Last week, JPMorgan boss Jamie Dimon told an economic forum in California that the US bond market was going to “crack” under the weight of Donald Trump’s “Big, Beautiful Bill”. He said of the bill now working its way through Congress, “I just don’t know if it’s going to be a crisis in six months or six years,” before adding that he had told regulators to expect panic when the moment came.

Dimon’s warning is just the latest from a prominent voice in the financial sector, saying the US is running perilously close to a crisis. It has added to the general mood of tension rising in markets as the clock runs down on Trump’s signature initiative. With the President’s main tariff policy on ice due to a recent court ruling, the extension of the 2017 tax cuts remains the linchpin of his economic program. If it fails, he risks being seen as a busted flush.

But there are only a few weeks left to pass it. Sometime this summer, the US will hit its statutory debt ceiling, something which can only be raised by an act of Congress. Since Congress goes on recess in August, that leaves just the few weeks remaining to the end of July for the Senate to pass the House bill.

And right now there’s a standoff in the Senate. Although fiscal hawks are a dying breed in today’s Republican Party, there are still a few holdouts left, and they seem to regard this battle as their last stand. Their leader is Senator Ron Johnson, who insists he has the numbers to stop the bill in its current form. He is demanding much deeper cuts to spending than the bill passed by the House, which already took a hatchet to Medicare and food stamps.

But even deeper cuts could cause problems for senators in swing states, or for House Republicans facing tough re-elections next year. House Republican opposition to Trump’s bill buckled under his pressure, but it’s just possible the senators may prove less malleable.

In the meantime, bond investors keep sending signals that they’re girding for a fight. So far, the major market indices have shown broad equanimity amid the ructions of recent events: the stock market is flat but not falling, and bond prices are declining but not crashing.

But what explains this relative peace? Retail investors have eagerly bought the dips caused by the retreat of institutional investors, their faith animated by what has been termed “TACO trade”, meaning “Trump always chickens out”. Markets have so far behaved as if Trump will always roll back policies which damage stock and bond markets, and will instead proceed with the most market-friendly ones, such as tax cuts.

But this uneasy balance may not last. If the Senate approves the House bill and the deficit worsens, bond markets could panic. If it placates the bond market by demanding much steeper spending cuts in the final legislation, the fiscal compression could slow the economy, knocking the wind out of stock markets. The worst scenario of all might be that Trump, who apparently hates the TACO label, could decide to stick it to markets altogether and return to his tariff-heavy, deficit-busting program, and all investors panic.

With evidence mounting that foreign investors are already heading for the exits, such an outcome could trigger the sort of financial crisis of which Dimon and his ilk warn. All eyes will thus be on the Senate to see if it heeds their increasingly loud calls.

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John Rapley is an author and academic who divides his time between London, Johannesburg and Ottawa. His books include Why Empires Fall: Rome, America and the Future of the West (with Peter Heather, Penguin, 2023) and Twilight of the Money Gods: Economics as a Religion (Simon & Schuster, 2017).

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China is trying to catch up with America on artificial intelligence. The Wall Street Journal has reported that Zhipu AI — one of China’s six “AI tiger” LLMs — has released a new model that can rival leading US systems, including Anthropic’s Mythos, in cybersecurity tasks such as pinpointing security bugs. While this marks a milestone in China’s drive to catch up with Western AI capabilities, strong performance on a single benchmark does not mean it has taken the lead. Chinese models still lag behind their Western counterparts in broader capabilities, such as autonomous operation. Skepticism is therefore warranted before resorting to hysterical conclusions, but complacency about the geopolitical implications of China’s AI advances would be an even greater mistake.

On the infrastructure side, Chinese AI is still constrained by access to advanced chips, with American labs way ahead in computing capacity as well as investment. Analysis from earlier this year suggests that Chinese models are likely to be at least a few months behind those in the US. But they are still continuing to make progress, or that the geopolitical importance of AI will be decided only by whose LLM has ventured deeper into the technological frontier. The practical applications of AI, countries’ to capture foreign markets, and the application of AI into the real economy will matter just as much.

Here, China may hold an advantage. As with its dominance across many critical supply chains, Beijing may not need to produce the most advanced AI systems — only those that are affordable and widely deployable. In doing so, it could consolidate global influence by supplying functional, low-cost AI at scale.

Beijing seems to be pursuing exactly that path, developing an AI “open-source” strategy that offers affordable, widely available AI models for companies and individuals to use and modify as they wish. The production of the DeepSeek AI model, which matched the performance of Silicon Valley tools such as ChatGPT at a fraction of the cost for users, created goodwill among Chinese models with developers.

The four most popular models on OpenRouter, an AI hardware platform for developers, are now all Chinese. The goal for China is not only to win the frontier-model race, but to make its systems the default layer of AI adoption across industries and global markets. For most economies, the choice is increasingly between an affordable tool they can deploy now and a more robust one that may be out of reach.

And while the countries adopting Chinese models may be exposed to political pressure and cyber threats from Beijing, safer and more capable alternatives matter little if they are unaffordable. American AI companies are already under pressure to monetize products whose operating costs are rising. If Chinese open-source models become the cheap default for startups, universities, governments and businesses across the developing world, then America’s AI lead will be eroded from below.

Perhaps more concerning for America in the long run is how AI can give Chinese manufacturing even more strength, through the ongoing integration of AI as a general-purpose technology. China’s new Five-Year Plan mentioned AI more than 50 times and includes an “AI+” action plan aimed at spreading AI across the economy.

Beijing has been pioneering automation of its critical infrastructure for years, with promising recent results in increasing warplane production capacity. In that regard, China’s open-model strategy and manufacturing dominance will reinforce each other. Cheap, adaptable models accelerate deployment across the real economy while those deployments generate real-world data and use cases that can feed back into further model improvement.

The United States should not dismiss the importance of its lead in the AI race. That lead worries Beijing, not least because a more automated Chinese economy would also become more vulnerable to AI-generated cyber threats. But nor should Washington assume that China cannot catch up with American capabilities over time.

This AI competition represents part of a broader struggle over tech supply chains and geopolitical influence. Decisions over whether to adopt US or Chinese models could produce a more fragmented global reality, with different regions relying on different cloud providers, chips and security structures. The result will likely be a global economy which is divided into competing spheres, rather than one which produces a single winner.

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Miquel Vila is a political and geopolitical risk consultant focusing on industrial strategy, critical infrastructure and global supply chains.

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