Blood in the Streets

A wrecking. A shellacking. A thrashing.

Welcome to Cautious Optimism, a newsletter on tech, business, and power.

Happy Thursday friends, guess what we’re going to talk about today? But first, notes from around the world and several small technology items. To work! — Alex

• 📈 Trending Up: Criticism of RFK Jr. … Chinese influence … electronics prices … “panic and anxiety” … Europe? … corruption …

• 📉 Trending Down: Oil prices … comprehension … the IPO window … the dollar …

Small Bites

• Plaid raises: TechCrunch’s Mary Ann Azevedo writes that fintech giant Plaid “sold about $575 million worth of common stock at a $6.1 billion post-money valuation.” The company also said no IPO this year. Recall that we’re back in a warm period for fintech startups.

• So much for the datacenter glut, redux: The Information reports that Google wants to rent “state-of-the-art Nvidia Blackwell chips for running artificial intelligence from CoreWeave.” So much for there being too much AI compute capacity, I suppose. Recall that OpenAI is also buying up CoreWeave capacity as it builds out its own computing empire. Much as Google is also dropping tens of billions into capex.

• CoreWeave comes back to Earth: After rallying to more than 60% above its IPO price, CoreWeave’s stock is giving back some of its gains today amidst a larger market rout. Still, the GPU neocloud did invert its IPO narrative with just a trading session or two. Good on them.

• What the fuck, Newsmax: With a 52-week range — in reality a four day trading history — right-wing news channel Newsmax has seen its share price as low as $14 and as high as $265. Today? It’s worth $43. No, I don’t know either.

Welcome to the New World Disorder

The second Trump administration executed a tariff barrage yesterday (here’s a good primer on tariffs from Brown), adding import taxes to exports from a host of nations. The announced tariffs are mind-numbingly high, and painfully broad:

• A 25% tariff on imported automobiles.

• A 10% “tariff on all countries” that will commence on April 5th.

• A 20% tariff on the EU, 34% on China, 24% (in addition to prior tariffs), on Japan, 46% on Vietnam, 26% on South Korea, 32% on Taiwan, 27% on India. The list goes on.

• An end to the ‘de minimis’ trade loophole for Chinese and Hong Kong exports.

The market reacted negatively to the news, indicating that the street had expected lower, narrower tariffs from the Trump team. A few minutes into the trading day, here’s the scorecard from a select group of global indices:

• DJIA (USA): -1,200 points, or -2.8%

• S&P500 (USA): -187 points, or -3.3%

• Nasdaq (USA: -750 points, or -4.3%

• Nikkei (JPN): -990 points, or -2.8%

• Nifty 50 (IND): -82 points, or -0.4%

• DAX (GER): -460 points, or -2.1%

• FTSE 100 (UK): -113 points, or -1.3%

In terms of stock market performance, that’s a bloodbath. A wrecking. A shellacking. A thrashing.

Worse, shares of the Bessemer Cloud Index, which trades as the WisdomTree Cloud Computing Fund, is off 5.9% this morning. That means that the most useful basket of comps for startups that may want to sell or go public is taking an even more painful beating this morning.

• If you were hoping that the CoreWeave IPO and Circle’s filing indicated that we were on the cusp of an public-offering renaissance, it’s probably time to sit down and get patient again.

The new tariffs will impact businesses of all stripes around the world. Early reporting indicates that Chinese factories will face new challenges thanks to the impending trade barriers; Stellantis is idling some of its Mexican and Canadian factories.

We can expect widespread economic disruption as companies around the world sort out how to they will mitigate, dodge, or endure the new costs of doing business with the world’s largest economy.

In positive terms, the tariffs will raise some revenue for the Federal government, which needs the cash. Thus ends the good news.

In negative terms, the new trade barriers will harm the free flow of goods around the world, limiting trade. By limiting trade, comparative advantages in goods production will be blunted. In turn, that will lead to less efficient production and higher prices. Tariffs are also widely expected to raise prices on goods for American consumers. The new import taxes also limit American soft power by reducing our economic ties to other nations and blocs, and will lead to retaliatory tariffs from other nations, creating a loop of unnecessary pain that will slow economic growth at home and abroad.

Why are we shooting ourselves in the foot in such a dramatic, world-changing manner? Because the President is a big fan of tariffs. It appears that POTUS believes, sincerely, that:

• Trade is zero sum, meaning that charging for trading rights is a good way to tilt the global economy in our favor.

• Tariff revenue can replace a material portion of our existing tax base.

• Tariffs have been historically successful.

That last bit came to the fore when Trump, during his address announcing the new trade barriers, said the following (transcript source):

From 1789 to 1913, we were a tariff-backed nation and the United States was proportionately the wealthiest it has ever been. So wealthy, in fact, that in the 1880s, they established a commission to decide what they were going to do with the vast sums of money they were collecting. […]

Then in 1913, for reasons unknown to mankind, they established the income tax so that citizens rather than foreign countries would start paying the money necessary to run our government. Then in 1929, it all came to a very abrupt end with the Great Depression, and it would have never happened if they had stayed with the tariff policy. It would have been a much different story.

Summing, POTUS believes that the United States was wealthiest when we were a “tariff-backed nation,” and that a later move by the nation away from import taxes caused the Great Depression. The screaming you can hear is the sound of economists, market watchers, and the generally literate over the above historical summary.

What’s the tech angle?

I don’t think we have a good handle yet on the top and bottom-line impact on the technology industry regarding the upcoming tariffs. I expect every single technology company that reports earnings in a few weeks to answer the question, but for now we’re guessing.

Still, if you want to sell technology products around the world, stiffer trade restrictions are not the jam. Putting massive tariffs on chips from Taiwan will likely prove miserable, given how much of the gear United States-based technology giants buy from TSMC and its rivals. Many expect that the end of the de minimis loophole will harm low-cost exporters like Temu and Shein.

There are other risks. The United States could lose some of its primacy as the place to go public for global technology companies; seeing listings stay domestic to European and Asian companies won’t help keep the USA’s economy as central — and powerful — as it once was.

In general, a less economically connected world will make it harder for startups to sell around the world. And governments that might have once welcomed American firms to their shores, could erect new roadblocks to prevent their growth.

Even more, a falling stock market and limited economic optimism could see major capital pools retreat from higher-risk investments like venture capital funds and instead park their money in lower-risk investments like bonds and cash. Mix in a potential slowdown in startup exits thanks to market uncertainty and lower comp prices, and the venture world could find itself back in a liquidity drought. That would be bad for venture investing in terms of cadence and risk-tolerance.

I cannot find much in the news that will help tech companies large and small, and much that could harm them. Hell, even the titans could see their wings clipped. Zuck has been jawboning the Trump team to help him with EU fines. What’s the chance that the EU is willing to go easy on the nation that just tariffed the heck out of their exports?

Is this what the Trumpy VCs wanted?

Heavens now. If we return to 2024, I asked my TWiST co-host Jason Calacanis what tech folks thought that they were going to get out of a second Trump administration. A few quotes for flavor:

[Right-wing tech folks look] at the current situation as a John Galt-Atlas Shrugged situation. People in Silicon Valley believe what we're seeing under Biden is Atlas Shrugged. That's what they believe. And just to refresh anybody, it means capitalists and creators of jobs are diminished and held back and the state is getting bigger and bigger and controlling and mitigating more of your life. That’s actually how they feel.

They see Trump as a sledgehammer […] a cudgel, a weapon to break the system. […]

The tariff stuff? They look at that and they're just like, ‘that's just him saying he's going to blow up Russia if they invade Ukraine and he'll end that war.’ He's just being bombastic. That's the way he negotiates — is with a crazy starting position and then he works his way backwards.

Jason did a good job encapsulating the vibes amongst many of the tech-rich at the time. I wonder how many who thought along the above lines are now regretting their votes and donations to Trump. After all, what business person wants to see the world economy become smaller and less open?

Last summer I argued that there were a lot of folks betting that Trump was their guy, and that not all of them could be right. Trump couldn’t at once be his tariff-loving self and a clearly pro-business president, just as he couldn’t be a free speech advocate while demanding restrictions on speech.

Nevertheless, many folks voted him back in on the belief that only the sliver of his promises that they wanted to see enacted would be. And now we’re here:

If I was in a better mood, I’d crow about how the Musk-a16z administration just borked global trade because — and I’m only half-kidding — a lot of old men got mad about trans kids existing and being told that they should consider people of color when hiring.

But I am not in a good mood, because my nation — the national domicile of my children — is undertaking to not only limit its own economic future — trade is good — but also to limit our national ability to support democracy abroad. By isolating ourselves politically and economically, will we have more or less sway over how the world is governened? Will we be able to support free expression and free elections more or less now?

Less. Which is good if you believe, as POTUS appears to, that the world should be carved up between dictators into autocratic spheres of influence. I do not believe that.

All told, it’s a dark week for the national and global economy. And a lot more to boot.

Holy shit.