White smoke emerged yesterday from the Vatican signaling something that has never happened before -- an American pope. But it was a less divine U.S. first on Thursday that was catching the attention of markets -- the first trade agreement since President Donald Trump's tariff announcement.

The market was excited by the U.K.-U.S. trade deal announced Thursday, heeding Trump's advice to investors to "buy stocks now." The S&P 500 is back within touching distance of its levels before the April 2 'Liberation Day' tariff reveal.

On the surface, that's puzzling. The U.K. deal covers a relatively small amount of trade and didn't remove the 10% baseline tariff on exports to the U.S. That's a bad precedent, considering the U.S. has a trade surplus with Britain and might have been expected to offer generous terms.

But it makes more sense if the U.K. deal is largely seen as a sign of willingness to strike agreements ahead of talks between American and Chinese officials this weekend. Multiple reports suggest the U.S. is aiming to bring mutual levies below 60% as soon as next week. That really would be big news. The average tariff now charged by the U.S. on its global imports is around 23%, according to ING analysts, but duties on Chinese goods make up more than 15 percentage points of that.

A U.S.-China deal could set stocks on the way to regaining their February all-time highs. However, China has maintained a harder public line on negotiations and could be emboldened by data Thursday showing its exports comfortably beat market expectations in April, despite a 21% drop in shipments to the U.S., as it boosted trade elsewhere.

The Vatican's conclave resulted in an unexpectedly speedy decision in favor of an American. Don't count on something similar happening this weekend.

-- Adam Clark

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After U.K. Trade Deal, Now Comes the Hard Part

The U.K. trade deal is a framework for other negotiations, but don't expect substantial relief. The U.S. will ease levies on British steel and autos, while a British firm will buy Boeing jets and the U.K. will open its markets to American farm products. But America's baseline 10% tariff remains.

   -- President Donald Trump said the 10% baseline tariff is as low as the U.K. 
      and other countries will see. Trump has called the deal "a full and 
      comprehensive" arrangement with the U.K. that will be the "first of 
      many." Details will be finalized in the coming weeks. 
 
   -- People are hoping for a streak of bilateral agreements that will 
      substantially bring down overall tariff levels before July, when Trump's 
      so-called "reciprocal" tariffs, which are country-specific on top of the 
      10% baseline, take effect. There are reasons the U.K. deal was the 
      quickest and easiest to complete. 
 
   -- The U.K. is only the fifth-biggest buyer of U.S. exports, behind Canada, 
      Mexico, China, and Japan. The European Union, which represents 20 
      countries including Germany and France, will be negotiating as a bloc. 
      America ran a trade surplus with Britain in the fourth quarter. 
 
   -- The deal was seen as good news for the British car, aerospace, and 
      pharmaceutical companies that export a lot to the U.S., such as 
      Rolls-Royce, BAE Systems, and AstraZeneca. It was also a boost to spirits 
      maker Diageo, the owner of Johnnie Walker whiskey and Tanqueray gin. 

What's Next: The U.K. deal could fuel fears among Chinese officials that Trump keeps renegotiating deals after striking them. Peter Mandelson, British Ambassador to the U.S., noted Trump's last minute demands in the deal. Trump says adjustments mean the U.S. is flexible or thinks it could do better.

-- Joe Light, Reshma Kapadia, and Brian Swint

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Consumer Price Increases From Tariffs Could Come in Waves

President Donald Trump's tariffs are already increasing prices on consumer goods and more hikes could be ahead. But Paul Donovan, chief economist at UBS Global Wealth Management, said when and how much depends on the product and the knock-on effects of the tariff regime.

   -- Trump's announced levies on trade so far have cumulatively lifted the 
      effective tariff rate to roughly 25% from 2.5% at the start of the year, 
      but are expected to be negotiated down from here. Donovan estimates that 
      a 10% increase in tariffs could raise price levels by about 1.1%. 
 
   -- Companies will probably opt for one-time increases to compensate for the 
      hit to their profits, but second order effects, including price-led 
      inflation, could persist at the retail level, he said. 
 
   -- Some companies have already begun raising prices. For instance, Ford 
      Motor is increasing prices on several 2025 models, Microsoft is 
      increasing Xbox prices, and Mattel has indicated toy prices will go up. 
 
   -- The argument goes if consumers believe prices are increasing, then 
      retailers can push through price increases because their customers are 
      expecting it as a concept. 

What's Next: U.S. talks in Geneva this weekend with China could lay the groundwork for a reduction in tariffs. The deal struck with the U.K. on Thursday potentially provides a blueprint for other countries in their negotiations with the Trump administration, showing what can be achieved from talking and a calm diplomatic approach

-- Andrew Welsch and Rupert Steiner

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Coinbase Stumbles on Revenue But Optimistic About Crypto Prospects

As Bitcoin climbed back above $100,000 for the first time since February, crypto exchange operator Coinbase Global released earnings that missed expectations. It also announced a $2.9 billion acquisition of Dubai-based Deribit, the world's largest trading platform for Bitcoin and Ether futures and options.

   -- Anil Gupta, Coinbase's vice president of investor relations, told 
      Barron's that the deal will help Coinbase gain even more market share in 
      the crypto derivatives business, where it has already seen record growth 
      in its own offering. For the quarter, sales rose 24% to $2 billion, below 
      estimates. 
 
   -- Coinbase has been whipsawed by volatility in stocks and cryptocurrencies 
      driven by tariff policy and macroeconomic uncertainty. It is hoping to 
      diversify beyond trading. First-quarter transaction revenue of $1.3 
      billion fell 19% from the fourth quarter. 
 
   -- Quarterly profit of $1.94 a share was better than Wall Street forecasts, 
      however. Coinbase touted the Trump administration's plans to create a 
      Strategic Bitcoin Reserve as one of many highlights coming out of a more 
      crypto-friendly Washington. 
 
   -- Congress had hoped to pass a new crypto bill creating regulations for 
      so-called stablecoins, which are digital currencies backed to other 
      financial assets. But the bill failed to clear a key hurdle in the Senate 
      after Democrats demanded stronger anti-money-laundering and national 
      security provisions. 

What's Next: Coinbase guided for lower current-quarter subscription and services revenue, of $600 million to $680 million. It wants to boost its stablecoin trading business, including through a partnership with payments firm Circle, and to generate more fees from crypto staking, where investors earn rewards by locking digital coins in virtual wallets.

-- Paul R. La Monica and Janet H. Cho

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About Apple's Connection to Google Search: It's Complicated

Though Apple isn't involved in the case, it has an intense interest in the penalty phase of the government's landmark antitrust suit against Alphabet's Google. In testimony this week, Apple executive Eddy Cue said Google searches through Apple devices declined for the first time ever in April.

   -- Cue blamed a new crop of AI search tools like Perplexity and ChatGPT. The 
      antitrust case has focused on the steps that Google took to maintain its 
      monopoly in U.S. search engines, including the payments it sends to Apple 
      for making Google Search the default on its products. 
 
   -- Over half of U.S. Google searches begin on an Apple device. In 2022, 
      Google paid $20 billion to Apple, 18% of Apple's total pretax earnings 
      that year. The Justice Department has proposed prohibiting Google from 
      making payments to guarantee search placement, which could cost Apple 
      billions of dollars. 
 
   -- Apple's interest is so great here that it tried to join Google's case as 
      a co-defendant in the penalty phase. Apple told the Court that the 
      Justice Department's proposal "threatens to undercut Apple's property 
      interest in its existing contract with Google." Its request was denied. 
 
   -- Cue's testimony has to be seen through Apple's broader interest in the 
      case. His comments on falling search traffic, even if true, may be an 
      attempt by Apple to show Google's search dominance is already fading, and 
      that it deserves more lenient treatment from the Court. 

What's Next: For its part, Google denies AI is eating into its market, saying it continues to see overall query growth in Search, including from Apple devices and platforms. Apple is looking at adding AI search providers, including OpenAI and Perplexity AI, as search options on its devices in the future.

-- Adam Levine and Adam Clark

***

Bill Gates Will Speed Up Giving Away His Fortune

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May 09, 2025 06:39 ET (10:39 GMT)

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