No touching

MARKETS

• Economy: You say inflaytion, I say inflahtion. But we can agree that the personal consumption expenditures (PCE) price index, the Fed’s go-to measure of inflation, grew 0.3% in April. That kind of uptick is what the central bank was looking for.
• Currency: We don’t always include the Mexican peso up here...but when we do, it’s because volatility surged after President Trump threatened tariffs on Mexican imports.
• U.S. markets: The Dow posted a sixth consecutive negative week, making for the longest weekly losing streak since 2011. Don’t get cocky, S&P and Nasdaq diehards—those indexes tallied their own fourth straight down weeks.

TRADE

Mexico Tariffs Could Cut to the Bone

There are two kinds of people: those who spend their evenings thinking about all the plans they’ll cancel the next day, and those who spend them spiraling markets on Twitter.

Guess which President Trump is. He tweeted Thursday night he’ll slap 5% tariffs on Mexican imports starting June 10 unless the flow of Central American migrants stops. If the border situation isn’t resolved, tariffs on Mexico will rise five percentage points monthly, as high as 25% on Oct. 1.

Many U.S. industries and trade groups sounded the alarm, and the U.S. Chamber of Commerce is even considering legal options. But we're going to focus on the auto sector.

That’s because a massive chunk of U.S.-Mexico trade comes from the U.S. auto industry’s exchange of goods, services, and parts with entities American players own in Mexico, Axios reports.

• For Detroit’s biggest carmakers, Mexico-built vehicles were 17% of all U.S. sales last year.
• Overall, the U.S. imported $52.6 billion in cars and $59.4 billion in auto parts from Mexico in 2018.

Bottom line: Of all the Trump administration’s tariff threats, this is the most nightmarish for the all-important auto sector. Already, shrinking global car sales have dented worldwide GDP by an estimated 0.2%—you can expect that figure to grow if Mexico tariffs go into effect.

TRADE

China’s Checklist Manifesto

Showing it also knows a thing or two about targeting multinationals, China said it is creating an “unreliable entities” list. Slackers on group projects? You’re at the top.

• According to China’s commerce ministry spokesman Gao Feng, the way to earn a spot on the list is to “violate market norms, break the spirit of business contracts, block Chinese enterprises and use discriminatory measures for non-commercial purposes.” You’ll also have to endanger Chinese national security.
• Neither the U.S. nor any specific companies were mentioned, but Bloomberg cites Big Tech firms including Apple, Intel, and Qualcomm as potential targets.

This is more than just a trade war

This is World ’Wei III (been wanting to unleash that one for a while). The move by China appears to be in direct response to the Trump administration’s ban of Huawei, a Goliath of Chinese business. The recent clash shows that tariffs are just one front in a multi-pronged war that may define a new technological world order.

Don’t worry, tariffs, we didn’t forget about you. In response to the U.S.’ tariff hike last month, a Chinese tariff hike on $60 billion in U.S. goods is now in effect.

PAYMENTS

Can't Perfect the Swipe?

Good news. For the first time, New Yorkers can now use Apple Pay, Google Pay, and other mobile wallets to make contactless payments when getting on the subway or taking the bus.

We can get behind this for two reasons: 1) Mobile wallets remove flimsy and magically disappearing Metrocards from the equation and 2) it’s a best practice to physically touch the subway system as little as possible.

For now, the feature only works at certain stops on the 4, 5, and 6 subway lines and Staten Island buses. But it’s the start of a broader NYC rollout set to finish by late 2020.

• By then, consumers might be a little more comfy with contactless payment—just 24% of U.S. iPhone users have used Apple Pay, per Loup Ventures.

It may feel like a high-tech upgrade, but the U.S. is actually well behind other countries when it comes to contactless payment. Take Poland for example—it’s on track to become the first country with 100% of checkout terminals supporting contactless payments.

PERSONAL FINANCE

Millennials: Not Very Rich

The bad news: Millennials are far worse off financially than previous generations thanks to the crippling pressure of student loans, health care costs, sky high rents, and flat wages.

The good news: We’ve got a full week to save up before celebrating National Rosé Day next Saturday.

According to a recent study from Deloitte, the average millennial net worth has fallen under $8,000, down 34% from the average net worth of Americans ages 18-35 in 1996.

It’s not all because of green juice. Okay, it's a lot of green juice, but per Deloitte, millennials spend about 17% of their incomes on education, health care, and rent (compared to the 12% young people spent on that a decade ago).

Drilling down, per WaPo…

• Education costs have climbed 65% in the last decade.
• Health care costs are up 21%.
• Housing costs 16% more.

Bottom line: Next time Nana nags you for not settling down, explain that it has nothing to do with your Tinder profile and everything to do with broader economic trends.

WHAT ELSE IS BREWING

• India is no longer the world’s fastest-growing major economy. Congrats, China.
• Tesla (-1.63%) is now taking preorders for lower-priced Model 3s in China. Great week there, huh?
• Renault said its board will meet Tuesday to vote on a nearly $40 billion merger with Fiat Chrysler.
• Slack released Q1 stats ahead of its planned June 20 IPO. The verdict? Not too shabby—revenue climbed 67% and losses feel manageable.
• Johnson & Johnson (-0.73%) was ordered to pay $300 million in damages in a case alleging its talc products cause cancer. It’s appealing.

BREAKROOM

Saturday Headlines
There’s nothing quite like good satire. Three of these news stories actually happened, the other was a headline we pulled from the Onion.

1. “Man caught smuggling nearly 5,000 leeches in luggage”
2. “Struggling Rainforest Cafe adds thousands of animatronic patrons to restaurants”
3. “The world’s first digital blockchain clothing sells for $9,500”
4. “Audible hockey puck could revolutionize the sport for blind players, say researchers”

Breakroom Answers