MARKET PERSPECTIVE

By J Mulraj

May 3-9, 2025

The economic world is frozen without it

Image created by OpenAI.com

On Thursday, black smoke spewed from the chimney of the Sistine Chapel, indicating that the Conclave hadn’t succeeded to select a new Pope, following the demise of Pope Francis.

On Thursday, black smoke also appears to be spewing out of the global trade chimney, indicating no progress in the tariff war launched by President Trump of USA. Both Trump and President Xi appear to be stoically waiting for the other to reach out. Meanwhile, without clarity on the issue, the global economy stands still.

Things changed on Friday, when the chimney of the Sistine Chapel emitted white smoke, indicating the success of the Conclave in electing a new Pope, Robert Provost, who took on the name of Pope Leo XIV.

By happenstance, the US announced, on the same day, the  conclusion of a new deal on tariffs with the UK, and development on deals with 3 more large countries (possibly including one with India). These will be announced soon.

This would lead to a huge, global sigh of relief (hopefully the simultaneous exhalation may help global warming? 🤞). Industry has been scrambling to re-jig supply chains, capital investment was stalled as entrepreneurs sought clarity on final tariff rates, and J. Powell, Chairman of the US Fed was, rightly, averse to cutting rates, to help reduce unemployment, lest high tariff rates re-ignite inflation. In fact, Trump has asked Americans to expect higher inflation.

No one can pay the ridiculously high tariffs of 100% or more. Producers could never have such margins and would rather opt out of serving US demand, in favor of other countries. Buyers cannot afford to chip in for excessive tariffs without impacting consumer demand and causing inflation (which was Powell’s worry).

It was, essentially, a wonky contest to between US and China, to see who blinked first. The announcement of more deals will be encouraging.

As pointed out in this column emerging technologies, and new business models, are providing an edge to USA, which can lead to an abundance, or cornucopia, of things. A combination of a new SWB (solar, wind and batteries) system, which will cost, as per think tank RethinkX, US $ 2 trillion to set up, will provide clean, cheap and abundant 24X7 energy to USA. A  revolution in agriculture, led by new technologies like precision fermentation and cellular agriculture, will provide all the needed proteins at a tenth of the cost of animal farming. Animal farming will become uncompetitive and unnecessary, thus releasing huge tracts of land (50% of agri land)  and half the water resources used by animal farming. The positive impact on the environment would be astounding.

With the advent of humanoid robots, manufacturing productivity will dramatically improve, and at a cost of labour approaching zero, over time. The cost of transportation will drop substantially thanks to full self driving, FSD, coming in H2 2025, combined with TASS, or transport as a service.

Given all these, it appears that USA will be less dependent on global trade, perhaps the reason why Trump is cocky.

China, too, is working along these lines. For energy China is turning to nuclear reactors based on thorium, of which, as per this video  it has enough reserves, 300,000 tonnes, to provide energy for 60000 years. Interestingly, India has the world’s largest reserves of thorium, nearly 3X China’s, so one wonders why it’s not using thorium instead on importing over 80% of it’s crude oil. Thorium is extremely energy efficient. One tonne of thorium provides as much energy as 3.5 million tonnes of coal (see 12:19 on the video). So it would be hugely beneficial to the environment. China is also a leader in EV mobility, though perhaps, Tesla’s FSD technology may prove superior. China is a leader in robotics, including humanoid robots.

So, perhaps, it would be a good idea for Trump and Xi to look away, blink several times, then face each other, with eyes wide open to the reality of the situation.

Both should stare, open eyed, at the fact that global trade was 62.5% of global GDP and that a trade war is self destructive to both. However much they may dislike their own noses, it is foolish to cut them off just to spite their faces.

Pakistan seems to be doing just that, by nurturing and supporting terrorists who attack Indian civilians. A recent dastardly attack killed 26 tourists in Pahalgam, Kashmir, resulting in a nationwide outcry and support for a retaliatory action. India struck out last week, in an operation, Sindoor , targeting terrorist infrastructure in 9 centers, and destroying them with precision bombs fired from Indian airspace. There was retaliatory attacks by Pakistan, which were successfully thwarted. The weak financial condition of Pakistan doesn’t enable it to sustain a long, conventional war.

It is rumored that Asif Munir, the head of the Pakistan army, has been replaced. If true, it could help de-escalate.

Last week the BSE Sensex closed at  for a weekly  of  points.

If there are more tariff agreements and if the subcontinent situation de-escalates, the stock market should react positively.

And it all started with white smoke from a chimney!

Comments may be sent to jmulraj@asiaconverge.com