Made in China

MARKETS

• U.S. markets: Stocks finished in the red after the Fed raised rates. It's the sixth rate hike since late 2015.
• International: Most European and Asian stocks closed lower.

ECONOMY

A Trade War Is Brewing with China

After taking aim at China with steel and aluminum tariffs, President Trump is far from done with our Far East rivals. Today, he'll unveil a plan to slap China with about $50 billion worth of additional tariffs...a move that would be a whole lot more explosive than the first volley.

And that trade war you've been hearing about? It could be on.

How this round of tariffs is different than the last one

The president's top trade guru, Robert Lighthizer, is zeroing in on China's serial theft of U.S. intellectual property.

But is IP theft that big of a deal? Definitely.

Here's why: Say you come up with an amazing new invention...a wildly entertaining business newsletter. After you spend time and money working to perfect it, you've got to be certain no one else will come along and rip off your idea (looking at you, Morning Chew).

Well, stealing ideas is exactly what bad Chinese actors are doing...

...through a variety of methods—software piracy, copycat consumer goods, cyber attacks, and more. The Chinese government itself is partially responsible, requiring some foreign companies to share their IP in exchange for the right to do business in China.

The result? A serious drain on the U.S. economy. One independent commission estimates that IP theft costs the U.S. as much as $600 billion a year. And no surprise here, China is the main culprit. 87% of seized counterfeit goods arrived from China.

But not everyone is on board with Trump's plan
Major importers from China—Walmart, Best Buy, Nike—could be forced to raise prices for consumers as the tariffs go into effect.

And then there's retaliation from China itself, which is prepping its own tariffs on U.S. agricultural exports like soybeans.

After all, even in a trade war it takes two to tango.

ECONOMY

The Fed Raises Rates for the First Time in 2018

Things the Fed's central bankers unanimously agree on: Phillips had some beautiful curves and raising interest rates is a no brainer.

In Jerome Powell's first meeting as chairman, the Fed raised rates to a target of 1.5% to 1.75% and left us with a pretty clear report card of the economy:

* GDP growth (A+): Forecasts were bumped from 2.5% to 2.7% for the year. By 2020, GDP growth could fall to 2%.
* Inflation outlook (B+): Inflation should remain around 1.9% in 2018. By 2020, it could hit 2.1%.
* Unemployment (A+): Currently at ~17-year lows, the unemployment rate could fall again from 4.1% to 3.6% by 2020.

Powell reiterated the Fed's stance at the meeting: look out for two more hikes this year. Our bookies, on the other hand, are placing strong odds on three more hikes in 2018.

What's it mean for you? Better returns for bondholders; higher costs for borrowers.

TECH

Musk Lands a New Salary

After Elon Musk finishes up his vacation in the Middle East, he'll come home to some welcoming news: a fresh $2.6 billion compensation plan approved by Tesla (+1.93%) shareholders.

Understanding the plan: Picture Musk holding a whistle in a tracksuit, Boring Company hat, and black sunglasses. He's the drill sergeant coaching Tesla to a $650 billion valuation over the next 10 years. Currently, Tesla is worth $53 billion.

Each time Tesla hits certain market value checkpoints...*cha-ching*...Musk's options vest. There are 12 checkpoints in all. And if Musk carries Tesla to the finish line, the company will be one of the world's biggest AND Musk could be $56 billion richer (that initial $2.6 billion will appreciate as the market cap grows).

Here's the catch: At any point, Musk can step aside as CEO to become the Chief Product Officer and executive chairman. Which is scaring some Tesla stakeholders, since he already spends a whole lot of time ping-ponging between The Boring Company, Neuralink, and colonizing Mars.

CONSUMER GOODS

General Mills Is Feeling the Pinch

We hope you've loaded up on your lifetime supply of Gushers, because General Mills said it will boost prices and cut package sizes on some of its products (while also cutting profit forecasts).

Investors weren't enthusiastic about the idea of "Fruit by the Inch," sending the stock down 9% to hit a five-year low.

CEO Jeff Harmening blames logistics. He said shipping costs are at a 20-year high thanks to fuel prices and a shortage of truckers.

And this isn't just a General Mills story...higher freight costs are crippling the entire industry. Tyson Foods will pay $200 million more in shipping this year, while Kellogg's will shell out 10% more on logistics.

But you have to wonder: In a hyper-competitive consumer goods environment, can General Mills ask consumers to pay more for its old-school brands?

Mark your calendar: Fellow packaged foods company Conagra reports earnings today. Let's see if it sounds a similar note to General Mills.

WHAT ELSE IS BREWING

• Dropbox raised its IPO range $2 to between $18 and $20 per share.
• After purchasing Time Inc., media firm Meredith (-0.09%) is laying off 1,200 employees and selling its Fortune, Time, Sports Illustrated, and Money magazine brands.
• Bidding for the Carolina Panthers has hit $2.5 billion. If it sold at that price, it would be the most a U.S. sports franchise has ever sold for.
• Google (-0.16%) is developing its own blockchain tech.

WATER COOLER

A CLOSER LOOK

Having trouble staying up-to-date on the latest developments in each industry? We got your back. Today, we’re looking at the video game sensation, Fortnite.

Nearly 45 million players globally are obsessing over the free, battle royale shooting game, Fortnite. And for one blue-haired, button-mashing savant, that game has brought more success than he could've ever imagined.

Tyler ‘Ninja' Blevins went from working at Noodles & Company to making $500,000 a month as one of Fornite's best players.

We know what you're thinking: "Well, I picked the wrong profession"...okay fine, that's what we're thinking.

Ninja has 5 million YouTube followers, 1 million Instagram followers, 1 million Twitter followers, and 4 million Twitch followers. You know Twitch—the live-streaming network purchased by Amazon for $970 million in 2014. It's a platform where people pay to watch you play video games.

We know, it's crazy. And over the last two weeks, Fortnite's success has knocked $6 billion off competitor Activision Blizzard's market cap.

If you have any feedback on the newsletter in the near future, come find us at the Tilted Towers.

THE BREAKROOM

THEY SAID IT

Mark Zuckerberg ended his silence on Facebook's data privacy scandal with a Facebook post. A few highlights:

"We have a responsibility to protect your data, and if we can't then we don't deserve to serve you."

"This was a breach of trust between Kogan, Cambridge Analytica and Facebook. But it was also a breach of trust between Facebook and the people who share their data with us and expect us to protect it. We need to fix that."

"I started Facebook, and at the end of the day I'm responsible for what happens on our platform. I'm serious about doing what it takes to protect our community."

TRIVIA

In the spirit of counterfeit goods, which of the following knock-off brands is NOT real? Borio (Oreo), Game Child (Game Boy), Sunbucks Coffee (Starbucks), Sam’s Son (Samsung), or Mash Donald's (McDonald’s)

(Answer located at bottom of newsletter)

BRAIN TEASER

BRAIN TEASER

Breakroom Answers

Trivia
Sam’s Son (Samsung)

Brain Teaser
If you take the first letter and move it to the rear of the word, you get the same word when read backwards.