Bureau of Economic Analysis Sounds Warning Bell on U.S. Economy

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The Big Picture

Supply Chain

Washington Slams the Brakes on High-Tech Shipments to China

The U.S. government has halted exports of key technologies to China, including semiconductor design software, jet engine parts, and industrial tools, in a move that could reshape global supply chains.

Washington’s decision follows limited progress in reversing China’s recent mineral export bans. While both countries had previously agreed to ease tariffs, American officials say China’s shipments of rare earths remain constrained, raising alarm for manufacturers across the defense, automotive, and electronics industries.

Export restrictions are reportedly targeting aircraft projects, such as China’s COMAC C919, which relies heavily on U.S.-made components. Software from major American chip design firms is also part of the freeze, limiting China’s access to tools needed for building modern semiconductors.

Supply chain tension is building on both sides. China’s hold on rare earths and magnets, which are used in everything from electric vehicles to military systems, has already prompted U.S. buyers to explore alternative sources. Now, the export ban adds pressure on global producers who depend on both Chinese materials and American tech.

For manufacturers and policymakers in the U.S., this signals a deeper shift: critical tech exports are no longer just a commercial issue. They’re becoming a matter of national leverage. Trade compliance teams, particularly in aerospace and semiconductor manufacturing, now face increased scrutiny as export license reviews become more stringent.

Commodities & Tariffs

Court Strikes Down Billions in Tariffs, Sending Shockwaves Through US Trade and Oil Markets

A U.S. court has just blocked a major pillar of the country’s global trade strategy, striking down tariffs on goods from China, Canada, Mexico, and others. The decision, delivered by a three-judge panel, found that the administration overstepped its authority when imposing sweeping import taxes under emergency powers.

If upheld, the ruling could eliminate up to 30% in tariffs on key trading partners within days, impacting billions in goods, from industrial machinery to consumer products. That sudden shift is sending ripples across global markets and could rewire economic forecasts heading into the second half of the year.

For the U.S., this could immediately relieve pressure on manufacturers and import-heavy industries. Lower input costs might bring short-term relief to companies battling inflation. However, it also leaves a hole in the current strategy to encourage domestic production, particularly in sectors such as oil and energy equipment that rely on tariff protections.

The energy sector is watching closely. Some imports used in refining, drilling, and renewables had become more expensive due to the tariffs. A rollback could re-energize certain supply chains, but with price volatility and regulatory whiplash, planning ahead just got harder.

For oil producers, the legal uncertainty adds another layer to already complex market dynamics. Global demand is shifting, OPEC+ is still holding the line, and now, the trade front looks far more unpredictable.

Whether this move leads to meaningful trade resets or just temporary price relief remains to be seen. But the days of weaponized tariffs may be numbered, at least for now.

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Agriculture

New Trade Path Opens for US Farmers as Costa Rica Approves Dairy Imports

The US just scored a key win in agriculture exports. Costa Rica has officially approved the first American dairy facility to sell into its market, thanks to a faster registration process rolled out by the Costa Rican government.

This move gives US dairy producers a direct route into a $130 million market, something the industry hasn’t had before. The breakthrough came when Costa Rica’s National Animal Health Service (SENASA) completed the registration under a new system for foreign suppliers.

For American farmers, this is a big development. It means fewer barriers, quicker access, and a new international buyer at a time when producers are seeking growth beyond domestic borders.

Officials expect more US dairy companies to get approved under the same streamlined system. Beyond Costa Rica, the USDA’s Foreign Agricultural Service has recently helped secure export wins in India, Japan, Panama, and Pakistan, covering a range of products, including pork, almonds, bourbon, and soybeans.

For the agricultural sector, it signals strong momentum in trade diplomacy and fresh opportunities in markets that were previously more challenging to access.

Metrics to Watch

• Seller-to-Buyer Ratios: Homesellers outnumber buyers by more than 500,000 across the U.S., the widest gap since 2013.

• GDP Drop Not as Bad as Feared: The United States’ GDP shrank by 0.2% in Q1 after the Bureau of Economic Analysis (BEA) revised its previously estimated -0.3% drop (much worse than Q4, 2024’s 2.4% gain).  

• Corporate Profits, However… The BEA also revised its corporate profitability reports, which show an 11.3% annualized decline, or the largest quarterly drop since the COVID-19 era.

• Q1 Consumer Trends: Revisions to the BEA report also softened consumer sentiment, with domestic demand growth revised 0.5% lower to 2.5% and consumer spending climbing by just 1.2% (down from the prior estimate of 1.8%).

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Market Movers

💰Ins-and-Outs of GDP: Remember that the Bureau of Economic Analysis releases three “look-back” reports following a quarter’s close, creating the downward revision we looked at previously. But what’s next? The more impactful part of the BEA’s analysis is their “look-ahead” estimates, which now include a less optimistic picture of consumer spending, increased initial jobless claims, and similar leading indicators of potential recessionary conditions. 

🛍️ Consumers Clap Back: Retailers are increasingly wary of risks to their businesses caused by internal DEI policies, with Walmart (NYSE: WMT), Home Depot (NYSE: HD), and Target (NYSE: TGT) among others, including specific “backlash risk to business” language in recent financial filings. In a nutshell, these companies are telling shareholders that they’re stuck between a rock and a hard place, with factions on either side of the political spectrum ready to boycott at a moment’s notice - no matter what action management takes.    

🤖 Semiconductor Explosion: By now, Nvidia (NASDAQ: NVDA) is all but a proxy for the global semiconductor sector, so when CEO Jensen Huang posted strong earnings last night, the entire chipmaking market popped. Japanese, European, and domestic semiconductor names all posted positive trading sessions following Nvidia’s report, outpacing wider market action. 

⚖️  Judges Strike Down Tariffs: Of course, the hot news of the day is a series of court rulings judging Trump’s tariffs illegal, based on the President “exceeding his authority.” While the news is significant, the fact remains that the legal battle will be ongoing, and markets will remain in a state of limbo until then - and keeping volatility on the menu.

Market Impacts

With semiconductors exploding, you may be tempted to buy into Nvidia (NASDAQ: NVDA). And while that isn’t a bad idea, necessarily - it certainly would have been the right move over the past two years - increased geopolitical risk to Nvidia’s stock and export ability make going all-in on a single stock riskier than ever.

But, as we said, the semiconductor sector is still expanding, making the iShares Semiconductor ETF (NASDAQ: SOXX) an ideal pick to snag domestic semiconductor manufacturing. The ETF holds high-growth luminaries like Nvidia (8.66% weight) and Broadcom (NASDAQ: AVGO) alongside smaller and diversified picks like Texas Instruments (NASDAQ: TXN) and Onto Innovation (NYSE: ONTO).

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Key Indicators to Watch

• 📅 Consumer Spending (April) – May 30th: Spring tends to be a strong sales season, though most doubt April’s report will follow the cyclical trend.

• 📅 Personal Income (April) – May 30th: Jobless claims increased in recent weeks, which should signal a dip in personal income.  

• 📅 Auto Sales (April) – June 2nd: Auto sales may have spiked already before settling into a downward trend if other sales patterns are an indication.

Everything Else

• Some sectors (like pharma) will soon see new tariffs despite a recent court ruling. 

• Jobless claims hit a 5-week high, though analysts claim it is due more to seasonal adjustments than true labor market softness. 

• Apollo is making inroads toward the red-hot private credit market in a new JPMorgan and Goldman Sachs partnership. 

• Vanguard is expanding the options it offers individuals invested in its mega-funds for voting in shareholder proxy meetings. 

• Trump’s next move in his tariff battle is in the Supreme Court as he gears up to ask for them to block the injunction as soon as tomorrow.