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Stocks fall on US debt downgrade and further tariff threats, China’s economy shows unexpected resili͏‌  ͏‌  ͏‌  ͏‌  ͏‌  ͏‌ 
 
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May 19, 2025
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The World Today

  1. US debt downgrade fallout
  2. China’s resilient economy
  3. EU centrists’ success
  4. UK, EU ‘reset’ talks
  5. Europe’s nuclear agreement
  6. Fusion power progress
  7. Biden cancer diagnosis
  8. Africa’s jihadi problem
  9. Election boost for Milei
  10. The eternal Windows XP

The London Review of Substacks, and recommending some of Istanbul’s best street food.

1

Debt and trade fears drive markets

A chart showing general government debt as a percentage of GDP for the US, China, and the EU.

Asian and European stocks fell, the dollar dropped, and US Treasury yields rose on concern over the global economy’s prospects after a downgrade of American debt and renewed tariff warnings from Washington. Markets had enjoyed a reprieve after US President Donald Trump suspended his “Liberation Day” duties and reached trade deals. But over the weekend, he told reporters his administration would impose new levies in the coming weeks and his Treasury secretary warned they could soon return to sky-high levels. Of increasing concern, however, is the prospect of surging US debt if Trump’s tax-cutting plans — which passed a key congressional hurdle over the weekend — are realized: As Bloomberg put it, a “mini ‘sell America’ trade” is being revived.

For more on the tax-cutting proposal and its prospects, subscribe to Semafor’s daily US politics briefing. →

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2

China’s consumption challenge

A chart showing private consumption as a percentage of GDP for the world’s biggest economies.

New data showed China’s economy exhibited surprising resilience in the early weeks of its trade war with the US, although slowing consumption highlighted the challenges facing Beijing. Industrial output outperformed analysts’ expectations, but retail sales and fixed-asset investment were below forecasts and an index of nationwide property prices fell, figures that ING’s China chief economist characterized as “a bit of a mixed bag, showing an overall moderation of growth as the tariff escalations shook global markets.” China’s leaders have made boosting consumption a key part of efforts to reorient the economy away from a dependence on exports, trying to re-enthuse shoppers who are put off by high unemployment, dizzying levels of debt, and the prospect of deflation.

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3

Moderates win across Europe

Nicușor Dan, the winner of Romania’s presidential election.
Nicușor Dan, the winner of Romania’s presidential election. Stoyan Nenov/Reuters

Moderates won elections across Europe over the weekend, though anti-immigrant blocs showcased their growing strength. In Romania’s presidential election, the centrist mayor of Bucharest — who “ran a campaign that was pro-Europe, pro-NATO, and pro-Ukraine” — triumphed over a nativist firebrand who had been leading the polls, while the center-right narrowly took the first round of Poland’s presidential vote and emerged victorious in Portugal. “Europhiles can exhale today,” Politico wrote, although the ballot box successes risk masking the power of Europe’s populist movements: Romania’s centrists needed near-record turnout to win, Poland’s second round will be a neck-and-neck affair, and Portugal’s far right saw its best-ever result.

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4

EU-UK reset talks due to open

President of the European Commission Ursula von der Leyen and UK Prime Minister Keir Starmer.
Ursula von der Leyen and Keir Starmer. Leon Neal/Pool via Reuters.

The European Union and UK reached a preliminary deal to reset their post-Brexit relations ahead of a summit of the two sides’ leaders in London today. Britain will ease access to its waters for EU fishing vessels, and Brussels plans to lower barriers for British firms to sell into the bloc, though hopes for simplified migration rules were apparently dashed. The agreement — alongside the widely expected signing of a security and defense partnership — comes with Britain’s prime minister set to host top EU officials for their first such meeting since 2020, part of efforts to “emphasize a spirit of reconciliation,” the Financial Times said, following years of rancor sparked by Britain’s decision to withdraw from the EU.

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5

Europe shifts on nuclear power

A chart showing the share of electricity generation from nuclear for France, the EU, and Germany.

Berlin dropped its opposition to nuclear power, part of a rapprochement with Paris that also marked a potentially major change in European Union energy policy. France is strongly pro-nuclear, while Germany began phasing it out after the 2011 Fukushima incident. But new Chancellor Friedrich Merz has been critical of that decision, and is keen to build bridges with France. He agreed to remove all “biases” against nuclear in EU legislation, leaving it on a par with renewable energy. Europe in general has seen a nuclear revival: A dozen EU members signed a letter backing the technology, the Netherlands and Belgium reversed decisions to shut down reactors, and Denmark may lift a 40-year nuclear moratorium.

For more on the energy transition, subscribe to Semafor’s Net Zero briefing. →

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6

Nuclear fusion makes progress

A chart showing equity investment in nuclear fusion by country.

The US nuclear fusion lab which achieved a “scientific breakeven” milestone has been steadily ramping up its reactor’s output. To be useful, a fusion reactor must get more energy out than is used to make it work. In 2022, the National Ignition Facility made a breakthrough, getting 3.15 megajoules out from 2.05 megajoules directly put in by its lasers. More recently, output has more than doubled to 8.6 megajoules. It’s a long way from being commercially viable: The energy required to run the lasers, as opposed to the energy those lasers actually fired into the reaction, was 300 megajoules. But it is “continued proof that controlled nuclear fusion is more than hypothetical,” TechCrunch reported.

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7

Biden’s ‘aggressive’ prostate cancer

Joe Biden.
Mandel Ngan/Pool via Reuters.

Former US President Joe Biden has an “aggressive” form of prostate cancer which has spread to his bones. He reported urinary symptoms and was diagnosed Friday, his office said, adding that the cancer is expected to be responsive to treatment. Rivals and colleagues wished him well. The Washington Post noted that “there is no suggestion of any connection” between the diagnosis and the issues that torpedoed his reelection bid, but the news comes at a difficult time: Original Sin, a book on apparent efforts to conceal his health decline, publishes tomorrow, and audio was recently released from a 2023 interview with a special prosecutor revealing his “fragile voice and… difficulty providing dates and details,” said The New York Times.

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8

Worsening jihadism near Sahel

A chart showing the countries with the highest terrorism index scores.

Islamist militants killed at least 23 people in northern Nigeria and kidnapped several others, while a separate armed group killed at least 10 in Somalia, the latest signs of worsening regional jihadism. The nearby Sahel region, which borders the Sahara desert, has become the globe’s terrorism hotspot, accounting for more terror deaths than the rest of the world combined. The advance of extremist and insurgent groups has been aided by numerous recent coups, with junta leaders ending security alliances with Western powers they said were exploitative. “The expansion of militant groups within the region… seems to be imminent,” an expert told the BBC.

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9

Milei makes electoral gains

Javier Milei.
Tomas Cuesta/Reuters

Argentine President Javier Milei’s party won a surprising victory in local elections, boosting his movement ahead of midterms this year.Today is a turning point for the ideas of freedom,” the self-described anarcho-capitalist said after his party’s electoral gains in Buenos Aires, historically dominated by the traditional center-right. Milei’s agenda — including drastic cuts to subsidies, helping cool runaway inflation but on which a significant share of the population relied — has gained plaudits abroad, including the near-simultaneous approval of World Bank and IMF loans this year. However they have proved more controversial at home, with his approval ratings dipping, La Nación reported.

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10

Microsoft as infrastructure

A Microsoft office.
Gonzalo Fuentes/File Photo/Reuters

Much of the world runs on decades-old Microsoft products long after they have been discontinued, illustrating how the company — which recently marked 50 years since its founding — has itself become global infrastructure. Some New York hospitals run elevators on 1998’s Windows XP; many ATMs run on Windows NT, launched in 1993. Deutsche Bahn, the German railway system, posted a job listing last year requiring knowledge of MS-DOS, released in 1981, while San Francisco’s light railway needs booting with a DOS floppy disk each morning. Physical hardware such as ATMs or elevators may remain unchanged for decades, and reliability is key, so long-outdated software remains in use: “Windows is the ultimate infrastructure,” one tech professor told the BBC.

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Flagging
  • Indonesia’s president meets Thailand’s prime minister during an official visit to Bangkok.
  • Nvidia’s chief executive is set to announce new products at the annual Computex conference in Taipei.
  • The US Country Music Hall of Fame opens a new Dolly Parton exhibition.
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LRS
The London Review of Substacks

The sweet science

The US government is slashing science funding. That’s extremely shortsighted, argues Gabriel Weinberg, the creator of the search engine DuckDuckGo — but so was the existing budget, which was already far too low. Science is the engine that drives increases in longevity and improvements in health; cutting R&D risks the US falling behind China and losing future wars; science investment makes money, with a roughly 20% annual ROI; and winning the battle against climate change without cutting living standards relies on new technologies, such as energy storage and carbon removal.

Before the White House’s cuts, the federal government invested about $150 billion in R&D annually. What’s the right amount? “I’m not sure exactly,” Weinberg says, “but I’m positive the optimal level is much higher than it is now.” Just from the perspective of keeping pace with China, an extra $500 billion or so from the government, with a roughly equal amount hopefully following from industry, sounds about right, he argues. That would be equivalent to the levels of investment during the 1960s Space Race, around 10% of the federal budget.

The road not taken

US roads are dangerous. Per capita, twice as many die on them as on Greek roads, six times as many as on Japanese. Other rich countries have seen road deaths plummet since around 1980, but US numbers went up: If American roads had improved at the rate of Sweden’s, 25,000 lives would be saved a year. This is a policy choice, argues Abi Olvera in Asterisk. Other countries around the world implemented a set of urban planning decisions — the so-called Safe System — and the US did not. American road users are paying the price.

In Europe, speed limits were lowered — in the Netherlands, the percentage limited to 30km/h, or 18mph, went from 15% in 1998 to 70% in 2008. Fast roads were designed to be intuitive, and to be forgiving of human error, with wide lanes and gentle curves. And European cities clearly distinguish between roads, designed for fast transport, and streets, which prioritize public access. US cities often have “stroads,” thoroughfares “where cars reach high speeds yet must also avoid drivers entering from adjacent businesses and homes.” The majority of fatal crashes happen on “stroads.” The solutions exist, says Olivera: “What’s missing is our collective will to demand them.”

Full steam ahead

Airliners are no faster today than they were in 1970. Slower, if you take Concorde into account. Traffic means that road speeds have decreased. “New buildings, airplanes, bridges, and trains built today are often barely distinguishable from those built decades earlier,” Michael Hopkins writes in Works in Progress, “apart from often costing much more money.” But one area defies the trend toward stagnation: Cruise ships. They continue to get bigger. Last year saw the largest passenger ship ever built, five times the volume of the Titanic, carrying 10,000 people at a population density 70 times that of London.

Passenger ships used to be primarily for transport, built for speed. But with the advent of cheap jet travel, they pivoted to a new offering: Leisure cruises. Since then, freed of the constraint of being streamlined, they have got steadily larger, while building them has got cheaper, as have fares. Big liners are “some of the most impressive pieces of large physical infrastructure [built] this century,” says Hopkins, and have been able to become such because they lack “the rocketing costs and permitting obstacles that face new land-based infrastructure.”

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Semafor Recommends

Siirt Şeref Büryan, Istanbul. Büryan kebabı is slow-cooked lamb or mutton, served in its own fat on fluffy bread; it is “the kind of dish that leaves fingers slick with oil [and] always leaves you thinking about how soon you can have it again,” according to Culinary Backstreets. Some of the best büryan is served at this venue in an open-air market in Fatih, Istanbul: “We would not be exaggerating if we told you that we ate at Siirt Şeref at least once every two weeks for several months,” the reviewer said. See their Instagram page here.

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Semafor Spotlight
A great read from Semafor BusinessTakeshi Niinami
Yoshio Tsunoda/AFLO via Reuters

It’s been 10 years since Takeshi “Tak” Niinami became the first non-family member to lead Suntory, the drinks company behind Yamazaki, Maker’s Mark, and Orangina. In that time, Niinami has advised four Japanese prime ministers, chaired Japan’s top business lobby group, and sat on numerous international CEO councils.

What he calls old-fashioned capitalism hasn’t worked for those in need, Niinami told Semafor’s Andrew Edgecliffe-Johnson: “MAGA is a big lesson to us.” And unless corporate leaders embrace “inclusive” capitalism, they should expect populism to get “worse and worse.”

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