Flagship

Trump defends Iran deal

US President Donald Trump defended the Iran deal that offers several concessions to Tehran, saying Wednesday he wanted to avoid an “economic catastrophe.” It was an admission that the markets forced his hand, with the war driving up inflation and energy costs. Terms in the US draft include reopening the Strait of Hormuz in exchange for the unfreezing of billions in Iranian assets, the creation of a $300 billion reconstruction fund, and Iran agreeing to dilute its enriched uranium. It’s a “massive gamble,” The Wall Street Journal wrote, that “the Iranian regime will choose economic progress over nuclear development.” US officials cautioned that either side could walk away before a final deal, and Trump threatened to bomb Iran if they misbehaved.

Fed holds rates in Warsh’s first meeting

The US Federal Reserve held interest rates steady on Wednesday in Kevin Warsh’s first meeting as chair, signaling a more hawkish turn for the central bank after inflation hit a three-year high last month. Markets dipped on the announcement, as traders fully priced in a hike by October; just one of 19 Fed officials pencilled in a cut this year. President Donald Trump said he was willing to be “guided” by Warsh, acknowledging a hike “could happen.” The Fed cited “uncertainty” resulting from the Iran conflict as reason for the hold, and reiterated its mandate to “deliver price stability.” The Iran deal, if it holds, suggests that war-driven inflation has likely “peaked,” a Bloomberg economist said.

Global central banks grapple with war

Global central banks’ responses to the Iran war’s energy crisis reveal different underlying concerns. The US Fed held rates steady and hinted at future hikes; the ECB last week increased rates, as did Japan’s central bank on Tuesday, all of them trying to tamp down the Iran war-fueled inflation. While the booming US economy provides room for hikes, Europe risks slowing its already sluggish economy. But increased borrowing costs in the US could make local debt more expensive across Africa, forcing officials there to raise rates themselves, Semafor’s Africa editor wrote. The People’s Bank of China, meanwhile, could look to ease rates, as threats to growth mount amid weak consumer spending.

Tech chiefs pitch G7 on AI guardrails

AI bosses called on G7 leaders to cooperate on mitigating the technology’s risks. The CEOs of OpenAI, Anthropic, and Google DeepMind argued that AI could facilitate bioterrorism and cyberattacks, and proposed a US-led coalition to protect against such dangers. The call comes after the US government blocked foreign nationals from using Anthropic’s cutting-edge models, and France’s president warned of economic damage if the US “can turn off the switch.” Anthropic’s head told the group to “resist the temptation to splinter” over AI, but his company’s feud with the Trump administration is of its own making, Semafor’s technology editor argued: Anthropic stoked fear over AI rather than framing it as an economic booster, putting its models in the crosshairs of Washington.

EU eyes unified China approach

The EU is increasingly united on the need for a tough approach to China. Europe has long been nervous about cheap, state-subsidized Chinese goods undermining the continent’s manufacturing industries. Paris has led efforts to respond, calling for new tariffs and other measures, but Berlin has been more wary, since Chinese buyers supported much of Germany’s car industry. But the balance of risks has changed, with Chinese domestic demand falling and its exports expanding. The bloc has no appetite for a full-scale trade war with Beijing, a European Council on Foreign Relations analyst argued, but it looks increasingly prepared to deploy an array of smaller measures: “Europe’s era of acquiescence is over.”

Trump praises Modi as ‘angel,’ ‘killer’

US President Donald Trump said he would visit India soon, an apparent effort to smooth over rocky relations with New Delhi. At their G7 meeting Wednesday, Trump praised Indian leader Narendra Modi as an “angel” but “total killer,” referencing the yearlong tough negotiations that are yet to produce a trade deal between the two countries. A “fusillade of actions” by Trump have hurt India’s economy and pride, The New York Times wrote, namely imposing tariffs on Indian goods, punishing India for purchasing Russian oil, and drawing closer to India’s rival Pakistan. Most recently, New Delhi protested against US strikes that killed three Indian sailors. Whether the thawing is substantive or “performative theater” from two strongman-style leaders remains to be seen.

Colombia’s narco gangs expand

Colombia’s cocaine producers have professionalized, funding a deadly drone war amidst a historic production boom. The drugs trade was largely controlled by the Marxist rebel group FARC, but since a 2016 peace treaty it has been pushed aside by organized crime. The profit-driven gangs have since tripled output, and used the profits to expand their operations into illegal mining and human trafficking, the Financial Times reported. They have also widened their market, with cocaine availability and drug-related crime both up significantly in Europe. Drone attacks rose 138% in the first half of last year, according to Medellin’s Ministry of Defense; Colombia has the highest rate of such attacks in Latin America, The Wall Street Journal reported.

Setback in Trump’s wind energy fight

The White House dropped legal efforts to reimpose a freeze on wind farm projects nationwide, with US renewables development surging despite President Donald Trump’s opposition. A judge ruled the freeze illegal in December and the administration has ended its appeal. A record 51.6 gigawatts of renewables were added last year and 79.7 gigawatts are projected this year, driven by solar-and-battery systems’ affordability; the buildout is fastest in red states, where land is often cheaper. AI demand is so great, however, that fossil fuel construction is also surging, as the country scrambles to augment the energy supply. The administration is still attempting to limit renewables, though: It will pay developers $765 million to terminate four wind farm projects.

Microfinancing has largely failed

Once hailed as capitalism’s tool for ending poverty, microfinancing has proven largely ineffective and in some cases actively predatory. The economist Muhammad Yunus pioneered the idea of small loans to the very poor in his native Bangladesh. But 20 years after he won the Nobel Peace Prize for it, lenders have provided hundreds of billions to entrepreneurs, and despite uplifting anecdotes, trials find little evidence that the loans improve borrowers’ economic outcomes, The Wall Street Journal reported. Commercial lenders have also entered the market, pushing interest rates up — in some cases in Mexico to more than 400% — and collateralizing debt against borrowers’ land. The practice has, however, built real financial institutions in some places, and helped some existing businesses to expand.

AI can ‘liberate literature,’ poet argues

AI could have an effect on writing comparable to that of photography on painting, a (human) writer and poet argued. Cameras allowed anyone to produce realistic images, and “freed from the obligation of realism,” The Atlantic’s Adam Kirsch noted, “painters developed radical new ways of seeing.” Similarly, chatbots have allowed anyone to produce “emptily competent” prose, and “can liberate literature in the same way,” if writers are “daring, challenging, and obstinate enough to tell us what it’s like to be human.” But the technology has also degraded critical thinking, another poet argued: By offering to “help me write,” AI takes away “the pleasure of making the next associative or logical leap on my own,” Dan Chiasson wrote in The New York Review of Books.