Gavin Newsom is warning that Donald Trump’s use of troops where state and local officials don’t want them is actually a test, one the Republican president may seek to replicate across other American towns and cities as part of his mass deportation effort. “We’re getting word that he’s looking to operationalize that relationship and advance significantly larger-scale ICE operations in partnership and collaboration with the National Guard,” the Democratic governor said on the podcast Pod Save America. Such a move would likely be illegal for reasons similar to those Newsom has cited in litigation to stop Trump’s use of the military in Los Angeles. Legal experts have said that, as with many of Trump’s emergency declarations since he took office, there is no legal basis for the Republican’s move to take control of the California National Guard.

State and city officials have reported that protests against Trump and his immigration raids have been largely peaceful during the day with minor skirmishes at night, while limited to a few parts of a city that spreads over several hundred square miles. With no reported deaths and few injuries—some among journalists shot with plastic rounds by local police—protests have begun spreading across the country. Demonstrations have been held in New York City, San Francisco, Chicago, Texas and Washington. Meanwhile, Trump’s federalization of 4,000 members of California National Guard and his ordering of 700 active duty Marines to Los Angeles will reportedly cost $134 million for 60 days. —Jordan Parker Erb and David E. Rovella

What You Need to Know Today

Citigroup is set to put aside hundreds of millions of dollars more than it did last quarter to account for potential losses on loans, an early sign that the biggest US banks may be bracing for deteriorating economic health. The figures point to a cautious approach for the months ahead, even as analysts expect loan losses to decline in the second quarter. Economists are cautiously watching the outlook for US consumers as the country manages the impact of uncertainty around Trump’s trade war and a GOP tax bill that may add trillions of dollars to the almost $37 trillion national debt. 

That said, Wall Street investors closely monitoring trade discussions between the US and China drove stocks higher Tuesday as Trump’s aides claimed progress. The S&P 500 finished less than 2% away from its record. Still, JM Smucker sank the most in nearly four decades after saying tariff-inflicted damage to costs in its coffee business will hurt profit. Bonds barely budged after a $58 billion sale of three-year notes—the first in a trio of offerings that will culminate in Thursday’s sale of 30-year debt. Then there’s the looming inflation news (see below). Here’s your markets wrap.

Globally the outlook isn’t great either. So says the World Bank, which cut its forecast for growth this year. It warned that the 2020s are on track for the weakest performance for any decade since the first Apollo moon landing, and that the reason for it are trade tensions and policy uncertainty. The development lender lowered its 2025 outlook to 2.3%, from 2.7% projected in January. That pace would be the weakest in 17 years, outside of the recessions in 2009 and 2020 tied to the global financial crisis and Covid-19 pandemic. It also warned—based on its current forecasts—that global growth in the first seven years of this decade is on course to average 2.5%, the slowest for any decade since the 1960s.

Blackstone is planning to invest as much as $500 billion in Europe over the next 10 years, underlining the continent’s growing appeal to investors amid US retrenchment. Blackstone is the latest firm touting Europe’s appeal. At last week’s SuperReturn International conference in Berlin, executives from behemoths such as BC Partners, Permira and Brookfield Asset Management talked up the case for Europe as an investment destination as global economic risks mount.

“We see it as a major opportunity for us,” Chief Executive Officer Steve Schwarzman said in a Bloomberg Television interview Tuesday. “They are starting to change their approach here, which we think will result in higher growth rates. So this has worked out amazingly well for us.”

Hedge fund manager-turned Treasury Secretary Scott Bessent is emerging as a contender to succeed Fed Chair Jerome Powell, whose term ends next year. Trump regularly browbeats the Fed Chair in the hopes of forcing an interest rate cut, and has publicly mulled trying to fire him. Trump said Friday he would name a successor “very soon,” with a growing chorus of advisers inside and outside the administration pushing for Bessent. Still, Powell’s show of independence from Trump has gone a long way to soothe markets amid worries about Trump over-reach. Bessent, as one of the president’s closest aides, would have to prove to the world that he isn’t beholden to him.

Trump said he will move forward with winding down much of the Federal Emergency Management Agency. But first, he’ll wait for hurricane season to pass. Some projections show this one could be particularly deadly thanks in part to climate change (which Trump has called a hoax). Trump’s Homeland Security Secretary Kristi Noem said the administration would create a council “over the next couple of months” to envision the future of the agency under her department. Any such change would represent a dramatic overhaul to federal disaster assistance, which currently includes both grants to state governments and direct payments to disaster survivors. Currently, Republican-leaning states tend to receive more federal financial assistance under FEMA than Democratic-leaning states, as is the case with federal tax dollars in general.

Argentina’s Supreme Court upheld former President Cristina Fernandez de Kirchner’s fraud conviction, ratifying her sentence to six years in prison as well as a lifelong ban on holding public office, according to the court ruling reviewed by Bloomberg. With President Javier Milei facing a crucial midterm vote in October, Argentina’s three Supreme Court justices ruled unanimously Tuesday on one of the country’s most polarizing cases. In the run-up to the ruling, unions and party affiliates blocked traffic around Buenos Aires, burning tires and banging drums. Argentina’s two other court seats remain vacant. Kirchner painted the ruling as politically motivated, telling supporters that the powers-that-be know they are “the only ones that can build an alternative” when Milei’s government “falls apart.”

At least 19 explosive blasts rocked southwest Colombia, just days after the attempted assassination of presidential candidate Miguel Uribe Turbay. A bomb on a motorcycle detonated Tuesday near a police station in Cali, the nation’s third-biggest city, among other attacks. Police said the violence has left at least four dead. Defense Minister Pedro Sánchez blamed the attacks on a warlord known as Iván Mordisco, who President Gustavo Petro also accused of involvement in the assassination plot against Uribe. 

What You’ll Need to Know Tomorrow

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