With Donald Trump in charge of the base and Elon Musk in charge of the money, the growing daylight between them had already put Republicans in a bit of a pickle. The president’s one-time right-hand man spent the past week attacking the GOP’s tax-cut bill just as Trump was pushing for its passage. Party members counting on the blessings of both men didn’t know which way to turn.

On Thursday, the conundrum got much worse. Open tweet-war broke out between the 78-year-old Republican and the 53-year-old South Africa native. They traded insults over a range of topics: the pending legislation, why Musk left the White House and how Trump may owe the fact he’s there at all to Musk’s millions. Things quickly escalated as Trump immediately threatened Musk’s contracts and Musk threatened to kneecap a key tool of the US space program. The Tesla CEO even suggested Trump should be impeached for a third time.

Since he stepped away from his “Department of Government Efficiency,” Musk has lambasted the GOP bill—set to push the national debt close to $40 trillion—as a budget-busting “abomination.” Trump, who said he’s “disappointed” by Musk’s sniping, claimed the end of electric-vehicle tax credits (and Tesla’s coming $1.2 billion loss as a result) are what drove his former adjutant away. “Such ingratitude,” Musk retorted. “Without me, Trump would have lost the election, Dems would control the House and the Republicans would be 51-49 in the Senate.”

While there’s always the possibility some of this drama is, well, performative, that last bit is unlikely to be lost on members of Trump’s party. The world’s richest man has already alluded to how Republicans might want to keep his priorities in mind if they like his money. If they end up having to choose between him and Trump, next year’s midterm elections could be unlike any in recent memory. —Jordan Parker Erb and David E. Rovella

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The US trade deficit narrowed in April by the most on record on the largest-ever plunge in imports, illustrating an abrupt end to the massive front-loading of goods by some companies ahead of higher tariffs triggered by Trump’s trade war. The gap in goods and services trade shrank 55.5% from the prior month to $61.6 billion, the smallest since 2023 and more than completely reversing the sharp widening that occurred in the first quarter, according to US government data. The median estimate in a Bloomberg survey of economists was for a $66 billion deficit. Imports of goods and services declined a record 16.3% in April, while exports increased 3%.

More bad news for the US labor market. Applications for US unemployment benefits rose last week to the highest since October, the latest in recent signs that the job market is slowing. Initial claims increased to 247,000 in the week ended May 31. The median forecast in a Bloomberg survey of economists called for 235,000 applications. Recent data and surveys point to a slowdown in economic activity, and sustained jumps in benefit filings in the coming weeks could be a sign more Americans will soon be fired from their jobs. Here’s your markets wrap.

Chinese leader Xi Jinping agreed to further trade talks with Trump as there appeared to be a step-back from recent tensions over rare-earth minerals. Xi invited Trump to visit China, according to a Chinese government statement, and Trump posted on social media he “reciprocated” with an invitation for Xi to visit the US. Trump later said both leaders had accepted the offers.

A US judge ruled that the Trump administration violated the due-process rights of more than 100 Venezuelan men and boys deported to a notorious prison in El Salvador, and they must now get a chance to challenge their removal. US District Judge James Boasberg in Washington found that the Venezuelans—deemed “alien enemies” by Trump under the Alien Enemies Act of 1798—were entitled to notice and an opportunity to challenge their removability before being sent to the El Salvador mega-prison in March.

The legality of Trump’s use of that law—which generally requires a declared war first—is under assault in multiple courts. Investigations by Bloomberg and other media organizations found that the majority of the detainees taken away by American security forces had no US criminal record. In his decision, Boasberg said he would decide later how exactly the administration now must provide notice and opportunity to the Venezuelans.

The European Central Bank lowered its deposit rate by a quarter-point to 2% as it nears the end of its interest-rate cuts, according to President Christine Lagarde. Money markets trimmed wagers on additional cuts, with another quarter-point move no longer seen as a certainty. With inflation below the ECB’s goal for the first time in eight months and only the second since 2021, officials increasingly see their task of taming the region’s biggest spike in prices as almost complete. The big unknown is Trump’s trade war, which has dented confidence in the US and clouded global growth.

Businesses believing that the worst-case tariff scenarios were less likely to become reality helped convince Bank of Canada policymakers to stay on the sidelines this month. That’s according to Deputy Governor Sharon Kozicki in a speech the day after officials held their key interest rate steady at 2.75% for a second straight meeting. “While uncertainty remains high, there was less talk of catastrophic outcomes,” she said. “Firms believed that their worst-case tariff scenarios were much less likely to materialize than they reported earlier this year.” Still, it’s far from a rosy, or certain, outlook. Businesses have now started seeing tariff impacts on their performance and expect activity to weaken in the near-term, putting jobs at risk, she said. They also spoke about their costs rising, adding to inflation risks.

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