Despite the trade war, Chinese exports are holding up

Economic

Summary:

China’s exports rose 5.8% in June despite the trade war, but future growth faces risks from fragile U.S. tariff agreements, rising duties, and efforts to block indirect exports via third countries.

Chinese exports exceeded expectations in June. Data released on Monday showed that Chinese exports rose 5.8% year-on-year, above the 5.0% expected and up from 4.8% in May.

Chinese imports also rebounded, rising 1.1% after contracting 3.4% in May. Economists had expected a 1.3% increase.

Nevertheless, imports remain at fairly low levels since the beginning of the year. This is due to weak demand for raw materials (agricultural and energy).

On the other hand, exports have been very strong. First, shipments were very robust in anticipation of tariffs. Then, the decline in shipments to the United States was more than offset by an increase in exports to other regions.

As a result, China's trade surplus continues to grow. In the first half of 2025, it amounted to $586 billion.

An uncertain future

While China got through the first half of the year without too much damage, the future is very uncertain. In May, the US and China agreed to a 90-day truce in Geneva. Since then, an agreement, the details of which have not been disclosed, has been reached in London. But we do not really know whether the previous deadline of August 12 still stands or whether the June agreement will prevail indefinitely.

What we can say is that this provisional tariff agreement remains fragile. The previous compromise in May was quickly undermined by a series of export controls that disrupted supply chains in several key sectors.

Beijing must now maneuver skillfully to convince Washington to ease tariffs. Analysts estimate that taxes above 35% would undermine the profitability of Chinese manufacturers. "Tariffs are likely to remain high, and Chinese manufacturers are increasingly constrained in their ability to rapidly increase their global market share by lowering prices," warns Zichun Huang, China economist at Capital Economics. She anticipates a slowdown in exports in the coming quarters, weighing on the country's growth.

Beyond direct tariffs on Chinese products, the US is trying to prevent these measures from being circumvented. Since the introduction of tariffs during Donald Trump's first term, China has been using third countries, particularly in Southeast Asia, to ultimately export its products to the US without paying tariffs.

The Trump administration now seems determined to close this loophole. The agreement reached with Vietnam in early July provides for a 20% tariff on Vietnamese products but 40% on "illegal transshipments" (goods transiting through Vietnam). However, it is still unclear how Washington will define illegal transshipment and what added value Vietnam will have to bring to imported products to avoid the 40% tax.

The fact remains that China is in Washington's sights and that US trade policy is a threat to its economy. For China, the equation is still the same: tariffs are holding back exports. Exports are the main driver of growth. The trade war therefore highlights, once again, the need to further stimulate domestic demand.

Source: marketscreener

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Cryptocurrency

Stocks

Vanguard, one of the world’s top asset managers, has become the largest institutional shareholder of Strategy, which is widely seen as a proxy for Bitcoin, despite previously labeling the crypto as speculative and lacking inherent value.

According to Bloomberg News, Vanguard now owns more than 20 million shares of Strategy, representing nearly 8% of the company’s Class A common stock.

The investment positions Vanguard above Capital Group Cos. as the Bitcoin firm’s largest shareholder, potentially cementing that lead in the fourth quarter.

The development comes as a striking contradiction to Vanguard’s long-standing stance on digital assets. Executives at the $10 trillion fund have repeatedly stated that Bitcoin is not “appropriate” for long-term investors, calling it an “immature asset class” with “no inherent economic value.”

They have also described crypto as more akin to speculation than investment, cautioning against its volatility and the risk it poses to portfolio stability.

However, Vanguard has accumulated a significant stake in Strategy through its passive index investment strategies. Strategy has transformed itself from a business intelligence firm into one of the most prominent corporate holders of Bitcoin, now owning over 601,550 BTC as of July 15.

Industry analysts point to the unintended consequences of passive index investing, which may force firms like Vanguard to gain exposure to assets they openly criticize.

Bloomberg noted that this irony highlights the broader tension between index-based strategies and the active ideological positions of asset managers.

With nearly $9 billion in Strategy stock linked to index fund flows, some critics argued that the situation exposes a contradiction in traditional finance.

Matthew Sigel, head of digital assets research at VanEck, called it “institutional dementia” in a social media post and criticized the firm for mocking Bitcoin publicly while simultaneously fueling exposure to it through indexing.

The contradiction raises questions about whether institutional finance can continue to resist crypto on philosophical grounds while remaining beholden to automated investment mandates that tell a different story with capital allocation.

Source: CryptoSlate

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Economic

China–U.S. Trade War

President Trump is pushing through with his tariff agenda, unveiling a new batch of letters to country leaders outlining tariffs on goods imported from their countries beginning in August.

Trump on Thursday announced a 35% tariff on Canadian goods. He followed that up this weekend with promises of 30% duties on Mexico and the European Union. In an interview with NBC News published late Thursday, Trump also floated 15% to 20% blanket tariffs on most trading partners, higher than the 10% level currently in effect.

The fresh tariff salvos capped a week in which Trump sent a barrage of tariff letters to over 20 trade partners, setting levels of 20% to 40% — except for a 50% levy on goods from Brazil in a move that waded into the country's domestic politics.

The EU is now scrambling to avoid the tariffs in just over two weeks, with leaders both pledging to negotiate but also warning of a "big gap" and the need to prepare countermeasures in case talks fail.

"There will be a huge impact on trade,” the EU's chief negotiator said Monday. "It will be almost impossible to continue trading as we are used to in a transatlantic relationship."

As markets focus on US talks, here is where things stand with other key partners:

Vietnam: Trump said a deal with Vietnam will see the country's imports face a 20% tariff — lower than the 46% Trump had threatened in April. He also said Vietnamese goods would face a higher 40% tariff "on any transshipping" — when goods shipped from Vietnam originate from another country, like China. According to reports, Vietnam's leadership was caught off guard by Trump's announcement last week that it agreed to a 20% tariff and is now seeking to lower the rate.

India: Trump's tariffs on Brazil have raised the stakes for India, another member of the BRICS coalition. Bloomberg reported that the countries are working toward a framework deal that could see US tariffs on goods from India drop below 20%.

Russia: Trump threatened "secondary" tariffs on Russia of up to 100% as he attempts to pressure the country into negotiating an end to the war in Ukraine.

Source: Yahoo Finance

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Stocks

A number of Wall Street firms are raising their S&P 500 (^GSPC) targets as initial investor panic from President Trump's "Liberation Day" tariffs continues to subside — but that doesn't mean strategists are expecting a solid run higher for stocks in the second half of the year.

In a note to clients on Sunday, RBC Capital Markets boosted its year-end S&P 500 target to 6,250 from a prior target of 5,730. But the firm's head of US equity strategy, Lori Calvasina, explained that the adjustment comes amid the market's more than 25% bounce back from April lows, reached when Trump announced a wide array of higher-than-expected tariffs on goods from various countries. Those tariffs were delayed, and the US is now in the process of negotiating them.

RBC is now essentially moving its target back to where it sat in mid-March before the bulk of the tariff turmoil began. In fact, a target of 6,250 means the benchmark index would end the year mostly flat from its closing price last week, when it notched a fresh record.

"We feel neutral on the outlook for stocks in the 2nd half of 2025, and are mindful that our new price target is essentially in line with recent levels," Calvasina wrote. "We expect choppy conditions in the back half of the year, and swings in both directions."

Calvasina noted that, among other risks, it's likely still "too early to stop worrying about tariff impacts" on corporate earnings.

Overall, eight strategists among the 14 tracked by Yahoo Finance currently project the S&P 500 to close either nearly flat from current levels or lower. Even those who predict an increase aren't pounding the table for the rally to continue in the short term.

Yardeni Research president Ed Yardeni, who maintains a 6,500 year-end target for the S&P 500, wrote in a note to clients on Sunday that the recent V-shaped recovery for stocks could soon look more like a "square root shaped pattern," where the path higher stalls.

Yardeni pointed out that his team had expected Trump to relent on his tariff back-and-forth by now. But that is not happening. New letters from Trump over the weekend threatened 30% duties on goods from Mexico and the European Union. The latest tariff actions follow a 35% tariff on Canadian goods announced last week.

Yardeni believes his 6,500 target could still be reached by year end, but added, "Trump must get the tariff issue resolved in coming weeks."

Last week, Bank of America's equity strategy team led by Savita Subramanian also recently moved its year-end target, boosting its call to 6,300 from a prior forecast of 5,600.

"It's hard to identify a positive catalyst for the S&P 500 to continue its meteoric run into Q3," Subramanian wrote. "Among our five target models, our earnings per share surprise framework represents our near-term read and is mixed, at best. Negative guidance and revisions in April/May have improved to average levels but economic surprises have broken down. And the meat of corporate profits, tech company earnings, are slated to decelerate."

source : finance.yahoo

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Cryptocurrency

Bitcoin traded above $120,000 to set a new record high on Monday as U.S. lawmakers gear up to potentially pass regulatory changes that could bolster institutional demand.

The largest cryptocurrency by market capitalization traded at $119,840 at 12:02 p.m. ET, according to data from Coin Metrics. Earlier in the day, it topped $123,000.

The rally has seen bitcoin reach new highs amid more inflows into bitcoin ETFs. On Thursday, bitcoin ETFs had logged their biggest day of inflows in 2025 at $1.18 billion.

“We believe that Bitcoin’s surge is driven by longer-term institutional buyers and this will propel it to $125k in the next month or two,” Jeff Mei, chief operating officer at cryptocurrency exchange BTSE, said in a statement sent to CNBC.

“Trump’s trade disputes with the likes of the EU, Mexico, and other trading partners could cause dips in the week ahead, but it’s likely that Bitcoin’s institutional buyers are discounting this risk and maintaining their positions that Bitcoin will still appreciate in the long run,” he added.

‘Crypto Week’

Investors have been anticipating bitcoin to hit fresh records this year as corporate treasuries accelerate their bitcoin buying sprees and the U.S. Congress nears the passing of new crypto legislation.

The U.S. House of Representatives will begin deliberations on a series of crypto bills on Monday in what has been dubbed “Crypto Week.” The potential laws are aimed at providing a clearer regulatory framework for the digital asset industry.

The policy had been long sought by the industry, and is supported by U.S. President Donald Trump, who has branded himself as a pro-crypto president and is involved in several crypto ventures.

One of the most significant bills under consideration is the Genius Act, which could establish federal guardrails for U.S. dollar-pegged stablecoins and create a pathway for private companies to issue digital dollars.

“Long-term holders are locking up supply, while global policy clarity — especially around stablecoins and crypto legislation — has boosted investor confidence and capital inflows,” Xu Han, director of the Liquid Fund at HashKey Capital, said in a statement to CNBC.

Speaking on CNBC’s “Access Middle East,” Markus Thielen, CEO of 10x Research, noted that corporate and institutional investors have purchased $15 billion in bitcoin ETFs over the last six to eight weeks. In contrast, retail investors appear to have been on the sidelines during the latest rally, he added.

10x Research has a year-end bitcoin target range of $140,000 to $160,000, Thielen revealed, but the most significant risk facing this remains the U.S. Federal Reserve continuing its hawkish policy and further interest rate hikes due to tariffs.

source :cnbc

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Economic

Markets in focus

US equities consolidate ahead of earnings season amid trade policy uncertainty

Investors largely shrugged off tariff announcements as the extended deadline provides three weeks for diplomatic negotiations. Major US indices retreated marginally from previous week's historical peaks, with the Nasdaq 100 declining 0.4% and the Dow Jones falling 1.0%.

Over the weekend, President Trump has threatened to impose 30% tariff European Union arrangements. The IG's weekend indices US Tech 100 declined by 0.5% while the Germany 40 declined by 1% following the news.

The Q2 US corporate earnings season commences, representing a critical performance driver for July as markets navigate elevated valuations. Analysts project 4.9% YoY growth for the S&P 500 in Q2, significantly below Q1's actual 13.3% and the 10-year average of 9.2%. Major banks, Netflix and Johnson & Johnson feature prominently in this week's reporting schedule.

Technical analysis indicates the US Tech 100 is consolidating near recently established historic highs. Traders await directional signals to assess potential for testing the next psychological resistance at 23,000. Maintenance above the 20-day simple moving average at 22,442 preserves the ascending trend from mid-May. Failure to hold this level may drive the index towards support around 21,500.

Figure 1: US Tech 100 index (daily) price chart

Hang Seng Index remains constrained within narrow trading range

Supported by risk-on sentiment, the Hang Seng Index (HSI) advanced 0.9% last week, closing at 24,140. The index has traded within a +/-500 point range from 24,000 for 15 consecutive sessions, reinforcing this level as substantial resistance from both technical and psychological perspectives.

Star Plus Legend emerged as the top performer on the Hang Seng Composite index. As a proxy for Jay Chow's entertainment business, shares surged 174% following the Asian pop star's official account launch on Douyin, the domestic version of TikTok. Materials represented the sole sector generating negative returns amid uncertainties surrounding international copper prices following recent US tariff policies.

Technical indicators have improved for the HSI as it rebounded swiftly after approaching the lower boundary of the narrow uptrend channel established from 24 April at approximately 23,700, with the year's peak at 24,874 in sight. The moving average convergence divergence (MACD) indicator approaches positive crossover territory. Material support should be found around 22,500.

Figure 2: Hang Seng Index (daily) price chart

Bitcoin establishes new record above $118,000

Beyond risk-on sentiment, anticipation of the GENIUS Act discussion in the House this week has bolstered optimism. If enacted, the legislation would represent the first US law regulating stablecoin issuers. Bitcoin appreciated 8% last week, approaching $119,000 before retracing to current levels.

Following record highs established on 23 May, Bitcoin has maintained a mildly bearish trajectory. However, last week's price action suggests the correction phase has concluded. Momentum indicators are improving as July trading volume tracks to recover or exceed May's levels following a subdued June. Institutional investor flows predominantly drive activity, with market capitalisation now exceeding $2.2 trillion.

A 61.8% Fibonacci extension of the upward movement from 7 April to 23 May indicates potential for prices to reach $121,439 before encountering material resistance. The previous high of $111,977 has established support.

As highlighted in our Market Navigator on 30 June, Ether — the second-largest cryptocurrency — has demonstrated higher market sensitivity (beta). Last week's rally confirmed this analysis as Ether outperformed Bitcoin with a 15% gain, though it remains 28% below its 52-week high.

Figure 3: Bitcoin (daily) price chart

The week ahead

The week ahead delivers crucial economic assessments across major economies, with China's Q2 gross domestic product (GDP) data taking centre stage as markets evaluate whether the world's second-largest economy can maintain momentum amid escalating trade tensions and domestic headwinds.

China's economy expanded robustly by 5.4% year-on-year (YoY) in Q1, supported by strong industrial output and export growth as manufacturers accelerated shipments ahead of looming tariffs. Government trade-in subsidies also spurred a sharp rebound in retail sales, providing a substantial boost to headline gross domestic product.

However, the intensifying US-China tariff war in April has led to noticeably weaker purchasing managers' index (PMI) readings throughout Q2, raising questions about whether resilient retail strength alone can offset mounting external headwinds.

While consumer prices edged up slightly from -0.1% to +0.1% last month, inflation remains subdued, and producer prices continue to contract, highlighting ongoing deflationary pressures. Combined with persistent weakness in the property sector, these domestic challenges are likely to weigh on near-term growth.

Against this backdrop of mixed signals, we anticipate China's YoY GDP growth to ease to 5.2% in Q2.

Elsewhere, inflation readings across three major economies will command significant attention, as US consumer price data tests whether tariff impact will begin to manifest, whilst UK inflation figures gauge the Bank of England's policy trajectory and Japan's price pressures reveal the persistence of above-target inflation amid economic uncertainty. The University of Michigan's consumer sentiment reading for July will conclude the week, offering critical insights into American household spending intentions.

Figure 4: China's GDP growth rate

Source: ig

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Forex

The Japanese yen is trading quietly on Monday. In the North American session, USD/JPY is trading at 147.47, up 0.04%.

The US dollar posted strong gains last week, as USD/JPY jumped 2.0%, its best week since December 2024.

BoJ could revise inflation forecast

The Bank of Japan may revise upwards its inflation forecast for the 2025 fiscal year, due to sharp rises in the price of rice and other foods. Core consumer inflation, which is made up to a large extent from food prices, has trended higher as a result and rose to 3.7% in May, well above the Bank's inflation target of 2%. Underlying inflation, however, remains below the Bank of Japan's 2% inflation target. Governor Ueda has repeatedly stressed that the central bank will raise rates once it is convinced that underlying inflation will approach and remain sustainable at the 2% level.

The BoJ will release its quarterly updated growth and inflation at its meeting on July 31. The central bank is expected to maintain interest rates at 0.5% and continue its wait-and-see attitude. BoJ policymakers are concerned over the impact of US tariffs and the stalled trade talks between the US and Japan. President Trump poured some cold water on hopes of a deal last week, saying that he would impose new tariffs on Japanese products if a deal wasn't reached by August 1.

Some hawkish BOJ members expressed concern at the June meeting that inflation and wage pressures were building quickly and inflation was close to the 2% target. Still, the Bank will be hesitant to raise rates in this turbulent economic climate and the Bank could decide to hold rates until 2026.