1. President Trump follows through on tariffs: US imports from China, Canada and Mexico, which account for 40% of US trade, will be subject to tariffs ranging from 10%–25%. Mexico and Canada have already negotiated a temporary pause in implementation and talks are continuing with China, although their response has been more muted. They will challenge the legality of the tariffs at the World Trade Organization and have created a list of US agricultural imports which could potentially be subject to tariffs. It remains to be seen whether president Trump’s tariffs are a negotiating tactic, similar to the recent immigration spat with Colombia. We note that immigration across the US-Mexico and US-Canada borders declined sharply in the second half of 2024, and China resumed cooperating with the United States on blocking precursor chemicals used to make fentanyl in 2023. While the loss of life from fentanyl remains unacceptably high, it has been declining.

2. Lunar New Year consumption: The 2025 Lunar New Year in China lasted for eight days, raising optimism that the longer holiday could boost consumer spending. Our on-the-ground team will be watching the high-frequency and social media data for indications of the turnout. We note that consumption patterns in China are changing with, in particular, the rise of emotional consumption, which many companies are pivoting to focus on. This trend includes increased consumer demand for experiences as well as for low-priced goods.

3. DeepSeek sends tremors: The Chinese artificial intelligence (AI) reasoning model DeepSeek is cheaper and more efficient than comparable opensource US models. Compared to peers, it ranks seventh on test criteria in the Large Model Systems (LMSYS) evaluation of chatbots. The model’s efficiency is evident in the smaller number of chips used to train the model – 2,000, compared to the 16,000 chips that Meta’s Liama model uses – and its use of rounding to reduce the number of calculations required. The near-term impact of the model’s availability is likely to focus on increased innovation globally as companies utilise its open source code.

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