What We Learned This Week

Tariffs Take Center Stage: Tariffs have dominated the headlines this past week, and while plenty has been said, we wanted to offer a level-headed perspective on what’s happening and why. From a broad view, Trump’s approach seems to center on two key objectives. First, in the long term, he wants to shift more manufacturing back to the U.S., encouraging companies to produce domestically while steering consumer preferences toward American-made goods. Second, in the immediate term, he is looking to extract concessions from key trade partners—namely Canada and Mexico—on border security, drug trafficking, and trade agreements. None of this is particularly new; these were pillars of his original campaign. However, the speed and scale at which he’s moving have caught some market participants off guard, leading to the volatility we’ve seen in recent days. The market's least favorite thing is uncertainty, and no matter how expected a policy shift might be, once it becomes reality, the unknowns create turbulence.

One of those unknowns is how other countries will respond. Initially, we saw strong pushback from Canada and Mexico, with threats of retaliatory tariffs. But the reality is that the U.S. holds a significantly stronger negotiating position. Between 75-85% of both Canada’s and Mexico’s total exports come to the U.S., representing nearly a third of their GDP. In contrast, U.S. exports to both countries combined accounted for less than 3% of our total exports last year. So while there’s plenty of headline noise, the imbalance of leverage makes it difficult for these nations to engage in a prolonged trade dispute. That’s why we quickly saw early signs of concessions from both, and we may see similar moves from the EU if the focus shifts there. Whether this approach is the right one is up for debate, but from a strategic standpoint, it’s clear that the U.S. has leverage and is willing to use it.

Another hotly debated issue is who actually pays these tariffs. This has become a largely partisan argument, with one side claiming they are absorbed by foreign exporters and the other insisting they are passed directly to U.S. consumers. The reality is more nuanced. While tariffs are technically paid by the importer at the port of entry, those costs are negotiated up and down the supply chain based on leverage, competition, and relationships. The inflationary impact is unavoidable, but it’s not as simple as everything suddenly becoming 25% more expensive overnight. The real unknown is how much short-term pain Trump is willing to endure in pursuit of longer-term trade advantages. Some signs point to potential gains, such as early concessions from Canada and Mexico or Volkswagen and Porsche exploring U.S. manufacturing. But the risks remain largely unclear.

We aren’t taking a stance on whether this is the right move or not. What we do know is that the U.S. remains the dominant economic force globally, and that brings negotiating power. If our trade partners believe these policies aren’t just a bluff, some of these tactics may produce meaningful results. That said, the market will continue to react sharply to every development—likely overreacting in both directions relative to the true long-term implications. As always, it’s important to separate noise from substance and keep a measured perspective as the situation evolves.

Doesn’t Appear Big Tech’s AI Investments are Slowing: Alphabet’s latest earnings report was somewhat underwhelming, with slowing revenue and cloud growth weighing on the stock, but the real takeaway was its plan to spend $75 billion on AI and data center expansion in 2025—far exceeding the $50 billion analysts expected. This signals that major tech players aren’t pulling back on AI investment despite concerns sparked by DeepSeek’s cost-efficient model. Meta has reiterated its aggressive AI spending plans, and rumors of a $340 billion valuation for OpenAI (up from ~$150bb currently) following a potential SoftBank investment further reinforce this trend. Alphabet’s move has helped stabilize sentiment around AI infrastructure, particularly benefiting Nvidia, as it suggests the AI investment cycle is evolving, not shrinking.

GM Exits the Robotaxi Race: GM is slashing 50% of its staff at Cruise, its autonomous driving unit, as it continues to wind down operations and shift focus away from robotaxis toward self-driving personal vehicles. Once a frontrunner in the space alongside Waymo and Uber, Cruise’s exit marks a significant shift in the race to develop autonomous transportation. While the potential for self-driving taxis remains massive—offering cost efficiencies and operating leverage—regulatory hurdles and long development timelines make it a high-risk endeavor. Unlike Alphabet and Tesla, which are more accustomed to absorbing that kind of uncertainty, GM’s more traditional industrial DNA makes it harder for shareholders to justify an open-ended investment. With a major player stepping aside, the door is now open for others to solidify their lead—if they can actually make it work.