Market Beats | Trump Threatens 50% Tariff on EU Goods; Trump Administration Blocks Harvard from Enrolling International Students; Joel Wiener Places NYC Apartment Holdings Into Bankruptcy; US Deficit Widens and Term Premium Hits Decade High; US New-Home Sales Surge to Two-Year High; Canada Slips Toward Recession

—— Trump Threatens 50% Tariff on EU Goods; Trump Administration Blocks Harvard from Enrolling International Students; Joel Wiener Places NYC Apartment Holdings Into Bankruptcy; US Deficit Widens and Term Premium Hits Decade High; US New-Home Sales Surge to Two-Year High; Canada Slips Toward Recession

1. Trump Threatens 50% Tariff on EU Goods

President Donald Trump threatened to impose a sweeping 50% tariff on goods imported from the European Union starting June 1, citing stalled trade negotiations and accusing the bloc of taking advantage of the United States.

“The European Union, which was formed for the primary purpose of taking advantage of the United States on TRADE, has been very difficult to deal with,” Trump posted on Truth Social Friday, criticizing what he described as the EU’s “powerful Trade Barriers, VAT Taxes, ridiculous Corporate Penalties, Non-Monetary Trade Barriers, Monetary Manipulations, [and] unfair and unjustified lawsuits against American Companies.”

The threat, which comes just days after the EU submitted a renewed trade proposal in an attempt to revive negotiations, triggered sharp market reactions. S&P 500 futures fell 1.1%, and Nasdaq 100 futures dropped 1.3% Friday morning.

The tariff threat on the EU was issued just minutes after Trump also warned that he would levy at least 25% tariffs on Apple Inc. products if the company does not relocate iPhone production to the United States.

Trump’s aggressive stance signals a hardening of trade policy in his second term, echoing tactics used during his first administration and raising fears of renewed transatlantic trade tensions.

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2. Trump Administration Blocks Harvard from Enrolling International Students

The Trump administration has revoked Harvard University’s certification to enroll international students, delivering a severe blow to one of the world’s most prestigious academic institutions and dramatically escalating the administration’s ongoing conflict with elite universities.

The decision by the Department of Homeland Security to strip Harvard of its Student and Exchange Visitor Program (SEVP) certification means the university can no longer admit foreign students, and those already enrolled must transfer or lose their legal immigration status, the agency said Thursday.

“Harvard’s leadership has created an unsafe campus environment by permitting anti-American, pro-terrorist agitators to harass and physically assault individuals, including many Jewish students,” the department claimed in a statement, alleging the university has failed to uphold a safe and inclusive educational environment.

Harvard, already under financial strain, now faces even greater pressure. The administration has frozen more than $2.6 billion in federal funds and cut off future grants. Additionally, President Trump has called for revoking the university’s tax-exempt status — a move that Harvard has warned could have “grave consequences for the future of higher education in America.”

The move significantly intensifies a broader standoff between the Trump administration and elite universities over campus politics, federal oversight, and the handling of antisemitism.

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3. Joel Wiener Places NYC Apartment Holdings Into Bankruptcy

Joel Wiener, one of New York City’s largest apartment landlords, has placed multiple property holding companies into Chapter 11 bankruptcy, months after Flagstar Bank began foreclosure proceedings on thousands of residential units.

On Wednesday, numerous entities tied to Wiener’s real estate firm, Pinnacle Group, filed for court protection in New York. Each bankruptcy petition was signed by Wiener, who serves as Pinnacle’s CEO. The filings report assets and liabilities in the range of $500 million to $1 billion.

The move comes after Flagstar Bank initiated foreclosure actions in state court earlier this year. Filing for Chapter 11 bankruptcy immediately halts legal proceedings, giving the companies time to restructure their debts.

The entities that filed cover apartment buildings across Manhattan, Brooklyn, Queens, and the Bronx, according to court documents. Attorneys representing the properties notified the state court of the filings on Thursday.

The companies are being represented by law firm Weil, Gotshal & Manges LLP and financial advisory firm FTI Consulting Inc.

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4. US Deficit Widens and Term Premium Hits Decade High

Bond investors are increasingly demanding higher compensation for holding long-term US government debt, as mounting concerns over the country’s widening fiscal deficit shake global markets.

The US 10-year term premium — a key measure of the extra yield investors require to hold long-term bonds over a series of shorter-term ones — has surged to nearly 1%, a level not seen since 2014. This reflects growing unease about the rising volume of federal borrowing and the risk of fiscal instability.

The spotlight on US funding pressures intensified after Moody’s Ratings stripped the country of its last remaining AAA credit rating a week ago. That move was followed by the US House of Representatives’ passage of a multi-trillion dollar tax bill that extends former President Donald Trump’s tax cuts, further exacerbating concerns about the country’s long-term debt sustainability.

Adding to the pressure, a weak auction of 20-year Treasury bonds underscored soft investor demand for longer-dated securities.

“The danger for now is that this fiscal phenomenon feeds on itself,” said Ella Hoxha, head of fixed income at Newton Investment Management. “That should be somewhat of a concern, certainly for risky assets and certainly for policymakers as well, as they have to finance at much higher interest rates.”

Long-term borrowing costs have surged this week, with the 30-year Treasury yield climbing to 5.15% — just shy of its highest level in nearly two decades. Meanwhile, the inflation-adjusted real yield for the same tenor reached its highest point since 2008 on Wednesday.

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5. US New-Home Sales Surge to Two-Year High

US new-home sales rose unexpectedly in April to the highest level since February 2022, driven by builder discounts and incentives that helped offset affordability challenges in a high-rate environment.

According to data released Friday by the US Census Bureau, purchases of new single-family homes climbed nearly 11% to a seasonally adjusted annual rate of 743,000 units. The gains were especially strong in the South and Midwest regions, and the figure surpassed most forecasts in a Bloomberg survey of economists.

The data suggest that the new-home market is holding up better than the resale market, as homebuilders continue to lure buyers with lower prices and added incentives — tools that individual home sellers have less flexibility to offer.

However, analysts urged caution. Downward revisions to sales data for the prior three months cast doubt on the sustainability of the April jump. Samuel Tombs, chief US economist at Pantheon Macroeconomics, noted, “The jump in new-home sales looks like a statistical illusion, rather than a genuine pick-up in demand.”

Tombs and others cite persistently high mortgage rates as a continuing drag on housing demand and expect a slowdown in new-home sales over the coming months.

To adapt to tighter conditions, builders have increasingly shifted toward more moderately priced homes. The median sales price fell 2% from a year earlier to $407,200, continuing a 12-month downward trend in pricing.

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6. Canada Slips Toward Recession

Canada’s economy is likely in the early stages of a recession, according to economists surveyed by Bloomberg, as the effects of a trade war with the United States ripple through exports, employment, and consumer spending.

Analysts expect Canadian GDP to contract at a 1% annualized rate in the second quarter and shrink another 0.1% in the third quarter — meeting the technical definition of a recession.

Exports are forecast to plunge 7.4% on an annualized basis this quarter, following a surge earlier in the year as US importers rushed to get ahead of new tariffs imposed by President Donald Trump. Though a modest recovery is expected later this year, the near-term outlook remains weak.

The trade tensions are also filtering through to the labor market. Economists predict the unemployment rate will rise to 7.2% in the second half of 2025, before easing slightly in 2026.

Inflation, meanwhile, is projected to hover just above the Bank of Canada’s 2% target, with rates of 2.1% in Q3 and 2.2% in Q4, raising questions about how much policy flexibility the central bank has if the downturn worsens.

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7. Federal Reserve to Cut Workforce by 10%

The Federal Reserve plans to reduce its workforce by approximately 10% over the next couple of years, largely through attrition and a voluntary deferred resignation program offered to retirement-eligible employees.

Fed Chair Jerome Powell announced the initiative in a memo to staff, stating that the move aims to modernize operations and ensure the central bank remains appropriately sized to meet its statutory mission.

“I have directed the leadership of the Federal Reserve, here at the Board and across the System, to find incremental ways to consolidate functions where appropriate, modernize some business practices and ensure that we are right-sized and able to meet our statutory mission,” Powell said.

The voluntary deferred resignation program will be available to Board of Governors staff who are fully eligible to retire by December 31, 2027, similar to a program the Fed used in 1997.

As of 2023, the Fed reported 23,950 employees across its system. The 2024 budget had anticipated increasing staff to 24,553 — a 2.5% rise — making this a sharp reversal in hiring trajectory.

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