White House imposes 25% tariffs on specific semiconductors; TSMC to announce earnings today.

Trump Proposes 25% Tariff on Imported Chips Not Used for AI

Overview

Former President Donald Trump announced that a 25% tariff will be imposed on imported chips that are not utilized in the U.S. artificial intelligence (AI) industry. This tariff targets chips that pass through the U.S. and are later used in products like data center servers before being exported to other countries. Trump stated that this could generate billions in revenue.

Supreme Court's Inaction on Tariff Legality

On January 14, the U.S. Supreme Court did not rule on the legality of Trump's tariff policies, leaving the fate of this significant economic policy uncertain for at least another week.

Executive Order on Rare Earth Supply

Trump signed an executive order aimed at securing the supply of critical minerals, including rare earth elements essential for advanced technologies. This order is part of a broader strategy to enhance domestic production and streamline federal land permit approvals.

Economic Updates

Fed's Beige Book Report

The Federal Reserve's Beige Book indicated moderate economic expansion across most regions, with stable employment but persistent inflationary pressures. This report supports the Fed's decision to maintain interest rates in the short term.

U.S. Treasury Yields Drop

Increased risk aversion has led to a decline in U.S. Treasury yields, with the 30-year bond yield hitting a year-to-date low. Factors contributing to this trend include a drop in U.S. stock indices and geopolitical tensions.

Stock Market Movements

Major Indices Decline

U.S. stock indices fell, with the Dow Jones down 0.09%, the Nasdaq down 1%, and the S&P 500 down 0.53%. Small-cap stocks outperformed, with the Russell 2000 index achieving a record streak of outperformance against the S&P 500.

Sector Performance

Defensive sectors attracted investment, while major tech stocks like Broadcom and Amazon saw declines. Notably, Bilibili's stock surged over 6% due to strong advertising revenue growth.

Rare Earth Stocks Surge

Following Trump's executive order, rare earth stocks experienced significant gains, with CRML rising over 32%.

Corporate News

OpenAI and Cerebras Partnership

OpenAI has signed a multi-year agreement with Cerebras Systems to utilize their hardware for AI infrastructure, valued at over $10 billion.

Meta and Rivian Updates

Meta has completed layoffs in its Reality Labs division, while Rivian's stock fell over 7% after UBS downgraded its rating.

Baidu's Potential Primary Listing

Baidu is considering upgrading its Hong Kong listing to a primary status to attract more mainland investors.

Ctrip's Compliance with Investigation

Ctrip announced it will cooperate with regulatory investigations into alleged monopolistic practices, ensuring normal business operations continue.

Conclusion

The U.S. economic landscape is currently influenced by Trump's tariff proposals, the Fed's cautious stance on interest rates, and significant movements in the stock market, particularly in tech and rare earth sectors.