In previous months, I have mentioned the uncertainty surrounding what was to come in the United States, and now we find ourselves confused about the master plan behind the actions being taken and what the outcome will be. The imposition of very high tariffs, only to lower them a few days later and then suddenly raise them again, reminds me of the story of the boy who cried wolf. After many false alarms, the townspeople stopped believing him, and when the wolf came, they were caught off guard.
I feel that President Trump’s ongoing disputes with other countries, federal courts, and universities are exhausting and, so far, have yielded few tangible results. The basis of these disagreements is valid, as the rest of the world has long seen the United States as a rich uncle who hands out money to anyone who asks and allows himself to be taken advantage of with a smile. Courts at all levels have politicized their actions, believing they can determine government policy. Universities have become centers of agitation and promotion of leftist movements, and have allowed the exaggerated rise of antisemitism—a situation confirmed by an internal Harvard study.
The current government must clearly define its long-term economic and social policies and implement them decisively, so that the world understands the necessary steps and can adjust accordingly. The U.S. economy continues along a path of lower inflation, as the Fed’s preferred index—the Personal Consumption Expenditures (PCE) Price Index—fell to 2.1%. Unemployment has remained at 4.2%, with around 150,000 jobs created monthly, and 70% of companies reporting earnings above analysts’ forecasts. However, these strong earnings reports are accompanied by negative commentary on future outlooks, and in many cases, announcements that companies will no longer provide forward guidance, mainly due to the potential impact of tariffs.
The consequences are already beginning to show: General Motors, the largest importer of cars to the U.S., would be struck by a potential 25% tariff. UPS announced the layoff of 20,000 employees. There has been a 45% drop in container shipments from China to the U.S., with the main entry port—Long Beach—showing a 23% decrease, and Vietnam has, for the first time in history, sent more goods to the U.S. than China. One troubling statistic is that the U.S. manufacturing sector has lost 6.8 million jobs from 1979 to the present, despite population growth. On a positive note, the country collected $16.4 billion more in April than in March, mainly due to the new tariffs. Additionally, during President Trump’s visit to Arab countries, he secured investment commitments of over $4 trillion for the next decade. When combined with promises from American companies, new investment commitments reach nearly $9 trillion.
President Trump successfully secured approval of his new budget by Congress, which includes many of the tax cuts he promised during his campaign. However, I fear it may get stuck in the Senate due to a projected $2.3 trillion deficit increase, which many conservative Republicans oppose. On the other hand, several indicators highlight the uncertainty prevailing in the country:
• Consumer confidence fell to 40.2, the lowest figure since the pandemic.
• Builder confidence is at its lowest point in 4 years.
• Public expectations of rising inflation.
• A contraction in tourism.
• Durable goods production is at its lowest due to reduced consumption.
• People changing jobs now earn 4% less on average, whereas they used to gain 7.3%.
Trump continues his feud with the Central Bank (the Fed) chair, who refuses to cut interest rates until inflation is under control and employment declines. However, Trump has reiterated he will not fire him before his term ends in 2026—a position the Supreme Court has confirmed, noting that the role is not under executive authority.
Returning to the cancellation of contracts with hospitals, universities, and tech labs, I’m concerned that with 500,000 foreign scientists currently in the U.S., the loss of federal funding may lead them to return to their countries, creating a brain drain that could undermine the country’s leadership in science and technology. We have already seen how Biden’s ban on exporting advanced chips to China prompted China to develop them domestically, with great success. Today, in fields such as electric vehicles, the U.S. holds a marginal position in the global market, dominated by BYD, despite the ban on importing their vehicles into the U.S. In Q1 of this year, the U.S. economy contracted by 0.2%, partly due to a surge in imports before the tariffs took effect. The PMI (Purchasing Managers’ Index) showed an alarming reading of 40.5. Ending on a positive note for the U.S., overdose deaths fell by 27% from 2023 to 2024.
Mexico had its much-talked-about judicial reform election yesterday, with only 13.5% of registered voters participating. Widespread ignorance of the candidates and the limited impact of the popular vote turned this process into a mockery of democracy. President Sheinbaum continues to show prudence by not taking a confrontational stance toward Trump, seemingly placing Mexico in a favorable position. But internal problems still dominate. AMLO’s departure has left the country with limited resources, a massive burden of 33 million monthly welfare checks, and stalled foreign and domestic investment due to tariff concerns—obstacles hindering the launch of an ambitious and optimistic “Plan Mexico” that lacks the resources to take off.
The U.S. has already announced plans to begin reviewing the USMCA (T-MEC) agreement in September or October, with little optimism for Mexico’s outcome in those negotiations. Senator Marco Rubio’s visit and the designation of cartels as terrorist organizations put U.S. military intervention in Mexican territory on the table—clearly a violation of national sovereignty.
As every month, here’s a list of positives and negatives for Mexico:
Positives
• PEMEX is refining 1.015 million barrels per day, 51.6% of installed capacity—the highest in years.
• Imports of finished clothing fell 60%, and fabric imports dropped 12%.
• CFE pledged to increase the electricity supply by 25% to 60%.
• Private consumption rose despite falling production indicators.
• Remittances in April climbed to $5.16 billion—a 16% increase from the previous month.
• The peso strengthened to $19.20 today.
• The government removed a censorship clause (Article 109) from the new Telecommunications Law.
• ANTAD reported that April was the best month for retail sales in the last five months.
• Foreign direct investment rose to $21.4 billion in Q1.
• Reserves reached $240 billion for the first time.
• Government tax revenue rose 7.4% while spending fell 3.7%, despite a 12.3% drop in oil revenue.
• Tax revenue from large taxpayers (148 companies) increased 74.4% year-over-year, reaching 177 billion pesos.
Negatives
• Mexico’s current account deficit reached $7.613 billion.
• Business confidence is at its lowest point in the past 24 months.
• Consumer confidence is at its lowest point in the past 23 months.
• April was the worst month for car rentals in the last 40 months.
• The IMEF expects a negative GDP growth rate, while the Ministry of Finance predicts a challenging environment, and the IMF forecasts -0.3% GDP with a 65% chance of recession.
• According to the Bank of Mexico, GDP will grow just 0.1% in 2025, while Brazil is growing at 2.9%.
Israel: The Israeli economy in May shows mixed signals of recovery amid ongoing challenges: the Gaza conflict, Iran’s potential development of nuclear weapons, and global economic issues. Q1 saw annualized GDP growth of 3.4%, as the temporary ceasefire from January 19 to March 16 allowed many reservists to return to work, and tourism rose by 14%. Inflation hit 3.6%, above the central bank’s 1–3% target, so the interest rate remained at 4.5%, unchanged for 11 straight central bank meetings. Unemployment rose slightly from 2.9% to 3%, but the stock market performed positively.
Much of Israel’s future depends on resolving the Gaza conflict, currently without a clear end. Relations with the U.S. have cooled, especially after America negotiated directly with Iran, the Houthis, the UAE, and even Hamas to free a U.S. hostage, excluding Israel from the process.
Global observations:
China’s exports to the U.S. dropped 17%, but exports to other countries rose 14%, essentially offsetting the tariff impact. It’s interesting how new trade alliances are forming as a result of U.S. policies. In the long term, this could weaken U.S. influence and even threaten the dollar’s role as the global reserve currency.
China’s birthrate is just 1.61 per couple, far below the 2.1 needed to maintain population. If unchanged, China may face Japan’s fate: years of recession due to shrinking consumer bases. The number of marriages in China fell 21% in 2024 vs. 2023—an effect of the now-discontinued one-child policy. Among those aged 15 to 30, 58% are men and 42% are women. China exempted $40 billion in import tariffs for essential goods and has essentially violated its temporary pact with the U.S. by reinstating export restrictions on “rare earths,” crucial for semiconductor production in the West. China now has 50% of the world’s AI researchers and has just announced a $70 billion subsidy for AI development.
Europe is moving decisively to the right, with anti-immigration candidates gaining ground and support systems for the most vulnerable being reduced. Until recently, major Japanese investors bought long-term U.S. Treasury bonds and hedged currency risk with futures, thanks to very low domestic yields. But this has changed with Japanese bond yields rising 1.5%. Japan was the largest holder of U.S. debt, with over $1 trillion in Treasury bonds, but that may change if interest rate gaps remain.
Brazil exports 40% of the world’s chicken, but a disease outbreak has halted exports. If not resolved soon, we could see a serious global price increase. In May, U.S. stock markets rose nearly 6%, bond prices fell slightly as rates increased 0.2%, gold was volatile, closing around $3,250/oz, and Bitcoin hit a record $111,200 before dropping back to $104,000. It’s worth remembering that from 1945 to today, the Dow Jones has fallen between 5% and 10% 63 times, so stock investments must be viewed with a long-term perspective.
Further Reading: