China Fires Back at Trump Tariffs, Warns Against Supply Chain Exclusion

Economic

China–U.S. Trade War

Summary:

Beijing has issued a stern warning to the U.S. and its allies over escalating trade tensions, vowing retaliation if new tariffs are imposed or if supply chain deals marginalize China...

Beijing Issues Firm Response to Trump’s Tariff Threats and Supply Chain Shifts

China has raised the stakes in the unfolding trade standoff with the United States, warning the Trump administration against reactivating high tariffs on Chinese goods and vowing to retaliate against countries that strike exclusive supply chain deals with Washington. The warning, published Tuesday in the People's Daily under the pseudonym “Zhong Sheng” (a voice often used to express the government’s official line on foreign affairs), comes as the August 1 deadline for new U.S. tariffs looms.

While President Trump delayed the majority of his planned April tariffs maintaining only a 10% rate to give space for trade negotiations, he has now started issuing formal notices to multiple trade partners regarding much steeper tariffs. China faces an especially severe hike, with duties set to exceed 100% on certain goods if no agreement is reached by August 12.

Tariff Framework Under Pressure

The fragile trade truce struck in June now appears increasingly unstable. Despite hopes that it might pave the way for de-escalation, details remain murky. Investors and policy watchers on both sides of the Pacific fear a renewed tit-for-tat conflict could again rattle financial markets, dampen consumer confidence, and choke trade between the world’s two largest economies.

The People’s Daily editorial accused Trump’s administration of engaging in economic "bullying" and made clear that Beijing views diplomacy and cooperation not coercion as the only legitimate avenue forward. “Practice has proven that only by firmly upholding principled positions can one truly safeguard one's legitimate rights and interests,” it asserted.

Supply Chain Realignment: A Red Line for Beijing

Perhaps more striking than its rebuke of tariffs was China’s warning to third-party countries considering supply chain pacts that sideline Beijing. Specifically citing Vietnam’s recent deal with the U.S. which reduced tariffs on transshipped goods from 46% to 20%, while still taxing China-origin goods at 40% the article condemned any move that undermines China's role in global production networks.

“China firmly opposes any side striking a deal that sacrifices Chinese interests in exchange for tariff concessions,” the editorial said. “If such a situation arises, China will not accept it and will respond resolutely to protect its legitimate interests.”

This signals that China may now treat supply chain exclusion as a strategic threat on par with direct tariffs, likely complicating regional dynamics for nations like Vietnam, Thailand, and South Korea, which are all balancing relations with both superpowers.

Tariff Averages Reflect Escalation

According to the Peterson Institute for International Economics, average U.S. tariffs on Chinese exports now stand at 51.1%, with China’s average duties on U.S. goods at 32.6%. Unlike earlier phases of the trade war, both nations have extended duties across nearly the entirety of bilateral trade, suggesting limited room for further escalation without direct economic fallout.

The editorial’s tone and content confirm that Beijing views the coming weeks as critical. Should Washington proceed with its tariff hike on August 1 and fail to carve out a compromise deal with Beijing by August 12, another disruptive trade clash appears all but certain.

The broader message is clear: Beijing is drawing lines not just around its own trade with the U.S., but also around its regional influence. Countries that align too closely with American protectionist measures may find themselves in China’s crosshairs both diplomatically and economically. As global supply chains continue to fragment along geopolitical lines, the risk of permanent decoupling between China and the West edges closer to reality.

Source: Reuters

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Economic

Trump's Tariff Threat Puts Swiss Timepiece Industry on Edge as Tourists Retreat from Lucerne

The glittering watch boutiques of Lucerne, Switzerland long a magnet for high-spending international tourists are feeling the strain of President Donald Trump’s renewed tariff pressures. In recent months, the threat of a 31% U.S. import duty on Swiss goods, up from the previously proposed 20% for the EU, has created ripples of uncertainty across one of the country’s most prized export sectors: luxury watches.

Although Trump ultimately paused the full tariff implementation and extended the deadline to August 1, the initial shock sent Swiss watchmakers scrambling to reroute inventory to the U.S. in anticipation. As a result, export volumes have fluctuated unpredictably, with January–May unit exports down nearly 5% year-on-year, according to the Federation of the Swiss Watch Industry (FH). While total export value has slightly risen thanks to the enduring strength of ultra-premium models the overall trend signals weakness, particularly in volume.

Currency Pressures and Fading Chinese Demand Compound the Pain

Beyond the tariff saga, Swiss exporters are contending with a surging franc that has grown stronger amid global trade uncertainty. The franc's rise has made Swiss watches even more expensive for foreign buyers, compounding the slowdown caused by tepid Chinese demand once a pillar of growth for the industry.

"That obviously really put the brakes on," said Ken May, boutique manager at Hublot in Lucerne, referring to Trump’s abrupt tariff escalation.

Yves Bugmann, president of the FH, acknowledged that exporters can no longer rely on the U.S. and China alone. “We have to open other markets. We have to look for other opportunities,” he said, as the industry braces for what could be its lowest wristwatch export volumes since the pandemic-plagued year of 2020.

Lucerne’s Retail Scene Reflects the Strain

On Lucerne’s famed Grendelstrasse, where window displays from Rolex, Patek Philippe, and Breitling shimmer behind pristine glass, foot traffic is visibly lighter this summer. Sales staff report that tourists are arriving in smaller numbers, and those who do are more budget-conscious.

Boutique manager Michael Haas of Breitling noted, “Everything is just a bit slower than last year. We're in a luxury business, and as a rule, that's where people save first when the going gets tougher."

Even in Patek Philippe’s upstairs salon where watches can cost nearly 3.8 million francs a sense of caution prevails. The boutique’s signature white-coated watchmakers still serve trays of customized timepieces to elite clients, but the mood is subdued.

An Industry at a Crossroads

Swiss watchmakers, famed for precision and prestige, now find themselves navigating geopolitical turbulence that threatens their most profitable markets. With Trump’s tariff deadline looming on August 1 and no clarity on whether negotiations will ease tensions or escalate them, exporters are watching closely.

If Swiss watch exports continue to slump in volume despite stable value, the pressure will intensify to diversify into emerging markets and streamline production costs. For now, Switzerland’s luxury timepiece industry is ticking, but under tension and with less time than ever to adapt.

Source: Reuters

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Daniel Carter

Economic

Political

Bangladesh will hold further negotiations with the United States to push for deeper tariff cuts, even as US President Donald Trump slapped a 35% levy on goods from the South Asian nation.

Officials are scheduled to hold crucial trade negotiations with the Trump administration from July 9-10 to seek a solution, Commerce Adviser to the interim government Sk. Bashir Uddin said in an interview from Washington.

“We will give and try our best to find mutually win-win proposition,” he said, adding that the goal is to find a “common ground.”

Dhaka is reviewing the draft documents from the US trade representative and will assess the way ahead, said Uddin, who is also heading the delegation. “This is an uncertain world,” he said, referring to the challenges ahead in talks with the US.

The Trump administration sent the first tranche of letters to various countries on Monday, detailing the levies that the US will impose on products from them. While the tariff on Bangladesh is slightly lower than the 37% proposed earlier, it still risks hurting the nation's already fragile economy and its garment exports.

The South Asian nation's main rival in the ready-made garment sector, Vietnam, secured a more favorable 20% tariff, placing Bangladesh at a competitive disadvantage.

The upcoming discussions offer a pathway, said analysts at Dhaka-based BRAC EPL Research. “Proactive diplomacy could still yield positive outcomes,” they added.

Source: Bloomberg Europe

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Economic

Australia’s Central Bank Stuns Markets With Steady Rate Decision Amid Mixed Economic Signals

In a move that defied both market forecasts and household hopes, the Reserve Bank of Australia (RBA) held its benchmark cash rate unchanged at 3.85% following its July policy meeting. The decision shocked traders who had priced in nearly a full probability of a 25-basis-point rate cut to 3.60%, citing softening inflation and weak consumer demand.

The board vote revealed a rare split: six members opted to hold rates, while three favored a cut. This outcome indicates growing internal debate within the RBA over how to balance domestic disinflation with the broader risks posed by global uncertainty, including President Trump’s escalating tariff threats.

Market Reaction and Updated Outlook

The Australian dollar immediately jumped 0.8% to $0.6545, while bond futures saw sharp declines, with three-year futures falling 13 ticks. The decision shifted market expectations for rate cuts: while a cut is still seen as highly likely at the next meeting in August, the anticipated easing path now bottoms out closer to 3.10% rather than the previously forecast 2.85%.

Economists had become increasingly confident in a July cut after the trimmed mean inflation rate hit 2.4% in May, falling squarely within the RBA’s 2–3% target band. Coupled with sluggish retail sales and an economy that barely grew in Q1, many believed conditions were ripe for further stimulus.

Rationale for Holding

In its statement, the RBA emphasized the need for more time and data to confirm that inflation is on a sustainable path toward its mid-point target of 2.5%. The board also highlighted that monetary policy remains flexible and ready to act should international developments significantly impact Australian activity or inflation.

The labor market’s resilience remains a key factor. With the unemployment rate steady at 4.1%, the RBA appears reluctant to risk overheating the housing market further or triggering a wage-price spiral without firm disinflation confirmation.

Treasurer Jim Chalmers acknowledged the disappointment the decision would cause for many Australians, noting that the economy has made “substantial and sustained progress” on inflation, with two cuts already delivered earlier this year. However, he echoed the central bank’s cautious tone, recognizing ongoing global trade tensions as a complicating factor.

Uncertainty Ahead

Oxford Economics and Capital Economics both expressed concern that the RBA may be falling behind the curve by not acting more decisively. With global volatility increasing—especially amid President Trump’s newly announced tariffs on key trading partners—the RBA is walking a fine line between caution and complacency.

The decision leaves the door wide open for an August cut, particularly if Q2 inflation data, due later this month, supports the disinflation trend. However, the magnitude of any future easing now appears more modest than previously expected.

As Australia navigates a delicate recovery, the RBA’s restraint suggests it is preparing for a world where inflation proves sticky, trade risks escalate, and consumers continue to tighten their belts.

Source: Reuters

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Political

Middle East Situation

Wartime Sparks Innovation as Israeli Defense Startups Attract Global Interest

Israel’s defense technology sector is undergoing a major transformation, fueled by wartime innovation and battlefield-driven urgency. In the wake of the October 7, 2023, Hamas attack and the ensuing war in Gaza, a wave of new startups has emerged, many led by army reservists applying frontline experience to develop practical, cutting-edge solutions for modern combat.

One such example is SkyHoop, a startup founded by 36-year-old reservist Zach Bergerson, which developed a mobile device to detect incoming drones a direct response to real-time threats encountered during military service. Now moving beyond stealth mode, the technology is being piloted in Ukraine and is under consideration by the U.S. Defense Department.

A Surge in Startups and Investment Since 2023

According to Startup Nation Central, over one-third of Israel’s defense startups were established since the Gaza war began. Venture capital interest, previously hesitant due to regulatory risks, has intensified. U.S. and Israeli funds are now actively backing firms developing battle-tested tech, including Protego Ventures, founded by reservist Lital Leshem, which has reviewed over 160 defense tech firms and raised $100 million for investment.

The appetite is being driven not just by innovation, but by the practical advantages of combat-hardened systems. Israel’s recent 12-day air war against Iran, during which it intercepted 86% of incoming ballistic missiles, reinforced its reputation for high-performance defense systems.

Europe Emerges as Strategic Target Market

Although the U.S. has long been viewed as the primary market, Israeli startups are pivoting towards Europe. This shift aligns with U.S. President Donald Trump’s push for European NATO members to increase defense contributions. A newly proposed NATO spending plan envisions a defense budget equal to 5% of GDP, vastly expanding the procurement landscape.

Israeli defense exports already reached a record $14.8 billion in 2024, with Europe accounting for more than 50% of that total up from 35% in 2023. This demand is being driven by the Russia-Ukraine conflict, as European nations replace donated equipment with modern gear, much of it sourced from Israel.

Innovation vs. Legitimacy: The Political Dilemma

Despite Israel’s technical successes, the growing death toll and humanitarian toll in Gaza where over 57,000 Palestinians have reportedly been killed has fueled international criticism and sparked calls to boycott Israeli-made weapons. Brigadier General Yair Kulas, head of Israel’s defense export agency, acknowledged that reputational risks pose a “huge challenge,” even as buyers continue seeking the most effective technologies regardless of political pressure.

The Next Frontier: Integration and Scale

Avi Hasson, CEO of Startup Nation Central, likens the current moment to the mobile revolution of two decades ago. Today’s battlefield innovations may soon shape not only the future of warfare, but also the direction of Israel’s defense industry. Larger firms like Elbit Systems, Rafael, and Israel Aerospace Industries may either accelerate in-house development or seek acquisitions to stay ahead.

The convergence of high-tech civilian talent with direct combat experience is proving to be a potent engine of innovation. As Israeli startups navigate global markets and geopolitical headwinds, the defense sector is entering a new phase defined not just by cutting-edge technology, but also by its entanglement with global diplomacy and public perception.

Source: Reuters

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Economic

Stocks

Goldman Sachs Sees S&P 500 Climbing to 6,900 in 12 Months as Fed Pivot and Mega-Caps Drive Rally

In a decisive shift in market outlook, Goldman Sachs has raised its S&P 500 return forecasts across all near-term horizons, forecasting a 3% gain over three months, a 6% rise over six months, and a substantial 11% gain over the next year. The firm now expects the index to reach 6,400 in three months, 6,600 by year-end, and 6,900 over 12 months, buoyed by macroeconomic support and large-cap resilience.

A key factor underpinning Goldman’s optimism is the anticipation of earlier and deeper interest rate cuts from the Federal Reserve than previously projected. The bank believes that lower bond yields will help sustain elevated valuations for equities, particularly those of dominant large-cap firms.

The bank revised its forward price-to-earnings (P/E) forecast for the S&P 500 to 22 times earnings, up from a prior estimate of 20.4. This re-rating reflects investor confidence in forward earnings despite what Goldman acknowledges will likely be "near-term earnings weakness."

Large-Cap Strength Shields Market from Tariff Shock

While April’s equity market turbulence driven by President Trump’s “Liberation Day” tariff threats sparked a brief sell-off, Goldman now sees the market stabilizing. The firm's analysts point to signs that inflationary pressure from tariffs has been less severe than initially feared, as recent inflation data and corporate surveys show limited pass-through of higher import costs to consumers.

Furthermore, they highlight that many large-cap firms have absorbed shocks using existing inventory, giving them a temporary cushion as new tariff rates begin to take effect.

Stable EPS Growth Outlook, but Risks Remain

Despite tariff-related uncertainty, Goldman maintained its earnings-per-share (EPS) growth estimates for the S&P 500 at 7% for both 2025 and 2026. However, it warns of potential volatility in either direction depending on second-quarter earnings results and global macro conditions.

As the earnings season begins this week with Delta Air Lines set to report first analysts will watch closely for early signs of how U.S. corporations are handling policy uncertainty, supply chain stress, and evolving consumer demand.

Rate Cuts and Resilient Earnings Fuel Long-Term Optimism

Goldman Sachs’ upgraded outlook reflects broader market sentiment that monetary policy is once again aligning with equity market needs. The combined effect of easing rates, subdued inflation pressure, and the structural dominance of U.S. mega-cap firms has created conditions for a sustained bull market albeit one still subject to geopolitical and earnings season surprises.

Investors are now looking ahead to the Fed’s meeting minutes and subsequent statements for confirmation of the dovish pivot that Goldman’s new models are betting on. The S&P 500's current rally could continue if both rate cuts and corporate earnings meet expectations in the second half of 2025.

Source: Reuters

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Economic

China–U.S. Trade War

Bessent's Diplomatic Sprint: U.S. and China Scramble to Stabilize Trade Ties Before Deadline

With President Trump’s tariff warnings looming over a growing list of nations, U.S. Treasury Secretary Scott Bessent is racing to keep trade lines open with Washington’s largest rival China. In a Monday interview with CNBC, Bessent confirmed that he is set to meet his Chinese counterpart “in the next couple of weeks,” with the hope of expanding the fragile trade truce reached earlier this year.

While he did not name the Chinese official, Bessent has previously negotiated with Vice Premier He Lifeng, who led Beijing’s delegation during recent talks in London. Those talks culminated in a preliminary agreement: China agreed to relax export restrictions on rare earth minerals critical for U.S. industries from semiconductors to clean energy in exchange for the U.S. lifting some trade barriers.

This dialogue came after months of tit-for-tat tariff escalations between the two nations, rattling markets and raising fears of a deeper global slowdown. The April tariffs, which have since been paused, are now set to return or intensify on August 1 if no deal is reached.

Rare Earth Minerals: The Leverage at Play

Although the truce led to some progress, Bessent recently acknowledged that rare earth mineral flows have yet to return to pre-tariff levels. The ongoing disruption continues to affect U.S. manufacturing sectors reliant on these critical inputs. Their strategic significance has elevated rare earths to a central point of leverage in the negotiations.

TikTok Tensions and Cross-Issue Bargaining

Trade is not the only issue on the table. The U.S. push to force the divestiture of TikTok’s U.S. operations from its Chinese parent company ByteDance has complicated the economic dialogue. Trump has claimed a potential buyer is in place an investment group comprising Oracle, Blackstone, and Andreessen Horowitz but any final deal would require Chinese regulatory approval.

This gives Beijing a new bargaining chip. By leveraging TikTok’s divestiture, China may seek further concessions from Washington, possibly delaying or diluting the looming tariffs. Fentanyl trafficking is another contentious topic likely to surface during the upcoming meetings, with Trump linking trade and public health concerns in a broader geopolitical calculus.

What’s Next: Strategic Pressure and Political Optics

While Bessent emphasized mutual respect in past meetings in Geneva and London, the political clock is ticking. Trump’s letters to 14 countries this week set August 1 as a hard tariff deadline albeit one he later described as “firm, but not 100% firm.” The door is clearly open for deals.

The U.S.–China economic relationship, though turbulent, remains a cornerstone of global trade. Bessent’s upcoming talks signal the administration’s willingness to pursue diplomacy but only if it can extract favorable terms in return.

Whether the discussions produce a substantive agreement or simply delay further escalation remains uncertain. Yet as investors, manufacturers, and foreign governments watch closely, one thing is clear: the next few weeks could redefine not only the U.S.–China trade dynamic but also the broader architecture of global commerce.