Trump Plans to Appoint Musk Confidant David Sacks as AI, Crypto Czar

President-elect Donald Trump named a Silicon Valley investor close to Elon Musk as the White House’s artificial intelligence and cryptocurrency policy chief, signaling the growing influence of tech leaders and loyalists in the new administration .

David Sacks , a former PayPal executive, will serve as the “White House A.I. & Crypto Czar,” Trump said on his social-media platform Truth Social.

“In this important role, David will guide policy for the Administration in Artificial Intelligence and Cryptocurrency, two areas critical to the future of American competitiveness,” he posted.

Musk and Vice President-elect JD Vance chimed in with congratulatory messages on X.

Sacks was one of the first vocal supporters of Trump in Silicon Valley, a region that typically leans Democratic. He hosted a fundraiser for Trump in San Francisco in June that raised more than $12 million for Trump’s campaign. Sacks often used his “All-In” podcast to broadcast his support for the Republican’s cause.

The fundraiser drew several cryptocurrency executives and tech investors. Some attendees were concerned that America could lose its competitiveness in emerging areas such as artificial intelligence because of overregulation.

Many tech leaders had hoped the next president would have a friendlier stance on cryptocurrencies, which had come under scrutiny during the Biden administration.

“What the crypto industry has been asking for more than anything else is a clear legal framework to operate under. If Trump wins, the industry will get this, and more innovation will happen in the U.S.,” Sacks posted on X in July.

The tech industry has also pressed for friendlier federal policies around AI and successfully lobbied to quash a California AI bill industry leaders said would kill innovation.

Sacks’ venture-capital firm, Craft Ventures, has invested in crypto and AI startups. Sacks himself has led investment rounds in many. He has previously invested in companies such as Slack, SpaceX, Uber and Facebook.

Sacks was the former chief operating officer of PayPal, whose founders included Musk and Peter Thiel . The group, called the “PayPal mafia,” has been front and center this election because of its financial muscle and influence in drumming up support for Trump.

Office Conversions Find New Life After Property Values Plunge

Developer efforts to convert emptying office towers into residential buildings have largely gone nowhere. That may be finally changing.

The prospect of transforming unused office space into much-needed housing seemed a logical way to resolve both issues. But few conversions moved forward because the cost of acquiring even an aging office building remained too high for the economics to pencil out.

Now that office vacancy has reached record levels, sellers are willing to take what they can. That has caused values to plunge for nothing-special buildings in second-rate locations, making the numbers on many of those properties now viable for conversions.

Seventy-three U.S. conversion projects have been completed this year, slightly up from 63 in 2023, according to real-estate services firm CBRE Group. But another 309 projects are planned or under way with about three-quarters of them office to residential. In all, about 38,000 units are in the works, CBRE said.

“The pipeline keeps replenishing itself,” said Julie Whelan , CBRE’s senior vice president of research.

In the first six months of this year, half of the $1.12 billion in Manhattan office-building purchases were by developers planning conversion projects, according to Ariel Property Advisors.

While New York,  Chicago  and Washington, D.C., are  leading the way, conversions also are popping up in Cincinnati, Phoenix, Houston and Dallas. A venture of General Motors and Bedrock announced Monday a sweeping redevelopment of Detroit’s famed Renaissance Center that includes converting one of its office buildings into apartments and a hotel.

In Cleveland, 12% of its total office inventory is either undergoing conversions or is planned for conversion. Many projects there are clustered around the city’s 10-acre Public Square. The former transit hub went through a $50 million upgrade about 10 years ago, adding fountains, an amphitheater and green paths.

“You end up with so much space that you paid so little for, that you can create amenities that you would never build if you were doing new construction,” said Daniel Neidich, chief executive of Dune Real Estate Partners, a private-equity firm that has teamed up with developer TF Cornerstone to invest $1 billion on about 20 conversion projects throughout the U.S. in the next three years.

Conversions won’t solve the office crisis, or make much of a dent in the U.S. housing shortage . And many obsolete office buildings don’t work as conversion projects because their floors are too big or due to other design issues. The 71 million square feet of conversions that are planned or under way only account for 1.7% of U.S. office inventory, CBRE said.

But city planners believe that conversions will play an important part in revitalising depressed business districts, which have been hollowed out by weak return-to-office rates in many places.

And developers are starting to find ways around longstanding obstacles in larger buildings. A venture led by GFP Real Estate is installing two light wells in a Manhattan office-conversion project at 25 Water St. to ensure that all the apartments will get sufficient light and air.

Cities such as Chicago, Washington, D.C., and Calgary, Alberta, have started to roll out new subsidies, tax breaks and other incentives to boost conversions.

The projects are breathing new life into iconic properties that no longer work as office buildings. The Flatiron Building in New York will be redeveloped into condominiums. In Cincinnati, the owner of the Union Central Life Insurance Building is converting it into more than 280 units of housing with a rooftop pool, health club and commercial space.

In the first couple of years of the pandemic, office building owners were able to hold on to their properties because of government assistance and because tenants continued to pay rent under long-term leases.

As leases matured and demand remained anaemic, landlords began to capitulate and dump buildings at enormous discounts to peak values. In Washington, D.C., for example, Post Brothers last year paid about $66 million for 2100 M Street, which had sold for as much as $150 million in 2007.

Washington, D.C., has been particularly hard hit by the office downturn because the federal government has been especially permissive in allowing employees to work from home .

“We’re able to make it work as a conversion because it was no longer priced as though it could be repositioned as office,” said Matt Pestronk , Post’s president and co-founder.

Increasingly, more deals are taking place behind the scenes as converters reach deals with creditors to buy debt on troubled office buildings and then push out the owners. GFP Real Estate reduced costs of its $240 million conversion of 25 Water Street by buying the debt at a discount and cutting deals with tenants to exit the building before their leases matured.

One of the first projects planned by the venture of Dune and TF Cornerstone likely will be the Wanamaker Building in Philadelphia. TF Cornerstone just purchased the debt on the office space in the building and is in the process of taking title.

“The banks are foreclosing and doing short sales,” said Neidich, Dune’s CEO. “There’s a ton of it going on.”

In Washington, D.C., a conversion of the old Peace Corps headquarters building near Dupont Circle is 70% leased just four months after opening, said developer Gary Cohen . Rents are higher than expected.

“If that’s the way to get people downtown, that’s what we have to do,” Cohen said.

Not all developers agree that the economics of conversions work, even at today’s low prices. Miki Naftali , who has converted more than five New York properties over the years, said he has been very actively looking at conversion candidates but hasn’t yet found a deal that works financially.

One of the issues facing converters is that even if an office building is dying, it often has a few existing tenants who would need to be relocated. Some buildings would need atriums to ensure that all the apartments have sufficient light and air.

“When you start to add everything up, if your costs get close to new construction, that’s when you get to the point that it doesn’t make financial sense,” Naftali said.

Some landlords are including clauses in leases that give them the right to evict tenants to make room for a major conversion. Others are keeping a small ownership stake when they sell buildings so that they can learn the conversion process for future buildings.

“The world is looking at these assets in a different way,” said developer William Rudin , whose company decided to learn the conversion process by keeping a stake in 55 Broad Street, a downtown New York office building it sold last year to a converter.

Hong Kong Is Becoming Hub for Financial Crime, U.S. Lawmakers Say

Leading China hawks in the U.S. House of Representatives are calling for a rethink on whether Hong Kong should continue to enjoy the cozy banking relationship it has with the U.S., saying the city is becoming a hub for money-laundering and sanctions evasion.

Hong Kong has turned into a major centre for the export of controlled Western technology to Russia; the creation of front companies to buy Iranian oil; the managing of “ghost ships” that serve North Korea, as well as other violations of U.S. trade controls, the bipartisan leaders of the House Select Committee on the Chinese Communist Party said in a letter to Treasury Secretary Janet Yellen .

The letter was signed by Rep. John Moolenaar , a Michigan Republican who chairs the committee, and Rep. Raja Krishnamoorthi , an Illinois Democrat who is the committee’s ranking member. The Wall Street Journal reviewed a draft of the letter, which was publicly released Monday.

“Hong Kong has shifted from a trusted global financial centre to a critical player in the deepening authoritarian axis of the People’s Republic of China, Iran, Russia and North Korea,” the lawmakers said. “We must now question whether longstanding U.S. policy towards Hong Kong, particularly towards its financial and banking sector, is appropriate.”

The lawmakers cited research, for example, that shows that nearly 40% of goods shipped from Hong Kong to Russia in 2023 were high-priority items such as semiconductors that Russia could use to prosecute its war in Ukraine.

Both lawmakers have worked extensively in the past with President-elect Donald Trump ’s pick for secretary of state, Sen. Marco Rubio of Florida, on China-related issues, including efforts to force TikTok’s Chinese owners to sell the app.

The allegation that Hong Kong is a money-laundering hub is unfounded, a spokesman for the Hong Kong government said. The spokesman added that Hong Kong has a vigorous enforcement system to prevent the illegal diversion of strategic commodities. A representative for Yellen didn’t respond to a request for comment.

The two lawmakers, whose committee focuses on competition with China and frequently makes bipartisan calls for a tougher approach to the country, asked Treasury for information on how it intends to combat money-laundering and sanctions evasion that use Hong Kong’s financial system.

Hong Kong, which has a special status within China, has seen its role as a global financial hub increasingly come into question as Beijing has muscled the city closer into its orbit, driving an exodus of expatriates. U.S. officials in particular have condemned Hong Kong authorities’ crackdown on dissidents under a tough national security law, though many Western banks have continued to do some business there.

Last week, a court in Hong Kong sentenced dozens of pro-democracy advocates for what Communist Party leadership viewed as subversion under that law. The Biden administration has called for their immediate and unconditional release. The government of the Hong Kong special administrative region said attacks on the “fair and open” sentencing are smears.

The same day, a Hong Kong government-sponsored financial summit played host to a number of global financial leaders, including Goldman Sachs Chairman David Solomon , Citi Chief Executive Jane Fraser and State Street CEO Ronald O’Hanley , according to a program of the event. Leaders from HSBC , BNP Paribas and other institutions also attended.

Banking leaders didn’t publicly discuss the court proceedings on the summit’s panels. A spokesman for State Street confirmed O’Hanley’s attendance. A spokeswoman for Citi declined to comment. Representatives for the other banks didn’t respond to requests for comment.

Earlier this month, Moolenaar and Krishnamoorthi called on the Biden administration to sanction Hong Kong police, judges and prosecutors for their role in the arbitrary detentions of human-rights activists.

What’s Flying Higher Than Bitcoin? The Software Company Buying Up Bitcoin

Bitcoin prices have surged about 40% since Election Day. MicroStrategy has climbed even faster.

The software company turned itself into a bitcoin buying machine in 2020 and now holds some $37 billion worth of tokens. For many individual investors, the stock is a more popular bitcoin play than the cryptocurrency itself and they are willing to pay up for it.

With a $91 billion market value, MicroStrategy is trading at more than twice the value of its underlying bitcoin. The shares have soared more than sixfold this year and 77% since Nov. 5, with traders betting that the digital-assets industry will flourish under President-elect Donald Trump . Bitcoin prices are hovering just below $95,000, after trading near $100,000 last week.

“MicroStrategy found a way to outperform bitcoin,” Michael Saylor , the company’s founder and executive chairman, said in an interview. “The way that we outperform bitcoin, in essence, is we just lever up bitcoin.”

And Saylor says he is just getting started. He unveiled an audacious plan just days before the election to hire investment banks to raise $42 billion in capital over three years through stock and bond offerings to buy more tokens. His company had $4.3 billion in convertible debt outstanding as of Oct. 29.

MicroStrategy’s mix of bitcoin maximalism and Wall Street-style financial engineering has paid off for its investors, but skeptics question whether it is sustainable.

Saylor’s heavy use of leverage, or borrowed money, to buy bitcoin backfired during the 2022 crypto-market meltdown when the collapse of Sam Bankman-Fried ’s FTX dragged bitcoin prices below $16,000. Quarter after quarter, MicroStrategy incurred mounting losses tied to bitcoin and Saylor stepped down as CEO, a position he had held since 1989.

“This stock has become detached from reality,” said Andrew Left, a prominent short seller and founder of Citron Research.

Left describes himself as bullish on bitcoin itself and praised MicroStrategy in 2020 when it first began amassing bitcoin. But in a Thursday post on X , Left said he had taken out a bet against MicroStrategy, which caused its stock to tumble.

Some analysts warn MicroStrategy’s stunning run-up is part of a broader investor euphoria for speculative assets and will inevitably collapse. David Trainer, founder of research firm New Constructs, said MicroStrategy is a bad business by conventional metrics—for instance, it has posted a net loss for the past three quarters.

Michael Saylor’s heavy use of borrowed money to buy bitcoin backfired during the 2022 crypto-market meltdown. Photo: Alyssa Schukar for WSJ

“It’s symptomatic of a market that has become obsessed with believing in get-rich-quick schemes,” Trainer said. “If you like bitcoin, go buy bitcoin. But don’t invest in a company that’s losing money and also buying bitcoin, because then you’ve sort of doubled your risk.”

Some traders say a key part of the stock’s appeal is its volatility, which can help amplify their gains over a short period.

Garrett Shirey , a barber in Florence, Ala., bought one share of MicroStrategy at $436.53 in his retirement account Tuesday afternoon and sold it at $472.40 Wednesday morning, notching a quick profit.

Restricted from purchasing bitcoin in his Roth IRA account, the 39-year-old crypto enthusiast has had to settle for bitcoin proxies like MicroStrategy stock and bitcoin exchange-traded funds. He holds some shares of the Bitwise Bitcoin ETF .

“I don’t think bitcoin went up 8% in the last 24 hours, but MicroStrategy did,” said Shirey, who has been investing in cryptocurrencies since the pandemic.

Saylor said he came up with the bitcoin strategy in 2020 when Covid-19 forced lockdowns and the Federal Reserve cut interest rates to zero. MicroStrategy was competing with tech giants such as Microsoft and falling behind. The company was under pressure to return cash to shareholders through stock buybacks and dividends.

“It was either a fast death or a slow death, or take a risk, do something out of the box,” he said.

Saylor has often boasted about MicroStrategy’s volatility. “When you embrace volatility, then you’re outperforming the S&P,” he said during last month’s earnings call.

MicroStrategy’s volatility has helped it find ready buyers for its repeated issuances of convertible bonds—debt that can eventually be converted into shares, if the stock price rises to a specified level. Such bonds are often purchased by hedge funds that protect themselves against a collapse in the stock’s price by going short, or placing a bet that the stock will fall. Such funds generally don’t focus on whether the company is a good long-term investment, and instead seek to profit from the volatility of its stock.

MicroStrategy is an attractive trade for convertible-bond arbitragers, said Vadim Iosilevich, a veteran hedge-fund trader in New York.

“We can definitely agree that the volatility will be there,” he said.

Some investors are turning to ETFs that seek to amplify the return of MicroStrategy shares using borrowed money or derivative contracts. One such fund, the Defiance Daily Target 2x Long MSTR ETF aims to double the daily return of the stock and has attracted $1.8 billion in assets since it launched in August. Other funds allow traders to make inverse bets.

Chase Furey , a 25-year-old trader in Newport Beach, Calif., said he started buying bitcoin-related stocks including Coinbase Global, MicroStrategy and BlackRock’s bitcoin ETF in October. Hoping to turbocharge the gains, he moved all of his investments, worth about $112,000, into the Defiance ETF instead and has grown his portfolio to about $400,000.

The Harvard graduate, who studied economics in college, convinced his parents to let him manage $700,000 of their retirement assets. He said he came up with a “less dangerous and smarter” plan for them, investing 27% of their portfolio in the Defiance ETF and the rest in MicroStrategy shares. The money has more than doubled to $1.8 million, he said.

“I think bitcoin could hit $400,000 and I think MicroStrategy could possibly 10x from where it is now by the end of next year, so that’s kind of my game plan with that,” he said.

Even some bitcoin bulls have expressed unease about the risks investors face by betting on MicroStrategy. Mike Novogratz , the billionaire CEO of crypto-trading firm Galaxy Digital , warned in an interview on CNBC Thursday that bitcoin could fall 20% after peaking at $100,000—in part because of leveraged bets on MicroStrategy available through some exchange-traded funds.

“The crypto community is levered to the gills right now, so there will be a correction,” Novogratz said.

Warren Buffett Donates Another $1 Billion. He Has Estate-Planning Advice for Everyone.

At age 94, Warren Buffett is reflecting on life, wealth and mortality.

The legendary investor’s company, Berkshire Hathaway , said Monday that Buffett will again give a portion of his Berkshire shares, in this case worth about $1.15 billion, to four family foundations. The donations leave him holding 206,363 Class A shares worth about $148 billion.

As he did last November, Buffett is converting 1,600 Class A shares into 2.4 million Class B shares, which hold less voting rights, before donating them to the Susan Thompson Buffett Foundation, named for his late first wife, and to foundations led by his children.

The Thanksgiving-time donations supplement annual gifts to the four foundations, as well as to the Bill & Melinda Gates Foundation, that Buffett has made since 2006, when he unveiled plans to make major gifts throughout his lifetime.

In a message accompanying Monday’s news of the donations, Buffett discussed his plans for his three children, Susie, Howard and Peter Buffett , to distribute the Berkshire shares he owns at his death. Buffett told The Wall Street Journal in June that the Gates Foundation had no money coming after he dies.

The three Buffett children, now in their 60s and 70s, will need to decide unanimously what philanthropic purposes their father’s money serves. Buffett said in his new comments to shareholders that the requirement will give his children some degree of protection from an expected bombardment of requests.

“Those who can distribute huge sums are forever regarded as ‘targets of opportunity,’ ” Buffett wrote. “This unpleasant reality comes with the territory. Hence, the ‘unanimous decision’ provision. That restriction enables an immediate and final reply to grant-seekers: ‘It’s not something that would ever receive my brother’s consent.’ And that answer will improve the lives of my children.”

Buffett wrote that while potential successor trustees have been chosen, he hopes that Susie, Howard and Peter Buffett are themselves the ones to distribute all of his assets.

“I know the three well and trust them completely,” he wrote.

Buffett’s huge position in Berkshire means a rapid selling of his stock could jolt the share price. He wrote that his children should distribute his holdings gradually, and in a manner that “in no way betrays the exceptional trust Berkshire shareholders bestowed upon Charlie Munger and me.”

Buffett offered a suggestion for all parents, wealthy or not: “When your children are mature, have them read your will before you sign it.” He said it is better for children to be able to ask questions when a parent is still able to respond.

In discussing his fortune, Buffett, ever the teacher, highlighted the importance of compounding, especially after many years of investing.

“The real action from compounding takes place in the final twenty years of a lifetime,” he wrote. “By not stepping on any banana peels, I now remain in circulation at 94 with huge sums in savings—call these units of deferred consumption—that can be passed along to others who were given a very short straw at birth.” undefined undefined Berkshire’s Class B shares have rallied 34% this year, compared with a 26% gain by the S&P 500. Earlier this year the company joined a small club of U.S. businesses worth more than $1 trillion.

Buy the House First, Get Married Later: Couples’ New Math

The big wedding can wait. Couples are deciding they would rather take the plunge into homeownership.

In reshuffling the traditional order of adult milestones, some couples may decide not to marry at all, while others say they are willing to delay a wedding. Buying a home is as much, if not more of a commitment, they reason. It helps them build financial stability when the housing market is historically unaffordable.

In 2023, about 555,000 unmarried couples said that they had bought their home in the previous year, according to a Wall Street Journal analysis of Census Bureau data. That is up 46% from 10 years earlier, when just under 381,000 couples did the same.

Unmarried couples amounted to more than 11% of all U.S. home sales. The percentage has climbed steadily over the past two decades—a period in which marriage rates have fallen. These couples make up triple the share of the housing market that they did in the mid-1980s, according to the National Association of Realtors.

To make it work, couples must look past the significant risk that the relationship could blow up, or something could happen to one partner. Without a marriage certificate, living situations and finances are more likely to fall into limbo, attorneys say.

Mark White, 59 years old, and Sheila Davidson, 62, bought a lakeside townhouse together in Newport News, Va., in 2021. But only her name is on the deed. He sometimes worries about what would happen to the house if something happened to her. They have told their children that he should inherit the property, but don’t have formal documentation.

“We need to get him on the deed at some point,” Davidson said.

White and Davidson both had previous marriages, and decided they don’t want to do it again. They also believe tying the knot would affect their retirement benefits and tax brackets.

Financial foundation

Couples that forgo or postpone marriage say they are giving priority to a financial foundation over a legal one. The median homeowner had nearly $400,000 in wealth in 2022, compared with roughly $10,000 for renters, according to the Federal Reserve’s Survey of Consumer Finances.

Even couples that get married first are often focused on the house. Many engaged couples ask for down-payment help in lieu of traditional wedding gifts.

“A mortgage feels like a more concrete step toward their future together than a wedding,” said Emily Luk, co-founder of Plenty, a financial website for couples.

Elise Dixon and Nick Blue, both 29, watched last year as the Fed lifted rates, ostensibly pushing up the monthly costs on a mortgage. The couple, together for four years, decided to use $80,000 of their combined savings, including an unexpected inheritance she received from her grandfather, to buy a split-level condo in Washington, D.C.

“Buying a house is actually a bigger commitment than an engagement,” Dixon said.

They did that, too, getting engaged eight months after their April 2023 closing date. They are planning a small ceremony on the Maryland waterfront next year with around 75 guests, which they expect to cost less than they spent on the home’s down payment and closing costs.

The ages at which people buy homes and enter marriages have both been trending upward. The median age of first marriage for men is 30.2, and for women, 28.6, according to the Census Bureau. That is up from 29.3 and 27.0 a decade earlier. The National Association of Realtors reported this year that the median age of first-time buyers was 38, up from 31 in 2014.

Legal protections

Family lawyers—and parents—sometimes suggest protections in case the unmarried couple breaks up. A prenup-like cohabitation agreement spells out who keeps the house, and how to divide the financial obligations. Without the divorce process, a split can be even messier, legal advisers say.

Family law attorneys say more unmarried people are calling for legal advice, but often balk at planning for a potential split, along with the cost of drawing up such agreements, which can range from $1,000 to $3,000, according to attorney-matching service Legal Match.

Dixon, the Washington condo buyer, said she brushed off her mother’s suggestion that she draft an agreement with Blue detailing how much she invested, figuring that their mutual trust and equal contributions made it unnecessary. (They are planning to get a prenup when they wed, she said.)

There are a lot of questions couples don’t often think about, such as whether one owner has the option to buy the other out, and how quickly they need to identify a real-estate agent if they decide to sell, said Ryan Malet, a real-estate lawyer in the D.C. region.

The legal risks often don’t deter young home buyers.

Peyton Kolb, 26, and her fiancé figured that a 150-person wedding would cost $200,000 or more. Instead, they bought a three-bedroom near Tampa with a down payment of less than $50,000.

“We could spend it all on one day, or we could invest in something that would build equity and give us space to grow,” said Kolb, who works in new-home sales.

Owning a place where guests could sleep in an extra bedroom, instead of on the couch in their old rental, “really solidified us starting our lives together,” Kolb said. Their wedding is set for next May.

Homes and weddings have both gotten more expensive, but there are signs that home prices are rising faster. From 2019 to 2023, the median sales price for existing single-family homes rose by 44%, according to the National Association of Realtors. The average cost of a wedding increased 25% over that time, according to annual survey data from The Knot.

Rent versus buy

Roughly three quarters of couples move in together before marriage, and may already be considering the trade-offs between buying and renting. The cost of both has risen sharply over the past few years, but rent rises regularly while buying with a fixed-rate mortgage caps at least some of the costs.

An $800 rent hike prompted Sonali Prabhu and Ryan Willis, both 27, to look at buying. They were already paying $3,200 in monthly rent on their two-bedroom Austin, Texas, apartment, and felt they had outgrown it while working from home.

In October, they closed on a $425,000 three-bed, three-bath house. Their mortgage payment is $200 more than their rent would have been, but they have more space. They split the down payment and she paid about $50,000 for some renovations.

Her dad’s one request was that the house face east for good fortune, she said. Both parents are eagerly awaiting an engagement.

“We’re very solid right now,” said Prabhu, who plans to get married in 2026. “The marriage will come when it comes.”

Emerging-Markets Stocks Have Rarely Been So Hated. It’s Time to Buy

The last time emerging markets were doing this badly the term “emerging markets” hadn’t been coined yet.

That spells opportunity, and the greatest spoils might go to those investors who are the boldest and also willing to look past that poorly-defined category. The benchmark for how emerging markets stocks are doing is a widely followed index maintained by MSCI that has returned less than 4% annually in the past five years, compared with nearly 12% for global equities and more than 15% for U.S. stocks.

Dig into any of those broad categories, though, and there are clear leaders and laggards. A whopping 65% of the MSCI All Country World Index’s market value, including nine of its top 10 stocks, were American as of the end of October. The MSCI Emerging Markets Index has been dragged down in large part since 2020 by China, where a housing crisis and a heavy-handed approach to technology firms by leader Xi Jinping have depressed valuations. Alibaba Group and Tencent Holdings were two of the world’s most valuable companies four years ago, before the tech crackdown.

If not for the massive surge of the MSCI index’s Chinese components in September on renewed stimulus hopes, the overall picture for emerging-markets stocks would be even worse. India, in no small part because it isn’t China, has seen huge foreign and domestic investor interest and now has the third largest weighting in the emerging-markets index. But it also is one of the world’s pricier markets .

Emerging markets outperformed developed market stocks in the century’s first decade as commodity prices boomed and the tech and housing bubbles dented the U.S. market. Today, though, they are much cheaper as a multiple of earnings, and not solely because of China.

Just buying an emerging-markets index fund and betting on the performance pendulum swinging back could be a decent strategy. Bolder investors might be able to do better: The most enticing opportunities are where skepticism is highest.

For example, Mexico and the multinational companies that use it as a base to sell products destined for the U.S. are in President-elect Donald Trump ’s crosshairs. Newly-elected leftist President Claudia Sheinbaum also faces violent drug cartels and protests over changes to the country’s judiciary. But the MSCI Mexico Index has gone absolutely nowhere, with a slightly negative return over the past decade and a forward price-to-earnings ratio of around 10 times—less than half that of the U.S. market.

And Mexico is pricey compared with South Africa, Brazil and Turkey, which fetch multiples on the same measure of about 9.8 times, eight times and five times, respectively. All three also face significant domestic problems and leaders who have mismanaged their economies. But even poorly-run countries can have long-term promise, and occasionally some short-term charms: Brazil’s dividend yield, for example, is about 6%, or five times that of the S&P 500 index.

Another way to profit as a savvy emerging-markets investor? By reading what is on the label and then ignoring it. MSCI’s benchmark has had an odd definition of what qualifies that mostly matters to professional money managers.

For example, both South Korea and Taiwan are major emerging markets, but their citizens are wealthier than those of developed Portugal or Greece. With leading high-tech companies like Taiwan Semiconductor Manufacturing Co . and Samsung Electronics , educated workforces and excellent infrastructure, they have more in common with neighbouring Japan, a developed market. MSCI cites market access issues that hold them back. That might still make them attractive places to invest, but the rapid growth a country enjoys by becoming modern, educated and wealthy—the sort of thing that has people so excited about India’s long-term potential—are now behind them.

Getting booted from the index can create anomalies too. Israel, which is richer than Britain or France , was included in the emerging-markets index until 2010 for what seems like geographical reasons. Then it went from being a notable emerging-markets investing destination to irrelevancy for many fund managers.

Because it is the only officially “developed” market in the Middle East, Israel is now part of the little-tracked MSCI Europe and Middle East Index created that year instead of the more-followed MSCI Europe, which dates to 1986. It is also a minuscule part of MSCI EAFE, which tracks 21 non-U.S. developed markets. With world class healthcare and tech companies like Teva Pharmaceutical Industries  and Check Point Software in the index, “Startup Nation’s” stocks trade at barely half of the forward price-to-earnings ratio of the tech-heavy U.S. market.

And there are other stock markets just waiting to join, or rejoin, the official emerging-markets club. By the time they do the best gains might have been had. Take Argentina , which was demoted to “stand-alone” status three years ago because it was difficult to invest there. It has had a blistering return in dollars of almost 50% a year in the three years through October compared with a negative return for the MSCI Emerging Markets Index over that time.

While far from a foolproof investing strategy, betting that the last shall be first and buying what feels uncomfortable could pay off when it comes to beaten-down emerging-markets stocks.

How to Make AI Less of a Power Guzzler

Artificial intelligence is poised to transform both work and everyday life. But it has a dark underside: AI computer centres consume enormous amounts of electricity and water, to power their processing chips and cool the heat they emit.

Annual U.S. electricity use by data centres of all types will rise from 3% to 4% of the nation’s total today to between 11% and 12% in 2030, with AI being the main driver, according to projections from consulting firm McKinsey.

Meantime, AI’s demand for water globally in 2027 could account for more than the total annual amount withdrawn for use in Denmark or half of that in the U.K., according to researchers at the University of California, Riverside and University of Texas at Arlington.

All of that heavy use is causing logistical and public-image problems for the industry. Some utilities struggle to supply the needs of AI providers, and communities push back, fearing the added use will boost power prices and deplete water supplies.

The biggest AI providers, including Amazon , Alphabet Inc.’s Google, Meta and Microsoft , say they are working to be both carbon-neutral and replenish more water than they use—even as they continue to build massive data centres.

“It will be harder to build data centres, especially where energy already is at a premium or water might be scarce,” says Ed Anderson, research vice president at technology advisory firm Gartner. But, he adds, “the economic opportunity is rich enough that the providers will find a way.”

Below are some of the steps tech companies and researchers are hoping will reduce AI’s appetite for power and water.

Making chips more efficient

One way of addressing power consumption is to make chips less power hungry. Nvidia , the largest maker of AI processors, says its newest ones, called Blackwell, will be about 25 times as energy efficient as its previous high-end version. Meanwhile, Amazon, Google, Meta and Microsoft are designing their own processing chips, in part to cut costs but also to make them use less power.

“Each generation has been significantly more efficient than the prior one,” says Google’s Partha Ranganathan , a vice president and engineering fellow, speaking of his company’s processing units.

Different sources for water

Equipment used to cool data centres creates another issue: where to get the vast amount of water these systems consume. Google says its data centers globally used about 6.1 billion gallons of water in 2023, equivalent to the water used to irrigate and maintain 40 golf courses in the Southwest each year.

OpenAI’s GPT-3 model, meantime, consumes the equivalent of a 16.9-ounce bottle of water for every 10 to 50 responses it provides to users’ queries, according to the researchers at UC Riverside and UT Arlington. OpenAI declined to comment on the finding.

Data-centre water typically comes from municipal water systems. But in an era of water shortages, diverting drinking water for an industrial use has created tensions in some locales. That has sent AI companies searching for other sources, including rainwater, treated wastewater or water left over from factory processes.

Amazon, for example, uses recycled wastewater for cooling at its Santa Clara, Calif., data centers. The water comes from the city’s sewage-treatment system after it undergoes a three-step process that removes 99% of impurities.

Smarter training for AI

Some researchers have experimented with carefully controlling what kind and how much information an AI model takes in during training. Usually, training a so-called large language model AI, such as OpenAI’s ChatGPT and Microsoft’s Copilot, involves ingesting hundreds of billions of words from the internet and elsewhere, then learning the relationships among them.

And that is energy and water intensive. Training an AI model called BLOOM over a 3½-month period consumed enough electricity to power the average U.S. home for 41 years, according to a Stanford University report.

As for water, training one of Google’s AI models, known as LaMDA, used about two million liters of it, both to produce the electricity used and keep the computers cool—enough to fill about 5,000 bathtubs, according to Shaolei Ren , a professor of electrical and computer engineering at the University of California, Riverside. Google declined to comment on the research, but said it is “committed to climate-conscious cooling of our data centres.”

One possible solution is to have AIs remove redundancy and low-quality data, instead of just vacuuming up the whole internet. The goal is a much smaller set of data that the AI system can more easily sift through when a user asks it a question.

This can lower electricity consumption, according to some researchers.

AI systems that limit the information they take in are also less likely to “hallucinate”—give false or misleading answers—and can respond in ways that are more on-point because of the higher quality of the data they contain, experts say. Microsoft found that one of its pared-down AIs exceeded that of vastly larger ones in measurements of  common sense and logical reasoning .

Dialling down the juice

Researchers at several universities have found that capping the amount of electricity used by AI computers has only a minor effect on the outcome, such as slightly more processing time.

Experts at the Massachusetts Institute of Technology and Northeastern University say that reducing the power to one of Meta’s AIs by 22% to 24% slowed the speed at which the AI responded to a query by only 5% to 8%. “These techniques can lead to significant reduction in energy consumption,” the researchers say. They add that the method also caused the processors to run at a lower temperature—which could trim the need for cooling.

Meta declined to comment on the research, but said it has had efforts to boost data-centre energy efficiency “since we started designing our first data center over a decade ago.”

Meantime, a team at the University of Michigan, University of Washington and University of California, San Diego devised an algorithm to modulate the use of power during training. The technique could cut power use by up to 30% , they say.

Show users AI’s impact

Some researchers believe companies should give users more context about the environmental impact of AI, to let them make more-informed decisions about the technology. Ren, of UC Riverside, proposes that AI providers disclose the approximate amount of electricity and water each query consumes—akin to how Google tells people searching for flights the amount of carbon emissions each trip would create.

Another proposal is to devise a rating system for the power efficiency of AI systems, akin to the government’s Energy Star ratings for home appliances and other products. Such a system could help people choose AI models for differing tasks based on their energy consumption, according to Sasha Luccioni , an AI researcher at Hugging Face, a company that makes machine-learning tools.

Using greener power

Academics and others have come up with other proposals to minimise AI’s environmental impact by tapping into green energy. For instance, companies might build more data centers in countries with abundant, low-emission power, such as hydropower in Norway or geothermal in Iceland. Or companies might do AI calculations at different locations at different times of the day, such as deploying computer centers with high use of solar power during the daytime or wind-powered ones when wind is more reliable at night.

Chilling the computers

Data-centre computers put out tremendous amounts of heat, and their temperature must be kept in a certain range, often 64 to 72 degrees, to prevent damaging the electronics. Traditionally, this has been done by high-power air conditioning. But air conditioning uses up to 40% of all the electricity consumed by a typical data centre, while devices called cooling towers that expel the heat to the outside air use a lot of water.

In response, the data-centre industry is moving to liquid cooling, which circulates a special liquid or cold water to “cold plates” that sit on top of the processor chips and keep them at a safe and efficient temperature range. The system, called direct-to-chip liquid cooling, uses less power than the traditional method—about 30% less, Nvidia says—because liquid is vastly better at removing heat from the electronics than blowing cold air over them.

Another method under development, called immersion cooling, involves placing the computers themselves inside big tanks of cooling liquid. While showing early promise, there are environmental concerns about the chemicals often used in the setup, says Mark Russinovich , chief technology officer of Microsoft’s Azure cloud-computing unit.

Some companies, meanwhile, are using computing gear that can withstand higher temperatures and doesn’t need as much cooling. Google says its data centres already are 1.8 times as energy efficient as the typical data centre, which it achieved in part by raising the inside temperature to 80 degrees. For every one-degree boost in their temperature, data centres can save 4% to 5% in energy costs, according to the Energy Star program.

Missiles and Commercial Jets Are Sharing the Skies in One of the World’s Busiest Flight Corridors

“Are those fireworks or something?” asked a passenger on Emirates flight EK146 from Amsterdam to Dubai last month, in a video posted to social media. In fact, what she was watching through her cabin window was a barrage of Iranian missiles headed to Israel.

Her flight was one of scores that shared the skies with Iranian missiles on Oct. 1, an example of how the escalating conflict in the Middle East is endangering commercial aircraft in some of the world’s busiest skies.

The number of missiles crisscrossing the region has surged since the start of Israel’s war with Hamas: An average of 162 missiles have been fired each month so far this year, up from 10 a month in 2023, according to aviation security firm Osprey Flight Solutions. This has led to warnings from airlines, crews, security experts and families of air crash victims that an airliner could inadvertently be shot out of the sky.

Missiles have been spotted in-flight by pilots and passengers, struck near airports, and been fired by militaries and militias without warning to airlines. Governments and aviation regulators have meanwhile failed or been slow to close or restrict airspace.

There is precedent for the concern. Two commercial aircraft have been shot down in recent conflicts. Malaysia Airlines flight MH17 was downed over eastern Ukraine by Russian-backed militants in 2014, and Ukrainian Airlines flight PS752 was mistaken for an incoming missile by Iranian forces shortly after takeoff from Tehran in 2020.

For passengers flying on Oct. 1, the threat felt real. Madalina Birca, 24, was flying with Emirates from Nice, France, to Dubai when the captain announced, with a slight tremble in her voice, that “due to the war situation” the flight was being diverted.

Passengers quickly switched their screens to news channels to find that Iran had started its attack on Israel. Birca followed on the live flight map as the aircraft made an abrupt turn just before crossing into Iranian airspace. She used the in-flight Wi-Fi to try to calculate the missiles’ trajectories and how close her flight had come to catastrophe.

“We were very lucky that we didn’t cross already into the airspace,” Birca said.

Birca’s was one of more than 80 flights that were diverted on Oct. 1 because of the attack. Many other flights continued uninterrupted over Iraq, Jordan, Syria and northern Saudi Arabia, with dozens passing close to launch sites in the north and south of Iran.

Radio messages from air-traffic control towers in Iraq, Kuwait and Bahrain captured some of the tumult in the skies, with pilots declaring emergencies and diversions, and in some cases exclaiming that they could see the projectiles themselves.

“Missiles over Baghdad, over Najaf, over everywhere,” one pilot radioed to Baghdad air traffic controllers, according to a feed from live radio specialist, Broadcastify.

“We noticed some missiles,” a Kuwait Airways pilot said.

“Lights, rockets, I don’t know, now they’re not visible anymore,” someone radioed to pilots on Air France flight 662 to Dubai. Air France has opened a probe into why the flight was caught in the affected airspace.

While ballistic missiles reach an apex far above the altitude of a commercial jet, they pose a major risk during their ascent and descent. About 10% of Iran’s ballistics are also estimated to fail midflight, which, along with their ejected boosters, leads to falling debris. Cruise missiles typically fly at lower altitudes, endangering aircraft as they take off and land. At times, the biggest risk is posed by air-defence systems misidentifying a commercial aircraft as incoming fire.

The tally of projectiles, tracked by Osprey, accounts only for ballistic and cruise missiles. Its figures don’t include unguided rockets, mortars, artillery fire and drone attacks, each of which can also endanger flights.

The risk is ongoing. Iran has briefed regional officials that it’s preparing a response to Israel’s latest retaliatory strike that will utilise more powerful warheads. Osprey has warned airline customers that the next attack could be coordinated with Iranian-backed militias in Iraq, Syria, Yemen and Lebanon, widening the areas of airspace at risk.

Meanwhile, strikes exchanged between Israel and Hezbollah have regularly targeted or struck areas near airports, including a missile that landed in a parking lot at Tel Aviv Airport this month and an Israeli airstrike that caused an explosion near Beirut Airport’s runways a day later.

Israel’s strike against Iranian sites on Oct. 26 was also launched without official notice to airlines, though the early morning timing—around 2:15 am in Iran—meant fewer aircraft were operating. The Israeli Air Force typically consults air-traffic controllers before any strike to try to minimise risk, according to an official.

“It’s a huge concern to civil aviation. We know what happened with the Ukrainian airliner that was shot down in Iran mistakenly,” said Hassan Shahidi , president of the Flight Safety Foundation, a global, nonprofit advocacy group, calling the incident “absolutely preventable.”

Despite the surge in military activity, Middle Eastern airspace has largely remained open over the past year. The region’s already busy skies have become more important after Russia’s invasion of Ukraine locked out carriers from swaths of airspace over both countries.

Aviation safety experts have criticised the inconsistent way in which the skies have been managed by governments, including issuing late or no airspace closures.

“National security and foreign policy trump aviation security, and it happens over and over again in conflict zones,” Osprey’s Chief Intelligence Officer Matt Borie said in an interview.

The U.S. Federal Aviation Administration and others have long imposed bans and restrictions on flights over North Korea because of the country’s tendency to conduct a handful of unannounced ballistic missile tests each year. Last year North Korea launched 37 missiles; this year so far, 52.

Days after Iran’s Oct. 1 launch, the FAA extended its ban on U.S. carriers crossing into Iranian airspace by three years until October 2027, a prohibition it first put in place after the downing of Ukrainian Airlines flight PS752 in 2020. A separate restriction that prevents flights over Syria is also in effect until 2028.

U.S. carriers aren’t restricted from flying over Iraq as long as the aircraft is traveling at a minimum altitude of 32,000 feet, according to the FAA’s latest advisory. There are no explicit warnings against operations over Jordan, Lebanon   or Israel, though the agency maintains a 2021 notice that airlines “exercise caution” in those areas because of the proximity to the military situation in Syria.

A push at the United Nations to standardise rules for commercial flights over conflict zones that began after the downing of MH17 in 2014 has largely stalled, security experts say.

The U.N.’s International Civil Aviation Organization disputed that characterisation, citing an updated manual due this year, a meeting of its “Safer Skies” committee next year and the possible hosting of a third workshop on the subject. The measures demonstrate “the international community’s ongoing dedication to preventing future tragedies in conflict zones,” a spokesman said.

Outside of official bans, airlines typically make their own decisions about whether to fly over a conflict zone on any given day. They rely on a patchwork of advisories from regulators, intelligence from government agencies and advice from private security companies. Rerouting a flight can be a major operational challenge that adds additional fuel costs, can require additional staffing, and which disrupts preassigned takeoff and landing slots.

Even before Oct. 1, most Western carriers, including U.S. airlines, had withdrawn flights to Israel, Iran and Jordan. Many have also opted to reroute flights crossing that corridor to now fly via Egypt and Saudi Arabia.

Carriers are also taking other measures. Emirates is carrying additional fuel in case a flight is required to make an emergency diversion, while European discounter Wizz Air says it will only fly in certain airspace during daytime hours when the risk of an attack is lower. Israel’s flag carrier El Al, meanwhile, has long equipped its aircraft with antimissile defence systems.

Airlines say that safety is their top priority and that any flight path is carefully considered before being allowed to depart. But they’ve also criticized governments, including after Iran’s Oct. 1 attack, for not taking adequate care to protect commercial aviation.

“It’s quite volatile,” Emirates Chief Commercial Officer Adnan Kazim said in a recent interview, adding that his airline has regularly been holding multiple security meetings a day, in addition to its daily security briefing. “Some of these kinds of situations, unfortunately they don’t come with any alert, or any pre-information and you need to manage the situation as you go.”

Israel has rerouted standard flight paths in and out of the Tel Aviv airport away from danger zones since the start of the conflict, according to Libby Bahat, head of aerial infrastructure at the Civil Aviation Authority of Israel. When it learns of potential incoming attacks, it reduces the number of flights in the airspace to make it easier for air-traffic controllers to quickly scatter aircraft to safety, Bahat said.

A spokeswoman for the Israeli Defense Force declined to comment. Aviation regulators in Iran, Iraq, Jordan and Lebanon didn’t respond to requests for comment.

Pilots have expressed concerns. The European Cockpit Association has complained that some airlines are forcing pilots to fly routes even if they disagree with their airline’s safety assessment. The union also wants airlines to update life insurance policies, which typically don’t pay out in the case of a downing over a conflict zone.

“At any moment another disaster could happen that can take the life of innocent people again,” said Kourosh Doustshenas, whose partner died along with 175 others when Iran inadvertently shot down Ukrainian Airlines flight PS752. “We have gone through this, and this can happen any time.”

The U.S. had cautioned that morning of an increased risk of misidentification in Iranian airspace, but with most of its security team off work for Orthodox Christmas, Ukrainian Airlines failed to heed the warning.

Doustshenas has called for governments to be held legally accountable for failing to protect civilian airliners from becoming collateral damage. He also wants passengers to be informed if their flight is routed to fly over a conflict zone.

“Regular people going to the airport to catch their flight have no idea,” Doustshenas said.

American Companies Are Stocking Up to Get Ahead of Trump’s China Tariffs

By 9 p.m. on election night, it had become clear to Jason Junod that Donald Trump was returning to the White House. That night, he contacted his skin-care company’s suppliers in China to order a year’s worth of inventory for about $50,000—as much as he could afford to buy and had room to store.

His hope is that the roughly 30,000 body brushes and exfoliating gloves make it to Bare Botanics’ facility in Madison, Wis., before Inauguration Day. He thinks Trump is serious about his campaign promise to impose tariffs of 60% on all Chinese goods.

American businesses are dusting off a playbook they used during Trump’s first term: stocking up on imported goods before tariffs are enacted. They are also considering how to cope with the levies if and when enacted—whether they will be able to raise prices and whether they will need to find alternatives to their Chinese manufacturers.

“The biggest consideration is, do we stay in China?” Junod said.

When Trump began his trade war against China in 2018, U.S. businesses scrambled to front-load imports before tariffs were implemented, according to an International Monetary Fund analysis. As a result, the U.S.’s trade deficit with China—how much imports exceed exports—rose in 2018 before falling in 2019.

Bare Botanics’ body brushes are manufactured in China. Photo: Jamie Kelter Davis for WSJ

Already, exports from China surged last month, which some economists think could have been driven at least in part by front-loading amid uncertainty around election results. Outbound shipments from China rose nearly 13% in October from a year earlier, well above consensus expectations and up sharply from 2.4% growth in September.

Chinese exports growth should remain strong through the next few months because of front-loading, Wall Street economists said.

China remains the world’s top exporter of goods and the U.S. its top buyer. American companies bought roughly $430 billion of Chinese goods last year, with computer and electronic products making up the biggest chunk.

Wan Junhui, who works in marketing for an electronics manufacturer in Guangdong province, said his company has observed an increase in inquiries and “noticeable unease” from its U.S. clients recently. He said that tariffs so far haven’t affected sales significantly, but that buyers end up absorbing the levies and sometimes raising prices for their end customers.

“We’ll do our best to focus on reducing costs to help ease the situation and make it through this harsh winter,” he said.

Though China’s share of U.S. imports has declined to roughly 14% in 2023, from 22% in 2017, rising tariffs between the U.S. and China have done little to curb the overall U.S. trade deficit in global trade or China’s overall trade surplus.

The persistent trade imbalance is driven by strong demand from American consumers and weakening domestic demand in China, according to the IMF. U.S. firms have boosted their share of imports from places such as Vietnam, while China has increased exports to regions including Southeast Asia.

Tariffs aren’t paid by exporters, but rather by businesses that import products. Economists say those businesses usually pass on the bulk of the cost to consumers by raising prices.

Some economists doubt the U.S. will succeed in raising tariffs to 60% across the board on Chinese products. Economists at Goldman Sachs predict additional duties on China could average out to a 20 percentage-point increase in the effective tariff rate.

In addition to duties on Chinese goods, Trump proposed tariffs of 10% to 20% on imports from all countries.

That would be the worst-case scenario for Leah Dark-Fleury, co-founder of Stone Fleury, a natural-stone and porcelain wholesaler in San Francisco. She has been buying natural stone from the same supplier in China for two decades and imports most of her other materials from Europe.

When Trump imposed a tariff on Chinese natural stone during his first term, Dark-Fleury continued buying from China as usual. The company raised prices to compensate, but tried to not charge the full increase to stay competitive.

This week, she asked her supplier in China about the possibility of ordering about two shipping containers’ worth of natural stone under a payment plan to try to get ahead of tariffs. That could cost up to around $100,000 and last her between a few months and a year, depending on customer demand. In the longer run, she expects to raise prices on materials from China and shift some sourcing to Vietnam.

“I wish that I could buy enough to get us through the four years,” she said.

Toni Norton , owner of Fine Fit Sisters in Charlotte, N.C., sources body oil from China that is popular with customers in the summertime. She normally wouldn’t be stocking up until the new year, but is trying to order about 20,000 units before the end of the year.

If tariffs on Chinese products indeed reach 60%, Norton said she might have to stop selling body oil and focus more on her fitness-coaching services. She said she doesn’t think she has much room to raise prices on the body oil, which she mostly advertises on TikTok and sells for about $13, because “people like cheap things.”

Front-loading imports “is a short-term solution,” said Chris Tang , a professor of supply-chain management at the University of California, Los Angeles. Businesses are likely to need additional strategies in a world with persistently higher and broader tariffs.

Companies have already been moving manufacturing from China to places such as Southeast Asia and Latin America, a trend that is expected to continue—if buyers are able to find a suitable alternative to Chinese production.

A 2024 survey by Bain & Company found that 69% of chief executives and chief operating officers plan to reduce their company’s dependence on China, up from 55% in 2022.

Ryan Bursky , CEO of Lucidity Lights, a maker of lighting products in Boston, said the expectation of new tariffs is only accelerating a process under way at his company. Lucidity Lights made a strategic decision last year to begin sourcing outside of China, where it had previously done all of its production, in part because of the first phase of the trade war.

The company is on track to do about 15% of production in Cambodia this year, with plans to move about half of production out of China next year. He believes it is a better use of resources to invest in supply-chain diversification, rather than stockpiling.

Bursky said it has taken some time to find the right suppliers in Cambodia, which is still growing its manufacturing capacity and speed. But he thinks that the products made in Cambodia are better quality and that there is more attention to detail.

Joe Jurken , the founder and managing director of the ABC Group in Milwaukee, which helps U.S. businesses manage supply chains in Asia, expects China to still dominate manufacturing somewhat, even as his clients have beefed up sourcing from countries such as Vietnam, India and Cambodia.

China has developed infrastructure, communication and transaction channels that make doing business easy for Western companies, while those systems are still being developed in other countries, he said. Plus, it is hard for manufacturers in other countries to beat Chinese suppliers’ low prices.

“China will never be replaced,” Jurken said. “Other markets are an alternative.”

Junod, who started his skin-care business in 2020, has considered looking for manufacturers in Southeast Asia, but believes it would be difficult to replicate the low cost and high quality he has come to rely on from his Chinese suppliers.

“It feels like we’re being punished because there isn’t really anywhere else for us to turn domestically,” he said of Trump’s proposed tariffs. “We have no choice, really, but to pay them.”