India's strikes, Russian explosives, the Fed and tax cuts
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Today, Pakistan says it shot down Indian drones as tensions simmer. Russia is building a major new explosives facility in Siberia. And Republicans can't agree on how to pay for Trump's first-term tax cuts. It's Thursday, May 8th. This is Reuters World News, bringing you everything you need to know from the frontlines in 10 minutes every weekday. I'm Tara Oakes in Liverpool.

First, the latest from India and Pakistan. Pakistan's military says it shot down 12 drones from India that violated its airspace. It's just a day after Indian strikes on multiple targets in the country fanned fears of a larger conflict between the nuclear-armed neighbors. India's defense ministry did not immediately respond to a request for comment.

President Donald Trump is expected to announce a trade deal between the US and the UK today. It would be the first agreement since the US slapped tariffs on its trading partners earlier this year. Pro-Palestinian demonstrators were handed over to police after protesting at Columbia University. The demonstration was one of the biggest since last year's protest movement against Israel's war in Gaza.

Yesterday, we told you about our exclusive reporting that the US is looking to deport migrants to Libya. Now, a US judge says any effort to do so would clearly violate a prior court order. The ruling bloc's sending migrants to countries other than their own without weighing their risk of persecution or torture.

And another exclusive. The UAE is mediating back-channel talks between Syria and Israel. That's according to three sources. The indirect talks focus on confidence-building between the two countries, which have no official relations. More about the challenges Syria faces after the fall of Bashar al-Assad in a special episode of the podcast. We'll put a link in the description.

A three-day ceasefire declared by Russia has come into effect, with skies over Ukraine's major cities quiet. Ukraine has not committed to abide by the Kremlin's ceasefire, and earlier this week launched successive drone attacks on Moscow, forcing the closure of airports in the Russian capital.

Now, Reuters can report that nearly 2,000 miles east of Moscow, in a small Siberian town, Russia is preparing to ramp up production of a powerful explosive used in artillery shells and other munitions. Our reporting strongly points to this being an explosive known as RDX. Our Ukraine bureau chief, Christian Lowe, explains what it could mean on the front lines.

The projected annual production of RDX from this new facility is 6,000 tons a year, enough to fill the warheads, the business end of a very common 152 millimeter artillery shell around 1 million times over. To put it in context, Russia annually is producing around about 2 million artillery shells of various types. And here's the issue. Russia isn't actually able to produce artillery shells

as fast as they are using them on the battlefield. So that made it really important for Russia to boost its ability to produce its own munitions in enough numbers. So to bolster that domestic production, Russia has been importing millions of artillery shells from North Korea. Ukraine's military intelligence directorate says 2.7 million in 2024 alone.

How soon might this facility begin contributing to Russia's war effort? So all we know from the plans is that the completion date is set for 2025. We're not sure that they're on schedule.

We know that there have been a few setbacks. What we can see is that they're entering the latter phases of construction. So they're doing things like ordering the polymer flooring and ordering furniture, the kind of stuff you want to do at the end of the process. We believe that they could be up and running producing RDX within kind of six to ten weeks of the completion of the construction. How has the Kremlin responded to the findings of this reporting?

We did reach out to the Kremlin, and not only them, but the defense ministry. We reached out to the company that owns this factory site. We reached out to other agencies that we believe are involved in the construction of this in Russia. All of them either did not comment or declined to comment.

The U.S. Federal Reserve held rates steady yesterday, as economic uncertainty remains the most certain thing about this economy. It's a fairly clear decision for us to wait and see and watch. Our Fed reporter Howard Schneider was in the room for Fed Chair Jerome Powell's remarks.

This is Donald Trump's economy now. And J-PAL pretty much said that without actually saying that they are handcuffed, waiting to see what Trump decides and then how that lands in the economy. It doesn't mean they're going to sit on their hands. It means they want to get a clear signal from the data that the economy is tilting in one direction or the other. And the problem right now is that tilting in one direction or the other is very much conditional on

what trade regime and what tariff regime ultimately emerges from the Oval Office. And at this point, we don't know whether tariffs on China are going to stay at 145%. They've got talks going on in Geneva this weekend, but Trump says he won't lower them. Or that giant big board of tariffs he held up on April 2nd, is that going to go in place in July after the 90-day pause? Or are those import taxes going to be relaxed?

All of this is up in the air and very much will determine if several months from now we're dealing with high unemployment and high inflation or just one or just the other. And all of that will shape the Fed's response.

Republican hopes of making all President Trump's 2017 tax cuts permanent are in jeopardy, as lawmakers in Congress can't agree on how to pay for them. Reporter David Morgan in Washington explains what's going on. Behind all of this debate is an agreement that House Republicans adopted earlier this year as part of the blueprint for the Trump legislation. And what this agreement says is that

House Republicans will try to find $2 trillion in spending cuts to help pay for the legislation. And if they don't, then the scope of the tax cuts

needs to be reduced accordingly. And at the moment, it looks as though House Republicans are trying to get to the $1.5 trillion level, which suggests that the scope for tax cuts could be reduced by as much as $500 billion over the next decade, which could rule out some

proposals that the president has put his priorities on, or it could mean that some of the 2017 tax cuts are not extended permanently.

Top Republicans are saying that the provisions of the 2017 tax cuts would help pay for themselves, essentially. But it seems that trillions are needed in new revenue to prevent ballooning of the debt and the annual deficit. What are you hearing from experts about that? What the experts say is that even under the best conditions, this legislation would add to the debt. But

But there are some additional problems on the horizon. One is that Republicans have been projecting this rosy economic picture. Unfortunately, the prospect for economic growth has been dimmed by President Trump's tariff policies, and his crackdown on immigration to the United States is also expected to

tighten the U.S. labor force, which is a fundamental pillar of economic growth. Some of the analysts I've spoken to have said that those factors applying downward pressure on the economy could very easily swamp the benefits to the economy that would come from the tax cut portion of the legislation.

Federal health agencies will create a database of autism patients enrolled in Medicare and Medicaid. Health Secretary Robert F. Kennedy plans for it to be used to study the causes of autism spectrum disorder. Ukraine is considering shifting away from the U.S. dollar and linking its currency more closely to the euro. Ukraine's central bank governor tells Reuters that volatility in global markets and EU membership talks are influencing the potential move.

And North Korea has fired what appears to be multiple short-range missiles off its east coast. That's according to South Korea's military, which says the launch is likely to test performance of projectiles for export.

And for today's recommended read, Alarm in Bollywood about Trump's 100% tariff threat on movies produced outside the US. India's film industry relies on the US for almost half of its overseas revenue. We'll drop a link to the story in the pod description. For more on any of the stories from today, check out Reuters.com or the Reuters app. Don't forget to follow us on your favorite podcast player and we'll be back tomorrow with our daily headline show.