Good morning,

Trump threatens pharma with a tariff blitz — “small at first” but eventually ramping to 250% — in a bid to bring drug manufacturing back home. Next in line are chips. 

Meanwhile, JPMorgan just raised the recession flag again, saying the latest jobs slump is a “precursor to entrenchment.” 

The call comes as debt delinquencies climb and new household credit data from the New York Fed shows more than one in ten student borrowers is already 90 days late.

On the flip side, safe havens are making a comeback. Gold ticked higher and silver popped 1.4% Tuesday as a weaker PMI report revived stagflation worries.

And with Powell under fire, Trump says Treasury Secretary Scott Bessent won’t be replacing him next year, but “the two Kevins” are still in play.

It’s shaping up to be another big day for markets. Let’s dig in.

Five things to know before opening bell

🧠 OpenAI’s $500B share sale

OpenAI is reportedly lining up a secondary share sale that could value the AI juggernaut at a mind-bending $500 billion. Existing investors, including Thrive Capital, are said to be sniffing around for employee-held shares. The deal would mark another massive paper gain for the ChatGPT maker as Wall Street’s AI fever shows no sign of breaking.

💊 Trump’s pharma tariff blitz

Trump says imported drugs are next on his tariff hit list, starting “small” but climbing to 150%, then 250% over the next 18 months. The president says the goal is simple: “We want pharmaceuticals made in our country.” He also hinted chips could be next. 

🥇 Gold jumps on stagflation fears

Safe havens are back in demand. Gold prices nudged higher Tuesday and silver jumped 1.4%. The rally came after fresh PMI data flashed the ugly combo of slowing growth and rising prices, a historical recipe for stagflation.

🏦 Bessent out as Powell replacement

Trump says Treasury Secretary Scott Bessent is out of the running to replace Fed Chair Jerome Powell when his term ends next year. But “the two Kevins” — ex-Fed Gov. Kevin Warsh and NEC chief Kevin Hassett — are reportedly still on the shortlist.

🗓️ Jobs data leads today’s calendar

Wall Street is nervously waiting for the latest jobless claims after Friday’s ugly unemployment report. Other numbers to watch: Q2 productivity, June wholesale inventories, and consumer credit. Eli Lilly, Constellation Energy, and Monster Beverage headline today’s earnings slate.

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📉 Deficit drops just in time for another tariff gut punch

We’re on the eve of yet another deadline, with U.S. partners bracing for the next round of tariff hikes on goods bound for American ports.

As we wait for the showdown, let's look at the latest data to see how those tariffs are reshaping trade so far.

📉 Digging into the numbers

The U.S. trade deficit dropped for a third straight month in June, falling 16% from May, according to new Census Bureau data.

That puts the deficit at its lowest level in nearly two years.

Both imports and exports were down. That's a pullback from the Q1 import surge when American companies rushed shipments ahead of Trump’s expected tariffs.

One standout was that U.S.-China disputes resulted in a historic drop in Chinese imports.

While the data hints at a return to something resembling normalcy after months of chaos, tomorrow’s deadline could quickly flip the script again.

📊 What the experts say

Oren Klachkin, Chief U.S. Economist at Nationwide Financial Markets, said exporters are in for a challenge but not a dead end.

“Exports are not poised to record strong growth going forward, but stronger foreign currencies and an opening up of foreign markets may bolster U.S. exports, though admittedly this will take time to play out,” Klachkin said.

Wells Fargo economists Shannon Grein and Tim Quinlan said the Q2 import pullback lines up with front-loaded demand in the first quarter.

“Businesses pulled forward demand in Q1, resulting in a massive import surge,” they wrote. “With a surplus of product and inventory on hand, imports fell in all three months of the second quarter,” Grein and Quinlan wrote in a note.

On the steep drop in Chinese imports, Matthew Martin, Senior Economist at Oxford Economics, said it’s not a major concern as other countries are filling the gap.

“Other trading partners in Asia have mostly filled the void, increasing their share by roughly the same amount,” he said.

🧾 $185B deeper in debt

Inflation keeps chewing through household budgets, and fresh data from the New York Fed signals the pinch is real.

🎓 Student loans take the hit

It wasn’t a surprise that delinquencies would spike after the long moratorium on student loan repayments ended earlier this year.

But the New York Fed’s latest Quarterly Report on Household Debt and Credit shows just how bad it’s getting: more than 1 in 10 Americans with student debt is at least 90 days late.

Total student loan balances hit $1.64 trillion in Q2 2025, with Fed researchers noting delinquencies rose “sharply” during the three-month stretch.

📊 Other red flags

Here are a few highlights from the report:

• Americans tacked on $185 billion in debt in Q2
• Credit card and auto loan debt also accelerated
• Overall delinquency rates ticked up to 4.4% from Q1

Mortgage delinquencies are also on the rise but not a red flag for the housing market yet.

“Despite the recent uptick in mortgage delinquency, overall mortgage performance remains strong by historical standards,” said Joelle Scally, Economic Policy Adviser at the New York Fed.

The Fed also highlighted FHA mortgages as a growing pain point, noting that transitions into 30 days past due exceeded 4% this quarter, the steepest rise among loan categories.

💥 PMI brings back stagflation talk

Businesses can only suck up higher costs for so long before passing them to shoppers, and the latest data says that handoff is already underway.

🔍 What the numbers show

The Institute for Supply Management’s July report painted a mixed picture:

• The Services Price Index jumped more than two points, the biggest rise since November 2022.

• The overall ISM services index unexpectedly slowed from June to July.

• The employment index missed expectations, falling to a four-month low.

“July’s PMI continues to reflect slow growth,” said Steve Miller, chair of ISM’s Services Business Survey Committee. “Nevertheless, it’s worrisome to see prices and unemployment rise in tandem.”

💼 Market fallout

Wall Street hated it. All three major indexes closed lower Tuesday as investors weighed the one-two punch of slowing growth and higher prices, a classic recipe for stagflation.

Ryan Sweet, chief U.S. economist at Oxford Economics, chalked up part of the input cost increase to tariffs. “The increase in the price-paid index is likely partially attributed to tariffs,” he said.

He warned the report highlights “the risks toward further slowing in the economy and higher inflation.”