(UBS)
Immigration. The recent tragic events in Minneapolis have prompted concerns from Democrats and some Republicans over the Trump administration’s immigration enforcement activities. As part of the aforementioned negotiations on government funding, Democrats are seeking restrictions on immigration enforcement operations, including requiring greater coordination with local and state police and ending immigration sweeps. They also want immigration enforcement authorities to obtain warrants before entering homes, wear body cameras, and stop wearing masks. Some Republicans have voiced concerns about the Trump administration’s handling of immigration enforcement and called for hearings and/or an independent investigation into the events in Minneapolis. The growing consensus for changes to the enforcement actions is a far cry from comprehensive immigration reform, but it’s the closest thing we’ve seen to bipartisanship on immigration in years.
China Disconnect. One area where there is significant bipartisan consensus in Congress is on having the US take a tough line with China (particularly on the development of advanced technologies). One bipartisan bill (called the GAIN AI Act) would restrict exports of advanced artificial intelligence (AI) chips to certain countries (including China) by requiring companies to prioritize sales in the US over foreign-owned entities. Last week, a House committee overwhelmingly passed a bill called the AI OVERWATCH Act. That bill would require Congressional approval for the sale of advanced AI chips to US adversaries (also including China), applying a similar oversight structure to the one already in place for the sale of weapons. With a foreign policy built around spheres of influence rather than shared values, the Trump administration perceives China differently than many in Congress. Additionally, China's dominance in the mining and processing of rare earth metals, which are critical for many key technologies, gives it leverage. Reflecting that, the administration has sought to keep the peace and has loosened export controls on the sale of certain advanced AI chips. Notably, the administration put pressure on Congress to remove the GAIN AI Act from last year's defense authorization bill. There will likely continue to be a disconnect on China between the Trump administration and Congress.
Tax Season. Tax season officially kicked off on Monday with the IRS beginning to accept tax returns. One variable this tax season is the potential impact of a partial government shutdown (one of the outstanding government funding bills covers funding for the IRS). A shutdown could delay the payment of tax refunds in the coming weeks and months. It also could impact its ability to conduct audits at a time when the IRS has already conducted fewer audits. There also have been questions about IRS's use of AI. The IRS has been notoriously slow to adopt new technology, and we are skeptical of the IRS using AI to a great extent in 2026. President Trump and Republicans will be touting larger refunds this tax season to try to convince voters that they benefited from the One Big Beautiful Bill.
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