Spyre results, updates

 On track for mid-year initiations of planned Phase 2 studies in ulcerative colitis ("UC") and rheumatoid arthritis ("RA"), providing for 7+ proof-of-concept readouts in 2026 & 2027

Reported extended follow-up Phase 1 data for SPY001, supporting that the molecule is well tolerated, has a pharmacokinetic ("PK") profile enabling quarterly or biannual dosing, and provides complete target engagement at expected Phase 2 trough concentrations

Remain on track to report interim Phase 1 data for SPY002 later this quarter, with the potential to demonstrate a product profile superior to first-generation TL1A antibodies

Announced first participant dosed in Phase 1 trial of SPY003, with interim PK and safety data readout on track for the second half of 2025

$565 million of cash, cash equivalents, and marketable securities as of March 31, 2025, with expected runway into the second half of 2028

https://www.prnewswire.com/news-releases/spyre-therapeutics-reports-first-quarter-2025-financial-results-and-provides-corporate-update-302447204.html

Let’s Face It, Dems Have Always Been ‘Dark Woke’

 By now, you’ve probably heard the term “dark woke.” It’s supposed to represent a new, edgy, gloves-off messaging strategy among Democrats.

But what’s new about this? Democrats have always taken the low road.

A recent New York Times feature says “As liberals try to get their groove back, some party insiders say Democratic politicians have been encouraged to embrace a new form of combative rhetoric aimed at winning back voters who have responded to President Trump’s no-holds-barred version of politics.”

An article posted on Yahoo News claims that “While traditional Democrats may still be pushing the idea of reaching across the aisle and finding a way to bring a fractured country together, this online faction is taking the gloves off and going ‘Dark Woke.’”

It’s all supposedly a response to Donald Trump’s abrasive personality.

But who are they kidding? Are we actually supposed to believe that Democrats were polite and deferential before Trump? That they were the ones reaching out to the other side for compromise? That they were the champions of civil discourse?

That’s how Democrats are routinely portrayed by their patrons in the media. But it is laughably detached from reality.

This is the party that, back in the 1960s, attacked a Republican presidential candidate with an ad showing a girl picking petals off a flower only to be obliterated by a nuclear bomb. Ronald Reagan was routinely on the receiving end of vicious attacks from Democrats. In 2003, Charles Krauthammer coined the term “Bush Derangement Syndrome” to describe the unhinged hostility Democrats had for George W. Bush.

In 2009, Rep. Alan Grayson “became an overnight sensation,” according to NPR, “when he said the Republican health care plan was ‘die quickly.’”

Politico, of all places, reported on the vicious tactics Barack Obama used against Mitt Romney in 2012, saying “Obama and his aides have used an arsenal of techniques — personal ridicule, suggestions of ethical misdeeds and aspersions against Romney’s patriotism — that many voters and commentators claim to abhor.”

It was Democrats who attacked a Republican Medicare reform plan by showing a lawmaker pushing a grandmother off a cliff.

During Trump’s first term, Rep. Maxine Waters told protesters to “get more confrontational” and in another instance told supporters to “push back on” Trump Cabinet members, and “tell them they’re not welcome anymore, anywhere.”

When Joe Biden was pretending to be president, he told donors in a private call that it was “time to put Trump in the bull’s-eye” and called Trump supporters semi-fascists.

It’s Democrats who are constantly calling their political opponents evil, racist, deplorable, greedy, fascists who don’t deserve to live. There’s a montage posted on Instagram in 2023 of prominent Democrats explicitly calling for violence against Republicans. It is several minutes long.

Do Republicans resort to harsh rhetoric and campaign tactics on occasion? Sure. But we’d argue that Democrats are far more likely to do so, and far more furious in their attacks, and far dirtier in their tactics because they crave political power so much more than do Republicans. In fact, the reason Trump stands out and raises so much ire — especially among establishment, Queensberry Rules Republicans — is precisely because he’s uniquely unafraid to punch back just as hard.

In any case, the idea that Democrats have until now been taking the high road is one of the biggest of Big Lies we’ve ever heard.

The only thing “new” is that some Democrats are admitting to what they are up to.

https://issuesinsights.com/2025/05/09/lets-face-it-dems-have-always-been-dark-woke/

California Fire Departments Fleece American Taxpayers

 With Republicans looking to cut federal spending and reduce the national debt, many are worried that Medicaid could be on the chopping block. President Donald Trump has said he doesn’t want to cut Medicaid spending, outside of “fraud,” but some GOP fiscal hawks may not be entirely comfortable with stopping there, especially if it means raising the debt ceiling again.

Interestingly enough, it was the recent fires that ravaged Los Angeles that helped reveal a state Medicaid scheme that fire departments have been plugging to backfill their hefty pensions. Some of the budget issues and mismanagement were brought to light as the local fire departments struggled to contain the fires, and people started to ask questions about where their tens of millions in taxpayer dollars were actually going.

One questionable political development in the aftermath of this crisis has emerged: Los Angeles City Council is expected to add $27 million to the fire department’s budget this year, “for the transportation of MediCal patients by city paramedics, a service that will be reimbursed by the state.”

First, some background on why this is relevant. In 2022, the Centers for Medicare & Medicaid Services (CMS), overseen by Secretary of Health and Human Services Californian Xavier Becerra under President Biden, approved California’s request to significantly increase Ground Emergency Medical Transportation (GEMT) reimbursement rates for public providers (i.e. local fire departments). This raised the per-trip rate of an ambulance ride from approximately $120 to over $1,000, a ninefold jump.

This reimbursement from the federal governments to California is called an intergovernmental transfer (IGT), where the local and state governments report the cost of something to the federal government to then be reimbursed. However, this massive expansion of the reimbursement rate applies only to public providers (e.g., fire departments, county EMS), not private ambulance companies, despite the latter handling over 70 percent of California’s ambulance rides. Private providers remain capped at lower Medi-Cal base rates (roughly $120–$250/trip).

Essentially, government ambulances were granted higher Medicaid reimbursements, allowing them to charge more for ambulance rides, burdening taxpayers across the country with the costs, and then using those extra tax dollars for whatever they want. Leave it to the disastrous political leadership in Sacramento to get creative when it comes to patching budget holes caused by their own overspending.

As a result, counties that previously used less expensive and more effective private ambulance services, have dismissed these private companies and transferred the contracts to local fire departments to provide EMS on their own, regardless of cost of patient outcome.

According to the California fire industry, the estimated cost for this program could reach $2 billion with federal taxpayers footing much of the bill outside the state. Some of these funds reportedly shore up underfunded pensions rather than enhance services.

States like Illinois, Arizona, New Mexico, and others are “cashing in” on IGTs for GEMT, mirroring California’s approach to secure higher Medicaid reimbursements for public EMS providers.  The practice leverages federal matching to offset local EMS burdens. For precise figures, state Medicaid plans or CMS data would be needed. However, GAO estimates suggest 15–25 states use IGTs for GEMT or similar programs. Total costs could range from $1.69 billion to $12.17 billion annually, depending on trip volumes and rates.

Proponents argue that increased revenue strengthens EMS infrastructure—by hiring paramedics, upgrading ambulances, or expanding training—indirectly benefiting patients. Unfortunately in California’s case, this magic revenue stream is not dedicated to health care. California fire departments are using inflated EMS reimbursements to backfill their government employee  pensions, which have been underwater for years.  It shouldn’t surprise anyone that fire departments are finding new “revenue streams” by inflating the cost of ambulance rides and collecting checks to bolster their bankrupt pensions.   These schemes, rooted in Medicaid’s joint financing, highlight a tension between state fiscal strategies and equitable healthcare funding, with billions annually at stake.

Definitive tracking requires CMS or state-specific audits; however, the trend is clear and widespread. If Republicans are looking for specific instances of fraud to investigate for Medicaid cuts, these intergovernmental transfers would be a great place to start.

Robert Goldberg is Vice President of The Center for Medicine in the Public Interest  

https://www.realclearhealth.com/articles/2025/05/09/california_fire_departments_fleece_american_taxpayers_1109253.html

Foreign Drug Pricing Policy Creates Unfavorable American Outcomes

 There’s no question that the budget reconciliation process is one of the most politically complex tasks Congress undertakes. But the pressure to pass a package cannot justify bad policy—especially when it threatens patient access, undermines American innovation, and invites foreign price-setting into our healthcare system.

That’s exactly what would happen under the “Most Favored Nation” (MFN) policy now being considered. MFN would tie Medicaid drug rebates to the lowest prices paid by foreign countries—many of which operate socialized, single-payer systems where bureaucrats dictate prices and patients wait months, even years, for access to new treatments.

Most Medicaid patients already pay less than $8 for their medicines today. Despite being sold as a pro-patient policy, MFN does nothing to further decrease these already low costs or improve access to care. Compared to Americans, patients living in countries that have adopted government price controls on pharmaceutical treatments consistently have access to fewer innovative medicines. Imposing those same price controls in the U.S. would create similar challenges for Americans looking to access vital treatments in order to stay healthy, independent, and in the workforce.

Tying our system to socialist models abroad means importing the same treatment delays and access restrictions that plague those countries. Patients with cancer, rare diseases, or other serious conditions could be the first to suffer.

Because Medicaid rebates impact the 340B Drug Pricing Program—a federal safety net program intended to help vulnerable patients access care—patients, employers, and taxpayers could all see increased costs through the inclusion of MFN in the Medicaid rebate formula. The 340B program requires pharmaceutical manufacturers participating in Medicaid to provide drugs at steep discounts to hospitals, clinics, and other entities serving a disproportionate number of low-income and uninsured patients. 340B prices are set based on rebates required in Medicaid.

Since its establishment in the early 90s, loopholes in the 340B statute have enabled covered entities to use the program as a profit center. Nationally, the 340B program is already driving up costs for employer-sponsored healthcare plans by up to $5.2 billion. MFN would exacerbate perverse incentives within the 340B program by enabling greater markups of drugs purchased at a discount by hospitals to the detriment of employers and taxpayers.

The U.S. is the global leader in pharmaceutical innovation. By hitting this thriving sector, MFN weakens U.S. competition and leadership just as China is growing its influence. In the past five years, China’s share of global clinical trials has increased from 10% to 15% of the worldwide share—an increase of 57%. China has also generated a 200.9% increase in drug development since 2019.

Recently, biopharmaceutical companies have announced more than $150 billion in U.S. investments. An MFN policy will only put these gains, and the benefits of homegrown innovation, at risk.

The damage wouldn’t stop with Medicaid. If manufacturers are forced to sell drugs at unsustainably low prices, they may pull out of the Medicaid market altogether. That would trigger ripple effects into Medicare Part B, where manufacturers are required to participate in Medicaid for their drugs to be reimbursed. Seniors could lose access to lifesaving treatments. That’s a risk too big to ignore.

MFN would also gut a key policy win from the Trump administration: the massive return of pharmaceutical investment to the United States. Since his election, companies have announced a whopping $230 billion in U.S.-based manufacturing and research projects. MFN threatens to undermine that momentum and hand a strategic advantage to nations like China and India, which are aggressively scaling their domestic biotech industries.

The U.S. biopharmaceutical sector is one of our greatest national assets. Nearly two-thirds of all new medicines developed in the last decade came from American firms. That leadership is only possible because our system rewards innovation. Replacing it with a price control model borrowed from European bureaucrats will crush investment and slow the development of new cures.

Even worse, American taxpayers already shoulder a disproportionate share of the cost of drug development, while wealthy countries underpay and benefit from our innovations. MFN would effectively lock in this freeloading by forcing U.S. prices down to their subsidized levels—making it even harder for American companies to recoup R&D investments. That’s not reform. It’s surrender.

There are smarter, targeted ways to reduce healthcare costs without sacrificing patient access or innovation. Congress should:

• Eliminate Medicaid loopholes and wasteful spending by requiring more frequent eligibility checks, ending special treatment for able-bodied adults, and cracking down on provider tax schemes that inflate federal payments.
• Rein in pharmacy benefit managers (PBMs)—the middlemen who pocket massive rebates while patients pay more at the counter. Any serious reform must include transparency and accountability for PBMs.
• Fix the 340B program, which was designed as a safety net but is now exploited by hospitals to mark up drugs and pad profits—driving up costs for employers and taxpayers. MFN would make this problem worse by further distorting rebate calculations.

We’ve already seen the harmful effects of price control policies in the Inflation Reduction Act. MFN would build on those failures—further shrinking access and disincentivizing future cures for cancer, Alzheimer’s and other chronic diseases. And it would do so by handing pricing authority to foreign governments that don't answer to the American people.

This is a critical moment. Policymakers must choose between protecting American innovation and autonomy or importing failed socialist models that put bureaucrats in charge of healthcare decisions.

If Congress is serious about affordability, competition, and patient access, it should reject the MFN model and pursue reforms that put patients—not foreign price-setters—in charge.

Andrew Langer is Executive Director of the Coalition Against Socialized Medicine

https://www.realclearpolicy.com/articles/2025/05/09/foreign_drug_pricing_policy_creates_unfavorable_american_outcomes_1109180.html

What's next for Rite Aid stores

 Rite Aid, which filed for bankruptcy twice in two years, will potentially close dozens of additional locations.

The pharmacy chain, which shuttered hundreds of its locations during its first bankruptcy proceeding, is now expected to close 47 stores due to a variety of factors, including financial underperformance and lack of interest from potential buyers. The company has already sold or closed 29 retail locations and entered into agreements to sell the prescription files of 63 additional stores.

It is an about-face from 2023, when the company operated thousands of locations around the U.S. Since then, the debt-laden company has significantly reduced the size of its footprint as part of its turnaround strategy.

Rivals CVS and Walgreens have also initiated closures in recent years as the industry rightsizes itself. According to George Hill, managing director and senior equity research analyst at Deutsche Bank, the industry watched the continued growth and capacity building in the pharmacy space, which Hill said "didn't necessarily make a ton of sense."

Customers inside a Rite Aid store in New York. (Bing Guan/Bloomberg via Getty Images / Getty Images)

Hill said that the "industry seemed to be growing footprints and locations kind of faster than the need for pharmacies was growing." 

Sarah Foss, head of legal at Debtwire, told FOX Business that while there is a "limited market for Rite Aid’s valuable pharmacy assets as they may generally only be sold to a licensed and registered pharmacy, the company has said that it has had significant interest from potential buyers." 

This is key, according to Foss, who noted that a "long, drawn-out sale process could be the death knell for Rite Aid as the value of the company’s assets can deteriorate quickly." 

This could especially happen if pharmacy customers choose to go elsewhere during this process, Foss added. 

A customer inside a Rite Aid store in New York. (Bing Guan/Bloomberg via Getty Images / Getty Images)

Foss said the sale process itself is to happen at lightning speed with an auction set for no later than May 14 for the pharmacy assets and June 20 for the rest of Rite Aid’s assets. The bankruptcy court approval of the sales is expected to come approximately a week later. 

"A court-approved auction and sale process inside of the protections of bankruptcy can offer several advantages from both a buyer and seller’s perspective in this type of situation, allowing for an expedited sale transaction in which buyers can purchase assets free and clear of liens, claims and encumbrances in a transparent process," Foss added. 

Rite Aid, which filed for bankruptcy twice in two years, will potentially close dozens of additional locations. (Michael M. Santiago / Getty Images)

Rite Aid marks the 14th company to file for Chapter 11 for a second time since the beginning of 2024 and is the fifth one in 2025.

https://www.foxbusiness.com/retail/rite-aid-files-bankruptcy-whats-next-its-stores

Arizona Becomes Second State To Establish Strategic Bitcoin Reserve

 by Oscar Zarrage Perez via BitcoinMagazine.com,

Arizona has made history by becoming the second state in the U.S. to create a Strategic Bitcoin Reserve. 

On Thursday, Governor Katie Hobbs signed House Bill 2749 into law, officially launching the Arizona Bitcoin & Digital Assets Reserve, a pioneering move that channels profits from unclaimed property into Bitcoin and other top-tier digital assets.

The bill outlines several key features:

• Redirection of unclaimed-property profits toward Bitcoin and other digital assets

• Use of interest, staking rewards, and airdrops from abandoned property to fund strategic acquisitions

• Strong diversification rules, ensuring Bitcoin supplements — but doesn’t dominate — Arizona’s investment portfolio

• Mandated U.S.-regulated custody for the assets

• Clear implementation steps that allow the state to begin purchasing digital assets and “stacking sats”

• Native Bitcoin redemption, which means lost Bitcoin can be returned in BTC rather than U.S. dollars

The law positions Arizona alongside New Hampshire in transforming idle state assets into potentially appreciating stores of value. By putting otherwise unused funds to work, the state is taking a strategic, forward-looking approach to safeguard its treasury without raising taxes or using the general fund.

“Arizona just showed the country how to turn forgotten assets into a fortress against inflation,” said Dennis Porter, CEO and Co-Founder of the Satoshi Action Fund, a key advocate for the bill. 

“With HB 2749, lawmakers converted dormant dollars into digital gold — without touching the taxpayer’s pocket. It’s a win for fiscal responsibility and for every Arizonan who believes in sound money.”

Cryptocurrency exchange Coinbase also played a role by offering expert testimony that helped propel the bill through legislative hurdles, according to Satoshi Action Fund. Their involvement gave lawmakers a clearer understanding of the financial and technological implications of Bitcoin-based reserves.

Representative Jeff Weninger (R-Chandler), the bill’s sponsor, was credited with tirelessly shepherding the legislation from its early draft stages through multiple committee hearings, stakeholder meetings, and floor votes, ultimately securing bipartisan support and ensuring its successful passage into law.

“Digital assets aren’t the future—they’re the present,” said Weninger. 

“This law ensures Arizona doesn’t leave value sitting on the table and puts us in a position to lead the country in how we secure, manage, and ultimately benefit from abandoned digital currency. We’ve built a structure that protects property rights, respects ownership, and gives the state tools to account for a new category of value in the economy. It’s exactly the kind of policy we should be leading on—modern, precise, and built with an understanding of where technology and finance are heading.”

The Satoshi Action Fund, which helped draft and advocate for HB 2749, has become a leading voice in Bitcoin policy. To date, the organization has contributed to the passage of eight pro-Bitcoin laws and inspired more than 20 additional legislative efforts across the country.

https://www.zerohedge.com/crypto/arizona-becomes-second-state-establish-strategic-bitcoin-reserve

'Fear Of Economic Collapse Forced China To Negotiate With Trump, Quietly Reach Out First: Reuters'

 Three weeks ago, when we first reported that as a result of the ongoing Trump trade war with China, "chinese factories are shutting down, laying off workers", we said that as a result of this war of attrition in which the outcome of every incremental clash and battle will be used just as aggressively for media propaganda, "the fact that any marginal pain will be amplified as trade war weakness will mean that Beijing will do everything in its power to prevent the full extent of the shutdowns from being revealed."

Sure enough, last week the WSJ reported that whereas "not long ago, anyone could comb through a wide range of official data from China... then it started to disappear." 

We detailed the unprecedented disappearance of Chinese "data", fake as it traditionally may have been, earlier this week. But while we had our theories why China quietly vaporized hundreds of data sets - naturally one wouldn't be deleting the data if it was good, or could at least be massaged in a credible way - it was not until today when a Reuters report confirmed what we said from day one, namely that in the long run China's economy has more to lose than the US, where the hit would be faster but would focus primarily on the market, and once the initial selloff shock wears off leverage would swing to benefit the White House.

And just as we supposed, Beijing's unprecedented propaganda campaign, it was the cracks in the economy that forced Xi to the negotiating. According to the Reuters report, "since U.S. President Donald Trump imposed steep tariffs on China last month, Beijing had responded in kind. On state and social media, it posted images of Mao Zedong, lambasted "imperialists," and sent a message: capitulation to bullies is dangerous, and it wouldn't back down."

But behind closed doors, China was quietly preparing to do just that, and Reuters reports that according three sources, officials had grown "increasingly alarmed about tariffs' impact on the economy and the risk of isolation as China's trading partners have started negotiating deals with Washington."

China's reasons for deciding to negotiate, Washington's letter on fentanyl, U.S. diplomatic challenges in Beijing, and the early outreach between the two sides are reported by Reuters for the first time, based on interviews with nearly a dozen government officials and experts on both sides.

As usual, China's diplomatic efforts had two faces, one for popular domestic consumption, and one for private engagement with the adversary, in this case the US. 

Sure enough, China's foreign ministry said in a statement to Reuters that it reiterated that "China's firm opposition to the U.S. abuse of tariffs is consistent and clear, and there is no change."  It added that "the U.S. has ignored China's goodwill and unreasonably imposed tariffs on China under the pretext of fentanyl. This is a typical act of bullying, which seriously undermines dialogue and cooperation between the two sides in the field of drug control."

In retrospect, the pretext may have been "fentanyl" but as we learn in a follow up report today from the WSJ, it was anything but a facade: according to the Journal, Xi Jinping is sending his top public-security aide to Switzerland as part of Beijing’s trade talks with Washington, signaling the importance of the fentanyl issue to bilateral relations.

Wang Xiaohong, who is the minister of public security and a senior leader within the State Council, China’s cabinet, will be part of the Chinese delegation led by Vice Premier He Lifeng, a trusted aide to Xi and a gatekeeper to the world’s second-largest economy.... Xi has designated Wang, a close lieutenant, as the point person in Beijing’s recent discussions with Washington over how to address President Trump’s concerns about China’s role in the fentanyl trade, The Wall Street Journal has reported, helping pave the way for the weekend trade talks.

So no, the US had not "ignored China's goodwill", and judging by Xi's response, clearly the issue of fentanyl is a very serious one, and more importantly, one which will allow Trump to score a quick and easy victory over the weekend, one which will further demonstrate the Trump admin's growing leverage in the ongoing negotiations.

But back to the Reuters report, according to which China's Vice Foreign Minister Hua Chunying said on Friday that China has full confidence in its ability to manage U.S. trade issues, adding that "the Trump administration's approach cannot be sustained." Once again, however, we learn that it was China's approach which was far more unsustainable.

The trade war between the world's two largest economies, combined with Trump's decision last month to impose duties on dozens of other countries, has disrupted supply chains, unsettled financial markets and stoked fears of a sharp downturn in global growth.

After Trump's tariff salvo last month, China took a hard line in its public messaging. Beijing posted footage on its official social media feeds of a Chinese MiG-15 fighter shooting down a U.S. jet in the Korean War, with commentary: "China won't kneel down, because we know standing up for ourselves keeps the possibility of cooperation alive, while compromise snuffs it out." The tone began to shift on April 30, when a state media-affiliated blog said the U.S. had "proactively reached out to China through multiple channels, hoping to discuss tariffs", commentary which according to the White House was a lie. Meanwhile, China was adamantly denying that there were any discussions taking place about trade talks, which was also a lie as just a day later we learned that discussions were in fact taking place ahead of this weekend's trade talks.

CSIS's Kennedy said contacts between Chinese agencies, Beijing's embassy in Washington and the Trump administration had been increasing in frequency in recent weeks. Some in-person interactions took place at the International Monetary Fund and World Bank meetings in late April, including with Treasury Secretary Scott Bessent, which paved the way for the Swiss meeting, said Kennedy, confirming what we reported two weeks ago ( see "Chinese Delegation Spotted Entering Treasury Department, Demands Photos Be Deleted: Report".)

More importantly, we also learn today that it was China that first reached out, more than a month ago.

After Trump's "Liberation Day" tariffs, Reuters reports that Chinese Commerce Minister Wang Wentao quietly reached out to his U.S. counterpart, Howard Lutnick, but was rebuffed as not senior enough, according to one official familiar with the exchanges. While Trump has been pushing for direct talks with Chinese President Xi Jinping, China had originally rejected that idea as not in keeping with its traditional approach of working out the details first before the leaders sign any deal, according to public statements by both sides. Which is why after the original Chinese overture was shut down, both sides engaged in unprecedented diplomatic jingoism to deflect attention from the failure to pursue a diplomatic solution.

There's more: another significant factor for China was Trump's public berating of Ukrainian President Volodymyr Zelenskiy in February, said one of the sources, adding that any unscripted hostile interaction between the U.S. and Chinese leaders would represent an unacceptable loss of face for Xi.

But as messaging on both sides grew more conciliatory, China decided to put forward its vice premier and Xi confidant He Lifeng, whose direct predecessor struck the "Phase One" trade deal with the U.S. in 2019.

The move satisfied Washington's demands for substantive talks with a senior official with direct access to Xi, but avoided exposing the Chinese leader to potential embarrassment, said one of the sources.

As for the choice of venue, the Swiss foreign ministry said that "during its recent contacts in Washington and Beijing, Switzerland expressed to the U.S. and Chinese authorities its willingness to organize a meeting between the two parties in Geneva."

And while that addresses the how and where, the big question is why? And what is key about the Reuters report is that it confirms what we had reported all throughout the first month of the trade war, namely that "the main drivers of Beijing's climb-down were internal signals that Chinese companies were struggling to avoid bankruptcies and to replace the U.S. market, three people familiar with the Chinese government's thinking said."

Some segments feeling immediate impact were furniture and toy makers, as well as textiles, one of the officials told Reuters. US diplomats in China had also been closely monitoring factory closures, strikes, and job losses in the industrial heartland in southern China, all of which were deteriorating rapidly, and confirming that Trump's gambit had worked.

Many analysts have downgraded their 2025 economic growth forecasts for China, and Goldman and Nomura warned the trade war could cost it up to 16 million jobs. Earlier this week, admitting just how bad the local economy had gotten, China's central bank this week announced fresh monetary stimulus (while the Fed did nothing).

One of the officials said Chinese companies were struggling to replace the U.S. market because developing nations cannot buy as many items, and that for many firms "this was an existential threat that needed to be resolved in days or weeks."

In addition, Beijing - which had made loud noises warning its "allies" not to engage in negotiations with the US - was worried it was left without a place at the negotiating table while its major trading partners, such as Vietnam, India and Japan, began talks with Washington, said two officials familiar with Beijing's thinking.

In a warning to the countries negotiating with the U.S., China's commerce ministry said in a statement this week that "appeasement cannot bring peace, compromise cannot be respected, and adhering to principled positions and upholding fairness and justice is the right way to safeguard one's own interests." The statement did nothing to change the direction of negotiations.

In Geneva, Beijing appears to have modest expectations, and certainly now after a report confirming that Trump indeed has the upper hand.

Internally, China has downgraded the talks from a higher level to merely a meeting, reflecting its view that the discussions will be mostly about finding out Washington's demands and red lines after weeks of contradictory messages by Trump and other senior U.S. officials, according to a person familiar with the matter.  Still, one official said China could draw on its extensive toolbox and follow Asian neighbors in offering to buy more American liquefied natural gas, a step which could be seen as capitulation - and thus devastating to Xi's reputation - unless it is offset by some action by Trump.

On the table may also be purchases of agricultural goods, similar to the 2019 "Phase One" deal during Trump's first term. At the time, Beijing said it would increase purchases of U.S. agricultural products by $32 billion over two years. While other matters like the U.S.'s axing of the "de minimis" exemption for packages under $800 from China and the sale of TikTok are also likely to play a part in the broader talks, Chinese officials said they do not expect them to play a central role this weekend.

Even before triggering the broader trade war, Trump imposed a 20% tariff on Chinese goods, saying Beijing wasn't doing enough to counter the flow of chemicals used to produce the deadly drug fentanyl. One of the moves that complicated the rapprochement, according to two officials, was a letter sent by the U.S. to China in late April that outlined the steps Trump wanted Beijing to take on fentanyl.

The document, reviewed by Reuters, caused friction with Beijing because it referenced a congressional report that asserted China, through value-added tax rebates for exporters, directly subsidizes production of fentanyl precursors for sale abroad. China denies it does so, although following the WSJ report, it appears that it actually does so.

The letter, sent to the ministries of foreign affairs, commerce, and public security, called on Beijing to publicize the crackdown on fentanyl precursors on the front page of the Communist Party mouthpiece People's Daily; send a similar message through "internal party channels" to party members; tighten regulation of some specified chemicals; and deepen law-enforcement cooperation.

Two officials familiar with China's reaction said it found especially the first two points "arrogant" because Beijing saw it as the U.S. dictating what China should do within its ruling apparatus. 

Of course, we now know that fentanyl would feature prominently in the Geneva talks and that the U.S. government's opening position would be to present the four points to China. A U.S. official familiar with the letter said the Trump administration simply wanted China to curb the flow of fentanyl precursors to drug cartels, in a move that would allow Xi to save some face.

Which is not to say that the US approach in the negotiations has been seamless. Complicating the negotiations, Trump's Washington team has frozen out many U.S. embassy officials responsible for earlier contacts with Chinese counterparts, two people familiar with the matter said. Trump's new ambassador to China, David Perdue, is slated to arrive in Beijing next week, but Deputy Chief of Mission Sarah Beran, who served as a senior official on China in the Biden administration's National Security Council, was removed from her post this week, the two officials said. 

The turmoil has resulted in lack of internal consultations on demands put forward by the American side, the officials said. An official familiar with Chinese thinking said there had been minimal contact with the U.S. embassy ahead of the Geneva talks.

In the end, however, both sides are about to sit down, and now that it is clear just how more powerful the economic hit to China has been - bizarrely receiving virtually no coverage by the anti-Trump American press which has been acting as if it works on behalf of Beijing for the past month - and how big the imbalance in political leverage between the US and China is, expect Trump to push for a quick, easy win and proceed from there with detailed negotiations that will likely take much of the next 2-3 years, and where every modest victory will be used to wash out any and all incremental market shorts, just as we saw during the first Trade War of 2018-2019.

https://www.zerohedge.com/markets/fear-economic-collapse-forced-china-negotiate-trump-quietly-reach-out-first-reuters-report