We just shot our own foot, reloaded, and shot the other
China strikes back
Welcome to Cautious Optimism, a newsletter on tech, business, and power.
This morning the domestic jobs report indicated that “nonfarm payroll employment rose by 228,000 in March,” with unemployment rising from 4.1% to 4.2%. In terms of the national economy’s strength in March, seeing a better than expected — the street anticipated a figure around +140,000 — the datapoint is gorgeous. However, if you were hoping for, say, rate cuts, I’d bet that it is not. — Alex
📈 Trending Up: RedPanda … Bessemer + Agents … caution … losing … Intel-TSMC? … recession odds, sadly … taxes … headlines I never wanted to read … criticism from inside the house! …
📉 Trending Down: Surprise … surprise … software that does one thing? … Treasury yields … Florida … Boeing stock yesterday, Boeing stock today … consulting gigs … Brown University? … stocks, again …
Tech gets hammered
Strident tariffs on global trade announced by the United States took a bite out of the stock market. Tech was not spared.
Microsoft lost 2.4%, and is off even more in pre-market trading; Apple shed a stonking 9.3% yesterday, and is off another half-point in pre-market trading; Tesla lost 5.5% yesterday, and is down another 5% in pre-market trading; Nvidia took a 7.8% cut yesterday, and is off another 4% this morning before the bell; Alphabet fell 4% or so yesterday, and is set to lose another 2.5% this morning; Meta lost 9% yesterday and is down another 0.8% today in pre-market trading. Amazon puked around 9% yesterday, and and is set to drop another 6% or so this morning, if pre-market trading holds up.
Putting the Mag7 aside, smaller cloud companies saw their collective worth fall 7.4% (as measured by the Bessemer cloud index), with another 2.8% on deck for today.
Falling equity prices are bad for acquisitions (companies have less wealth to put to work), and IPOs (comps are worse, making pricing more difficult). As a nation we just shot our own foot, reloaded, and shot the other.
There is some good news since CO’s last edition: Taiwanese exports to the United States are set to endure a massive tax, but not chips. That’s big news for every single chip-builder and buyer in the United States. Small mercies.
Big Tech faces enemies at home, abroad
News currently indicates that the EU is prepping a hefty fine against Elon Musk’s X for what the New York Times describes as “breaking a landmark law to combat illicit content and disinformation.” The penalty could push past the $1 billion mark, the Times reports.
Recall that Meta’s Mark Zuckerberg is currently lobbying the Trump administration to help his company. The WSJ reported a few days ago that the company is pressing “U.S. trade officials to fight against an expected European Union fine and cease-and-desist order.” EU technology laws are unpopular with many in the industry, whose complaints have clearly made their way to the ear of the VP.
I presume that if the EU tries to fine X, which is owned by a critical supporter of the second Trump administration, something hilarious and stupid will happen. Precisely what I do not know, but I would place a small bet on the side of our collective response being something akin to oh fucking really.
Isn’t it good from the perspective of American tech shops that the Trump admin is currently treating the EU not like a partner but instead like a former roommate who keeps trying to get back into the flat to pick up an appliance that wasn’t there’s to begin with? After all, if we can just say naw to EU fines and laws, that’s great for domestic technology profits? Right?
I am not endorsing that tack, to be clear.
No. Foreign Affairs writes persuasively that the current bent of many large domestic technology companies to support Trump and his various policies may not, in fact, help United States-domiciled technology giants. A few quotes for flavor, though the whole piece is worth your time.
Noting that a 2016-era agreement that set up a board — the Privacy and Civil Liberties Oversight Board, or PCLOB — to ensure that EU privacy rules were enforced for its citizens using American technology services, Foreign Affairs writes that the:
arrangement is now on the verge of disintegrating, with the operations of U.S. tech companies in Europe in serious jeopardy. The Trump administration has not only fired most of the PCLOB’s members; it has also made clear in multiple ways that it will not comply with those legal rules that it finds inconvenient. The executive order is under review—but even if it formally stays on the books, no one trusts the Trump administration to abide by it.
If the PCLOB collapses, or is simply rendered moot, it could collapse the ability for “any European entity to use U.S. cloud services to store personal data or for companies such as Meta to move data on European citizens back and forth between Europe and the United States,” which could “destroy Meta’s business model while making it difficult for companies such as Google and Microsoft to offer safe cloud services in Europe.”
The same piece argues that recent threats to shut off the American satellite internet service Starlink in parts of Europe have shaken EU trust in using our tech services. Alas.
Even losing growth momentum in Europe would be a problem for tech companies hungry for growth, and desperate to accrete as much global AI market share today, the cost be damned.
You might be thinking hey, it’s just Europe — American tech companies can just do more business at home, right? Wrong. A recent Y Combinator political shindig highlighted, the Washington Post reports, that there are a sizable number of Trump regulators and members of Congress who favor putting more antitrust pressure on the largest tech companies to ensure that their smaller rivals can become peers.
That sounds familiar!
Potentially troubled business abroad, and the risk of a break-up ruling at home? If it wasn’t for the current AI adoption cycle, big tech might be in a very different mood.
It’s a trade war
Closing out, here’s the latest:
European nations are calling US tariffs “wrong,” an “attack” and more — with responsive trade barriers expected, and Macron calling for a “pause on US investment as EU leaders condemn Trump tariffs”
“Canada announces new countermeasures in response to tariffs from the United States of America”
“Mexico celebrates dodging latest US tariffs but feels the effects of global economic uncertainty”
Alas.
Best. Headline. Ever.
Man, I'd laugh if it wasn't so depressing.