EU Plans New Tax on Big Corporates to Boost Budget

Political

Stocks

Summary:

The EU could also impose additional levies on non-recycled electronic waste and tobacco products, the FT said.

Brussels will propose a new tax on companies with a net turnover exceeding 50 million euros ($58.44 million) as part of an effort to generate new financing streams for the European Union’s common budget, the Financial Times report on Friday.

The proposal would need the backing of all 27 member states to enter into force.

It would cover all large companies operating in the bloc irrespective of where they are headquartered, according to the draft proposal. A “bracket” system would leave groups with the highest revenues making greater contributions.

The draft documents indicated that the European Commission, the bloc’s executive arm, had dropped plans to target US Big Tech groups like Apple and Meta with a tax on digital services, though they would still be hit by the proposed new broader levy.

A Commission spokesperson declined to comment on the FT story, saying only that the proposal could still change.

News of the plans came as the EU braced for a possible letter from U.S. President Donald Trump outlining planned duties on the United States’ largest trade and investment partner after widening his tariff war in recent days.

Trump has railed against what he sees as the EU’s heavy-handed regulation of Big Tech.

The EU could also impose additional levies on non-recycled electronic waste and tobacco products, the FT said.

Source: Reuters

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Manuel

Economic

Stocks

US stocks retreated Friday after President Trump threatened Canada with a 35% tariff on its imports to the US and floated higher blanket levies on most trading partners.

The S&P 500 (^GSPC) fell 0.3%, while the tech-heavy Nasdaq Composite (^IXIC) dipped 0.2%, both dipping from Thursday's record highs. The Dow Jones Industrial Average (^DJI) declined 0.6%, dropping over 250 points to lead the way down.

Other parts of the market remained upbeat, however: AI chip maker Nvidia (NVDA) notched a fresh record, while bitcoin (BTC-USD) rose above $118,000 per token to also hover at new highs, continuing a furious crypto rally.

Markets once again mostly took Trump's tariff threats in stride, without any major negative reaction that typified his tariff salvos earlier this year.

Late Thursday, Trump on Truth Social posted a letter to Canadian Prime Minister Mark Carney, telling him that Canadian goods imported to the US would face a 35% tariff starting in August. The White House has since clarified that many of the carveouts currently in place for Canada tariffs would remain, likely exempting a slew of goods from those punitive duties.

Trump's renewed tariff threats this week have culminated in nearly two-dozen letters to trading partners dictating the duties their country's imports will face beginning Aug. 1. In an interview with NBC News, Trump also floated 15% to 20% blanket tariffs on most trading partners, higher than the 10% level currently in effect. Eyes are on what happens next with the European Union, India, and other large trade partners.

For his part, Trump brushed off concerns about inflation and touted the stock market highs reached on Thursday. Wall Street has rallied over the last few months, though that has come after he decided to pause his most sweeping duties on trade partners announced in April's "Liberation Day" event.

"I think the tariffs have been very well-received. The stock market hit a new high today," he said.

But at least one prominent investor had said Thursday that markets need to start taking the tariff threats a bit more seriously.

"Unfortunately, I think there is complacency in the markets," JPMorgan CEO Jamie Dimon said Thursday.

Source: Yahoo Finance

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Manuel

Economic

China–U.S. Trade War

U.S. seaport operators are asking for extra time to implement pending tariffs on towering ship-to-shore cranes as they expect President Donald Trump's administration to follow through on a promise to essentially ban that vital cargo-handling equipment.

The United States Trade Representative (USTR) earlier this year proposed tariffs of up to 100% on those cranes after China devoured market share in its bid to dominate maritime manufacturing as well as commercial and military dominance on the seas.

China, via state-owned Shanghai Zhenhua Heavy Industries (ZMPC), now commands the global market and has supplied some 80% of the ship-to-shore cranes in the United States. ZPMC has more than 200 cranes in operation across nearly two dozen U.S. ports, including Houston, Los Angeles and New York. Each of those cranes costs anywhere from $10 million to $20 million.

Countering that trend is a priority for the Trump administration, whose officials stated in meetings they intended to put an end to such purchases, said Carl Bentzel, president of the National Association of Waterfront Employers (NAWE), which represents terminal operators and other groups.

Asked whether he expected the tariff rate to land at around 100% when USTR issues its pending decision on the matter, Bentzel said, "I've been operating under the position that that's the floor. This essentially is a ban on the use of Chinese manufactured cargo equipment."

USTR and the White House did not immediately comment.

Trump is not the first U.S. President to push ports to buy higher-priced cranes from manufacturers with ties to U.S. allies, including Konecranes of Finland, Mitsui E&S of Japan and Swiss-headquartered Liebherr.

Joe Biden slapped 25% tariffs on ship-to-shore cranes from China in 2024 after the Cybersecurity and Infrastructure Security Agency, the Federal Bureau of Investigation and the National Security Agency publicly stated that China has sought to preposition cyber vulnerabilities in American critical infrastructure, including port equipment.

U.S. officials also warned that modems, software and other technology in that equipment could be a backdoor for spying on military operations or used as kill switches to hobble port operations.

Nevertheless, ports and terminal operators continued buying lower-cost Chinese cranes.

"The inaction and resistance from the port operator community is focused on short-term cost savings and massively underestimates the ultimate cost of inaction," said William Henagan, a Council on Foreign Relations research fellow who was director for critical infrastructure at the National Security Council under Biden.

U.S. port operators and representatives for ZMPC in letters to USTR in May said security concerns linked to the cranes were out of proportion to the risk. Opponents also warned that the tariffs could heave billions of dollars of unexpected costs on the industry, stifling improvements meant to keep U.S. ports competitive.

These days NAWE, one of the industry organizations representing terminal operators, is working to mitigate the impact of the new tariffs by asking for exemptions for previously ordered cranes and a transition period for the implementation of new duties.

"We've chosen to work with them," Bentzel said.

Source: Reuters

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Manuel

Economic

Political

U.S. President Donald Trump's threat of a 50% tariff on copper imports is raising alarm in the U.S. auto sector, as it could make it even harder for carmakers and suppliers to absorb border taxes and rising costs, executives and industry experts say.

The duties on their own may be manageable, but prices of the red metal vital for making cars, in particular in wire harnesses and in motors for electric vehicles, have soared to record highs.

The U.S. market is heavily reliant on imported copper, aluminium and steel, and developing new capacity could take years, so users are scrambling to buy metal from a limited number of suppliers, spurring price rises.

Added to import tariffs on those metals, as well as higher prices in the United States, the extra costs are compounding the financial strain on carmakers and parts suppliers, interviews with a dozen executives, industry analysts and experts show.

Carmakers have so far been relying on inventories to avoid raising prices, but could be forced to pass on mounting import tax costs to consumers.

Some like Ford and Toyota have already announced hikes to mitigate other Trump-induced tariffs, while Porsche expects a 300-million euro ($351 million) hit to results from tariffs for April and May alone.

"This (a copper tariff) complicates an already difficult situation" for the auto industry, said Daan de Jonge, lead analyst for copper demand and prices at Benchmark Mineral Intelligence.

Trump's announcement of the tariff this week propelled prices on U.S. platform COMEX to a record $5.6820 a pound or $12,526 a metric ton, a premium of more than $2,920 a ton over the price on the London Metal Exchange, currently around $9,600 a ton, which the market uses as the global benchmark. The rate is effective August 1.

The U.S. Midwest duty-paid aluminium premium paid on top of the benchmark LME price for physical delivery has tripled to 60 U.S. cents a pound since Trump was inaugurated. In the same period, the LME price has slipped 3% to $2,604 a metric ton.

U.S. top carmakers GM, Ford and Jeep maker Stellantis declined to comment for this story.

SUPPLIERS PASS ON SOME COSTS

After a chaotic week in the copper market, suppliers to carmakers have already asked their customers this week to pay more for their product because they cannot afford the additional costs, experts say.

A source at a major auto supplier in the U.S. market said the company had seen "meaningful" impact from elevated copper, aluminum and steel prices.

This creates both commercial friction and structural cost gaps, said the source, who spoke on condition of anonymity because they were not authorised to discuss the issue publicly.

Even before any tariff takes effect, users are paying more for their U.S. copper.

Takashi Imamura, an executive officer at Japanese trading house Marubeni said on Wednesday a copper tariff would mean higher costs for U.S. consumers.

"When they (the U.S. government) reconsider the damage, my final expectation is that they will reduce or eliminate the tariffs," Imamura said.

Parts suppliers are feeling the squeeze. Melanie White, president of suspension parts maker Hellwig Products, said steel prices have quadrupled since 2018.

Steel tariffs have caused a rush to source from U.S. providers, making it harder to secure supplies.

White said the roughly 50-person business has cut costs by putting off equipment purchases or not rehiring for certain vacant positions.

"It has affected a lot of things," she said.

COSTS

Benchmark's de Jonge said that at pre-tariff rates, steel, aluminium and copper accounted for around 5% of a vehicle's production costs in the United States.

With tariffs, that rises to up to 9%, he said.

Based on estimates from Cox Automotive and Benchmark Mineral Intelligence on tariffs already in place combined with the planned copper rates, the U.S. auto industry would pay on average minimum duty of $1,700 for every car made in the U.S. and $3,500 per car imported from Canada and Mexico that complies with the USMCA trade deal.

It would be as much as $5,700 for every car imported from elsewhere.

Those numbers add up fast in a low-margin industry where the average U.S. new vehicle selling price in June hit $46,233, according to consultancy J.D. Power.

Consultancy CRU Group estimates the average combustion-engine or hybrid car requires about 24 kg (53 pounds) of copper, while the average fully-electric car needs around 59 kg.

Dan Hearsch, global co-leader for automotive and industrials at consultancy AlixPartners, said supplier agreements tend to be indexed to copper prices and revised every few months.

But the spike in copper prices this week has forced auto suppliers to go to customers and "say, 'Hey, we need to talk about this on top of all our other tariff conversations,'" Hearsch said.

Some in the industry remain skeptical that the copper tariff will actually be implemented. Trump has a history of delaying or walking back tariff threats.

Andy Leyland, co-founder of supply chain specialist SC Insights, said that a copper tariff would likely be short-lived because higher inflation caused by border taxes will collide with the reality of the U.S. political calendar - where midterm elections will be held in November 2026.

"Most Americans don't really give a damn about foreign policy," Leyland. "Inflation is the only concern that people really have."

Source: Reuters

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Damon

Central Bank

President Trump and his team are not happy with Jerome Powell. Russell Vought, Trump’s budget chief, says Powell has “grossly mismanaged the FED.” Vought points to expensive renovations at the FED’s D.C. offices, calling them wasteful. Trump wants lower rates, but Powell is holding back. This tension is shaking up the world of finance.

Trump has been pressing the FED for aggressive rate cuts. He believes lower rates will ease inflation concerns and fuel growth. Powell, however, stays cautious. He points to a strong economy that can handle current rates. Yet with inflation still above 2%, the debate over rate cuts keeps heating up.

FED Faces Rate Cut Pressure as Inflation Fears Linger

FED Governor Christopher Waller is clear: a rate cut should happen soon. He says the current policy is “too tight.” Inflation, driven by Trump’s tariffs, is a big worry, but Waller believes it will only be a temporary spike. He argues the FED should not fear a small bump in inflation.

Waller is not alone. Michelle Bowman also supports a cut at the FED’s July meeting. But others, like St. Louis FED President Alberto Musalem, are cautious. Musalem wants to see more data on inflation before making a move. The FED’s June meeting minutes show a split, with some ready for cuts and others warning that inflation might stick around.

Despite the divide, Waller insists the FED needs to move now. “It’s not political,” he says, aligning his stance with Trump’s calls for easier policy. This clash inside the FED could shape finance markets in the coming weeks.

FED’s Balance Sheet Shrink Continues, but For How Long?

Waller also addressed the FED’s massive balance sheet. The FED’s holdings once peaked at $9 trillion during COVID-19. Now, the FED is cutting back, reducing its bond holdings to drain excess liquidity. Waller says the FED can keep shrinking its balance sheet for “some time.”

The FED currently holds around $6.7 trillion, but Waller sees it dropping to a “hypothetical” $5.8 trillion. He believes the FED should aim for about $2.7 trillion in reserves, down from the current $3.3 trillion. This drawdown, known as quantitative tightening (QT), is part of the FED’s plan to return to a normal policy stance.

However, there are challenges. The FED’s holdings are heavy with long-term bonds. Waller suggests shifting toward shorter-term Treasury bills. This process will take time, but it may help manage inflation and support future rate cuts if needed. The FED must find the right balance between reducing its holdings and keeping the financial system stable.

FED Debates Rate Cut as Finance Markets Watch Closely

The FED is under intense pressure from Trump, who sees lower rates as key to fighting inflation and boosting finance markets. Waller and Bowman push for a rate cut, seeing room to ease policy without sparking runaway inflation. Meanwhile, Powell and others want to wait, fearing tariff-related inflation could last longer than expected.

Markets are watching every signal. If the FED cuts rates in July, it could fuel a rally in finance markets, crypto included. However, if inflation surprises to the upside, the FED may have to tighten again later. The uncertainty keeps traders alert, as Trump continues to push for aggressive rate cuts.

What’s Next for the FED, Trump, and Inflation?

As Trump increases pressure, the FED must decide its next move. Waller’s potential rise as the next FED chair could shape the path forward. Rate cuts may come soon if inflation data stays mild. But if tariffs push prices up, Powell and others may hold back.

Finance markets, including crypto, will react fast to any FED decision. Inflation, Trump’s policies, and the FED’s next steps are all tied together now. The coming weeks will be crucial for rate cuts, inflation control, and the balance of power between Trump and the FED.

Source: CryptoSlate

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Devin

Economic

Most European Union countries have backed plans to agree a deal on their new climate change target by September, sources familiar with the discussions said on Friday.

EU countries are negotiating their new 2040 climate change target, which the Commission last week proposed should be a 90% emissions reduction from 1990 levels, although countries would be allowed to buy international carbon credits to meet a limited share of the goal.

Denmark, which took over the EU's rotating presidency this month and is chairing negotiations among countries on the target, aims to strike a deal at a summit of ministers in September, Denmark's energy and climate ministry said in a statement on Friday.

"It is extremely important that we unite the EU around new climate goals... We have a very small window to put a bow on these negotiations," Danish climate minister Lars Aagaard said, following a meeting of EU countries' climate ministers in Aalborg, Denmark, which concluded on Friday.

In the meeting, most of the EU's 27 member countries backed the plan to land a deal on the 2040 climate target in September, three sources familiar with the talks said.

But a handful of countries, including Poland, Hungary and the Czech Republic, opposed a fast-tracked deal - while others demanded changes to the Commission's proposal, the sources said.

"This is not a decision that we can just take lightly, it's affecting the whole economy. Working under such time pressure is just not reasonable," Polish deputy climate minister Krzysztof Bolesta told Reuters, of the proposed September deadline.

Spokespeople for Hungary and the Czech Republic's EU representations each confirmed their governments opposed the September deadline.

Climate change has made Europe the world's fastest-warming continent, fuelling deadly heatwaves and fires. But the 2040 target has stoked political tensions over how ambitious to be in tackling climate change, at a time when Europe is sharply raising defence spending and attempting to support struggling local industries.

To attempt to win over sceptical governments, the Commission proposed flexibilities that would soften the 90% emissions target for European companies.

Bolesta said countries had raised concerns in Friday's meeting over issues including a lack of clarity on how these flexibilities would work.

The EU faces a mid-September deadline to submit a new 2035 climate target to the U.N. - which the Commission has said should be derived from the 2040 goal.

Source: Reuters

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Adam

Economic

The U.S. tariff saga has stolen global spotlight from trade tensions between China and the European Union, which are now heating up.

Accusations and investigations over each other’s trade practices have long been a staple of EU-China trade relations, underpinned by concerns over how domestic economies are likely to be impacted by competing imports.

In recent weeks, EU restrictions on Chinese companies taking part in public tenders for medical devices were quickly met with China imposing import curbs on such products. Separately, long-threatened Chinese duties on brandy from the EU came into force earlier this month, and both Beijing and Brussels have ramped up criticism of each another.

Altogether, EU-China trade relations are now “quite poor,” according to Marc Julienne, director of the Center of Asian Studies at the French Institute of International Relations (Ifri).

“What was once a domain of great opportunity and enthusiasm for the bilateral relationship has now become more about risks than opportunities,” he told CNBC earlier this week.

A sour relationship

EU and China relations are encumbered by many challenges and risks often linked to clashing economic positions, Grzegorz Stec, senior analyst at the Mercator Institute for China Studies, suggested.

“The EU and China are broadly on a colliding trajectory in terms of their trade and industrial policy concerns,” he told CNBC. Bones of contention include the challenge of China’s overcapacity and trade diversion to Europe, Stec, who is also head of the Mercator Institute’s Brussels office, explained.

“Beijing’s increasingly pressing need to export contradicts the EU’s need to protect its own industrial base,” he added.

China’s economy is facing a gap between its production capacity and demand. It is also struggling with sluggish growth, while exports, which long boosted the economy, have been under pressure amid global trade tensions and lower demand.

Ifri’s Julienne also flagged a series of concerns that make the EU-China relationship tricky, including an increasingly difficult environment for foreign companies operating in China and Europe’s growing trade deficit. Additionally, he said Beijing was “weaponizing” trade to put pressure on Europe — like they did with the brandy tariffs.

China first started investigating European brandy imports after the EU began slapping levies on Chinese-made electric vehicles last year, which pose steep competition to Europe-made alternatives.

U.S. tariffs impacting EU-China relations

U.S. President Donald Trump’s recent tariff regime could have been an opportunity for China and the EU to improve their relations, according to Ifri’s Julienne.

“It should have had a positive impact on the bilateral relationship, in the sense that — facing economic coercion from the United States — [the EU and China] — might have been expected to negotiate and compromise in order to make the most of their trade relationship amid the US tariff war,” he said.

This has yet to materialize.

Jean-Marc Fenet, senior fellow at the ESSEC Institute for Geopolitics & Business, suggested one reason for this failure could be that Beijing feels it has come out on top in its own trade drama with Washington.

“The need for a common front with the EU is therefore less necessary,” Fenet said. “In fact, the fear now in Beijing is rather that the EU will accept an alignment with an anti-Chinese line that the American administration would impose on the sidelines of the trade negotiations.”

After initial sharp escalations and tense negotiations, China and the U.S. confirmed a trade framework agreement in June, including provisions around hotly contested rare earths and tech regulations. Earlier this year, Beijing had imposed export restrictions on several rare earth elements and magnets, which are often used in the automotive, defense and energy sectors, as part of its response to initial U.S. tariffs.

Light at the end of the tunnel?

The Mercator Institute’s Stec argued that a solution is “unlikely to be found” on the lingering points of trade contention between Beijing and Brussels, instead foreseeing further issues.

“The overcapacity and trade diversion issues paired with Beijing’s willingness to use rare earths export controls as leverage in EV tariffs negotiations signal more turbulences to come,” he said.

Tensions over the EU’s measures to boost its autonomy and China’s attempts to prevent these efforts can also be expected according to Stec.

Fenet struck a similarly skeptical tone.

“The significant hardening of the European Commission’s positions and the increase in the power of the protection tools it has equipped itself with in recent years, make it likely that there will be growing frictions, as shown by the recent measures taken against Chinese medical equipment and as we will undoubtedly see at the EU-China Summit on July 24th in Beijing,” he added.

His hopes for the summit — which sources told CNBC will include a meeting between European Commission President Ursula von der Leyen and Chinese President Xi Jinping — are also low.

“The two parties already seem to be anticipating a difficult and probably inconclusive meeting,” Fenet said.