US Vice President JD Vance, speaking at the AI Action Summit in Paris on Tuesday, pledged that the US would safeguard its artificial intelligence (AI) and semiconductor technologies from theft and misuse, emphasizing a firm stance against the “weaponization” of critical technologies.

He detailed the Trump administration’s approach to artificial intelligence (AI), emphasizing a focus on innovation, deregulation, free speech protection, and safeguarding US workers.

Vance likened the current AI advancements to the onset of a new industrial revolution, underscoring the administration’s commitment to positioning the United States as a leader in the AI-driven economy.

“Some authoritarian regimes have stolen and used AI to strengthen their military intelligence and surveillance capabilities, capture foreign data, and create propaganda to undermine other nations’ national security,” Vance said.

He vowed that the administration would “block such efforts, full stop.”

Vance outlined a multi-pronged approach to achieving this, including working with allies to bolster protective measures and closing avenues that could allow adversaries to access sensitive AI capabilities.

Vance on USA’s AI leadership

At the Paris AI Summit, the vice president underscored America’s commitment to maintaining its leadership in artificial intelligence while emphasizing the need for global collaboration.

“The United States of America is the leader in AI, and our administration plans to keep it that way,” Vance declared, calling on international partners to foster trust through regulatory frameworks that encourage innovation rather than stifle it.

He urged European allies, in particular, to approach AI’s potential with “optimism.”

The vice president criticized reports of foreign governments considering restrictive measures on US tech companies, warning, “America cannot and will not accept that, and we think it’s a terrible mistake.”

Vance also highlighted the transformative potential of AI, likening it to “a new industrial revolution,” but cautioned against over-regulation and monopolistic control that could suppress innovation and free thought.

“The Trump administration will ensure that AI systems developed in America are free from ideological bias and never restrict our citizens’ right to free speech,” he said, reaffirming the government’s commitment to preserving an open exchange of ideas.

DeepSeek worries at Paris

The summit’s discussions have largely revolved around China’s AI advancements, particularly its DeepSeek model, which claims performance comparable to OpenAI’s o1 reasoning model but at a fraction of the cost.

While Vance avoided mentioning DeepSeek by name, he criticized “cheap tech in the marketplace” subsidized by authoritarian regimes, hinting at concerns over China’s influence.

Vance also cautioned against nations collaborating with firms tied to such regimes. “Collaborating with such parties means chaining your nation to an authoritarian master that seeks to infiltrate, dig in, and seize your information infrastructure,” he said.

His remarks come amid rising geopolitical tensions over emerging technologies, with the US seeking to protect its dominance in AI and chip development while rallying global allies to adopt similar safeguards.

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In January, the Broad National Consumer Price Index (IPCA), Brazil’s official inflation measure, rose only 0.16% month-on-month, according to the Brazilian Institute of Geography and Statistics (IBGE).

On February 11, the number reduced to 0.16% from 0.52% in December, following a 0.36 share reduction and exceeding BCB’s estimates.

The rate stayed over the central bank’s upper tolerance zone of 4.5%, supporting the expectation that the monetary authority will raise interest rates again in March, as previously stated in December.

However, that means the path for managing inflation over the next few months will now be a very different trajectory.

Inflation gaps in transport and food

By analyzing the IPCA, IBGE noted that there was heterogeneity in the sectors, with five of the nine categories surveyed registering price increases in January.

The data shows that the Transport and Food and Beverage groups had the greatest impact on selling prices this month, contributing significantly to inflation.

The transport prices jumped 1.30% and added an expressive 0.27 percentage points to the IPCA.

The increase is attributed to higher expenses in the movement of goods and services as well as fuel price changes.

Likewise, the Food and Beverage category recorded an increase of 0.96%, which contributed to 0.21 percentage points.

Such trends highlight the ongoing strain on consumers in key expenditure categories.

Electricity prices in Brazil

In January, the average price of residential electricity fell by 14.21%, causing the most significant decrease in inflation.

This reduction was mainly the result of the inclusion of the Itaipu Bonus in bills paid by consumers, a government measure that seeks to alleviate part of the consumer’s financial burden with energy costs.

Cuts in energetic costs are usually viewed as an important driver of inflation and in this instance, the decline had a strong negative impact of -0.55pp on the total IPCA.

Consequently, the Housing aggregated index fell by 3.0% in January, where electricity has proven to be a strong contributor to this cut, generating a countercyclical effect to inflation.

Water and sewage rates increased by 0.97% on average in the Housing category, while piped gas increased by 0.49%.

This suggests that, despite cheaper power, the other factors driving up housing prices continue to climb.

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Federal Reserve Chair Jerome Powell emphasized a cautious approach to interest rate adjustments on Tuesday, citing persistent inflation and continued economic resilience.

In prepared remarks for his testimony before the Senate Banking Committee, Powell signaled that the central bank sees no urgency to alter its current stance.

“With our policy stance now significantly less restrictive than it had been and the economy remaining strong, we do not need to be in a hurry to adjust our policy stance,” Powell said.

His testimony kicks off the Fed’s semiannual monetary policy report to Congress, with a follow-up appearance before the House Financial Services Committee on Wednesday.

Powell’s comments align with expectations on Wall Street, where futures markets suggest the Fed is unlikely to cut rates at its next meeting in March.

Inflation progress remains slow but steady

After a series of rate cuts in 2024, the Federal Open Market Committee (FOMC) held its benchmark federal funds rate steady in January at a target range of 4.25% to 4.5%.

Powell acknowledged that while inflation has eased, it remains above the Fed’s long-term goal of 2%.

“Overall, a wide set of indicators suggests that conditions in the labor market are broadly in balance,” Powell said.

“The labor market is not a source of significant inflationary pressures.”

The latest data from the personal consumption expenditures (PCE) price index, the Fed’s preferred measure of inflation, showed a 2.6% year-over-year increase in December.

Meanwhile, the January consumer price index (CPI), a broader inflation gauge, is set for release on Wednesday, just before Powell testifies before the House.

Powell emphasized the importance of striking the right balance in monetary policy, cautioning against both premature easing and prolonged restraint.

“We know that reducing policy restraint too fast or too much could hinder progress on inflation,” Powell said.

“At the same time, reducing policy restraint too slowly or too little could unduly weaken economic activity and employment.”

Fed to review policy framework in 2025

Beyond short-term rate decisions, Powell highlighted that the Fed is undertaking a broader review of its policy framework, examining its strategy, tools, and communications.

This reassessment, scheduled for completion by late summer, comes five years after the last major review, which resulted in a shift to a more flexible approach to inflation targeting.

“Our review will include outreach and public events involving a wide range of parties, including Fed Listens events around the country and a research conference in May,” Powell said.

While Powell reaffirmed that the Fed remains committed to its 2% inflation target, he noted that the review would consider lessons from the past five years and explore whether adjustments are necessary to better serve the economy.

The next FOMC meeting is set for March 18-19, with futures markets indicating a less than 10% chance of a rate cut.

Investors and policymakers alike will closely watch upcoming inflation reports and economic data to gauge when the central bank might feel confident enough to begin easing its policy stance.

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President Donald Trump has reignited global trade tensions by imposing 25% tariffs on imported steel and aluminum, triggering an immediate backlash from major economies.

The European Union, China, and North American allies are already preparing to respond,  and concerns about a renewed trade war are rising yet again.

Trump’s goal is to support the US industry, but history suggests that this could lead to higher prices for consumers and retaliation from key trading partners.

With global inflation still high and supply chains under strain, these tariffs could disrupt trade flows and weaken economic growth.

The world has seen this happen before, so why is Trump bringing tariffs back, and what will happen next?

Why is Trump imposing tariffs again?

Trump argues that the US is being treated unfairly in global trade and that tariffs will boost domestic steel and aluminum production. 

The White House says the move is about national security, ensuring that the US does not rely on foreign metals. A senior counselor has stated: 

This isn’t just about trade. It’s about ensuring that America never has to rely on foreign nations for critical industries like steel and aluminum.”

Trump has also hinted that these tariffs are just the beginning, with plans for “reciprocal tariffs” on countries that impose higher duties on American goods.

During his first term, Trump introduced similar steel and aluminum tariffs in 2018, claiming they would revitalize US manufacturing.

However, economic studies later showed that the policy led to job losses in steel-consuming industries, as companies faced higher costs for raw materials.

The US steel industry has recovered from the pandemic downturn, and global markets are already dealing with high inflation.

Raising tariffs now could push prices higher and squeeze industries that depend on steel and aluminum, such as auto manufacturing and construction.

How is the world reacting to Trump’s tariffs?

The European Union has quickly condemned the tariffs and warned of proportionate countermeasures.

European Commission President Ursula von der Leyen has vowed that retaliation will be swift, targeting iconic US exports such as bourbon, jeans, and motorcycles.

“Unjustified tariffs on the EU will not go unanswered. They will trigger firm and proportionate countermeasures.”

Germany, the EU’s largest economy and a major steel exporter to the US, has signaled its readiness to act.

Chancellor Olaf Scholz has said that the EU could respond “within an hour” if needed. He also emphasized Europe’s power by saying:

“As the largest market in the world with 450 million citizens, we have the strength to do so.”

Brussels is also considering reinstating tariffs that were suspended after Trump’s first trade war in 2018.

Beyond Europe, China and Canada have also pushed back. China has already imposed new tariffs on select US goods, while Canada has called the move “totally unjustified.”

Emerging economies in Asia are also bracing for impact. Trump’s planned “reciprocal tariffs” could hit India and Thailand the hardest, as they impose higher duties on US exports than the US does on theirs.

Countries with large trade surpluses with the US could also face targeted measures, adding further uncertainty to global trade.

What does this mean for inflation and global markets?

Tariffs act as a tax on imports, meaning that companies paying more for steel and aluminum may pass those costs to consumers. 

With inflation still above pre-pandemic levels, the risk is that these tariffs will push prices higher across multiple industries.

The stock market has already reacted. Shares of US steelmakers surged following the tariff announcement as investors bet on higher domestic prices. 

But for manufacturers that rely on imported metals, this is terrible news.

Industries such as auto manufacturing, aerospace, and construction could face higher production costs, potentially leading to job cuts or price hikes for consumers.

Meanwhile, global trade uncertainty could weaken business confidence and slow investment.

A prolonged trade war would disrupt supply chains, just as the world is trying to stabilize from the economic shocks of the pandemic and the war in Ukraine.

Is Trump starting a new trade war?

The risk of a full-scale trade war is rising, especially if Trump follows through with his reciprocal tariff plan.

Unlike in 2018, when the US eventually negotiated tariff reductions with some allies, this time global leaders appear less willing to compromise.

The EU is preparing for aggressive countermeasures, and China has already begun retaliating.

Canada and Mexico, which are two of the largest steel suppliers to the US, are also weighing their next steps.

If multiple countries impose tit-for-tat tariffs, global trade flows could be severely disrupted.

There’s also a geopolitical factor at play.

Trump’s tariffs aren’t just about trade; they are about leveraging economic power ahead of upcoming negotiations with Europe and China.

By taking an aggressive stance, the US may be trying to force trade partners into new agreements that favor American industries.

But history suggests that trade wars tend to hurt all sides.

The 2018-2019 tariff battle between the US and China led to higher costs for American businesses and farmers, forced companies to restructure supply chains, and weakened global economic growth.

What happens next?

Trump’s March 12 implementation deadline leaves little time for negotiations. In the coming weeks, expect fast-moving developments as countries announce countermeasures.

The EU and China are already drafting their retaliatory tariffs, and companies in steel-dependent industries will likely lobby for exemptions or policy adjustments.

Meanwhile, the impact on global markets and inflation will become clearer as businesses start adjusting prices and supply chains.

If this trade dispute escalates into a full-scale tariff war, the global economy could take a massive hit.

But if diplomatic talks prevent an all-out confrontation, the damage could be limited.

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Chinese technology stocks have entered a bull market, with the Hang Seng Tech index surging more than 25% from its January low.

The sharp rally follows a renewed wave of investor optimism, driven in part by DeepSeek’s artificial intelligence breakthrough, which has shifted global perceptions about China’s technological capabilities.

The gains come as foreign investors reassess China’s tech sector, with major companies such as Alibaba, Xiaomi, Baidu, and BYD leading the charge.

In contrast, US tech stocks have struggled, with the Nasdaq 100 rising just 4.4% over the same period, and the “Magnificent Seven” recording less than 0.5% gains on an equal-weighted basis.

“Only Chinese internet companies are globally competitive and comparable to the US Magnificent Seven,” said Bush Chu, investment manager for Chinese equities at Abrdn in a report by FT.

That improvement in sentiment has driven some flows back to China. We are starting to see some outperformance and a rally in China in recent weeks because of that.

Alibaba (HKG: 9988), Xiaomi (HKG: 1810), Baidu (HKG: 9888), and BYD lead the rally

Shares of Alibaba jumped more than 6% on Wednesday following reports that the e-commerce giant is working with Apple to introduce the iPhone maker’s AI features in China.

“While we’re almost all talking about DeepSeek and AI advancements coming out of China, other Chinese tech firms are coming out with some pretty amazing stuff,” Brian Tycangco, editor and analyst at Stansberry Research, said.

Other major winners in the AI-driven rally include Xiaomi, up 34%, Baidu, up 13%, and BYD, up 40% over the last month.

E-commerce platforms JD.com and Meituan have also benefited, rising 24% and 11%, respectively.

Their gains have been supported by strong consumption data from the Lunar New Year holiday and rising expectations of fiscal stimulus from Beijing later this year.

The broader Hang Seng index has climbed 15% over the past month, reflecting growing investor confidence in China’s economic outlook.

Mainland China’s CSI 300 index, however, has seen a more modest 4% gain, as concerns over tariffs, a struggling property market, and deflationary pressures continue to weigh on sentiment.

DeepSeek’s AI model reshapes investor sentiment

The market rally was sparked by DeepSeek, a Chinese AI developer that unveiled a large language model in late January, reportedly built with far less computing power than its US counterparts.

The news triggered a global debate over the necessity of large-scale AI investments and led to a sharp sell-off in US tech stocks, with Nvidia losing a record $589 billion in market value on January 27.

While the US market reacted negatively, Chinese tech stocks surged, particularly companies positioned to benefit from AI innovations.

Cloud computing firms, consumer electronics manufacturers, and search engine operators saw strong gains, reflecting investor optimism about AI-driven growth.

Stock Connect program data shows high interest among Chinese investors

Investor enthusiasm is reflected in the sharp increase in trading volumes through the Stock Connect program, which allows mainland Chinese investors to buy Hong Kong-listed stocks.

Data shows that average daily turnover in February was two-thirds higher than in January and three times higher than the same month last year.

Analysts said investors were boosted by the belief that Chinese development of LLMs was advancing and consumer-facing companies would rapidly adopt them.

Citi analysts wrote in a note on February 3 that AI investment in China remains underappreciated by global investors.

“The US is strong in terms of zero-to-one innovation, but China is stronger in terms of one-to-100 innovation, in terms of widening access and adoption of tech,” he said.

As China’s tech sector continues its rapid recovery, investors will be closely watching how AI adoption plays out and whether the momentum can be sustained in the face of geopolitical uncertainties.

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