• In today’s CEO Daily: Diane Brady talks to Bombardier CEO Éric Martel.
• The big story: U.K. and China trade deals coming down the pipe.
• The markets: Up!
• Analyst notes from EY on the consumer mood, UBS on China trade talks, Convera on the dollar, and Goldman Sachs on recession risk.
• Plus: All the news and watercooler chat from Fortune.
Good morning. Growing up in Canada, Bombardier was a name I’d see plastered on snowmobiles, subway cars, and regional planes. In 2020, Éric Martel became CEO and launched a five-year plan to make the Montreal manufacturer focus solely on making private and military jets. It was a winning bet, with Martel reducing debt, selling businesses, and boosting revenue, which could hit $9.5 billion this year.
Then came the trade war. While Bombardier won a reprieve on the 25% tariffs on Canada—which are currently suspended for all goods deemed compliant under the U.S.-Mexico-Canada Agreement (USMCA)—it has caused turbulence. “I have more U.S. content than Canadian content in my planes,” says Martel, pointing to Bombardier’s 2,800 U.S.-based suppliers and defense headquarters in Wichita.
But he doesn’t sound unnerved by what’s going on, saying any “hesitation” in orders lasted about three weeks, almost identical to the pause he saw after Silicon Valley Bank collapsed two years ago. “I’m always a believer that common sense will prevail,” he says. And the pressure on places like Europe to build their defense infrastructure may mean more opportunity.“
The President has been very vocal that everybody needs to share the load.” Martel, who ran Hydro-Quebec prior to leading Bombardier, understands the power of having a big moat. “There’s not that many countries in the world that can design and manufacture a plane; many have tried,” says Martel, who’s investing in AI and other technologies to further grow that lead. He hints at new capabilities that could transform how Bombardier designs or certifies its planes which, in his view, are productivity tools for efficient and personalized travel. “I’m not Nike, trying to reach two billion people. I get to know my customers very well.”
More news below.
Contact CEO Daily via Diane Brady at diane.brady@fortune.com
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Could Trump be softening on China? Late last night the president reposted a video on Truth Social of an interview Treasury Secretary Scott Bessent gave on Tuesday to Fox News, on the subject of trade with China. In the talk, Bessent sends conciliatory signals. “China has been the missing piece,” he said. “We have shared interests that this isn’t sustainable, as I said before, especially on the Chinese side, 145%, 125% is the equivalent of an embargo. We don't want to decouple, what we want is fair trade.” He added. “This will be about de-escalation not about the big trade deal.” Talks with China will occur on Saturday and Sunday.
U.S. will announce trade deal with U.K. at 10 a.m. today. The president teased the big announcement last night on Truth Social and the BBC confirmed it this morning. Open question: Is this a final deal or merely a step on the path?
Powell keeps rates steady. Fed Chair Jerome Powell announced that interest rates will be kept steady but cautioned that Trump's tariffs could force the Fed to prioritize between tackling unemployment or inflation. The last time the U.S. encountered such “stagflation” was in the 1970s, which was followed by a recession. Stocks closed higher on the news.
Trump also offered to mediate the India-Pakistan conflict. Washington has good relations with both sides.
Toyota profits to drop 35% for the year in part due to tariffs, the world’s largest automaker said.
Pandora CEO says U.S. manufacturing can’t work. Pandora CEO Alexander Lacik told Bloomberg TV that making jewelry in the U.S. “won’t work” because the workers in Thailand that the company employs are specialized and cheaper. “I can’t find that amount of talent that actually has this craft experience in the U.S.,” Lacik said.
Goldman Sachs on recession risk. Goldman Sachs Chief Economist Jan Hatzius wrote in a note this week that he expects U.S. tariffs on China to drop from around 160% to around 60% relatively soon.” He still believes there is a 45% chance of recession over the next 12 months, however.
Binance founder CZ wants a pardon from Trump after four months in prison.
It’s a good time to cheat on your taxes. DOGE says it wants to save the government money, but its cuts are disproportionately targeting operations that bring in funds, such as the IRS’ auditors, a third of whom have already left, according to a Treasury report. Shrinking the agency would leave trillions in revenue uncollected, budget estimates predict.
Black smoke, no pope. No candidate received the two-thirds majority necessary to become the new pontiff. Conclave thus enters Day 2.
The markets
• Global markets rallied broadly after the U.S. Fed kept interest rates on hold and Fed chairman Jerome Powell made it clear he would pursue monetary policy, and fight inflation, independently of Trump’s desires for lower interest rates. The S&P 500 rose 0.43% yesterday but remains down 4.26% YTD. S&P futures were priced up by 0.83% this morning premarket. China’s CSI 300 was up 0.56% this morning on news of trade talks between Washington and Beijing happening this weekend. All major Asian indexes followed suit with the exception of India’s Nifty 50, which declined 0.34% this morning as the armed conflict between that country and Pakistan remains unresolved. Further west, the Stoxx Europe 600 gained 0.47% in early trading. Bitcoin was back above $99K this morning.
From the analysts
• EY on the consumer mood: “US consumer sentiment gauges have plunged to their lowest levels since the 1980s while forward-looking business confidence measures are at multiyear lows,” per Gregory Daco
• UBS on China trade talks: “US Treasury Secretary Bessent may not have blinked at China in the trade standoff, but they have definitely winked. Meetings with China are due this weekend to talk about de-escalating current tensions. It is unlikely that China will rush to deal with the US. It is in the interests of most US trading partners to wait until more of the economic damage from tariffs is apparent, thus strengthening their bargaining power,” per Paul Donovan.
• Convera on the dollar: “Any sign of potential cuts in the future might see the US dollar fall further, with recent Federal Reserve commentary divided between concerns over the inflationary impact of tariffs and worries about a slowdown in the labour market. The greenback, as measured by the USD index, fell to one-week lows overnight and remains only 1.3% away from three-year lows.” per Steven Dooley.
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