with Bayraktar drones, which were instrumental in resisting the Russian invasion in its early stages. Türkiye has also stated its support for Ukraine’s full territorial integrity.

Instability from Sahel to Horn of Africa amid state fragility, Russian interference, & Islamist insurgencies

The militant group Al-Shabaab claimed on Wednesday to have taken control of Adan Yabaal, a strategic town located around 220 kilometers (130 miles) from the Somali capital, Mogadishu. The group said it launched a surprise attack early in the morning, forcing government troops to retreat following intense fighting. The town is considered a critical logistics hub for the Somali military. While some military officials later claimed to have regained ground, reports remained conflicting. Government forces had previously recaptured Adan Yabaal from Al-Shabaab in 2022.

The group also briefly seized villages near the capital last month before being repelled. Somali President Hassan Sheikh Mohamud downplayed the incident, stating, “If Al-Shabaab captures one town, that does not mean they overpowered us… There is a big difference between a war and a battle.”

Mohamud has recently been dragged into disputes with the autonomous regions of Puntland and Somaliland, distracting him from the growing threat from Al Shabaab.