Do the U.S. and China Have a Deal? + May Inflation Data & Tesla Delays Its Robotaxi Again

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2:36Welcome to Prof G Markets. I'm Ed Elson. It is June 12th. Let's check in on yesterday's market vitals. The S &P and Dow closed nearly flat as investors digested the US-China deal. The Nasdaq slipped 0.5%. The yield on 10-year treasuries fell after inflation data came in cooler than expected. and steel stocks dropped on reports that a trade deal with Mexico would remove the 50 % tariffs on steel imports. By the way, Scott called this last week when the tariffs were first announced. It's not going to happen. Trump always chickens out. This is... What do you mean? Because it went into effect this week.

3:15Are you saying it's not going to hold, it's not going to last? No, it'll be revised downward or it'll affect... I just don't think it'll hold. Okay, what else is happening? The US and China have reached a deal. That is according to the White House. President Trump said, quote, our deal with China is done, subject to final approval with President Xi and me. He said the agreement would lead to China supplying its rare earth minerals to America, quote, up front. He also said that the US would hold up its end of the deal, and that would include allowing Chinese students to use our colleges and universities.

3:52However, he did not mention our export controls on AI chips. And that was something that was hinted at by the White House earlier this week. But as of today, US chips are still not allowed to be sold to China. The talks took two days. They happened in London. President Trump and President Xi Jinping were not there themselves. But Scott Besant and Howard Lutnick were there. And on China's end, the delegation was led by He Lefeng, who was in charge of China's economy. Now, how did the markets react? They didn't, really. I mean, stocks were pretty subdued. The dollar remained steady. The market basically shrugged.

4:30And I have to say, I'm with the market here. I mean, my reaction to this deal is the same reaction I had to every other deal we've seen so far, and that is, what is the deal? I mean, what did we even get? What has changed? And that's not a straw man position. That is truly what has happened here. I mean, Trump said China's going to supply these rare earth minerals up front, but it's not really clear what that actually means. On chips, we're still in the same position. We haven't seen any concessions on chip policy. Maybe that will change, but as of today, there's nothing new here to react to. And the dumbest part was Trump coming out and saying that the China tariff is now set at 55%, which sounds like a change at first.

5:17That's a number we haven't heard from him before. But then you realize, actually, no, it's not a change. That's just a consolidation of all of the pre-existing tariffs we already had. The effective tariff rate on China after the Geneva deal several weeks ago was 55%. So I look at this, and my reaction is the same as the market's reaction, and that is I have no reaction. I don't think anything's changed here. And the way I see it, this is just another instance of a press release that is being poorly disguised as some sort of policy breakthrough. I can't find anything of substance in this quote-unquote deal.

5:57But let's get a second opinion. Our producer Claire spoke with our favorite China expert, Alice Hahn. Alice is the China economist and director at Greenmantle. Here's what she had to say about the deal. Well, I think that what is clear is that we're still in the art of the deal, where the performance matters more than the substance. My number one takeaway is that ultimately nothing really was worked out. The tariffs remain paused at the current rate of basically 30%, including the fentanyl 20 % tariffs. And that ultimately there wasn't a real concession that was offered to Trump. Now, the Chinese have already started, I think, issuing licenses to European and American companies for rare earths exports.

6:43And I think that will continue to accelerate. But certainly my own sense is that both sides have basically decided to continue the ceasefire and tariffs and maybe do a little bit of a trade in terms of China getting access to potentially EDA, the equipment for semiconductors, in return for Americans getting more access to the rare earths that in the last few weeks were actually blocked off from exports to the US. That hit, obviously, automakers quite hard, both Europeans and Americans. But my number one takeaway is that ultimately this wasn't very substantive. And both of them have a vested interest in showing that they want to continue to negotiate and move towards a trade deal.

7:29And what do you make of the market's reaction to all this? I think markets in the U.S. have largely shrugged this off. They are obviously worried about inflation risk. They're also worried about the big, beautiful bill and what that will mean for the fiscal deficit. And I think that that is going to preoccupy markets moving forward beyond the U.S.-China tariffs, which seem to, again, have been locked into a bit of a ceasefire detente period. But I see some upside already in the Chinese markets. They actually finished up. So that is an indicator that people are getting a little bit more bullish about China with the relief from, obviously, these tariffs.

8:06but also from the prospect that we may see in the coming weeks and months of Chinese fiscal stimulus. So I think we have two very different outlooks. The Chinese stocks seem to be performing better in this environment, whereas U.S. stocks, I think, are still stuck in a bit of a quagmire, not just because of trade-related issues but primarily domestic-related fiscal issues. So what should investors be watching for next? I think we'll have to see, number one, in the immediate run, we'll have to see what happens on semiconductor sanctions as well as rare earths from China's side. If we start to see rare earths exports go back to normal, this will relieve a lot of pressure for automakers, but a ton of industries, even defense tech related industries, which rely on Chinese rare earths.

8:52And secondly, the Chinese market will be heavily dependent on EDA, the equipment for semiconductors, as well as potentially H20s, NVIDIA's H20 AI chips. If there are concessions on that front, that could be quite interesting and it could be good for semiconductor stocks across the board. But certainly, I think that the next thing to watch over the medium to longer term is where we end up with tariffs. Now, my own base case is that we're probably stuck here at the 30 percent mark. But certainly, there is some upside fat tail risk in the sense of tariffs going downwards or even worse on the opposite side, tariffs going further up.

9:32I mean, with this administration and Trump in power, it's really hard to say. And the ball is in the Americans' courts in terms of where they want tariffs to land. So I think that that is the next thing that we'll have to watch beyond some of these tech and rare earths-related sanctions. Well, there you have it. Alice and I agree. This is another nothing deal. The only thing that might matter here is an update on our chip policy, because to Alice's point, that would have a significant upward impact on chip stocks. But again, we haven't gotten that yet. So the verdict is in. This deal is purely symbolic.

10:06It lacks substance. In short, it doesn't really matter.

10:13The CPI report for May was published yesterday morning, and it was not so bad. U.S. inflation did rise, but it rose less than expected to 2.4 % year over year. Economists were expecting 2.5%. And the core measure of inflation, which strips out food and energy prices, and as a reminder, the reason they do that is because food and energy are very volatile, that measure remained flat at 2.8%. Let's take a look at some of the categories that really moved the needle here. Egg prices fell quite significantly, down more than 2 % from the previous month. Gasoline prices also fell more than 2 % from last month.

10:53But the biggest mover here was airline fares, which fell nearly 3 % from the previous month. So overall, pretty good, or at least not bad. Inflation did rise a little bit, but it didn't rise too much. But the big question that everyone is asking is, what does this say about the economy? And more specifically, what does this say about the tariffs? And the answer to that question, as I've said time and time again, and as I said on yesterday's episode, it tells us nothing about the tariffs, because the tariff impact isn't here yet. It's going to take three to six months for the price increases to funnel through, which means we're not going to see an impact in May.

11:35We're not going to see an impact in June. We're going to see an impact sometime in the fall. Now, did that stop the administration from going out there and saying, look, tariffs don't have an impact on the economy. No, of course it didn't. That is exactly what they did. It is the tried and true playbook of this administration. And the cheerleader in chief was yet again, Scott Besson. And this time, he said not only that tariffs aren't causing inflation, as we discussed yesterday, but this time he's now suggesting that inflation is moderating because of the tariffs, because of Trump's policies.

12:12After four years of price increases, diminishing the U.S. standard of living, inflation is showing substantial improvement due to the administration's policy. So look, I'm sorry to keep throwing these Scott Besant clips at you, but you know, he is the Treasury Secretary and he is kind of the leader of this whole tariff inflation psyop. So it does need to be covered. But the point I want to emphasize is, again, the tariff impact isn't here yet. And that is why inflation hasn't risen. If we get to December and we still haven't seen any price increases, then I will be willing to admit defeat. I will concede that Scott Besant was somehow right.

12:55But as of today, June 12th, no, I'm not going to engage in that conversation. The CPI report was decent. We saw those egg prices come down after the bird flu outbreak, which happened at the beginning of the year. And that's great news. I personally love eggs. I was getting pissed off at how much I was paying every time I went to Whole Foods. So that's great. But does any of that say anything about the tariff policy in America? No, no, no, it doesn't. Up next, Tesla delays its robotaxi launch once again. Stay with us.

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15:59We're back with Profit Markets. Our final story, Tesla has delayed the Robotaxi launch again. As we discussed on Tuesday, the Robotaxi was supposed to launch in Austin on June 12th, i.e. today. And I made the point that we shouldn't worry so much about all this Elon Trump drama, because the thing that matters for Tesla is the Robotaxi. That business is what determines the company's valuation. Well, it's June 12th, and it's been delayed again. Elon said on X that the Robotaxi will now launch on June 22nd. He also added that Tesla is, quote, super paranoid about safety, so the date could shift. So even that launch date might not materialize.

16:43Now, I do want to be fair to Elon and to Tesla, because yes, this isn't good for Tesla, but the June 12th launch date was an internal target that was set within the company. They never actually came out and officially confirmed or announced it publicly. All they said publicly was that the launch would happen sometime before the end of June. So I don't want to be too harsh here and I don't want to say they lied. They didn't or at least they haven't so far. But it is becoming almost farcical how they consistently continue to drop the ball on this robotaxi. And I just want to remind you of the promises Elon Musk has made about the robotaxi in the past.

17:26In 2015, he said we'd have robotaxis by 2018. In 2017, he said we'd have them by 2019. In 2019, he said we'd have a million Tesla robotaxis by 2020. In 2022, he said the robotaxi would come in 2023. And here we are in 2025, still no robotaxi. In sum, he's been making these promises for over a decade. So yeah, this is a theme now, and it's becoming a running joke. And it's hilarious that just two days ago, I was saying, give it a couple of days and we'll see the launch. So even I, who am a very outspoken skeptic of Tesla and of Elon Musk. Even I bought in. I genuinely thought it was going to happen.

18:13So it didn't happen. Now the question is, will the robo-taxi launch on June 22nd, or will they delay again? And to answer that question, our producer Claire spoke with Sean O 'Kane, the senior transportation reporter at TechCrunch. What would your prediction be? Do you think they'll push it again? Or do you think, can we safely expect they'll roll something out end of June? I think there will be something by the end of June. There will be some sort of form of public ride, whether it's on the 22nd or later in the week. The closer we get to July, the closer we get to financial figures from the second quarter.

18:52Those are going to be probably still pretty ugly. The first quarter was pretty rough for Tesla. They had some shutdowns at their factories that affected that. But in general, we've seen sales trending down almost all around the world for many different reasons. And so I think the closer they get to that, the more they lose this sort of buffer period where they can really get some good news out about the future of the company. Elon Musk has said he's bet basically the entire company on the autonomy piece versus selling vehicles at volume. And that's going to be essentially like a sort of complementary piece of the company going forward.

19:29So I think we will see something happen, smallish scale. Okay, so Sean sounds somewhat optimistic about the launch schedule. Sounds like he thinks Tesla will launch something, not because they necessarily want to, but because they have to. And I like his reasoning there. But before we end the episode, let's get a launch prediction from one more person. And just a quick disclaimer, this person is a little bit of a Tesla bear. Some call him a hater. Some say he has musked arrangement syndrome. You know, I'll leave it to you to decide that. But in spite of all of that, we do love him very much. Let's bring in Prof G.

20:11Hey, Scott. Ed, quick question. What's the number one business podcast in the world as of this morning? Prof G Markets, baby, with Ed Elson. How do you feel about that? Oh, yeah, dad, dad. Yeah, yeah. Something tells me someone's going to want to raise$8.50 an hour. That's right. That's exactly what I'm thinking about. I just checked we're four out of 10 of the top business podcasts on Apple Podcasts today. I don't want to brag, but I do want to brag. So there, I said it. Well, Ed, I don't want to get you too excited, but if you keep this up, someday I will be able to have a second one of these delicious Rolls Royces.

20:48Hello, daddy. Oh, wow. Wow. You know what happens? Beautiful. You know what happens? That's not yours. You don't have a car. I don't have a car. You know what happens though when you have a Rolls Royce, Ed? What's that? Blowjobs, Ed. Blowjobs. Okay. Is that wrong? No. Is that wrong? Number one business podcast in the world. I think you're right. I think you're probably factually correct. Scott, so Elon has delayed the RoboTaxi launch once again. The new launch date is June 22nd. Quick take from you. will it happen or will they delay again speaking of things you will you do while autonomous driving takes over

21:28daddy's had a few cocktails tonight I'm just leaving Maison Estelle in a suit and tie which is rare yeah I went to the fancy Tony event at the Royal Academy of Arts where I met one of my heroes I own one piece of art and it's by a guy named Grayson Perry legend a guy slash gal yeah it was half his half his years as a woman half as a man and i really enjoyed meeting i'm very impressed well i did yeah i didn't ask you about your art collection i own one piece of art anyways uh like when kathy wood tries to justify how fucking insane her ridiculous uh price targets are on tesla they hold out they hold out autonomous driving and it could be disruptive it could be a fundamental it could be a game changer, huge margins.

22:10The problem is, is that this podcast is about as far in autonomous driving or as credible in autonomous driving. If you and I said we were going to have autonomous driving in about three years, it might be just as credible as what they're saying right now. They just can't. Supposedly, this test next week or in two weeks is going to be geofenced, a small number of Teslas. Meanwhile, Waymo is running away with it. And even Elon Musk said, okay, Tesla is either going to be worth a lot or worth not a lot based on autonomous driving. So essentially, it's probably not worth very much. If Tesla gets valued at where, say, BYD is, which is, in my opinion, a better EV, but let's just give them the benefit of the doubt and say it's a BYD-like company, that means its stock gets cut by 95%.

23:05So they've been holding out this vision of autonomous driving, which just isn't happening. I feel as if we're on the launch pad and it's 10, 9, 8, oh wait, 11, 10, 9, oh wait, 15, 14, 13. This is at some point tomorrow needs to be today and it never happens. And this is my prediction. We're going to get to this event and it's going to be a bunch of jazz hands with bullshit like the Reboven or robots or I don't of flamethrowers. He's going to pull out anything he can out of his ass to say, hey, look over here and ignore the fact we are still way off from autonomous driving. I think this is literally the biggest head fake.

23:47This is a$950 billion head fake. This is a car company that's worth $30 to$50 billion, trading at nearly a trillion, all based on this hope and promise of autonomous driving, which is turning out to be a hallucination. It's not even a dream. It's literally hallucination. I'll lock in your prediction there. End of June, we'll see a launch, but it'll be a bullshit launch. Yeah, that brings new definition to the term launch. I think there'll be an event. I think they'll have videos of these things driving. But the team pulled some data. They've had dramatically more crashes. And despite the fact he's managed to insert himself in the government and fire every inspector general and regulator overseeing his automobile company.

24:35The market, just as the bond market is the adult in the room in the cabinet, the market is going to be the adult in the room. And if these things come out of the gates with a bunch of crashes, it's game over. So he knows he can't come out with an unsaved product. And so far, the record is not good. I think you're going to see another fun prediction. At this launch event, Alphabet stock ticks up because everyone's going to realize that Waymo is the market leader here and is way ahead, is further ahead than previously imagined. Okay. Pseudo launch and Alphabet stock ticks up. Thank you, Scott. Enjoy your night.

25:14Greetings. Thank you, Ed. Congratulations. Number one. Okay. That's it for today. Thanks for listening to Prof G Markets from the Vox Media Podcast Network. I'm Ed Elson. I'll see you tomorrow.