by Patrick Fearon-Hernandez, CFA, and Thomas Wash

[Posted: 9:30 AM ET] | PDF

Our Comment begins with an update on Stargate’s latest ventures. We then shift our focus to global developments, including stricter EU tariffs on Chinese steel and Beijing’s strategy to counter potential isolation from the West. Further analysis covers the decline in ADP private payrolls, the US defense pledge to Qatar, and the latest on the government shutdown. We also provide a summary of key economic indicators from the US and global markets.

Stargate Deals: Market optimism remains underpinned by the public-private AI infrastructure push. On Wednesday, OpenAI solidified this trend by securing key agreements with Samsung Electronics and SK Hynix for its ambitious Stargate projects. Crucially, the deal involves both the supply of next-generation chips and a commitment to jointly build AI data centers in Seoul. This strategic expansion is a clear indicator of the effort by the US-led AI ecosystem to diversify its computation capacity and deepen alliances with key global hardware partners.

• Stargate’s deal with a South Korean tech company forms part of its broader strategy for international growth. This follows closely on the heels of a similar infrastructure agreement with the UAE as well as with the UK, demonstrating a coordinated push to establish a global footprint that spans both advanced technology and critical data center capacity.
• The US push to develop AI infrastructure is a key component of a broader strategy to solidify its position as the global epicenter of artificial intelligence. The administration’s approach appears to be one of expanding US influence through technological supremacy, while simultaneously reducing the rest of the world’s reliance on international trade.
• The central challenge to watch for is the US’s ability to compete with China as both nations expand their AI reach abroad. US success hinges on convincing more countries to adopt US-based AI infrastructure and technology over Chinese alternatives. Successfully winning these build-out contracts will directly increase US market share, making it significantly easier for US tech companies to justify their aggressive, high-growth valuations.

EU Trade Restrictions: The EU has proposed doubling tariffs on imported steel to 50% in an effort to shield its domestic industry from dumping by China and other Asian nations. This new rate is designed to align with the US tariff level, a move intended to prevent steel exports that are being diverted by US policies from flooding the European market. Although the EU has steel import quotas in place already, this new plan is far more granular, introducing specific quotas based on individual product types and originating countries.

• The global move to restrict imports reflects a concerted effort to economically isolate China, as US trade policy is prompting a worldwide realignment. In response, key US partners and regional powers — including Canada, Mexico, Japan, and India — have enacted new anti-dumping measures targeting Chinese goods.
• Concurrently, efforts are underway to counter China’s potential to weaponize its own imports in retaliation. Last month, G-7 members began talks to establish price floors for rare earths. This strategy aims to incentivize investment in alternative production and reduce collective reliance on China. The group is also considering targeted tariffs on Chinese exports of these critical minerals.
• As Western nations toughen their stance, China is expected to deepen its ties with the Global South to reduce its own economic dependencies. This shift is already visible, with Chinese exports being increasingly redirected to Africa and Latin America, leveraging existing investment partnerships. We can expect this trend to accelerate as China works to establish an alternative trading bloc.

Cook Safe for Now? The Supreme Court will hear arguments in January on the president’s authority to fire Federal Reserve Governor Lisa Cook, a case that will define the limits of presidential power over independent agencies. The delayed hearing has, for now, secured Cook’s position on the FOMC. However, her eventual removal could undermine confidence in the Fed’s independence, potentially weighing on the US dollar.

ADP Payrolls: Private sector payrolls recorded their steepest decline since 2023, falling by 32,000 jobs in a fresh sign of a cooling labor market. The downturn appears broader than initially thought, as the prior month’s data was revised down from a gain of 51,000 to a loss of 4,000. Although the ADP report and official government data can differ, they typically move in tandem, offering a critical glimpse into the labor market while the federal government’s release is suspended.

China Soybean Purchases: The White House is preparing to confront China over its halted purchases of American soybeans, a critical point in the ongoing trade negotiations. China’s shifting of its massive agricultural orders to competitors like Brazil and Argentina has damaged the US farm sector. While a resumption of Chinese buying would offer significant relief, the agreement hinges on unspecified concessions that Beijing is expected to demand. The two nations face a November deadline, after which previously suspended tariffs are slated to be reinstated.

Qatar Protection: The White House has pledged to defend Qatar in the event of an attack, a move aimed at securing the country’s continued participation in the Abraham Accords. This assurance comes in response to a recent Israeli airstrike on Qatari soil targeting Hamas leaders — an act Israel has since apologized for but was seen as a severe breach of trust. By extending US protection, the Trump administration hopes to reassure Qatar that such an incident will not be repeated.

Federal Job Cuts: The White House is considering permanent layoffs to pressure Democratic lawmakers into ending the government shutdown. This escalation comes as the two parties remain deadlocked over a spending agreement to fund the government. While the threat of layoffs suggests the stalemate could persist longer than expected, there are indications that both sides remain willing to negotiate a deal.

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