Dollar Weakens as Taiwan Currency Surges and Market Speculates on Asian Revaluations to Ease Trade Tensions

Forex

Economic

Summary:

The U.S. dollar extended its decline as the Taiwanese dollar surged to a two-year high, triggering speculation that Asian currencies may be intentionally appreciating to gain leverage in trade negotiations with Washington...

Taiwan Dollar’s Rally Spurs Regional Currency Strength

The U.S. dollar opened the week under pressure as the Taiwanese dollar skyrocketed more than 3% on Monday, building on Friday’s record 4.5% surge to hit 29.618 per dollar—its strongest level in two years. This abrupt move has spilled over to other regional currencies, fuelling talk that some Asian governments may be tacitly allowing their currencies to appreciate in hopes of softening the tone of U.S. trade negotiations.

Although Taiwan’s central bank denied that the U.S. has requested such currency adjustments as a bargaining tool, market participants have begun pricing in a broader pattern. China’s yuan followed suit, appreciating to 7.1980 per dollar—its strongest level in nearly six months—on speculation that Beijing could allow a stronger exchange rate as a goodwill gesture amid tense trade talks.

U.S. Trade Policy Fuels Uncertainty and Currency Volatility

Despite the upward momentum in Asian currencies, a concrete breakthrough in trade talks remains elusive. China’s Commerce Ministry confirmed it is evaluating a U.S. proposal to resume negotiations following the imposition of 145% tariffs by President Donald Trump, but meaningful dialogue still seems distant. In a televised interview aired Sunday, Trump reaffirmed that China “wants to make a deal,” yet he provided no timeline or policy clarity.

These inconsistencies have left the dollar exposed. Recent remarks by Trump calling for lower interest rates and disparaging Federal Reserve Chair Jerome Powell—whom he called a “stiff”—have renewed concerns over the Fed’s independence. While Trump stated he would not attempt to remove Powell, markets remain wary of political interference.

Federal Reserve in Focus, But Rate Cut Expectations Decline

With the Federal Reserve set to meet this Wednesday, the market overwhelmingly expects no change in rates. However, stronger-than-expected U.S. labor data last week has further dampened the chances of a rate cut in June. According to JPMorgan’s Michael Feroli, the Fed is now more likely to stay on hold, given the dual risk of inflation persistence and trade-induced volatility.

Market-based probabilities of a rate cut in June have dropped from 64% a month ago to 37% currently, with institutions like Goldman Sachs and Barclays pushing their expected cut to July. Despite this, the dollar has failed to sustain momentum from the positive payrolls report, highlighting the extent to which tariff anxiety continues to weigh on investor confidence.

Currency Markets React to Uncertainty and Geopolitical Shifts

Broader currency movements reflect this uncertainty. The euro edged up to $1.1333, recovering from last week’s low, while the dollar index dipped to 99.717. The yen also gained, with the dollar slipping 0.4% to 144.21 yen, after Japanese Finance Minister Katsunobu Kato downplayed earlier comments suggesting Japan might reduce its U.S. Treasury holdings amid trade disputes.

Investor positioning further reveals fragility in sentiment. Speculative short positions on the dollar have increased, suggesting broader bearishness, but this also raises the risk of sudden reversals if unexpected bullish news emerges. Monday’s release of the U.S. ISM services data could be a turning point; a weak reading would reinforce fears of a downturn, while a strong result might offer temporary support for the greenback.

Pound, Aussie, and Scandi Currencies Also in Spotlight

Sterling is likely to face its most significant test at the upcoming Bank of England meeting, where a 25-basis-point rate cut to 4.25% is widely expected. Markets are looking for signals about whether the BoE will open the door to back-to-back cuts, potentially bringing rates down to 3.50% by year-end.

Elsewhere, the Australian dollar continued to firm, bolstered by the Albanese government’s reelection and improved global risk appetite. The currency touched $0.6466—its highest in five months—after the U.S. payroll data sparked a mild rally in risk assets.

Dollar’s Slide Underscores Erosion in Market Confidence

The weakening dollar reflects more than just technical shifts in exchange rates; it signals a deeper unease about the U.S.'s shifting trade policies, political pressure on the Fed, and unpredictability in global economic coordination. The surge in the Taiwan dollar and accompanying regional appreciation may mark a new phase in trade diplomacy—where currencies are wielded not just as monetary tools but as instruments of negotiation.

Until clearer signals emerge from the Fed and the White House, dollar sentiment is likely to remain fragile, driven by geopolitical posturing and speculative expectations more than economic fundamentals.

Sourcee: Reuters

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Forex

Economic

Rupee Strengthens Amid Global Volatility

India’s currency closed last Friday at 84.58 against the U.S. dollar, gaining 1% for the week as foreign portfolio inflows and appreciation in other Asian currencies lent support. Despite briefly breaching the 84 level, importer hedging and suspected central bank interventions curbed further gains. According to traders, the USD/INR pair has likely found a short-term floor around 83.80, with a broad expected range between 83.80 and 85. The Reserve Bank of India is anticipated to intervene again if the rupee strengthens below 84, aiming to accumulate more foreign reserves, which recently hit a six-month high of $688 billion.

This mild appreciation in the rupee contrasts with a broader strengthening of the U.S. dollar after strong nonfarm payroll data reaffirmed the resilience of the American labor market, despite tariff-driven uncertainties. Still, the rupee’s performance this week will largely hinge on the Federal Reserve’s May 7 policy meeting, particularly Jerome Powell’s commentary on inflation, employment, and trade exposure.

Bond Yields Decline for Seventh Week on RBI Actions

India’s 10-year benchmark bond yield ended last week at 6.3538%, down 1 basis point for the week and extending its decline to seven consecutive weeks—amounting to a cumulative 35 basis points. Market participants expect the yield to remain between 6.30% and 6.40% in the coming days.

The driving factor behind this trend has been the RBI’s aggressive liquidity injections. This week alone, the central bank plans to buy government bonds worth 750 billion rupees ($8.88 billion) through Open Market Operations (OMOs), followed by two additional rounds of 250 billion rupees each later this month. These purchases are part of a broader 2025 policy strategy, with the RBI having already acquired 3.65 trillion rupees worth of bonds through OMOs and 388 billion rupees from the secondary market since January.

This sustained liquidity support is likely to facilitate better transmission of lower interest rates into the real economy. As Radhika Rao of DBS Bank notes, these moves also serve as a buffer against potential liquidity tightening that could occur due to upcoming dollar-forward contract maturities held by the RBI over the next three months.

Interest Rate Swaps Signal Market CautionIndia’s overnight index swap (OIS) market may remain quiet early in the week, with reactions expected after the Fed policy statement. Over the past five weeks, key swap rates—particularly the one-year, two-year, and five-year tenors—have declined sharply, pricing in expectations of further global and domestic rate moderation. This trajectory reflects alignment with the RBI’s easing bias and market speculation around longer-term accommodative policy in response to weak global demand.

Macroeconomic and Policy Catalysts Ahead

Investors are also monitoring upcoming macro releases and central bank actions. Domestically, the April HSBC services and composite PMI on May 6 will shed light on India’s post-fiscal-year service sector performance. Globally, the Bank of England is expected to hold rates steady on May 8, while a flurry of U.S. data—including ISM non-manufacturing PMI, trade balance figures, and initial jobless claims—will feed into sentiment on the dollar and emerging markets.

The Indian rupee enters the week with cautious optimism, buoyed by regional inflows and central bank defense. Meanwhile, bond yields continue to respond positively to RBI’s deepening monetary support. However, global volatility—especially from trade-related disruptions and U.S. policy signals—will remain key variables.

Should Powell’s comments lean dovish or hint at downside risks from tariffs and slowing global trade, it could reinforce current trends in the rupee and bond markets. Conversely, a more hawkish tone could limit gains and reintroduce volatility.

Source: Reuters

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Daily News

[Quick Facts]

1. Trump says he has no intention of removing Powell, suggesting Vance and Rubio as potential presidential successors.

2. Over 15,000 USDA employees accept Trump Administration's Voluntary Resignation offer.

3. Major oil producers to exceed production hike targets for the second consecutive month.

4. U.S. military launches airstrikes across Yemen, injuring civilians.

5. EU Steel Exports to U.S. Plunge by 1 million Tons, €2 Billion Loss Linked to U.S. Steel-Aluminum Tariffs.

6. U.S.-Ukraine Mineral Deal Signed: Early Glimpse of American Profit Strategy Emerges.

7. South Korean Auto Exports to the U.S. Plummet.

8. Trump’s Budget Slashes Domestic Spending by 23%, Pushes Defense Outlays to Record $1 Trillion.

9. ECB Vice President Hints at Further Rate Cuts to Counter U.S. Tariff Impact.

10. April Nonfarm payrolls Beat Expectations, but Outlook Remains Cloudy.

[News Details]

Trump says he has no intention of removing Powell, suggesting Vance and Rubio as potential presidential successors

While reiterating his criticism of Federal Reserve Chair Jerome Powell for slow interest rate cuts, U.S. President Donald Trump emphasized he has no plans to dismiss the central bank chief. "Why would I do that?" Trump said. "I get to replace the person in another short period of time." Powell's term is set to end in May 2026. When asked again on Friday whether he intends to seek re-election, Trump replied, "It was too early to make a decision." He also named Vice President J.D. Vance and Secretary of State Marco Rubio as potential successors. He said he wants to serve these four years well and then hand over power to a great Republican—preferably one who can continue the work.

Over 15,000 USDA employees accept Trump Administration's Voluntary Resignation offer

A briefing document from the U.S. Department of Agriculture (USDA) to congressional staff, dated May 4 local time, revealed that more than 15,000 USDA employees have accepted a voluntary separation incentive program offered by the Trump administration. This figure represents roughly 15% of the department's total workforce. The initiative, part of the administration's broader effort to reduce the size of the federal workforce, provided eligible employees with several months' worth of salary and benefits in exchange for voluntary resignation.

Major oil producers to exceed production hike targets for the second consecutive month

The Organization of the Petroleum Exporting Countries (OPEC) announced on the 3rd that eight OPEC and non-OPEC oil-producing nations have agreed to increase production by 411,000 barrels per day starting in June. This marks the second consecutive month these countries will exceed market expectations in boosting output. Representatives from Saudi Arabia, Russia, Iraq, the UAE, Kuwait, Kazakhstan, Algeria, and Oman convened an online meeting to assess global oil market conditions and prospects.

According to the statement, the decision to adjust production was driven by robust market fundamentals and historically low oil inventories. The group pledged to maintain flexibility in adjusting the pace of production increases based on market dynamics to ensure stability. These eight nations had initially agreed to voluntary production cuts of 2.2 million barrels per day in November 2023, with the measures repeatedly extended, most recently until the end of March 2025. In March 2024, they announced plans to gradually phase out these voluntary cuts, beginning with incremental production hikes on April 1.

U.S. military launches airstrikes across Yemen, injuring civilians

According to a report by Yemen’s Houthi-controlled Al-Masirah TV on May 5 (local time), U.S. forces conducted six airstrikes targeting the Bani Matar district in southern Sanaa province. Additionally, U.S. strikes hit the Harith, Shu'ub, and Attan areas of Sanaa. The Houthi health authority stated that a U.S. attack on Forty Street in Shu'ub wounded 14 civilians and damaged multiple shops. Further strikes included two airstrikes in Marib province and three in Al-Jawf province, according to the report.

EU Steel Exports to U.S. Plunge by 1 million Tons, €2 Billion Loss Linked to U.S. Steel-Aluminum Tariffs

Since the 25% U.S. tariffs on all steel and aluminum imports took effect on March 12th, the European Union's steel sector has faced severe setbacks. American consumers, meanwhile, are also forced to foot the bill for the policy. Axel Eggert, Director General of the European Steel Association (EUROFER), revealed that steel exports to the U.S. have dropped by 1 million tons, incurring losses of approximately €2 billion The tariffs are expected to significantly impact U.S. steel consumers, as domestic producers currently lack the capacity to supply a wide range of specialized steel grades, relying heavily on EU imports. If U.S. industries cannot source these products domestically, their procurement costs could surge by 25%.

U.S.-Ukraine Mineral Deal signed: early glimpse of American profit strategy emerges

The U.S. State Department announced on May 2nd its approval of a $310.5 million sale of F-16 fighter jet components, along with training and maintenance services, to Ukraine. According to U.S. media reports, the transaction's costs will be classified as a U.S. contribution to a joint mineral development fund established under the recently signed U.S.-Ukraine mineral cooperation agreement. Analysts note that as details of the F-16-related deals surface, the underlying dynamics of the mineral pact are coming into sharper focus.

Under the current agreement, Ukraine's demands for U.S. security assurances have evolved into a more tangible arrangement: leveraging future mineral revenues to secure advanced U.S. weaponry, including F-16s. In essence, the U.S. is exchanging immediate arms transfers for potential long-term gains from Ukrainian mineral resources. While this quid pro quo is now explicit, implementation remains in its early stages. Key uncertainties linger, including whether the deal will materialize fully, what hurdles-such as logistical challenges or Russian countermeasures-might disrupt its execution, and how these factors will reshape the specifics of U.S.-Ukraine cooperation under the "mineral-for-weapons" framework.

South Korean auto exports to the U.S. plummet

The U.S. government's imposition of tariffs on imported automotive components has cast a shadow over sales prospects for South Korean parts manufacturers. The U.S. is South Korea's largest export market for auto parts, with shipments totaling $13.5 billion in 2023, according to data from the Korea International Trade Association (KITA). Meanwhile, the share of South Korean auto parts exports destined for the U.S. has risen steadily, reaching 36.5% of total exports as of 2024. Hyundai and Kia vehicles assembled in the U.S. rely heavily on imported South Korean components, with local procurement accounting for less than 20% of parts. For some popular models, South Korean-made parts make up as much as 90% of components. Latest figures released on May 2nd show that South Korea’s auto exports to the U.S. during the first 25 days of April fell 16.6% year-on-year, driven by tariffs on finished vehicles. The new levies on auto parts, however, are poised to deliver another blow to South Korea's automotive supply chain.

Trump's budget slashes domestic spending by 23%, pushes defense outlays to record $1 Trillion

In his fiscal year 2026 budget proposal, U.S. President Donald Trump has called on Congress to impose steep cuts to domestic agency funding while boosting military spending. The plan seeks to reduce non-defense discretionary spending to $557 billion for FY2026—a $163 billion cut from current levels. Meanwhile, national security spending would surge to a historic $1.01 trillion, up 13% from the previous year. The record defense budget prioritizes funding for the Golden Dome missile defense program, shipbuilding, nuclear modernization, and border security, alongside a 3.8% pay raise for military personnel. On the domestic front, Trump's proposal targets deep cuts to environmental and renewable energy initiatives, as well as programs addressing racial disparities. The Environmental Protection Agency (EPA) and Department of Energy face particularly sharp reductions, while $15 billion in renewable energy project funding under President Joe Biden's signature infrastructure bill would be axed.

ECB Vice President hints at further rate cuts to counter U.S. Tariff impact

European Central Bank (ECB) Vice President Luis de Guindos expressed optimism about the current rate-cutting cycle in an interview published Saturday by Austria's Die Presse. When asked how long the ECB would continue lowering interest rates, de Guindos stated, "This will depend on how inflation develops. But we can be optimistic." He added that inflation is projected to align closely with the ECB's 2% target by year-end, according to the bank's latest forecasts.

April nonfarm payrolls beat expectations, but outlook remains cloudy

The U.S. Bureau of Labor Statistics (BLS) reported on Friday (May 2) that nonfarm payrolls rose by 177,000 in April, while March’s figure was revised down to 185,000 from an initially reported 228,000. Though the stronger-than-expected job growth eased concerns about the immediate economic impact of the White House's tariff hikes, the report did not fully reflect the fallout from President Trump's "Liberation Day" tariffs announced on April 2. Economists warn that job gains will likely slow in the coming months once the full impact of punitive tariffs is reflected in the data.

The employment figures may lead the Federal Reserve to adopt a more cautious stance on rate cuts this year. Faced with stagflation risks fueled by tariffs, the Fed is conducting a real-time assessment of whether stagnation or inflation poses a greater threat to the economic outlook. The labor market's resilience could temporarily reassure policymakers that the economy is not deteriorating sharply, buying time to gauge tariffs’ actual inflationary effects.

Following the data release, interest rate futures markets pared bets on a Fed rate cut as early as June, pricing in a 35.6% chance of a June reduction—down from roughly 58% late Thursday. Overall, markets now expect about 80 basis points of cuts (three 25-basis-point moves) in 2024, compared with prior projections of nearly 100 basis points earlier in the week.

[Today's Focus]

UTC+8 14:30 Switzerland April CPI

UTC+8 22:00 U.S. April ISM Non-Manufacturing PMI

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Economic

Stocks

Albanese's Victory Met with Market Caution

Australian equities opened the week with modest losses as the benchmark S&P/ASX 200 fell 0.47%, reversing gains from its previous session when the index reached its highest level since late February. The pullback came after Anthony Albanese secured a second term as prime minister—an uncommon political outcome in Australia, not seen in over two decades. His reelection signals political continuity, yet investor sentiment remains cautious due to broader macroeconomic headwinds.

The decline suggests that while Albanese’s victory provides domestic stability, it does not shield Australian markets from external pressures, particularly uncertainty surrounding U.S. tariff policy and its global ripple effects.

Thin Trading Across Asia Limits Regional Momentum

Trading volumes were notably muted across Asia, as major markets in Japan, South Korea, Hong Kong, and mainland China remained closed for public holidays. Taiwan’s Taiex index dropped 0.31% in erratic trading, suggesting mild risk aversion. The lack of broader regional trading activity left Australian equities more exposed to global cues—particularly those emanating from the U.S. and commodities markets.

Despite the equity market softness, the Australian dollar appreciated by 0.45% to 0.6471 against the U.S. dollar, possibly reflecting relief over electoral stability. Meanwhile, the offshore Chinese yuan strengthened 0.30% to its strongest level since November 2024, at 7.187 per dollar. The New Taiwanese dollar also gained nearly 3%, hitting a two-year high at 29.795.

These currency moves suggest an undercurrent of optimism about regional economic resilience, even as equities face near-term headwinds.

Oil Price Decline Underscores Global Growth Concerns

A significant contributor to the cautious tone in markets was the ongoing slide in oil prices. Brent crude fell 3.31% to $59.26 per barrel, while WTI dropped 3.59% to $56.20. These declines followed OPEC+’s decision to raise output for a second consecutive month, exacerbating concerns over supply gluts in a market already anxious about slowing demand due to tariffs and potential recessionary forces.

For Australia, a resource-heavy economy, falling oil prices often translate to volatility in energy-related stocks and diminished revenue expectations for related sectors.

U.S. Markets Show Strength But Face Headwinds Ahead

Meanwhile, U.S. equity futures edged lower after a strong end to the previous week. On Friday, the S&P 500 gained 1.47% to 5,686.67, marking its ninth consecutive advance—the longest streak since November 2004. The index also fully erased losses sustained since April 2, the date President Trump announced sweeping retaliatory tariffs.

The Dow Jones Industrial Average climbed 564.47 points (1.39%) to 41,317.43, while the Nasdaq Composite surged 1.51% to 17,977.73. These gains highlight short-term resilience in U.S. markets, yet futures softness suggests that traders remain wary of deeper trade disruptions.

A Delicate Balance Between Stability and External Volatility

While Prime Minister Albanese’s reelection represents a stabilizing force domestically, Australia’s financial markets remain at the mercy of global economic conditions. The sharp oil price drop, softening U.S. futures, and global trade tensions—particularly those stemming from the U.S.-China tariff standoff—continue to cast a long shadow.

Investor attention will likely shift toward upcoming central bank commentary, U.S. trade negotiations, and China’s post-holiday policy signals to assess whether the recent turbulence will deepen or stabilize in the coming weeks.

Source: CNBC

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China–U.S. Trade War

No Talks with Xi, But Dialogue Continues Behind the Scenes

Speaking aboard Air Force One on May 4, U.S. President Donald Trump told reporters that while he has no current plans to speak with Chinese President Xi Jinping, American officials are actively engaged in discussions with their Chinese counterparts. He emphasized that securing a fair trade deal with China remains a top priority for his administration.

Although vague on specifics, Trump hinted that announcements related to new trade agreements could emerge within the week, suggesting that some deals are being negotiated in parallel with the administration’s broader tariff strategy. However, it remains unclear whether this includes any concrete breakthrough with China.

Tariff Strategy: Pressure Tactics Still in Motion

Since April 2, President Trump has implemented a sweeping 10% tariff on most countries, layered with 25% duties on key sectors like autos, steel, and aluminum, as well as 25% tariffs targeting Canada and Mexico. Notably, Chinese goods now face a staggering 145% tariff—an aggressive escalation aimed at pushing Beijing back to the negotiation table.

These tariffs are currently paused for 90 days and are scheduled to take effect on July 8. Trump suggested that for some countries, an agreement may not be possible, and instead, “a certain tariff” will be imposed in the coming weeks. This language points to a tactical use of trade barriers as leverage rather than as immediate economic tools—designed to shift the balance of power in ongoing negotiations.

Rhetoric and Strategy: From Isolation to Conditional Engagement

Trump reiterated his belief that the U.S. has been unfairly treated by China for decades, citing President Richard Nixon’s diplomatic outreach as a critical turning point that he views as historically damaging. This narrative aligns with Trump’s long-standing view that the U.S. must decouple from unfair trading relationships to restore economic balance.

Yet, in a pre-recorded NBC News interview aired Sunday, Trump struck a slightly more optimistic tone. He acknowledged that he had effectively frozen trade between the U.S. and China, declaring that this approach had halted an annual loss of “a trillion dollars.” His phrasing—“we’ve gone cold turkey”—underscores the deliberate nature of this cutoff, which he frames not as a failure, but as a pressure tactic.

Importantly, Trump claimed that China “wants to make a deal very badly,” suggesting that the administration believes the current economic pain imposed on Beijing is sufficient to force concessions. However, he emphasized that any future agreement must meet U.S. standards of fairness—leaving open the question of what specific benchmarks define such a deal.

Understanding the Current Trade Dynamics

The evolving U.S.-China trade relationship reflects a complex dynamic in which open hostility is coupled with guarded optimism. While the current administration uses high tariffs to punish and pressure, it simultaneously leaves the door ajar for negotiated resolution.

This behavior does not suggest a return to pre-2018 trade norms, but rather the potential for a new framework—one based less on mutual liberalization and more on strategic reciprocity. Trump’s insistence on fairness indicates that tariff withdrawal is conditional, not a given, and is likely tied to measurable changes in China’s trade practices or domestic economic policy.

Conditional Diplomacy and Tactical Trade Leverage

President Trump’s comments reflect a high-risk, high-leverage strategy: isolate, impose cost, and wait for the other side to fold. While China has not yet made public concessions, Trump's claim that Beijing is eager to deal suggests a belief that the current approach is working.

Yet, as the July 8 tariff implementation deadline approaches, the true test will be whether this mix of economic coercion and conditional diplomacy yields lasting structural changes—or simply another short-term pause in an ongoing trade standoff.

Source: Reuters

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Patricia Franklin

Economic

China–U.S. Trade War

U.S. President Donald Trump declared a 100% tariff on films produced outside the United States on Sunday. He revealed the change on his social media site, Truth Social.

Trump argued that the President’s job was to defend the United States against foreign and domestic threats and that the issue involved messaging and propaganda, among other concerns.

Trump said the tariff would take effect immediately and that the U.S. Department of Commerce and the U.S. Trade Representative would soon start taking all necessary and appropriate action under Section 301, a trade sense law, to halt what he said were unfair trade practices. Yet he did not detail when or how the policy would take effect.

The post was one in a series Trump has touched on tariffs since he began the tariff wars, indicating that no industry may remain untouched. He cast the move in patriotic terms to preserve American jobs and values.

China plans to cut American movie quota

China had already begun to act just weeks before Trump’s announcement. On April 10, China’s Film Administration announced it would cut the number of American movies permitted into the market. The action is believed to be in retaliation to previous U.S. talks of increasing tariffs on imported entertainment.

The administration said in a public statement that the U.S. government’s abuse of tariffs to interfere with and suppress legitimate industries had reshaped domestic audiences’ attitudes toward American films. It added that China would follow market rules and respect audience preferences by reducing the number of U.S. films allowed into the country.

China is the world’s second-largest film market, and Hollywood increasingly depends on it. But it has become more protective of its homegrown entertainment industry. For the last few years, Chinese films have been kicking the backsides of Hollywood imports at the local box office.

In 2024, U.S. movies accounted for about 14% of China’s box office. This is a significant decrease from 36% in 2018. That partly has to do with the fact that Chinese audiences are increasingly weary of sequels and reboots and what they view as formulaic storytelling from Hollywood, experts say.

The Chinese government is now backing more local productions and encouraging audiences to watch homegrown content. The most recent attempt to reduce the United States imports of films threatens to hit Hollywood where it hurts.

Hollywood studios struggle under trade tensions

Hollywood studios are looking at these developments with increasing alarm. The President’s new 100% tariff, though, would increase the cost for foreign films to play in the largest movie market in the world, the United States. This could wane competition for American films and escalate tensions among the nation’s major trade partners: China, France, South Korea, and India.

Meanwhile, China’s reduction of U.S. film imports is already having an impact. For studios like Disney, Warner Bros., and Paramount, which use international markets to help cover production costs, the dependence is even greater for costly blockbusters.

Companies that have long wielded great power are now on the brink of ruin because of the pandemic. Dwindling ticket sales in China — once a top early revenue market for Hollywood — has left major studios scrambling for new sources of revenue.

Film critics also caution that moviegoers could be denied various stories worldwide. If the move entails increased tariffs worldwide, international films could become a thing of the past in American theaters.

Source: CryptoSlate

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Commodity

OPEC+ Ups Production Despite Demand Weakness

Oil markets opened the week with sharp losses as OPEC+—a coalition led by Saudi Arabia—agreed to increase crude output by 411,000 barrels per day in June. This follows a similar increase in May, bringing total additional supply to over 800,000 barrels per day in just two months. The announcement significantly exceeded market expectations, including Goldman Sachs’ earlier projection of a modest 140,000 bpd hike.

As a result, U.S. West Texas Intermediate (WTI) crude fell by $2.49 or 4.27%, settling at $55.80 per barrel. Global benchmark Brent also dropped by $2.39 or 3.9% to $58.90. These moves continue a broader downward trend, with oil prices having declined more than 20% since the start of the year.

A Supply-Demand Imbalance Takes Shape

The synchronized surge in OPEC+ supply comes at a moment when global oil demand faces serious headwinds. Chief among them are fears of a global recession, amplified by U.S. President Donald Trump’s April 2 tariff package targeting multiple trading partners. The tariffs, which include a sweeping 145% duty on Chinese goods and 25% on steel, aluminum, and autos, have shaken market confidence and raised concerns about slowing industrial activity and consumer spending—both of which directly impact oil consumption.

The current combination of rising supply and weakening demand is pushing the oil market toward a structural imbalance. This shift is particularly significant given that April marked the steepest monthly price drop since 2021. Should OPEC+ maintain this production trajectory into the second half of the year, prices may fall below levels sustainable for many producers, especially those with high breakeven costs.

Investment Caution Spreads Across the Oil Sector

The repercussions are already rippling through the energy sector. Oilfield service firms like Baker Hughes and SLB (formerly Schlumberger) have expressed concern about declining capital expenditure, particularly in upstream exploration and drilling. Baker Hughes CEO Lorenzo Simonelli attributed the drop in international upstream spending to a mix of oversupply fears, rising tariffs, and regional uncertainties in Mexico and Saudi Arabia.

This investment hesitation is mirrored by the financial performance of oil majors. Both Chevron and ExxonMobil reported lower first-quarter earnings compared to Q1 2024, largely due to declining oil prices. While these companies remain profitable, prolonged price weakness could force them to revise their capex plans or delay key projects.

Market Expectations and Forecasts

Goldman Sachs, in response to the evolving dynamics, now forecasts that U.S. crude will average $59 per barrel in 2025, while Brent is expected to average $63. These figures suggest that while some recovery may be possible later in the year, the broader price environment will remain subdued relative to previous years.

The divergence between OPEC+ production policy and global economic signals is increasingly apparent. While the group may be attempting to defend market share or preempt supply gaps, the strategy risks oversaturating a market already on edge due to macroeconomic fragility.

Strategic Overproduction Meets Structural Uncertainty

OPEC+’s decision to ramp up production amid weak demand and escalating trade tensions has injected volatility into an already fragile oil market. The resulting price drop reflects not only the immediate fear of oversupply but also growing anxiety that global economic conditions are deteriorating faster than expected.

As upstream investment slows and producers brace for leaner quarters, the energy market appears to be caught between aggressive supply strategies and increasingly cautious demand forecasts. Whether this leads to another pricing collapse or a coordinated policy reversal remains contingent on how geopolitical and trade dynamics evolve over the coming months.