China Tightens Grip on EV Battery Tech with New Export Curbs, Raising Global Supply Chain Stakes

Economic

China–U.S. Trade War

Summary:

China has imposed new export controls on key electric vehicle (EV) battery production technologies, particularly those related to lithium processing and lithium iron phosphate (LFP) cathodes...

Strategic Export Restrictions Target Upstream Processing and IP

In its latest effort to safeguard critical technologies and secure economic leverage, the Chinese Commerce Ministry has expanded its export control list to include several EV battery-related technologies. Transfers of these technologies overseas whether through trade, investment, or cooperation will now require special licenses. The focus is on upstream know-how: refining, extraction of lithium, and LFP cathode manufacturing processes, which are essential for the increasingly popular LFP battery used in lower-cost EVs.

These new controls build on prior restrictions imposed earlier this year on rare earth materials and magnets, revealing a clear pattern in China’s trade strategy: shift from raw material dominance to intellectual property and process control. This tightening coincides with the global scramble to localize clean tech production, especially in the US and EU.

EV Expansion Plans Abroad Now Face Regulatory Hurdles

Chinese battery giants like CATL, BYD, and Gotion have rapidly scaled globally, setting up or planning production in the US, Europe, Southeast Asia, and Latin America. But these latest restrictions raise uncertainty over how much proprietary processing know-how can be transferred into overseas ventures.

At this stage, analysts suggest the short-term impact may be muted. CATL’s plants in Germany and Hungary primarily focus on assembling cells and modules not on restricted cathode or lithium processes. Similarly, BYD only assembles battery packs abroad and retains sensitive processing in China. Nonetheless, the long-term question is whether future expansions will face bureaucratic delays or denial of permits from Chinese authorities.

The policy effectively creates a conditional bottleneck: companies can expand globally, but only with Beijing’s approval of the specific technological elements involved. This could delay or reshape many localization efforts, especially in jurisdictions like the US, where clean energy tax credits require non-Chinese sourcing.

Reinforcing Global Dominance in LFP Batteries and Lithium

China controls 94% of global LFP battery production capacity and 70% of lithium processing output, according to Fastmarkets. This chokehold spans not just material extraction but also the technology underpinning high-efficiency LFP cathodes. In the EV sector, LFP batteries though lower in energy density compared to nickel-manganese-cobalt (NMC) types have become favored for their safety, durability, and lower cost. Their adoption has surged among Chinese EV makers and is now expanding into Western markets.

The export restrictions therefore represent a bid to keep that technological edge proprietary. Even if other countries develop LFP production capacity, they are still likely to depend on Chinese expertise for precursor materials and cathode processing, embedding a structural dependency.

Supercharged Innovation Raises the Stakes

BYD and CATL are pushing innovation boundaries that illustrate China’s lead. BYD’s latest “Super E-Platform” enables a 250-mile range with just five minutes of charging surpassing Tesla’s Supercharger metrics. CATL responded with a longer-range LFP battery capable of 320 miles with similar fast-charging performance. These breakthroughs demonstrate not only raw processing power but also process optimization, the very types of IP now under export scrutiny.

Such performance metrics give Chinese EVs a compelling value proposition in global markets. If this innovation edge is restricted from spreading through licensing or joint ventures, rival automakers may struggle to compete on cost-performance ratios unless local alternatives catch up.

Geopolitical Ramifications: From Trade War to Tech Containment

Beijing’s framing of the export controls as protecting “national economic security and development interests” underscores the geopolitical calculus. The move comes as the US and EU implement tariffs on Chinese EVs and battery components, trying to push Chinese firms to build locally or reduce market share. In turn, China is signaling that access to its tech advantage won’t come easily or cheaply.

Liz Lee of Counterpoint Research noted that this marks a shift from material constraints to intellectual property containment. It could accelerate Western efforts to develop domestic or allied processing capabilities, especially for lithium and cathodes. However, these buildouts will take time and substantial investment, during which Chinese firms may further solidify their dominance.

China Shifts from Material Dominance to Technology Leverage

With its new export restrictions, China is recalibrating the terms of competition in the global EV battery race. The controls emphasize not just holding ground in raw materials, but also preventing key process technologies from fueling rival industrial strategies abroad. This puts additional pressure on automakers and governments worldwide to localize not only production but also innovation.

The near-term operational effects may be modest for Chinese companies already abroad, but the longer-term implications are significant. These curbs represent a move from supply chain management to technological gatekeeping intensifying the global race for battery self-sufficiency and redrawing the strategic map of the clean energy economy.

Source: CNN

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Economic

Commodity

Crude Benchmarks Stabilize on Supply Tightness Signals

Oil held steady on Friday following a solid rally in the previous session, driven by optimism about the U.S. economy and tightening supply conditions in refined fuel markets. Brent hovered above $69 per barrel, while West Texas Intermediate traded just under $67, maintaining upward momentum established over the past two months.

Recent macroeconomic data out of the U.S. has allayed fears of an imminent slowdown, even as Washington’s escalating trade actions continue to create geopolitical friction. The resilience of consumer spending and industrial activity has helped sustain risk appetite, leading to broader gains in equities across Asia and other global markets.

Crucially for oil, backwardation continues to dominate the structure of both crude and gasoil futures. This pricing pattern, where near-term contracts are priced higher than those for later delivery, reflects a market in which physical supplies are tight and immediate delivery is at a premium.

Diesel Shortage Adds Upward Pressure to Crude Prices

One of the key causal drivers of crude’s strength is a persistent shortage in the diesel market. According to analysts at Dadi Futures and market data from Europe’s Amsterdam-Rotterdam-Antwerp (ARA) hub, gasoil inventories have dropped to their lowest seasonal level since 2022. Simultaneously, the diesel crack spread an indicator of refining profitability has surged to its highest since March 2024.

This tightness is especially visible in the U.S. and European markets, where diesel demand typically peaks during the summer transport and agriculture seasons. The imbalance between supply and demand in refined products exerts a feedback effect on upstream crude prices, as refiners are willing to pay more for feedstock to meet current output margins.

Huang Wanzhe of Dadi Futures noted that while crude’s strength is supported by diesel fundamentals, the real question is duration: “The logic of diesel tightness propping up crude flat prices remains unchanged. The key question is how long this strength can last.”

OPEC+ Output Expansion Yet to Loosen Market

Despite the OPEC+ alliance relaxing production curbs more rapidly in recent months, the anticipated glut has not materialized at least not in price-setting markets. Analysts at Morgan Stanley and Goldman Sachs pointed out that much of the global stockpile build has occurred in peripheral regions with limited influence on benchmark pricing, rather than in key hubs such as Cushing (U.S.) or Singapore.

This geographic distribution of inventory builds has muted bearish sentiment, as price-setting centers remain relatively tight. As a result, traders are not yet repositioning for a sustained downturn in prices, and physical premiums remain elevated for prompt delivery barrels.

Market Holds Bullish Bias, But Fragile Underpinnings Remain

Oil’s upward trend, supported by strong diesel demand, a backwardated futures curve, and solid macroeconomic data from the U.S., highlights short-term tightness in the physical market. However, the outlook remains uncertain. If inventory builds in peripheral markets shift toward major hubs or if refined product margins ease, the rally may lose steam.

For now, the confluence of peak seasonal demand, a steady macro backdrop, and regional diesel shortages continues to support crude at elevated levels. Traders are watching closely for signs of either a sustained structural tightness or the beginning of a reversal as production catches up and demand normalizes.

Source: Bloomberg

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Economic

Futures Hold Gains as Retail Resilience Lifts Sentiment

Futures tied to major US indices held modest gains late Thursday, continuing the bullish momentum that propelled the S&P 500 and Nasdaq to fresh record closes. Dow Jones futures rose 0.1%, while S&P 500 futures edged up by a similar margin. Nasdaq futures hovered just above flat, reflecting caution ahead of Big Tech earnings and broader macro developments.

Investors welcomed data showing stronger-than-expected retail sales in June and a drop in weekly jobless claims, both of which suggested continued consumer resilience. These indicators helped neutralize concerns that President Trump's tariffs are yet significantly dampening household spending, despite mounting cost pressures across other segments of the economy.

Earnings Season Supports Risk Appetite

Investor sentiment has also been underpinned by corporate earnings that so far reflect strong fundamentals. Netflix kicked off the Big Tech earnings season with a solid Q2 beat and an upgraded full-year revenue forecast, although shares dipped nearly 2% in after-hours trading due to the narrow margin of the revenue beat.

Upcoming earnings from 3M, American Express, and Charles Schwab will offer deeper insight into the strength of the industrial, financial, and consumer segments. So far, earnings have reinforced the market’s bullish tilt in Q2, allowing major indexes to shake off volatility triggered by political headlines.

Fed Focus Shifts from Powell Controversy to Successor Speculation

The political drama earlier in the week centered around reports that President Trump was considering removing Fed Chair Jerome Powell has since faded into the background. Powell responded by defending the Fed’s renovation budget in a letter to the administration, signaling institutional resilience despite mounting scrutiny.

Still, the market has begun to shift attention toward potential candidates to replace Powell next year. The debate centers around who can manage the dual mandate of maintaining monetary credibility while navigating political pressures from a president who continues to call for ultra-low interest rates.

Rate expectations have responded accordingly. Traders currently see a roughly 62% chance of a rate cut in September, though no move is expected at the upcoming July meeting. The Fed’s path forward remains conditional on data trends and tariff-related price effects.

AI Talent War Heats Up as Meta Poaches Apple Engineers

Beyond macro developments, investor focus has also turned to the intensifying competition in artificial intelligence. Meta has ramped up its recruitment spree, hiring multiple former Apple engineers for its Superintelligence Labs. These hires follow Meta’s blockbuster acquisition of Apple’s LLM leader Ruoming Pang, who reportedly secured a compensation package exceeding $200 million.

Meta’s aggressive investment strategy underscores Big Tech’s battle for AI dominance and is expected to drive long-term capital allocation decisions across the sector. The company’s strategic pivot continues to prioritize compute infrastructure, model development, and specialized engineering talent in a bid to compete with rivals like OpenAI and Google.

Other Notable Movers: Netflix, Norfolk Southern

Netflix, despite its earnings beat, saw its shares decline in after-hours trading, with investors parsing the narrow revenue margin and guidance. The market response suggests that expectations for Big Tech are elevated, and even solid reports may not be enough to sustain price momentum without upside surprises.

Meanwhile, Norfolk Southern surged 4.7% after reports from the Wall Street Journal revealed that Union Pacific is in early talks to acquire the rail operator. A merger would potentially create the largest rail network in the US, attracting regulatory attention and reshaping transportation logistics in North America.

As Wall Street rides the tailwind of strong economic data and encouraging earnings, futures markets suggest continued risk appetite heading into the weekend. While concerns over Fed independence and trade policy remain in the background, investors are choosing to focus on corporate resilience and consumer demand. Whether this optimism can be sustained will depend on the coming wave of earnings and clarity from the Federal Reserve’s July policy meeting.

Source: Yahoo Finance

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Daily News

[Quick Facts]

1. Waller: The FOMC should cut rates by 25 basis points this month.

2. U.S. House of Representatives passes Cryptocurrency Bill.

3. UK job market remains weak.

4. Sectarian clashes in Syria subside and Israel halts airstrikes.

5. U.S. does not support Israel's recent strikes in Syria.

6. Russian Foreign Ministry: Russia-Ukraine Talks halted due to Ukraine, Moscow used to new sanctions threats.

7. Positive momentum in Gaza Ceasefire Talks, but differences remain.

8. Daly: Two rate cuts this year are reasonable.

9. US retail sales rebound strongly in June.

[News Details]

Waller: The FOMC should cut rates by 25 basis points this month

Fed Governor Waller supports rate cuts for 3 reasons, saying: "First, tariffs are one-off increases in the price level and do not cause inflation beyond a temporary surge. Standard central banking practice is to 'look through' such price-level effects as long as inflation expectations are anchored, which they are."

"Second, a host of data argues that monetary policy should be close to neutral, not restrictive. Real gross domestic product (GDP) growth was likely around 1 percent in the first half of this year and is expected to remain soft for the rest of 2025, much lower than the median of FOMC participants' estimates of longer-run GDP growth. Meanwhile, the unemployment rate is 4.1 percent, near the Committee's longer-run estimate, and headline inflation is close to our target at just slightly above 2 percent if we put aside tariff effects that I believe will be temporary. Taken together, the data imply the policy rate should be around neutral, which the median of FOMC participants estimates is 3 percent, and not where we are—1.25 to 1.50 percentage points above 3 percent. "

" My final reason to favor a cut now is that while the labor market looks fine on the surface, once we account for expected data revisions, private-sector payroll growth is near stall speed, and other data suggest that the downside risks to the labor market have increased. With inflation near target and the upside risks to inflation limited, we should not wait until the labor market deteriorates before we cut the policy rate."

U.S. House of Representatives passes Cryptocurrency Bill

On July 17th, local time, the U.S. House of Representatives passed the "Guiding and Establishing National Innovation for U.S. Stablecoins Act or the 'GENIUS Act'," with 308 votes in favor and 122 against. The bill aims to enact significant legislative reforms in cryptocurrency regulation. It will be sent to U.S. President Trump and is expected to be signed into law. Additionally, on the same day, the House also passed a second, broader cryptocurrency market structure bill — the “Clarity Act” — with 294 votes in favor and 134 against. This bill will be submitted to the Senate for consideration. It proposes to establish a broader and more industry-friendly regulatory framework for digital assets.

UK job market remains weak

The UK's Office for National Statistics (ONS) reported on July 17th that the labor market continues to struggle due to rising labor costs, with the unemployment rate climbing to a multi-year high. Data shows that the UK unemployment rate for people aged 16 years and over was estimated at 4.7% in March to May 2025. This is above estimates of a year ago, and up in the latest quarter, marking the highest level in four years. When looking at March to May 2025, the period comparable with our Labour Force Survey (LFS) estimates, payrolled employees fell by 0.3% over the year, and by 0.2% over the quarter. The report cited ONS survey findings indicating that some UK businesses may no longer be hiring new employees or filling vacancies left by departing staff. Analysts believe employers are becoming more cautious in recruitment as National Insurance contributions rise. Jane Gratton, Deputy Director of Public Policy at the British Chambers of Commerce, said the data shows the UK labor market continues to weaken, with rising unemployment, fewer job vacancies, and slower wage growth. She noted that despite the slowdown, wage growth outpaces inflation, and employment cost pressure is continuing to erode firms' operating margins.

Sectarian clashes in Syria subside and Israel halts airstrikes

Deadly sectarian clashes in Syria eased on Thursday after armed groups in the predominantly Druze southern province of Suweida declared a ceasefire, and Israel announced it was pausing its airstrikes in recent days. In his first public remarks since the violence erupted over the weekend, Syrian President Ahmed al-Sharaa stated that he had reached an agreement with the Druze to withdraw from Suweida and hand over security responsibilities to local forces. Prior to this, Israel had intensified its airstrikes over consecutive days, claiming the strikes were aimed at protecting the Druze minority. On Wednesday, Israel struck a Syrian military headquarters near the presidential palace in Damascus and deployed additional troops to the north, citing security threats posed by a Syrian military buildup near the border. "I instructed the IDF to act with force, because the Damascus regime sent its army south of the capital and massacred the Druze. As a result of our intensified action, a ceasefire has been established, and Syrian forces have withdrawn back to Damascus," said Israeli Prime Minister Benjamin Netanyahu.

U.S. does not support Israel's recent strikes in Syria

The United States said on Thursday that it does not support Israel's recent strikes in Syria and has made its dissatisfaction clear. Meanwhile, Syrian President Sharaa accused Israel of attempting to divide Syria and pledged to protect the country’s Druze minority. Israel conducted airstrikes on Damascus on Wednesday and also targeted government forces in the south, demanding their withdrawal, claiming the goal was to protect Syria's Druze population.

Syria's state news agency SANA reported on Thursday that Israel had carried out airstrikes in the Suweida region, where clashes between Druze militants and government forces as well as Bedouin tribes had resulted in dozens of deaths. U.S. State Department spokesperson Tammy Bruce said the United States condemns the violence in Syria and is actively engaging with various Syrian parties, calling on the Syrian government to lead the way forward. "I can tell you regarding Israel's intervention and activity is the United States did not support recent Israeli strikes." Despite growing ties between interim President Sharaa and the United States, as well as increasing security interactions between his government and Israel, the violence highlights the challenges he faces in stabilizing Syria and establishing centralized governance.

Turkish President Erdoğan stated that there were attempts to undermine the ceasefire agreement reached yesterday with Turkey's help, adding that Israel has once again shown it does not want peace or stability in Gaza or Syria. "Israel, using the Druze as an excuse, has been expanding its banditry into neighboring Syria over the past two days." he told reporters. The foreign ministers of Jordan, UAE, Bahrain, Saudi Arabia, Iraq, Oman, Qatar, Kuwait, Lebanon, Egypt and Turkey affirmed in a joint statement on Thursday, support for Syria's security, unity, stability and sovereignty, and rejected all foreign interference in its affairs. Syrian government forces withdrew from the Suweida region overnight. White House spokesperson Leavitt said the de-escalation of the Syrian conflict appears to be continuing. "Syria agreed to draw back troops in conflict area." Said Leavitt, stating that the U.S. will keep monitoring the situation.

Russian Foreign Ministry: Russia-Ukraine Talks halted due to Ukraine, Moscow used to new sanctions threats

Russian Foreign Ministry spokeswoman Maria Zakharova stated at a routine press briefing on July 17 that the Russian delegation is willing to travel to Istanbul, Turkey, for a third round of negotiations with Ukraine. Zakharova said the Russia-Ukraine talks have been "suspended" due to reasons on Ukraine's part, adding that "Ukraine either avoiding or not ready for new round of talks." She noted that Kyiv has not sent any signals indicating its readiness for a new round of negotiations. In response to U.S. President Donald Trump's call for Russia and Ukraine to reach an agreement within 50 days, Zakharova said Russia has faced an unprecedented number of sanctions and restrictive measures, and Moscow has grown "accustomed" to new threats of sanctions. She also warned that as Russian forces advance on the battlefield, the likelihood of Ukraine resorting to "terrorist measures" in retaliation against Russia is increasing.

Positive momentum in Gaza Ceasefire Talks, but differences remain

A source familiar with the matter told reporters on July 17th that the latest round of Gaza ceasefire negotiations in Doha, Qatar, is making good progress, though key differences still need to be bridged. The source said Israel submitted a revised troop withdrawal plan to mediators on the same day, proposing to pull back from the "Molag Corridor" in southern Gaza during the proposed 60-day ceasefire. An Arab diplomatic official also noted that Israel has agreed in talks to significantly reduce its military presence in Gaza, including withdrawing from the Molag Corridor and scaling back operations in Rafah. The official said Israel's softened stance could help facilitate an agreement in the coming days. However, he added that disagreements persist between Israel and Hamas over humanitarian aid mechanisms in Gaza and the number of Palestinian detainees Israel is willing to release, requiring further negotiations.

Daly: Two rate cuts this year are reasonable

San Francisco Fed President Mary Daly said in a speech Thursday that the U.S. economy and FOMC monetary policy are in a good place, with the central bank still needing to fulfill its inflation mandate. Inflation remains the biggest "tax" on American households, she noted. While goods price inflation reflects the impact of tariffs (triggered by President Trump), inflation in other areas has not surged. There is no evidence yet of spillover effects from tariff-driven inflation, and the impact may not be as severe as previously feared. The U.S. economy is growing steadily, and the labor market remains strong. Daly emphasized that she does not want to see further weakening in the job market. Broad immigration concerns have not materialized into tangible economic pressures. Other issues, she said, will not distract the Fed from its core mandates of price stability and maximum employment. A forecast of "two rate cuts this year" is a reasonable outlook, Daly added. She expects interest rates to remain higher than pre-pandemic levels, ultimately settling at around 3% or slightly above. Current monetary policy is "modestly restrictive," and overly tight policy could harm the labor market. Importantly, the Fed should avoid preemptive rate cuts, but it should also not wait indefinitely on rate decisions.

US retail sales rebound strongly in June

The US Commerce Department reported that retail sales rose 0.6% month-over-month in June, far exceeding economists' expectations of a 0.1% gain and reversing May's 0.9% decline. Core retail sales (excluding autos, gasoline, building materials, and food services) increased 0.5%, topping the anticipated 0.3% rise.

Retail sales in June included a 1.2% gain in sales of autos and auto parts, a sharp rebound from May's significant 3.8%. Grocery stores surged 1.8% in sales, with a sharp rise in Apparel, Accessories, & Footwear and Building Materials and Garden Equipment and Supplies Dealers. However, Department Store sales fell 0.8%, and Electronics and Appliance Stores saw modest declines.

The resilience reflects consumers' ability to spend despite high interest rates and tariff uncertainty, countering fears of a "retail apocalypse." Strong retail sales data indicate that consumers are still spending, driving economic growth.

The data may reinforce the Federal Reserve's neutral monetary policy stance, reducing the urgency for immediate rate cuts.

[Today's Focus]

UTC+8 20:30 New U.S. housing starts in June (annual rate)

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Economic

Wall Street Rally Inspires Broad Asia-Pacific Optimism

Global risk sentiment remained buoyant on Friday as strong U.S. retail sales and jobless claims data reassured investors about the health of the world’s largest economy. The S&P 500 and Nasdaq each closed at record highs for a second day, as better-than-expected economic performance encouraged the view that the Federal Reserve could delay further rate cuts to assess inflationary effects from tariffs.

Netflix also reported earnings that beat forecasts, benefiting from a weaker dollar. However, its shares fell 1.8% in after-hours trading, a reflection that much of the growth had already been anticipated and priced in.

Mirroring the upbeat tone, MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.8%, reaching its highest level since late 2021. This brought its weekly gain to 1.7%, signaling regional momentum despite ongoing global tariff uncertainty.

Japan’s Markets Cautious as Election Uncertainty Weighs

In contrast to regional peers, Japan’s Nikkei 225 slipped 0.2%, and the yen remained under pressure at 148.54 per dollar, posting a weekly decline of approximately 0.7%. Investor nerves intensified after polls showed Prime Minister Shigeru Ishiba’s ruling coalition may fail to retain a majority in Sunday’s upper house election.

Political uncertainty has heightened currency risk. According to TD Securities, if Ishiba steps down following an election loss, the yen could break above 149.7 per dollar, with markets bracing for short-term turbulence. Conversely, a ruling coalition victory combined with swift progress on a trade agreement with the U.S. could stabilize the yen, at least temporarily.

Domestic inflation data released Friday showed a slowdown in Japan’s core consumer prices due to temporary utility subsidies. Nonetheless, inflation remained above the Bank of Japan’s 2% target, as rising living costs particularly for staple goods like rice continue to erode household confidence and voter support.

Chinese and Taiwanese Stocks Follow Through on Gains

Chinese blue-chip stocks edged up 0.3%, while Hong Kong’s Hang Seng Index advanced 1.2%, continuing a broader recovery from recent weakness. Meanwhile, Taiwan’s TSMC shares climbed 2.2% after reporting record quarterly profits, driven by AI chip demand. However, the company warned that U.S. tariffs may dent future revenue, especially as global supply chains remain vulnerable to shifting trade policies.

In currency markets, the dollar edged slightly lower Friday but remained on course for its second weekly gain, up 0.6%. Support came from robust U.S. economic data and tempered expectations for near-term rate cuts. Fed Governor Christopher Waller reiterated that he still favors a rate cut by month-end, though broader Fed sentiment appears more cautious.

Futures markets reflect a 62% probability of a rate cut in September, but very little chance of a move at the July 30 policy meeting. This uncertainty has lent some resilience to the dollar, though volatility remains tied to shifting rate expectations and geopolitical noise.

Treasuries and Commodities Reflect Stable Risk Appetite

In bond markets, U.S. Treasury yields softened modestly. The 10-year yield fell 2 basis points to 4.445%, and the 2-year yield slipped to 3.8981%. The slight decline signals ongoing investor confidence in a steady policy environment, while also reflecting the lack of immediate inflation fears despite tariffs.

Oil prices were steady following recent gains driven by regional instability. U.S. crude edged up to $67.66 per barrel, and Brent rose to $69.68, though both benchmarks were down about 1% for the week. Drone strikes on Iraqi Kurdistan oil infrastructure have injected renewed geopolitical risk, keeping supply-side anxiety in focus.

Spot gold traded at $3,337 an ounce, on track for a 0.5% weekly loss, as stronger equities and a firmer dollar continued to suppress demand for safe-haven assets.

The rebound in Asian equities underscores investor confidence in the U.S. economy, even as tariff policy and rate path uncertainty continue to pose challenges. However, Japan stands at a pivotal moment: Sunday’s election could either trigger fresh volatility or provide a foundation for renewed policy clarity. With rising living costs weighing on voter sentiment and currency stability, traders are preparing for heightened movement across yen and equity markets next week, depending on the political outcome.

Source: Reuters

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China–U.S. Trade War

Graphite Tariffs Signal Escalation in U.S.–China Trade Tensions

In a decisive move that deepens the rift in global electric vehicle supply chains, the U.S. Commerce Department on Thursday issued a preliminary anti-dumping determination against Chinese graphite imports. The agency concluded that Chinese firms were selling graphite a critical component for EV battery anodes at unfairly low prices. As a result, imports will now face a punitive tariff of 93.5%, in addition to existing duties, bringing the total effective rate to approximately 160%.

The decision stems from a petition filed last December by the American Active Anode Material Producers trade group, which accused Chinese firms of undercutting U.S. industry. The result is a dramatic policy shift with sweeping implications across EV manufacturing, renewable energy, and mineral supply chains.

Battery Makers Hit as Costs Surge and Margins Compress

The tariff's impact is particularly acute for battery manufacturers, which are now staring at a steep cost increase. According to CRU Group analyst Sam Adham, the 160% total duty adds an estimated $7 per kilowatt-hour to the cost of an average EV battery cell nearly one-fifth of the Inflation Reduction Act’s tax credit for battery production. This translates to major margin compression, particularly for Korean suppliers heavily dependent on Chinese graphite.

Tesla and Panasonic, among other battery producers, had actively lobbied against the tariffs, citing the limited capacity and lower technological maturity of domestic alternatives. Despite these objections, the U.S. government opted to move forward, signaling a prioritization of industrial policy and national security over short-term supply stability.

Tesla’s shares declined 0.7% Thursday following the announcement, while other battery-related firms, such as Fluence Energy and Enphase Energy, also recorded losses as analysts flagged likely increases in production costs and slower renewable storage deployment.

Winners Emerge in Australia and North America

Although the tariffs will disrupt global supply chains, they offer a major boost to non-Chinese graphite producers. Australian firm Syrah Resources surged as much as 38%, and South Korea’s Posco Future M jumped 24% on expectations of demand reallocation. Canadian producers Nouveau Monde Graphite and Northern Graphite Corp. also rallied sharply.

Domestically, Alabama-based Westwater Resources is among the primary beneficiaries. With 12,500 metric tons of annual production capacity expected next year and a plan to quadruple that by 2028 the company now stands at the forefront of Washington’s effort to localize the battery supply chain. “The ruling gives the market clarity to invest in U.S.-based graphite,” said Jon Jacobs, Westwater’s chief commercial officer.

This response highlights a causal relationship: as trade barriers increase, investment flows redirect toward domestic or allied suppliers. The incentive structure has shifted decisively in favor of North American and Asia-Pacific graphite firms operating outside China’s regulatory and geopolitical reach.

Global Supply Chain Volatility Remains a Long-Term Challenge

Approximately 180,000 metric tons of graphite were imported into the U.S. in 2024, with two-thirds originating from China, according to BloombergNEF. China’s dominance in graphite processing capacity recognized by the International Energy Agency as a major supply chain risk now faces more concerted pushback.

However, diversification will take time. Graphite is expected to remain the dominant anode material through at least the end of the decade, with silicon-based alternatives still years away from mass commercialization. As a result, U.S. manufacturers must either absorb higher costs or aggressively accelerate domestic production.

Adding to the strain, Treasury Department rules under Trump’s budget restrict the use of Chinese battery cells for projects seeking clean energy tax credits. This alignment of fiscal, trade, and industrial policy amplifies both incentives and constraints, placing renewable developers in a difficult position.

Wood Mackenzie analysts warn that supply chain stress and higher costs may dampen the pace of energy storage deployment, even as legislative frameworks continue to support the sector in principle.

A Pivotal Shift Toward Strategic Resource Realignment

The U.S. decision to impose anti-dumping tariffs on Chinese graphite marks a watershed moment in the country’s battery materials strategy. While the immediate effect is to raise costs and disrupt supply chains, the broader objective is clear: reduce strategic dependence on China and stimulate domestic and allied mineral capacity.

This move reinforces a recurring theme in 2025’s trade policy landscape the shift from efficiency-based globalization to resilience-focused regionalism. Over the medium term, the winners will be those firms and regions that can scale up production without sacrificing quality or cost-competitiveness. For now, though, battery makers will have to navigate rising input prices and shrinking margins in an already high-stakes race toward electrification.

Source: Bloomberg

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Economic

Dollar Strengthens on Resilient U.S. Indicators

The dollar index, which tracks the greenback against six major peers, held steady at 98.456 early Friday in Asia, setting it on course for a 0.64% weekly rise. This comes on top of last week’s 0.91% gain, reinforcing a modest but sustained recovery trend. The index reached a peak of 98.951 on Thursday the highest since June 23 after data showed U.S. retail sales in June exceeded expectations and initial jobless claims fell to a three-month low.

The stronger-than-expected economic performance has narrowed the market’s pricing for rate cuts this year. Traders now anticipate roughly 45 basis points of easing for the remainder of 2025, compared to 50 basis points earlier in the week. This repricing reflects a causal link between firm economic fundamentals and a slower Fed pivot toward monetary accommodation.

Additionally, a recent CPI report revealed the sharpest monthly increase in consumer prices in five months, adding weight to concerns that tariffs may be contributing to inflation pressures. The data mix has reinforced the Fed’s wait-and-see approach rather than immediate policy loosening.

Policy Tensions Remain a Drag on Confidence

Despite the near-term support from macro data, the dollar remains vulnerable to political instability. Earlier this week, Bloomberg reported that President Trump was considering firing Fed Chair Jerome Powell. Although the White House quickly walked back the statement, the rumor sparked a temporary drop in the dollar, exposing how sensitive markets remain to governance-related risks.

Analysts at Commonwealth Bank of Australia emphasized that ongoing criticism of Powell, combined with Trump’s push for ultra-low interest rates calling for levels at or below 1% could erode trust in U.S. monetary institutions. The incident is indicative of a broader pattern: fiscal and political developments are acting as counterforces to otherwise constructive economic signals.

While the dollar index has recovered in recent weeks, it remains 9.3% lower year-to-date, a decline largely driven by the March–April selloff sparked by Trump’s aggressive trade agenda and large-scale fiscal initiatives. The market’s reaction shows a correlation between U.S. political behavior and global confidence in dollar assets.

Yen Weakens on Election Uncertainty and Trade Risks

Against the Japanese yen, the dollar traded at 148.60 on Friday, holding close to a 3.5-month high of 149.19. The yen’s weakness this week down 0.73% reflects pre-election jitters as Japan heads into an Upper House vote that could result in the ruling coalition losing its majority. Such an outcome would inject political uncertainty and complicate trade talks with the U.S., especially with the August 1 deadline for a 25% U.S. tariff on Japanese exports looming.

Japanese trade officials, including top negotiator Ryosei Akazawa, met with U.S. Commerce Secretary Howard Lutnick on Thursday in a last-minute attempt to defuse tensions. Should the coalition fail to retain power, market participants anticipate delays in negotiations, potentially triggering fresh volatility in Japanese equities and further downside for the yen.

Euro and Sterling See Modest Rebounds but Remain Under Pressure

Elsewhere in currency markets, the euro edged up 0.25% to $1.1626 after hitting a three-week low of $1.1556 on Thursday. For the week, however, the common currency is still down 0.59%, as traders remain cautious over the eurozone’s mixed growth signals and its exposure to rising global tariffs.

The British pound followed a similar trajectory, rising 0.13% on the day to $1.3436 but nursing a 0.41% weekly loss. Political factors in the UK and underwhelming economic data continue to weigh on sterling’s momentum.

Bitcoin Holds Below Record as Stablecoin Legislation Advances

Bitcoin hovered around $119,899 on Friday, easing slightly from its record high of $123,153.22 earlier in the week. The cryptocurrency gained tailwinds from the U.S. Congress passing a bill to formalize regulation of dollar-backed stablecoins, a move seen as enhancing legitimacy for crypto markets.

Since its April lows, Bitcoin has gained over 60%, but Ethereum has surged more than 130%, with analysts pointing to technical breakout patterns favoring ETH’s continued outperformance.

The dollar’s firm footing this week stems largely from encouraging U.S. economic releases, which have delayed expectations for further monetary easing. However, underlying vulnerabilities remain tied to political uncertainty and fiscal expansion concerns. The market’s mixed response reflects a tension between hard economic data and soft institutional credibility. Going forward, traders will likely continue to weigh strong domestic fundamentals against the backdrop of unstable policy narratives both in the U.S. and globally.

Source: Reuters

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