Art of the real: Trump bows to markets

0:10Hello and welcome to The Intelligence from The Economist. I'm your host, Rosie Bloor. Every weekday, we provide a fresh perspective on the events shaping your world.

0:24Now here's a really bonkers idea. Data centers are giant warehouses that use land and water. So some people are considering whether we can launch them into space. Nope, not a belated April Fool. And The Great Gatsby was published exactly 100 years ago. It might evoke nostalgia for the jazz age and the rip-roaring 20s, but its questions about how we think about America are as urgent today as they were when it was written.

1:01First up, though.

1:1012 hours after launching the trade war, Donald Trump called it off, or at least part of it. People were jumping a little bit out of line. They were getting yippy, you know, they were getting a little bit yippy, a little bit afraid, unlike these champions. The regime of reciprocal tariffs has mostly been put on hold for 90 days. Trump says it's because so many countries had engaged in negotiations. a move Treasury Secretary Scott Besant tried to explain. It's a great courage, great courage, for him to stay the course until this moment. And what we have ended up with here, as I told everyone a week ago, in this very spot, do not retaliate and you will be rewarded.

1:58But this isn't the end of Trump's protectionism. He's maintained a blanket duty on almost all imports. and China's rate was raised to 125%. Feeling a little whiplash? You aren't the only one. This is amateur hour and it needs to stop. Democrats, markets, the whole world is now in a state of confusion. So is this the art of the deal or sheer incompetence? Yesterday was a really incredible moment. Rachna Shambhog is our business affairs editor.

2:39We saw the stock market starting to rise and we're trying to figure out what was going on. And it was that there was a truth social post saying that the president would delay the tariffs for 90 days on most of the world. Totally staggering moment because in the days leading up to that announcement, he only seemed more and more intent on breaking the global trading system. But against the backdrop of market mayhem, he seemed to change his mind. And have the markets just kept on going up? Yesterday, it looked like the Treasury market was on the verge of a panic. We saw yields starting to rise and that was really scary because these bonds are regarded by investors as safe assets.

3:26So when Trump announced that he was going to delay his tariffs, markets were euphoric. They breathed a huge sigh of relief. In America, the S &P 500 went up by nearly 10%, the most since 2008. The Nasdaq went up by the most in a single day since 2001. In Asia this morning, stock markets have continued to rise. So the immediate reaction has been very positive. Rachna, was this the plan? Does this mean that the trade war was all a negotiating tactic? It's interesting, Rosie, that a few of Mr Trump's supporters have painted this as an act of a strategic genius and it's the art of the deal in action.

4:11I would take issue with that. I think that the reaction in the bond market was really frightening and almost certainly had something to do with Mr. Trump's decision. His advisers were counselling him that the impact of these tariffs would be a big recession in America. And I think that might have stayed his hand as well. It's also clear that this is policy that's being driven just by one person, really. And some of Mr. Trump's trade advisers didn't know about the delay, it seems, until it had been announced. So it doesn't really give you the impression of a careful plan. That sounds like the understatement of the century.

4:51Ratchna, yesterday we said the trade war was on, but it's not actually off now, is it? Because there's still a 10 % blanket tariff. You're absolutely right, Rosie. Markets are euphoric because things are better than they were a couple of days ago. But America has implemented big tariff increases in the past week. What's actually been delayed here is the reciprocal part of the Liberation Day tariffs, which vary from country to country depending on the size of the trade surplus that they run with America. But the minimum baseline 10 % tariff is still going on on the rest of the world. So as it stands, America's tariff rate is still the highest that it's been in nearly a century.

5:32And the really worrying thing here is what's been happening with China. because the tariff delay only applies to countries that haven't retaliated to Mr. Trump's tariffs and China did retaliate, what we've seen is a spiralling upwards of the tariff rates that China and America are now imposing on each other. And even as Mr. Trump announced a delay of 90 days on the rest of the world, he increased tariff rates on China to 125%. So what happens next with China? it's hard to see how these tensions de-escalate it feels like both sides are getting further and further apart from each other we will see whether China now reacts to Trump's reaction and we'll see where the trade war goes next nobody expected Trump to back down on the tariffs on the rest of the world it's possible that he achieved some sort of deal that there's some act of strategic genius that happens with China as well.

6:35At this point, though, I don't quite see the path to that rapprochement. And what about the rest of the world? This is, as you said, a pause for 90 days of those higher tariffs. What can we expect to see now? It's going to be interesting, I think. In fact, in the lead up to the delay, we saw leaders of countries going to Washington or talking to Donald Trump and his advisors on the phone. They'll be thinking now about what to offer. In the past week, we've seen offers of buying more American LNG, for example. That seems to be something that many countries think could be elements of a deal. More favourable access to American businesses in their home markets.

7:17More spending on defence. That is possibly something that could be an ingredient of a deal, depending on the country. So for example, it's come up in talks with South Korea and Japan. It's not quite clear what Donald Trump wants. So I think for countries wanting to negotiate with Trump, they'll be trying to think, well, what are we looking for here? And what will Mr. Trump settle for? Will it be a zero percent tariff or is it a reduction on what was announced? And it's really only one person that they'll need to talk to. It's not clear that his advisers will be able to help with this negotiation.

7:49They'll want to get to the president as soon as they can. Ratchna, crazy stuff. Thank you very much indeed. Thank you, Rosie. For more on this extraordinary story of the tariffs turnaround, subscribers can listen to Money Talks, our business and finance podcast, out later today.

8:17The first Sputnik. We've been sending things into space since the first Soviet satellite blasted off in 1957.

8:30A man-made celestial body for the first time in history overcame terrestrial gravity and flew into space. Today, along with the International Space Station, over 11 ,000 active satellites orbit the Earth. They send back photos, GPS signals and keep us connected to the internet But as launches get cheaper, engineers have come up with another use for the cold, hard vacuum of space Data centres are the big warehouses full of computers, sort of where the internet lives Tom Standage is one of the Economist's deputy editors And they're all over the world and people are quite concerned about how many of them there are and how much energy they use and so on.

9:17And so one of the solutions that has been proposed to this is that we should put them in space. Why would we want to put a data centre in space, Tom? Well, I know it sounds crazy, but if you think about it, what do you need for a data centre? You need a lot of energy to run it and you also have the problem of cooling it. the chips inside these data centers get very hot and so you have to run these big kind of air conditioner systems that cool them down and in space you have a lot of energy because you can have solar energy and solar energy in space is stronger than solar energy on earth because it hasn't got to get through the atmosphere if you put things in the right orbit you can have solar energy all day you can stay in the sunlight 24 or 7 and you can then use the fact that space is cold to cool your data centre much more efficiently than you'd be able to do it on Earth.

10:08So essentially, you've got lots and lots of energy, cooling's much easier. And now, of course, we have these high-speed constellations like Starlink that allow you to connect things in space to the ground really quite easily and quite cheaply. So put all those things together, and the case for putting data centres in space isn't quite as crazy as it sounds. It does still sound quite crazy. Don't data centres involve having a giant building? Is it actually feasible to get something like that up there? Well, the other thing that's changing is that the cost of launching stuff into space is going down, and that means you can launch bigger things and bigger things more cheaply.

10:45So the idea would be that you would not just launch satellite-sized things, you would launch rather larger boxes, kind of shipping container-sized things full of computers, and you'd be able to stack them up in space. One of the most ambitious plans involves building an enormous solar array that would be, I think, four kilometres by four kilometres. And you would then have dozens of these container-sized boxes stacked up that would be powered by that, and they would all be full of humming computers. So the big new rockets like Starship, like the Blue Origin rocket, which can launch really quite large things into space, would be able to handle things of that size.

11:20So that's how you'd build them. And just to envision this for a second, you'd have giant warehouses orbiting orbiting the Earth. Yes, and in fact, if you look at data centers on Earth, they are warehouse buildings. They tend to be one story high. I mean, some of them are a bit taller in city centers, but essentially the computers are laid out on a two-dimensional grid. And one of the things that architects of space data centers, orbiting data centers, say is that you could actually arrange the computers in three dimensions. You could stack them up more easily. You could also use laser connections between them.

11:52And laser beams travel faster in a vacuum than they do through fibre-optic cable. So you might even get slightly faster networking between the computers in space. And so one of the companies involved, a company called StarCloud, says this is why we should train AI in space. This is why we should be building data centres in space, because you get all these extra advantages. And Tom, is any of this happening? Well, sort of. There is a small rack of computers on the International Space Station that's been put there by a startup called Axiom. And it's also a company that's keen on putting data centres in space and it hopes to launch some free-flying data centers of its own in the next couple of years.

12:31And StarCloud also wants to do this. It's planning to launch a demonstrator, which will be about the size of a fridge in the summer, and that would contain some NVIDIA chips, the AI chips that are used in data centers on Earth. What's weird about this is that if you look at the chips inside spacecraft, they tend to be quite old-fashioned chips because they've been radiation-hardened. and one of the things that the star cloud folks want to do is they just want to use ordinary off-the-shelf AI chips and one of the things they're hoping to test with this demonstrator later this year is whether you can just use off-the-shelf chips and just put a bit more radiation shielding around them they're also hoping to test their plans for how they cool them and can you actually cool them as efficiently in the vacuum of space as they're hoping that's one of the things they're going to find out they're hoping if you put the right kind of radiator on these things, you can get rid of the energy that way, but they may have to use heat pumps.

13:24So there are a bunch of people talking about this and getting closer to launching free-flying data centres into orbit, and we'll probably have something in the next year to 18 months. If all these tests go well, how soon might we actually see data centres up in space? Well, StarCloud is saying that they want to launch this demonstrator satellite, which you can launch with today's rockets, and then they want to scale up to a slightly bigger satellite, and then one bigger than that, and then they hope that by the 2030s you get to these sort of giant things. What this is all hinging on, though, is whether the big new rockets, and in particular Starship, SpaceX's big rocket, which has not had a great track record recently, the last couple of test flights have not gone well, but it's all assuming that these rockets are going to work, and that the cost of launching stuff into space is about to really drop dramatically.

14:16And if that doesn't happen, then this doesn't really make any sense. So this is really all a bet on those rockets working. And there are quite a lot of startups thinking along these lines, not just on data centers, but they're sort of saying, well, in a world where launching stuff into orbit costs 100 times less or even 1 ,000 times less than it does now, what are the new things you could do? And if we're going to sort of skate to where the puck is going to be, then what are the new business models that will unlock? And one of the convincing things I think the StarCloud folks say is, well, in a world where launch gets a lot cheaper, the first thing you would do is put data centers into space.

14:52And the reason you would do that is that, yes, you could launch space hotels and space factories, which Jeff Bezos likes to talk about and so on. But they involve moving things and people up and down. And a data center, you only have to move data up and down. and so that's cheaper and quicker and much less risky so if you do get much cheaper launch then the first thing it makes sense to build is data centers in space and i think the whole idea does sound quite crazy but that part of it really is logically sound and if we do see these rockets working then we should expect to see the data centers popping up pretty quickly afterwards extraordinary stuff thank you so much tom thank you Though orbital data centers may one day offer a greener alternative to their Earth-bound counterparts, on this week's episode of Babbage, our science and technology show, Alok Jha explores the environmental cost of AI back here on Earth.

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16:04A hundred years ago today, F. Scott Fitzgerald's novel The Great Gatsby was first published. Andrew Miller writes our backstory column on culture. Its narrator Nick Carraway tells the tale of rich, mysterious Jay Gatsby, who hosts lavish parties at his palatial home.

16:27It's a slim novel that raises enduring questions about time and money and above all about America

16:38Like a lot of people, I first read it at school but now I realise that encountering it that way is probably a mistake because its themes of memory and regret are bound to be lost on teenagers but I'm also struck by how timely, even urgent, the novel seems today.

17:04Incredible as it seems, The Great Gatsby actually flopped on release. The critic H. L. Mencken said it was a glorified anecdote. But from about the 1940s, its standing rose and it became part of school curriculums.

17:22Even if you haven't read it, you probably know the story from one of the numerous screen adaptations, like the 2013 film The Great Gatsby that stars Leonardo DiCaprio. I'm certainly glad to see you again. I'm certainly glad to see you as well. But for me, all the screen adaptations of The Great Gatsby are a bit too literal, about sex and gangsters and about Gatsby himself, who, after all, only enters the novel about a quarter of a way through. He's really as much a rumour as a character, a phantom in his own story. He's a romantic hero or a sordid bootlegger, or he's both. He's whatever you want to make of him.

18:07Beneath its shimmering, high-wire language, the book raises deep and intractable themes. One of them is time and memory. Gatsby is desperate to escape his humble origins, but he also yearns to reprise the happiest moment of his youth. Can't repeat the past, he cries at one point. Why, of course you can. It seems to me that this attitude to the past chimes today with the differing views of Western history writ large. Some people see it as a stain, while others yearn to recover lost golden eras.

18:45Then there's the issue of money and class in America Gatsby's in love with Daisy Buchanan whose husband Tom is a cheat and a bully yet he has a social ease and status that Gatsby's money can never buy Gatsby himself I think is a champion even a martyr for every American outsider who fears that the system is rigged against them and that grit and hustle can only take them so far

19:14In the story, money and connections equal immunity. People are defined by how careful or careless they can afford to be about drinking, driving, marriage, affairs and crimes. Tom and Daisy seem exempt from the consequences of what Nick calls their vast carelessness. Other characters must be much warier lest they crash. So this is a story of sex and dough, in other words, a story about New York. But it's also more than that. It's the great novel of America's entwined glory and heartbreak. Throughout the book, the ethereal elements, the fluttering dresses and deathless devotion, keep colliding with the earthly and brutish and hard.

19:59A man's hand breaking a woman's nose, a car's bumper, or a gun. Fitzgerald loves a party, but he also zooms in on a yucky dollop of shaving foam on a drunkard's cheekbone and a breast torn off in a wreck.

20:20His achievement in The Great Gatsby is to hold these opposites in a kind of magical equipoise, the seductive and the sordid, hope and cynicism, beauty and betrayal, and ultimately the promise and disappointments of America. The book makes me think of a line from a Bruce Springsteen song, Is a dream a lie if it don't come true? That, I think, is the mystery at the heart of The Great Gatsby. And that's why it's as compelling and powerful today as it was 100 years ago.

21:07That's all for this episode of The Intelligence. We'll see you back here tomorrow.