The LIT Sunday News

Trump Claims Xi Jinping Called to Discuss Trade Deals — Beijing Denies Contact

Key Developments

President Donald Trump claimed that Chinese President Xi Jinping had called him recently and that he had sealed "200 trade deals," despite no official confirmation from Beijing or Washington. Trump's statements, made during a Time Magazine interview, have added confusion to already strained U.S.-China relations amid an ongoing trade war triggered by Trump's 145% tariffs on Chinese imports.

• Trump asserted Xi had personally called him, calling it “not a sign of weakness”

• Beijing publicly denied that any talks or negotiations are currently taking place

• Trump claimed 200 trade deals were made globally but provided no evidence; he suggested they might be announced “over the next three to four weeks”

Beijing's Response and Diplomatic Reality

• The Chinese foreign ministry explicitly stated, "China and the US are NOT having any consultation or negotiation on tariffs. The US should stop creating confusion."

• Chinese officials reiterated that no call or summit discussions between Trump and Xi have occurred

• Future negotiations, if any, would require working-level talks and a tentative agreement before Xi would personally engage

Beijing’s firm denials signal that no diplomatic progress has been made, despite Trump’s repeated suggestions to the contrary.

Strategic Context and Broader Implications

• Trump’s comments reflect a pattern since his return to office in January: frequent claims of progress with China that are later contradicted by officials

• Previous unverified assertions included Xi planning a U.S. visit and the existence of ongoing trade discussions

• The confusion risks further destabilizing market expectations amid ongoing tariffs, retaliatory measures, and global supply chain disruptions

Trump’s description of U.S. consumer power — likening America to a “giant, beautiful store” where he controls access — underscores his transactional view of trade relations.

Market and Diplomatic Risks

• Repeated mixed signals from Washington could erode credibility with both domestic markets and international partners

• The lack of formal communication raises doubts about the prospect for short-term de-escalation in the trade war

• Investors remain wary, with markets sensitive to any perceived progress — or lack thereof — in U.S.-China relations

At this stage, the trade relationship remains in a deep freeze, with Beijing waiting for more substantial signals before committing to any formal negotiations.

TL;DR

Trump claimed he received a call from Xi Jinping and finalized 200 trade deals, but Beijing flatly denies any recent communication or active negotiations. The confusing and unverified claims come as U.S.-China tensions remain high following Trump's steep tariffs. Without real diplomatic progress, the trade war continues, leaving global markets and policymakers grappling with heightened uncertainty.

Japanese Investors Dump $20bn of Foreign Bonds Amid Trump Tariff Turmoil

Key Developments

Japanese investors sold over $20 billion in international bonds in early April as Trump’s tariff escalation roiled global markets, marking one of the largest two-week outflows since records began in 2005. The sharp pullback highlights the rapid transmission of Wall Street volatility to global fixed income markets.

• $17.5bn sold in the week to April 4, followed by $3.6bn the following week

• Data from Japan’s Ministry of Finance does not specify bond types, but analysts say most of the sales likely involved U.S. Treasuries and agency bonds

• Japan remains the largest foreign holder of U.S. government debt, with $1.1 trillion in Treasuries

The selling came amid a sharp drop in equities: the S&P 500 plunged 12% in four days post-April 2 before partially recovering after Trump paused some tariffs for 90 days.

Market Reaction and Spillover Effects

• Yields on 10-year U.S. Treasuries surged by the most since 2001 during the week of April 11

• Selling pressure likely came from Japanese pension funds, banks, and life insurers rebalancing portfolios after equity losses

• Some selling may have been linked to the unwinding of carry trades and hedging strategies, where investors borrow cheaply in Japan to invest in higher-yield markets like the U.S.

However, despite the headline figures, analysts note that in the context of the massive U.S. Treasury market — with ~$1tn daily turnover — the Japanese selling was “barely a ripple”.

Strategic and Structural Context

• The turmoil was triggered by Trump’s “liberation day” announcement on April 2, which imposed 145% tariffs on Chinese goods and unsettled global trade and financial expectations

• Japanese pension funds, which have significant overseas exposure, likely moved quickly to rebalance their portfolios in response to valuation swings

• U.S. hedge funds and asset managers also contributed to the broader Treasury selloff by unwinding leveraged trades during the spike in volatility

Stefan Angrick of Moody’s Analytics emphasized that while Japan’s bond selling was notable, it does not fully explain the extent of U.S. yield movements, suggesting other market factors — such as liquidity strains and repositioning by global funds — also played key roles.

TL;DR

Japanese investors offloaded $20bn in foreign bonds, mostly likely U.S. Treasuries, during early April as Trump’s new tariffs triggered global market turmoil. The move contributed to a spike in Treasury yields, though analysts caution the impact was minor relative to overall bond market size. Portfolio rebalancing by pension funds, along with the unwinding of hedges and carry trades, helped transmit Wall Street’s volatility worldwide, showing how rapidly Trump's trade war ripple effects are being felt across global financial systems.

Pandemic-Era Shortages Could Return Without China Trade Deal, Businesses Warn

Key Developments

Major U.S. retailers and logistics experts are warning that steep tariffs on Chinese imports could soon trigger widespread shortages and price increases for consumer goods, echoing pandemic-era supply chain disruptions. With U.S. ports already signaling a steep drop in incoming shipments, businesses are urging the Trump administration to strike a deal with Beijing to avert a full-scale economic shock.

• Tariffs up to 145% on Chinese goods have made many imports economically unviable

• Executives from Walmart, Target, and Home Depot reportedly warned Trump that shortages and price hikes could begin by early May

• Imports surged earlier this year as businesses front-loaded shipments to beat tariffs, but this buffer may only last a few more months

Supply Chain and Import Trends

• U.S. imports hit a record $300bn in January following 20% growth over the previous year

• Ports of Los Angeles and Long Beach saw a 56% jump in volume for the week ending April 26, driven by front-loading

• However, import volumes are projected to plunge 11–33% in coming weeks, according to port data

• Shipping giant Hapag-Lloyd reports container bookings from China down by about one-third since early April

With many ships idling at Chinese ports, awaiting tariff clarity, supply chains face growing risks of inventory gaps, particularly for goods that dominate U.S. imports such as toys, electronics, clothing, and pharmaceuticals.

Industry-Specific Vulnerabilities

• Toys: 80% of toys sold in the U.S. are made in China; shortages could emerge rapidly

• Consumer electronics, apparel, and medicine are also highly exposed to supply disruption

• Alternative sourcing is limited; replacing Chinese suppliers could take years, not months

Retailers and manufacturers stocked up ahead of the tariffs, but inventory levels are expected to dwindle by summer without new shipments.

Broader Economic and Logistical Challenges

Even if tariffs were cut immediately, supply chains would still suffer from lag effects:

• Ships take a month or more to cross the Pacific

• Additional delays occur moving goods from ports to distribution centers

• A sudden surge in shipping could trigger port congestion, reminiscent of the pandemic-era backlogs

Analysts caution that supply chain normalization could take months, if not longer, even under an optimistic trade resolution.

TL;DR

Businesses warn that pandemic-style shortages and price hikes could soon hit the U.S. if Trump’s tariffs on Chinese goods persist. Imports are plunging, ships are stuck at Chinese ports, and front-loaded inventories will only provide a temporary cushion. Toys, electronics, clothing, and pharmaceuticals are at particular risk. Even if a deal is struck quickly, shipping and distribution lags mean supply chain bottlenecks — and higher prices — could persist well into late 2025.

Apple Plans to Source All U.S. iPhones from India Amid Trump Tariffs

Key Developments

Apple is accelerating a major shift of its iPhone assembly for the U.S. market to India in response to escalating trade tensions under President Donald Trump’s administration. According to people familiar with the plans, Apple aims to source all iPhones sold in the U.S. from India by the end of 2026, moving away from its historically China-centric supply chain.

• The pivot would involve doubling iPhone production in India, where assembly is already underway via Foxconn and Tata Electronics

• In 2024, the U.S. accounted for about 28% of Apple’s global iPhone shipments (~65 million units)

• Apple rushed to ship Indian-assembled iPhones to the U.S. following Trump's tariff hikes earlier this year, which erased $700 billion from Apple’s market value

Trade War Impact and Supply Chain Shifts

• Trump’s "reciprocal" tariffs imposed over 100% duties on Chinese imports, with a temporary reprieve for smartphones, though a separate 20% tariff still applies

• India faces a 26% reciprocal tariff, currently paused as bilateral trade talks progress between Washington and New Delhi

• Apple’s production remains heavily reliant on Chinese component suppliers, meaning that even Indian-assembled iPhones often involve pre-assembled kits from China

This rapid shift underscores Apple’s urgent need to mitigate tariff exposure without sacrificing access to the massive U.S. market.

Operational and Strategic Challenges

• Apple must expand assembly capacity significantly in India to meet U.S. demand

• Foxconn and Tata have begun scaling operations, but full independence from Chinese parts is still years away

• Logistics complexity and local manufacturing capability in India remain hurdles despite accelerated investment
  
  

Analysts highlight that assembly is only the final step; true supply chain diversification would require relocating component production, which is a far bigger and slower challenge.

Broader Strategic Context

• Apple’s shift is emblematic of a wider tech industry pivot as global companies rethink China-centric manufacturing models

• Tim Cook has maintained direct dialogue with Trump, attempting to protect Apple’s interests amid volatile trade policy

• Investors are awaiting Apple’s quarterly earnings report next week, where management’s strategy for handling tariffs will be closely scrutinized

Research firm Futurum Group described Apple’s rapid moves as an example of how “a company with these resources is moving at relative light speed” to adapt to geopolitical risks.

TL;DR

Facing steep tariffs under Trump’s trade war, Apple plans to move all U.S. iPhone assembly to India by the end of 2026. The ambitious shift aims to protect its U.S. market share and mitigate tariff risks, though challenges remain in scaling production and reducing dependency on Chinese components. Apple’s move underscores a broader decoupling trend as the global tech sector navigates rising geopolitical tensions.

Baidu Founder Criticizes DeepSeek’s Text-Based AI as Demand Shifts to Multimodal Models

Key Developments

Baidu founder Robin Li made a rare public criticism of China’s AI frontrunner DeepSeek, arguing that the market for text-only AI models is "shrinking". Speaking at Baidu’s developer conference in Wuhan, Li promoted Baidu’s new multimodal AI models, suggesting that broader capabilities across text, audio, images, and video are now critical to remaining competitive in China’s rapidly evolving AI landscape.

• Baidu launched Ernie 4.5 Turbo and X1 Turbo, both multimodal models capable of processing various types of inputs

• Li claimed DeepSeek’s leading model R1 suffers from higher hallucination rates, slower performance, and greater expense

• DeepSeek did not comment on Li’s criticisms

Despite his remarks, Baidu continues to integrate DeepSeek’s models across its platforms, highlighting the complex competitive-cooperative dynamic in China’s AI sector.

Shifting AI Competitive Landscape

• Baidu is repositioning itself by dropping its paid chatbot subscription and moving toward an open-source model, following industry trends led by Alibaba and ByteDance

• New use cases for Baidu’s multimodal models include AI avatars for livestream commerce, aiming to bolster merchant adoption

• Baidu also launched Xinxiang, an AI agent application competing with Alibaba’s Quark and emerging start-ups like Manus AI

Analysts suggest Baidu’s announcements will accelerate AI adoption across industries, lower barriers for developers, and intensify competition with Alibaba, Huawei, Tencent, and others.

Infrastructure and Strategic Moves

• Baidu revealed it has built a computing cluster of 30,000 Kunlun P800 AI chips through its semiconductor arm

• The infrastructure investment is designed to ensure ample compute power for training DeepSeek-class models internally

• However, U.S. export controls may hamper future development, as Samsung’s ability to supply Kunlun logic chips is under pressure

Despite international supply chain risks, Baidu appears intent on securing its long-term AI development capabilities.

Broader Context

• After the launch of ChatGPT in 2022, Baidu was the first major Chinese company to respond with its chatbot Erniebot

• However, Baidu lost early momentum as ByteDance’s Doubao and DeepSeek’s R1 model gained greater popularity

• Baidu’s shift from a closed, subscription-based model to open-source and free-to-use offerings reflects a broader realignment in China’s AI market, where competition is fierce and user acquisition increasingly depends on lowering access barriers

Baidu’s aggressive push into multimodal AI suggests a belief that text-only LLMs are no longer sufficient to capture user demand and enterprise clients.

TL;DR

Baidu’s Robin Li criticized DeepSeek’s focus on text-based AI models, arguing that demand is shifting toward multimodal capabilities combining text, image, audio, and video. Baidu launched two new multimodal models and an AI agent app, repositioning itself amid fierce domestic competition. While Baidu continues to leverage DeepSeek’s technology, it is betting big on broader AI functionalities and large-scale compute infrastructure to regain leadership in China’s booming AI race.

The U.S. Ruled Against Google’s Monopoly — Now Europe Must Act

Key Developments

MIT professor and Nobel Prize winner Daron Acemoglu calls on the European Union to follow the U.S. lead and take decisive action against Google’s advertising monopoly. Following landmark U.S. court rulings that Google monopolized digital search and ad tech markets, Acemoglu argues that Europe must move beyond fines and embrace structural reforms to safeguard competition and democratic accountability.

• A U.S. federal court ruled that Google maintained monopoly power in the publisher ad server and ad exchange markets

• A parallel EU case against Google’s ad tech dominance is nearing a decision

• Acemoglu advocates for measures like breaking up Google’s ad business and levying a 50% tax on digital ad revenues exceeding $500 million annually

The Broader Context: Tech Giants’ Entrenchment

• Today’s tech giants—Google, Amazon, Apple—command valuations dwarfing those of historic monopolies like Standard Oil

• Acemoglu warns that Big Tech’s lobbying power and integration into government structures make monopolistic threats even more urgent than in the early 20th century

• He points to Google’s stranglehold on digital advertising as a critical factor in the decline of independent news, contributing to a weaker democratic discourse and more toxic social media environments

Google’s control over advertising, Acemoglu argues, has hollowed out media revenue models, eroding a key pillar of democracy.

Why Breakup, Not Just Fines, Is Essential

• Historical examples like the breakup of AT&T illustrate that dismantling monopolies spurs innovation, rather than stifling it

• Fines alone are insufficient: restructuring markets to ensure genuine competition must be the goal

• Acemoglu and fellow economist Simon Johnson propose a new taxation regime to curb runaway dominance by companies like Google and Meta

Without structural reform, even aggressive fines risk becoming the cost of doing business for Big Tech.

Transatlantic Momentum and Political Shifts

• Despite Trump administration ties to parts of Big Tech, bipartisan skepticism is growing: JD Vance and other conservatives have praised past antitrust activism

• With active cases against both Google and Meta in the U.S., there is momentum for stronger, sustained antitrust enforcement

• The EU’s Digital Markets Act and Digital Services Act have laid a foundation, but the Google ad tech case offers a chance for truly global precedent-setting reform

By acting now, Europe could demonstrate that democratic institutions—not tech monopolies—should shape the future of digital markets.

TL;DR

After decisive U.S. rulings against Google’s monopolistic practices, Daron Acemoglu urges the EU to finish the job by breaking up Google’s ad tech dominance. Big Tech monopolies have eroded competition, democracy, and innovation. Europe must go beyond fines and restructure digital markets to protect fair competition and democratic accountability, setting a global standard for meaningful tech regulation.

Elon Musk to Refocus on Tesla Amid Profit Slump and Political Blowback

Key Developments

Elon Musk announced he will scale back his role in the Trump administration to focus more on Tesla, following the carmaker’s weakest quarterly profits since 2020 and mounting political backlash. While Musk emphasized he would remain the figurehead of Trump’s Department of Government Efficiency (Doge), his priority will now shift back to revitalizing Tesla amid slumping sales and supply chain challenges.

• Musk said he would allocate "far more time" to Tesla starting next month

• Tesla’s adjusted Q1 net income fell 39% year-on-year to $934mn

• Reported net income plunged 71% to $409mn

• Tesla shares rose 5.2% after Musk’s announcement

Tesla’s Financial and Operational Struggles

• Revenue fell 9% to $19.3bn, missing expectations of $21.4bn

• Vehicle deliveries fell 13% year-on-year, marking Tesla’s worst quarter since 2022

• Tesla’s operating margin collapsed to 2.1%, down from 5.5% a year earlier

• Tesla lost its EV market crown to China’s BYD

Supply chain disruptions linked to Trump’s tariffs on China — particularly for battery components — have worsened Tesla’s challenges, despite assembling vehicles locally in the U.S.

Political Blowback and Brand Fallout

• Musk’s close association with Trump has triggered widespread protests at Tesla showrooms

• The Tesla brand has suffered in key global markets amid perceptions of political alignment

• Musk admitted there has been "blowback" impacting sales and reputation

• He criticized the administration’s tariffs, calling for lower levies to support economic prosperity

Despite being a prominent backer of Trump’s campaign and a driving force behind Doge, Musk’s relationship with the administration appears increasingly strained, particularly over trade policy.

Forward Strategy: Model Updates and Autonomy Push

• Tesla hopes to revive sales with an upgraded Model Y and launch of more affordable models by mid-2025

• Musk reaffirmed his promise to begin fully autonomous ride services (“cybercabs”) in Austin by June, predicting they could "significantly move the financial needle" by mid-2026

• Musk claimed Tesla could achieve "99% market share" for self-driving taxis, a bold and heavily scrutinized forecast

Tesla is also working to localize battery production and reduce dependence on Chinese suppliers, but executives warned this transition would take time.

TL;DR

Elon Musk is stepping back from his government role under Trump to refocus on Tesla after a sharp profit slump and sales drop tied to political fallout and trade tariffs. Tesla faces major headwinds, including lower demand, supply chain disruptions, and brand damage from Musk’s political entanglements. The company is banking on new models, price adjustments, and a push into autonomous ride-hailing to reignite growth — but faces stiff competition and execution risks ahead.

Instagram Co-Founder Testifies Zuckerberg Withheld Resources to Curb App’s Growth

Key Developments

Kevin Systrom, co-founder of Instagram, delivered testimony supporting the U.S. Federal Trade Commission’s antitrust case against Meta, alleging that Mark Zuckerberg deliberately withheld resources from Instagram to stifle its growth and protect Facebook’s dominance. Systrom's testimony is central to the FTC’s broader push to break up Meta, arguing the tech giant built and maintained a monopoly through anti-competitive acquisitions and internal strategies.

• Systrom testified that after Instagram’s acquisition in 2012, Zuckerberg viewed Instagram’s success as hurting Facebook’s user growth

• Systrom said that Meta later withdrew key tools and staffing that had initially supported Instagram’s development

• Internal emails showed Systrom’s frustration with being denied 300 additional staff to boost Instagram’s video development

• Systrom indicated these tensions were a major reason he resigned in 2018, alongside fellow Instagram co-founder Mike Krieger

Meta’s Defense and Cross-Examination

Meta’s legal team pushed back during cross-examination:

• Meta’s lawyers argued Instagram benefited enormously from Meta’s advertising and growth infrastructure, allowing faster monetization

• Systrom acknowledged that access to Facebook’s ad network accelerated Instagram’s revenue generation

• Meta asserted that Instagram's post-acquisition growth was proof that the merger benefited users, pointing to new features and engagement-boosting integrations

Meta maintains that the FTC’s case relies on outdated and mischaracterized documents, and argues the acquisitions were reviewed and cleared by regulators years ago.

Strategic Context and Broader Implications

• The FTC alleges Meta’s acquisitions of both Instagram (2012) and WhatsApp (2014) were designed to eliminate competition, not enhance innovation

• Zuckerberg’s 2018 email presented in court revealed he considered spinning off Instagram to avoid internal competition with Facebook

• The departures of Instagram’s founders and WhatsApp’s founders reflect deeper cultural and strategic conflicts within Meta, often centered on control, privacy, and competitive threats

The case marks the first major antitrust showdown for Big Tech under Trump’s renewed FTC leadership, with broader implications for future tech sector competition regulation.

TL;DR

Instagram’s co-founder Kevin Systrom testified that Mark Zuckerberg deliberately stifled Instagram’s growth by withholding resources to protect Facebook’s dominance, backing the FTC’s monopoly case against Meta. While Meta argues that Instagram benefited from Meta’s support, Systrom painted a picture of internal rivalry and strategic suppression. The outcome could be pivotal, potentially setting a major precedent for breaking up tech giants accused of anti-competitive behavior.

'Pure-Play' Bitcoin Vehicle Twenty One Capital Raises Eyebrows with Complex Structure

Key Developments

A consortium led by Brandon Lutnick — son of U.S. Commerce Secretary Howard Lutnick — along with SoftBank, Tether, and Bitfinex, has launched Twenty One Capital, a "pure-play" bitcoin acquisition vehicle. The structure, however, is anything but simple, drawing skepticism over its opacity, related-party entanglements, and ambitious (some say derivative) business model.

• Twenty One Capital is formed through a reverse merger with Lutnick’s SPAC, Cantor Equity Partners, which had raised $100mn in 2024

• Tether holds a majority stake, while SoftBank owns 24%, with its investment routed through bitcoin contributed by Tether on its behalf

• Twenty One Capital launches with an initial holding of 42,000 bitcoin, financed through convertible bonds, equity placements, and bitcoin asset transfers

The aim is to buy even more bitcoin and, secondarily, create educational material and act as a bitcoin adviser — a diversification strategy described as thin at best.

Business Model and Comparisons

The vehicle’s model is heavily inspired by MicroStrategy, the tech company turned bitcoin proxy under Michael Saylor. Twenty One's key innovations are:

• Bitcoin Per Share (BPS): A metric representing the amount of bitcoin each share indirectly represents

• Bitcoin Return Rate (BRR): A measure of the rate of growth in Bitcoin Per Share over time

Analysts note the similarity to MicroStrategy’s "bitcoin yield" narrative, questioning whether the additional jargon provides any new investment clarity.

Structural and Governance Concerns

• The transaction structure is highly convoluted, involving multiple layers of bitcoin contributions, convertible bonds, and self-interested parties

• Cantor Fitzgerald, chaired by Brandon Lutnick, is the sole placement agent for the deal

• Skeptics warn of material risk differences between "ownership in bitcoin" and direct bitcoin holdings, especially under stress scenarios

Observers also question the wisdom of launching a bitcoin-heavy vehicle in a time of high crypto volatility and renewed regulatory scrutiny under the Trump administration.

Strategic Context

• The project taps into renewed crypto optimism under Trump, who is seen as more crypto-friendly than previous administrations

• It also reflects broader institutional experimentation with bitcoin as a core asset, albeit in structures that blur traditional boundaries between operational companies and asset-holding vehicles

Still, the strong involvement of Tether — a controversial entity in crypto markets — and SoftBank’s passive, indirect investment raise concerns about transparency and alignment of interests.

TL;DR

Brandon Lutnick’s Twenty One Capital, backed by Tether, SoftBank, and Bitfinex, is positioning itself as a "pure-play" bitcoin acquisition vehicle — but its complex structure, MicroStrategy-mimicking model, and web of related-party dealings are raising eyebrows. Investors are warned that while shares are linked to bitcoin, the differences between bitcoin exposure and direct ownership could be significant if things go south. Despite the hype, Twenty One may struggle to differentiate itself meaningfully in a crowded and volatile crypto investment landscape.