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Taking Trump's tariff threats seriously and literally

    President Trump's tariff threats have long baffled and confused foreign leaders and CEOs as they fear unleashing a tit-for-tat trade war.

    Investors are apparently feeling relieved that he held off until now, as S&P 500 futures rose in value this morning. But a growing number of analysts and business leaders fear tariffs are inevitable (more on that below). There is one theory that is gaining ground: Trump sees tariffs not only as a negotiating tactic, but also as a way to make money.

    A summary of Trump's latest threats: Canada and Mexico could face tariffs of 25 percent from February 1, and China could be hit with a 60 percent tariff – or perhaps just 10 percent.

    “It is tempting” to see Trump's statements as a signal that he sees tariffs as “a transactional tool.” George Saravelos, the global head of FX Research at Deutsche Bank, wrote in a research note on Tuesday.

    Saravelos added: “But the only explicit reference to tariffs in Trump's inauguration speech was in reference to their use as a strategic revenue tool.”

    That would most likely be a task for the Tax Authoritiesan agency that Trump has proposed creating to collect what he said in his inaugural address would be “tremendous amounts of money flowing into our treasuries from foreign sources.”

    That's despite a number of questions about the potential new organization, including how it would act differently than U.S. Customs and Border Protection, which is currently responsible for collecting tariffs, and whether Trump could even create the agency without congressional intervention.

    Yet analysts take him at his word. Trump is chasing revenue and cost savings wherever he can find them, especially if he wants to pass a big tax cut that won't damage America's credit rating.

    Financial experts have warned that widespread new tariffs would have dire consequences, including accelerating inflation and shrinking economic growth. Economists at Goldman Sachs now estimate a 70 percent probability that Trump will impose some kind of tariff on China, and a 25 percent probability of imposing tariffs on goods from all countries.

    Elon Musk's government spending is changing shape. What was once described as a non-governmental panel is now an official unit – the “United States DOGE Service” – within the Executive Office of the President, along with “DOGE Teams” embedded in federal agencies. The DOGE task forces will still advise on possible cuts, although many things remain unclear, including how big a budget Musk's teams will have.

    Goldman Sachs is choosing its next generation of leaders. The investment bank promoted a number of top executives to its management committee on Tuesday and appointed new leaders for its equities, fixed income and banking divisions. It is the biggest wave of such promotions in years, although the percentage of women on the management committee will shrink.

    'Squid Game' and the NFL give Netflix a big boost. The streaming giant reported its biggest quarterly growth ever on Tuesday, adding 19 million new customers and posting a fourth-quarter operating profit of $10 billion. The company also announced it would increase prices for US customers.

    Even among executives optimistic about Trump's new presidency, there is one risk that worries them: tariffs. That led to a guessing game at the World Economic Forum in Davos, Switzerland this week: how serious is that really is President Trump on tariffs?

    US executives are already planning their own responses, DealBook's Lauren Hirsch reports.

    Business leaders are setting up tariff war rooms. Companies have already experienced a period of inflation when consumers began to push back on price increases, so they are aware of the limits of further increases.

    While they have done this type of scenario planning before, there is now more urgency given the potential size of any tariffs and the uncertainty under which businesses are now operating. For weaker companies, the question is more how long they can survive a trade war.

    The game theory: Should they pass on the higher costs to their customers? Or do they wait while competitors raise prices, hoping to gain market share?

    Companies are also considering changes to their corporate structures. Some European multinationals are looking for ways to avoid the tariffs. For example: can a company with production facilities in the United States locate there?

    Bankers tell DealBook that private European companies are increasingly talking about going public in the US – not only to get a higher valuation, but also to potentially avoid tariffs. Intriguingly, Chinese companies have also discussed this, although it is unclear whether these conversations will lead to actual listings.

    President Trump announced a $100 billion joint venture between OpenAI, SoftBank and Oracle to create the computing infrastructure needed to power AI technologies.

    That huge figure underlines the global race to build a new kind of data center that can take artificial intelligence to greater heights. Today's most powerful data centers were built at a cost of around $5 billion, but this undertaking makes these facilities look cheap by comparison.

    Another notable thing about the announcement is who is not involved, reports Cade Metz of The Times for DealBook: Microsoft, which has a partnership with OpenAI.

    The new effort, called Stargate, could ultimately pump as much as $500 billion into the project. Trump can now claim some success in his efforts to accelerate AI development in the United States, while China tries to catch up. Sam Altman of OpenAI, Masa Son of SoftBank and Larry Ellison of Oracle were present for the announcement.

    It is an important step for OpenAI. To build AI technologies like its popular ChatGPT bot, the startup must buy access to massive data centers from giants like Oracle and Microsoft. OpenAI entered into an agreement in 2019 to purchase this raw computing power exclusively from Microsoft, its largest investor. (The Times has sued OpenAI and Microsoft for copyright infringement, which the companies deny.)

    Over the past year, OpenAI has demanded more power than Microsoft could supply. So last summer, OpenAI negotiated a one-time deal for $10 billion in additional computing power from Oracle.

    That is why this joint venture is of great importance. If Microsoft can't provide what it needs, OpenAI can get it from the Stargate project, although Microsoft has the right of first refusal.

    Given how much OpenAI is spending, Microsoft wants to stay in the mix. But since Altman was unexpectedly fired by OpenAI's nonprofit board in late 2023, the relationship between the two companies has been tense.

    In an interesting timeframe, just hours after The Times and other media reported on the joint venture, Microsoft separately announced that it would continue to provide computing power to OpenAI even after the Stargate data centers are operational. For the first time, the tech giant revealed that its agreement with OpenAI runs until 2030.

    Even before President Trump announced his renewed interest in striking a deal for Greenland, Beijing was circling, as were Western companies and entrepreneurs, including Jeff Bezos and Bill Gates.

    Rare earth metals, tourism and even water exports play a role in Greenland, a vast area that is part of Denmark, writes Vivienne Walt for DealBook.

    Denmark has dismissed all rumors of a sale. Trump has not ruled out military force to annex the area, leaving the fate of its 57,000 residents one of the great geopolitical puzzles of the new Trump era. Mute Egede, the prime minister of Greenland, said on Tuesday that he wanted to meet Trump to talk “calmly”.

    This is what happens on the ground:

    • The island is rich in minerals needed to make batteries for smartphones and electric vehicles. China dominates the global supply chain in these resources, announcing last week that it had found a massive new mineral resource.

    • Critical Metals, a New York-based mine developer, has announced an all-stock offer to acquire a rare earth mine near Greenland's capital, Nuuk, operated by Australia's Tanbreez. The American company calls the mine a “game-changing” asset. The Biden administration had urged Tanbreez to reject offers from Chinese bidders, saying the gallium from the mine has potential military applications.

    • Bezos and Gates are investors in KoBold Metals, a company that uses AI to hunt for rare earth metals on the west coast of Greenland.

    Greg Barnes, chief geologist and managing director of Tanbreez, told DealBook that Greenland “should be producing tens of millions of dollars worth of mining products, but it's not.” One reason, he added, “is the perception that Greenland is full of igloos and polar bears.”

    That perception could soon change. In June, United Airlines will begin direct flights from Newark. It will be Greenland's first direct connection to the US, potentially attracting more investors.

    “The biggest barrier to economic development is Greenland's lack of connectivity with the world,” Dwayne Menezes, director of the Polar Research and Policy Initiative, a London-based think tank, told DealBook.

    Another business opportunity: Greenland's ice sheet contains about 20 percent of the world's freshwater supply. Menezes' organization, for example, is exploring ways to export chunks of iceberg and ship them to parched parts of the world. “We initially talked about India and Africa,” Menezes said. “But look at California and what happened there.”

    Greenlandic, the island's language, was added to Google Translate last year thanks to AI. But there's a catch: “The curse words are really poorly translated, so if you try to curse in Greenland, you're out of luck,” Barnes said. .

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