Apple’s Strategic Math: Why Paying a 25% Tariff Still Beats Moving iPhone Assembly to the U.S

Economic

China–U.S. Trade War

Summary:

Apple would suffer greater losses from relocating iPhone production to the United States than from absorbing a 25% import tariff, due to its vast, entrenched Asian supply chain....

Tariff Pressure Versus Supply Chain Disruption: Apple’s Cost-Benefit Dilemma

Amid renewed calls from former U.S. President Donald Trump for Apple to assemble iPhones domestically, a critical analysis by supply chain expert Ming-Chi Kuo suggests that paying the proposed 25% tariff on imported iPhones remains financially preferable for the tech giant compared to shifting production back to the U.S. The rationale lies in the immense complexity, scale, and cost efficiency of Apple’s current global supply chain centered in Asia.

Trump’s message, posted on Truth Social on May 23, reiterated his stance: iPhones sold in the U.S. should be made in the U.S., warning of at least a 25% tariff on devices assembled elsewhere. However, such a policy, if implemented, would not necessarily yield the intended reshoring effect. Instead, it could lead to higher consumer prices without fundamentally changing Apple’s global operations.

Why Apple’s Asian Manufacturing Remains Incomparable

Apple’s production ecosystem is anchored in Asia, notably in China and increasingly in India. The company relies on long-term partnerships with major Original Equipment Manufacturers (OEMs) such as Foxconn and Pegatron. These partners operate massive, purpose-built facilities tailored to Apple's standards, enabling high-volume, low-cost production. Years of supply chain fine-tuning and labor specialization make replicating this network in the United States a prohibitively expensive and logistically challenging proposition.

According to Kuo, attempting to replicate these facilities domestically would require billions in capital expenditures for infrastructure, hiring, and training. Moreover, there’s no guarantee the U.S.-based facilities could match the scale or efficiency of operations in Asia. A wholesale relocation would not only incur startup costs but risk operational inefficiencies, product delays, and quality control issues—undermining the very advantages that have defined Apple’s global dominance.

Cost of Tariffs Versus Domestic Reshoring

Even if Apple absorbs a 25% tariff on iPhones sold in the U.S.—where it has over 120 million users and sells more than 60 million iPhones annually—the cost is still considerably lower than rebuilding its production base on American soil. Estimates from Wedbush Securities suggest that domestic assembly could push iPhone prices as high as $3,500 per unit, potentially alienating consumers and shrinking market share in Apple’s most critical market.

In contrast, the 25% tax would merely increase import costs without requiring fundamental alterations to Apple's supply chain or product pricing strategy. Given Apple’s pricing power and brand loyalty, it could absorb part of the tariff or gradually pass it on to consumers without suffering dramatic losses.

India as a Strategic Middle Ground

Apple’s alternative strategy already reflects a global diversification agenda. The company is steadily shifting production to India, where it aims to manufacture over 60 million iPhones annually by 2026. Foxconn has committed $1.5 billion to build new facilities in India, signaling a long-term commitment to de-risking from China while avoiding U.S. cost burdens.

While this move may not fully satisfy U.S. political demands, it represents a pragmatic compromise: reducing dependence on Chinese manufacturing without the impractical costs of reshoring to the U.S. It also allows Apple to remain agile in navigating geopolitical tensions, currency risks, and labor cost differentials.

For Apple, the financial and operational calculus is clear. Tariffs—even steep ones—are a manageable cost in the broader context of global manufacturing economics. The integration, scale, and cost efficiency of its Asian supply chain are advantages too valuable to sacrifice for political messaging. Apple’s decision to maintain overseas assembly, while gradually expanding in India, underscores a strategic preference for flexibility, profitability, and continuity—values that outweigh the symbolic appeal of domestic production.

Source: Reuters

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[Quick Facts]

1. Trump extends trade negotiation window with EU to July 9th, reinstating 90-day period.

2. German economy faces worst crisis due to Ukraine issue.

3. International travel to the U.S. expected to drop 8.7% this year.

4. EU discussing new round of sanctions against Russia.

5. Traders bet summer will bring clarity for the Fed.

6. Japan's chief negotiator: Aiming for tariff deal with U.S. before June summit.

7. Trump backs partnership between U.S. Steel and Nippon Steel.

8. Iranian FM: Fifth round of Iran-U.S. talks 'Most Professional' so far.

9. U.S. new home sales surge to highest level since 2022.

10 U.S.-Ukraine Minerals Agreement officially launched.

11. Fed's Goolsbee: bar for near-term rate cuts 'a little higher'.

[News Details]

Trump extends trade negotiation window with EU to July 9th, reinstating 90-day period

Last Friday, U.S. President Donald Trump threatened to impose a 50% tariff on goods imported from the European Union starting June 1st, far higher than the previously announced 20% "reciprocal tariffs" that the U.S. had temporarily suspended for the EU, triggering renewed turmoil in capital markets. Key industries across Europe warned that the U.S. tariff policy was severely impacting exports, pushing them toward existential crises.

However, just two days later, Trump stated that the EU had requested an extension of the trade negotiation window and agreed to push the deadline to July 9th. Earlier, European Commission President Ursula von der Leyen said on Sunday after a phone call with Trump that the EU was ready to move quickly in trade talks with the United States, but needed Trump to reinstate the original 90-day negotiation period. This marks the first publicly disclosed call between the two leaders since Trump took office. In April, Trump suspended the initially proposed 20% tariffs on the EU and opened a 90-day negotiation window, originally set to conclude on July 9. Von der Leyen's office confirmed that she had initiated the contact. Her remarks suggest a potential shift in the European Commission's stance, leaning toward seeking a compromise.

German economy faces worst crisis due to Ukraine issue

According to a TASS report on May 24th, Helga Zepp-LaRouche, founder of the German think tank Schiller Institute, stated that Western countries lack consensus on supporting Ukraine, and the German economy is facing its most severe crisis and market losses as a result. Earlier, the German Council of Economic Experts released an economic forecast on May 21st, revising its 2025 growth projection from 0.4% to zero, indicating that Germany's economy may fail to grow for three consecutive years.

International travel to the U.S. expected to drop 8.7% this year

Data released by Tourism Economics, a subsidiary of Oxford Economics, shows that due to factors such as the U.S. government's "reciprocal tariffs," the number of international arrivals to the U.S. in 2025 is projected to decline by 8.7%, with significant drops in visitors from Canada, Mexico, and Western Europe. The firm estimates that arrivals from Canada will fall by 20.2%, from Mexico by 7.6%, and from Western Europe by 5.8%. As a result, international travelers are expected to spend $8.5 billion less in the U.S. this year compared to 2024, a 4.7% decrease.

EU discussing new round of sanctions against Russia

According to a TASS report on May 23rd, German Foreign Minister Johann Wadefull stated that the European Union is discussing a new round of sanctions against Russia, particularly targeting its energy sector. On May 20th, the EU formally adopted its 17th package of sanctions against Russia. The report noted that the 18th round of sanctions includes measures related to Russian oil, lowering the price cap on Russian oil and petroleum products, and new restrictions targeting Russia's "shadow fleet" of vessels. Western countries accuse Russia of using commercial ships, such as oil tankers, to evade sanctions, referring to them as the "shadow fleet."

Traders bet summer will bring clarity for the Fed

For months, Federal Reserve policymakers have made it clear that they want greater clarity on fiscal and trade policies, as well as the economy's response, before taking further action on interest rates. Over the past month, this cautious stance has led traders to unwind bets on a June rate cut, with markets now expecting policy to remain on hold until the July meeting. However, futures market positions still show a slightly more than 50% probability of a rate cut by the end of September. This essentially amounts to a bet that the next four months will bring clarity: either inflation easing enough to justify policy loosening or economic deterioration forcing the Fed to ramp up stimulus.

Japan's chief negotiator: Aiming for tariff deal with U.S. before June summit

Japan's chief trade negotiator, Ryosei Akazawa, stated after meetings with U.S. Trade Representative Jamieson Greer and Commerce Secretary Howard Lutnick that he had a "more frank and in-depth discussions" with the U.S. side and "very desirable" to urge a review of American tariff measures. He said negotiators would "do their utmost" to resolve tariff negotiations, with an eye on the planned June meeting between U.S. President Donald Trump and Japanese Prime Minister Shigeru Ishiba. When asked about progress in tariff talks, he said negotiations typically have no deadline, and he would proceed on that understanding. However, it has been confirmed that both leaders are looking forward to the summit, so he would do his best.

Trump backs partnership between U.S. Steel and Nippon Steel

U.S. President Donald Trump voiced support for a partnership between U.S. Steel and Japan's Nippon Steel, crediting his tariff policies for the deal and stating it would ensure the iconic American company remains rooted in the U.S. Though Trump did not explicitly endorse Nippon Steel's proposed $14.1 billion acquisition of U.S. Steel, his remarks sent the American steelmaker's shares soaring by as much as 26%, reflecting market optimism about the deal's prospects. "I am proud to announce that, after much consideration and negotiation, U.S. Steel will remain in America, and keep its headquarters in the great city of Pittsburgh."

On Friday, Trump said in a statement on Truth Social: My Tariff Policies will ensure that Steel will once again be, forever, MADE IN AMERICA.” Trump said the partnership would create at least 70,000 jobs and add $14 billion to the US economy, with the bulk of the investment occurring in the next 14 months. He also said he would appear at an event on May 30th in Pittsburgh. The White House confirmed that Trump has received recommendations from the Committee on Foreign Investment in the U.S. (CFIUS) regarding the acquisition.

Iranian FM: Fifth round of Iran-U.S. talks 'Most Professional' so far

On May 23rd local time, Iranian Foreign Minister Aragchi stated that the fifth round of nuclear negotiations between Iran and the U.S. was the "most professional" yet, adding that Tehran's stance was very clear and Washington now had a better understanding of Iran's position. Aragchi noted that Oman's foreign minister had proposed solutions to overcome obstacles, and this round of talks reviewed the outline and key elements of that proposal. Both sides agreed that while their respective leaderships deliberate further, Oman's foreign minister will continue refining the details of the proposed solutions and present them for further consideration. Aragchi said the timing and location of the next round of talks would be announced later.

He acknowledged the complexity of the negotiations, stressing that two or three meetings cannot produce a final conclusion. However, he said the talks are now on a reasonable track, which in itself represents progress. Aragchi expressed hope that the next one or two meetings could yield solutions to advance negotiations and pave the way for a final agreement. While a final deal remains distant, Aragchi described the current atmosphere as positive, adding that progress is more likely as Oman takes steps to remove obstacles.

U.S. new home sales surge to highest level since 2022

U.S. new home sales in April exceeded expectations, rising to their highest level since February 2022, likely driven by builder incentives aimed at easing affordability challenges. Based on government data released Friday, sales of new single-family homes jumped nearly 11% to an annualized rate of 743,000 units, with particularly strong performance in the South and Midwest. The figures surpassed most economists' forecasts in a Bloomberg survey. The increase highlights how the new-home market is outperforming the existing-home segment, reflecting builders' ability to cut prices and offer sales incentives. In contrast, existing-home sales remain sluggish despite rising inventory.

U.S.-Ukraine Minerals Agreement officially launched

On May 23rd local time, the U.S.-Ukraine Reconstruction Investment Fund Establishment Agreement officially took effect. Ukrainian media described the move as marking a new phase in Ukraine's post-war economic recovery. U.S. Chargé d'Affaires ad interim to Ukraine, Julie S. Davis, handed a diplomatic note confirming the completion of procedures to Ukraine's First Deputy Prime Minister and Minister of Economy, Yulia Svyrydenko. On May 12th, Ukrainian President Zelenskyy signed a law ratifying the agreement, according to his official website. The U.S.-Ukraine Reconstruction Investment Fund Establishment Agreement, also referred to as the "U.S.-Ukraine Minerals Agreement," was jointly signed by both nations on April 30th.

Fed's Goolsbee: bar for near-term rate cuts 'a little higher'

During an interview on Friday, Goolsbee said "Everything's always on the table. But I feel like the bar for me is a little higher for action in any direction while we're waiting to get some clarity." "I'm still underneath hopeful that we can get back to that environment, and 10 to 16 months from now, rates could be a fair bit below where they are today."

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Economic

Macroeconomic Landscape: Stability Masked by Currency Volatility

The first half of 2025 has delivered a paradox for Vietnam’s financial markets. While macroeconomic indicators remain robust—exemplified by a Q1 GDP growth of 6.93%, the highest in five years, and a subdued 4-month CPI of 3.2%—the Vietnamese dong has suffered intense depreciation pressure. The USD/VND rate peaked at over 26,200 at commercial banks, while the official reference rate hit 24,960. Simultaneously, foreign investors withdrew more than $1.6 billion from local equities, undermining market confidence despite favorable fundamentals.

This combination of exchange rate instability and equity outflows, juxtaposed against solid domestic indicators, creates a two-sided battlefield. Investors must choose between exploiting tactical opportunities or retreating into defensive allocations.

Rising Exchange Rate Undermines Export-Driven Optimism

Contrary to the expectation that a weaker dong would benefit exporters, many are facing heightened cost burdens. The surge in the exchange rate stems from several converging pressures: accelerating imports, subdued FDI and remittances, and psychological ripple effects from US tariff policies. By mid-May, Vietnam's imports reached $155.76 billion—up 17.4% year-on-year—further straining forex demand.

However, exporters are not universally advantaged. For example, Sao Mai Group reported that rising USD prices inflated costs for plastic raw materials, reducing profit margins and compelling a shift toward domestic markets. Each 1% increase in exchange rate adds VND 400–500 million per month in input costs for the firm. In high foreign debt sectors like real estate and construction, the pain is sharper. A 2.1% currency depreciation can translate into losses of up to VND 5 billion on a $10 million loan, directly impacting Q2 earnings.

Lower Interest Rates Offer Only Partial Relief

On the positive side, domestic interest rates have eased. By April, average lending rates dropped to 6.34% annually, while priority sectors enjoyed rates as low as 4%. Interbank rates remained soft, reflecting abundant system liquidity. Yet this monetary easing has been insufficient to invigorate the equity market.

Vietnam’s VN-Index hovered in the 1,200–1,300 range throughout May, suggesting that rate cuts alone are not reversing investor sentiment. One reason is the international divergence in monetary policy. The US Federal Reserve’s reluctance to lower rates—backed by persistent labor market strength—continues to exert upward pressure on the USD, weakening the VND and constraining Vietnam’s monetary maneuverability. The narrow USD–VND interest rate differential and limited forex reserves further dampen the State Bank’s ability to intervene, deterring large institutional investors from reentering the market.

Capital Flows Fragment: Emerging Opportunities Amid Sector Divergence

In this environment, investor capital has become highly selective. Companies with USD revenues, VND costs, minimal foreign debt, and low import dependence—such as those in seafood, textiles, electricity, and domestic retail—have outperformed. These firms enjoy margin expansion as the USD appreciates, even after adjusting for input cost inflation.

Conversely, real estate and banking equities face twin pressures. Higher funding costs and sluggish consumer demand compress net interest margins and reduce credit activity. This dynamic is especially detrimental to state-owned banks, many of which are now adjusting Q2 lending strategies. The property sector continues to suffer from illiquidity and an unstable exchange rate, limiting capital inflows.

As of late April, the Vietnamese dong had depreciated by about 2.1% against the USD on the interbank market. Forecasts suggest the rate could reach 26,500 by year-end if trade tensions persist. Should this scenario materialize, financial asset valuations may face cascading downward revisions, undermining earnings outlooks across several sectors.

Long-Term Outlook: Navigating Toward Resilient Value

Despite current turbulence, a long-term view offers pockets of promise. Investors who concentrate on firms with strong fundamentals—stable domestic revenue, healthy margins, limited exposure to forex swings, and consistent positive cash flow—are likely to benefit during the current portfolio rebalancing cycle.

Speculative strategies chasing short-term news flows risk capital erosion, especially in an environment marked by high volatility and sentiment-driven trading. Conversely, as global monetary easing gradually takes hold and the USD stabilizes, the Vietnamese equity market may regain its upward momentum. Those who endure temporary pain by holding value-oriented positions, rather than panicking into losses, will likely emerge as the true winners of this volatile investment year.

Vietnam’s market, though battered by external volatility, still holds significant upside potential for discerning investors who can sift through noise and remain anchored to fundamentals.

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Strategic Budget Reallocation to Counteract Economic Pressure

Thailand has officially abandoned its ambitious plan to distribute 10,000 baht in digital currency to 50 million citizens. Instead, the government is channeling over 150 billion baht from emergency reserves and central budget contingencies into a more targeted economic stimulus package. This decisive move comes at a time when the country is grappling with intensifying global trade tensions, especially following tariff escalations initiated by the United States, which have sent ripples through the global economy and pressured Thailand’s export and manufacturing sectors.

The broader context shaping this policy pivot includes the deteriorating global economic outlook in the latter half of 2025. With US-imposed tariffs triggering countermeasures across global supply chains, Thai exports—particularly in sectors heavily reliant on international demand—face significant hurdles. The resulting uncertainties have led policymakers to reconsider earlier populist approaches and instead adopt a more surgical, sector-specific response.

Government’s Revised Focus: Tourism and Manufacturing Liquidity

Deputy Prime Minister and Finance Minister Pichai Chunhavajira confirmed that the upcoming Economic Stimulus Policy Committee meeting, chaired by Prime Minister Paetongtarn Shinawatra, will unveil new measures focused on revitalizing the tourism sector and stabilizing the real estate market. These sectors are viewed as both economically vital and vulnerable to external shocks. By redirecting fiscal resources to support liquidity for affected businesses, the Thai government aims to cushion immediate losses while laying the groundwork for structural resilience.

This reprioritization also aligns with the administration's determination to maintain GDP growth above 3% in 2025, despite mounting external headwinds. The support measures will particularly benefit exporters and manufacturers facing price competition from low-cost foreign imports—a scenario exacerbated by a stronger baht and softening global demand.

Phase-Out of the Digital Wallet Scheme Reflects Pragmatic Adjustment

Initially introduced by the ruling Pheu Thai Party, the digital wallet program was a flagship policy designed to stimulate consumption, particularly among youth and vulnerable groups. The first two phases of the plan reached 19.55 million people over 60 and members of economically disadvantaged groups. A third phase targeting 2.7 million youths aged 16–20 was due to be implemented via electronic wallets.

However, with the evolving economic crisis posing more systemic threats, the government concluded that direct transfers no longer aligned with urgent national priorities. This redirection of strategy underscores a shift from broad-based, short-term consumption incentives toward a more strategic deployment of fiscal tools to protect productive capacity and employment.

Implications for Thailand’s Economic Planning

The planned use of 157 billion baht illustrates a growing recognition within Thailand's leadership of the need for precision-based economic management. Rather than focusing solely on citizen spending power, the new approach recognizes the multiplier effects of targeted investments in sectors that serve as economic engines. The choice to prioritize production restructuring and business liquidity suggests a belief that preserving industrial and service capabilities is more sustainable than temporary demand shocks.

This recalibration is not merely a reactive maneuver but signals a structural evolution in Thai fiscal policy—one that attempts to navigate a complex interplay of external shocks, domestic vulnerabilities, and the need for medium-term economic transformation. While the effectiveness of this new stimulus remains to be seen, it marks a significant departure from earlier populist models toward a more technocratic, resilience-oriented approach.

Source: The Strait Times

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Commodity

Crude Oil Climbs on Easing Trade Risk

Brent crude futures rose by $0.37 (0.6%) to $65.15 per barrel, while U.S. West Texas Intermediate (WTI) crude gained $0.34 (0.6%) to $61.87 per barrel as of early Monday trading. The uptick followed President Trump’s announcement over the weekend that the EU would be granted more time for trade negotiations, easing tensions that had threatened to derail global economic stability and oil demand.

IG analyst Tony Sycamore noted that Trump’s tariff extension helped lift both crude and equity futures, signaling reduced short-term downside risk for commodities.

U.S.-Iran Tensions and Memorial Day Effect Support Prices

Friday's modest 0.5% rise in both Brent and WTI was driven by two additional factors: the slow pace of U.S.-Iran nuclear negotiations, which eased concerns about Iranian supply flooding the market, and U.S. buyers covering positions ahead of the Memorial Day weekend, typically a period of increased gasoline consumption.

Adding further support, energy services firm Baker Hughes reported a drop of 8 active oil rigs in the U.S., bringing the total to 465—the lowest since November 2021. This decline underscores pressure on U.S. shale producers to scale back amid persistently soft prices and capital discipline.

OPEC+ Output Uncertainty Caps Rally

Despite positive momentum, the oil market remains cautious. Traders are closely watching OPEC+ developments, with the alliance scheduled to meet next week. Sources suggest the group may decide to increase production by another 411,000 barrels per day (bpd) in July, as part of an ongoing reversal of the 2.2 million bpd voluntary cuts announced in 2023.

According to Reuters, OPEC+ has already adjusted output targets higher by 1 million bpd for the April-June period and may fully unwind the remaining cuts by October. This signals a careful balancing act as producers seek to avoid price spikes that could damage demand while preventing oversupply.

Volatility Ahead as Trade and Supply Uncertainty Persist

While the Trump tariff delay has temporarily improved risk sentiment and offered short-term support to oil, the broader market faces continued volatility. Key wildcards include geopolitical developments, fiscal policy debates in the U.S., and the uncertain trajectory of global central bank interest rates.

In the near term, energy traders will also monitor mid-week U.S. economic data—including personal consumption expenditure (PCE) inflation figures—for further clues on demand strength. The outcome of the June OPEC+ meeting will likely set the tone for crude prices through the rest of the summer.

Source: Reuters

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Stocks

Market Reaction: Temporary Relief But Lingering Uncertainty

On Monday, Asian stock markets reacted positively—but cautiously—to President Trump’s unexpected decision to extend the tariff deadline on EU imports from June 1 to July 9. This extension, following a call with European Commission President Ursula von der Leyen, provided temporary relief to investors fearing a major escalation in U.S.–EU trade tensions.

The MSCI Asia-Pacific index excluding Japan rose 0.12%, while Japan’s Nikkei was marginally higher. Gains, however, were capped by low trading volumes due to public holidays in the U.S. and U.K., and broader caution around Trump's volatile trade policies.

Euro Strengthens, Yen and Safe-Havens Retreat

In currency markets, the euro gained 0.3% to $1.1397, touching its highest level since April 30, while the dollar also rebounded against the yen, up 0.3% to 143.085 after Friday’s sharp selloff. The delay in tariff implementation helped ease immediate fears of a trade rupture between two of the world’s largest economic blocs.

However, analysts continue to warn that investor confidence remains fragile. As Brown Brothers Harriman noted, “The U.S., EU, and China account for 60% of global GDP and so this escalation bodes ill for the entire world.”

Tariff Threats Shift Capital Flows and Market Focus

Trump’s sudden moves—ranging from threatening 50% EU tariffs to proposing 25% import duties on iPhones—have not only rocked equity markets but also sparked a shift in global capital flows. Investors are increasingly reallocating funds from the U.S. to Europe and Asia, as they brace for a potential American recession and global growth deceleration.

Adding to the volatility, Moody’s recent downgrade of the U.S. credit rating and weak bond auctions in both the U.S. and Japan brought sovereign debt sustainability back into the spotlight.

Corporate Watch: Nippon Steel and Nvidia Under the Microscope

Nippon Steel’s stock surged 4.3% after Trump voiced support for its $14.9 billion acquisition of U.S. Steel, calling the merger a “planned partnership” that would create jobs. This endorsement sharply contrasted with former President Biden’s earlier move to block the deal on national security grounds. U.S. Steel shares rallied 21% on Friday in response.

Meanwhile, investors are eyeing Nvidia’s earnings on Wednesday as a crucial catalyst for market direction. Despite being part of the “Magnificent Seven” that fueled the tech rally, Nvidia’s shares have fallen over 2% this year amid competition from low-cost Chinese AI models and concerns over U.S. export curbs. Nvidia is expected to unveil a new, low-priced AI chip tailored for the Chinese market, pending regulatory approval.

Commodities and Bonds: Crude Climbs, Gold Pulls Back

Crude oil prices edged higher, supported by a weaker dollar and expectations of summer demand. Gold, on the other hand, eased slightly from a two-week high as risk sentiment stabilized following the tariff delay.

While markets breathed a sigh of relief after Trump’s tariff deferral, the reprieve is widely seen as temporary. Investors remain wary of a highly unpredictable trade environment, rising U.S. fiscal imbalances, and structural shifts in global capital allocation. The coming weeks—particularly the July 9 deadline and key corporate earnings—will be critical in determining whether markets can stabilize or face renewed turmoil.

Source: Reuters

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Forex

Market Relief as Trump Offers More Time for EU Deal

Currency markets responded positively to President Donald Trump’s Sunday announcement that he would delay the imposition of a 50% tariff on European Union imports until July 9. The move, which followed a call with European Commission President Ursula von der Leyen, reversed a threat issued just two days earlier and provided markets with temporary relief.

The euro rose 0.3% to 162.60 yen and 0.2% against the dollar to $1.1382, its highest since April 30. The dollar, which had dropped 1% against the yen on Friday, rebounded 0.4% to 143.085 yen as investors interpreted the delay as a reduction in immediate geopolitical risk.

Temporary Calm, Persistent Volatility

Trump’s swift reversal underscores the volatility inherent in current U.S. trade policy. The July 9 deadline aligns with the expiration of the 90-day reprieve on tariffs issued during his “Liberation Day” announcement, adding a sense of urgency to U.S.-EU trade negotiations.

Ray Attrill, head of FX research at National Australia Bank, noted, “Markets have probably taken the view — and probably rightly so — that where we land eventually on a tariff situation between the U.S. and the EU is not going to be at 50%, but how we get there is frankly anybody’s guess at the moment.”

Despite this temporary calm, investors remain wary. The prospect of a 25% tariff on iPhones manufactured outside the U.S. is still on the table, continuing to weigh on tech sentiment.

Pro-Growth Currencies Hold Steady Amid Trade De-Escalation

Risk-sensitive currencies also showed resilience. The Australian dollar edged up to $0.6505, its strongest level since May 7, while the British pound held firm at $1.3535, just shy of Friday’s high. These gains reflected improved risk appetite, though analysts warned that any renewed deterioration in global growth expectations could reverse this momentum.

Attrill cautioned that “if global growth expectations are going to suffer a renewed setback here, that’s not good news for pro-cyclical, pro-growth currencies such as the Aussie dollar.”

Fiscal Concerns Still Linger

Even as trade tensions eased slightly, markets remain unsettled by the looming fiscal impact of Trump’s expansive tax and spending bill. The Congressional Budget Office estimates that the House version of the legislation would add approximately $3.8 trillion to the federal debt over the next decade.

Trump acknowledged the political resistance, hinting at "significant" changes expected in the Senate. Still, the implications of ballooning federal debt and uncertainty around policy implementation continue to cast a shadow over investor sentiment.

Trump’s decision to grant the EU more time has reassured currency markets for now, lifting the euro and supporting the dollar. However, with a July 9 deadline looming and threats like iPhone tariffs unresolved, the broader market narrative remains dominated by caution. While optimism over potential trade deals persists, the volatility of U.S. policy shifts ensures that market reactions will stay sensitive and reactive in the weeks ahead.