EU Sees Trump’s 10% Tariff As Trigger to Retaliate

Economic

Forex

Summary:

The European Commission finally revealed how it’s planning to react to the likelihood of an additional 10% baseline tariff from the US on EU exports remaining in place.

“We will need to retaliate and rebalance in some key sectors if the US insists on an asymmetrical deal,” the EU’s industry chief, Stephane Sejourne, told Bloomberg this week.

For many in Brussels, the big question for weeks has been how to respond to what they see as US President Donald Trump’s push for an unbalanced deal.

That’s been the backdrop for the commission’s accelerated talks with American counterparts to reach a negotiated solution to the tariff dispute before the July 9 deadline. If not, most European goods face the prospect of a debilitating 50% levy.

But while EU trade chief Maros Sefcovic said that talks have progressed at pace, the Trump administration has continued to insist in closed-door discussions on an agreement that the Europeans view as one-sided favoring Washington.

Many European officials expect that some tariffs will remain, including the 10% baseline. Those sectoral tariffs are based on Trump’s so-called 232 authority, which is expected to be deployed against more industries such as pharmaceuticals and semiconductors.

QuickTake: A Guide to Trade Talks, Trump-Style

One of the sectors hurt by US duties will be the civil aviation industry, and Toulouse-based Airbus can’t be subject to “unfair competition” from Boeing, the French commissioner said, because the European aircraft maker faces the 10% tariff. Airbus is arguably the primary example of the success of the bloc’s industrial cooperation.

“If we don’t rebalance, we would leave some leading sectors unprotected,” Sejourne said.

The EU’s executive arm is already preparing an arsenal featuring not “countermeasures” but “rebalancing” measures.

Sejourne, who’s been on the offensive to protect European interests versus Trump’s industrial charges, made clear that the EU will play smart and act in those sectors where there’s a clear economic interest.

But the commission will need to rally member states into a new reality of higher tariffs imposed by an unpredictable American president who sees Europe as more of an obstacle to his domestic goals than a partner.

Source: Bloomberg Europe

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Glendon

Economic

Forex

Pakistan and the U.S. have resolved to conclude trade talks next week, the South Asian nation said on Wednesday after a meeting between its Finance Minister Muhammad Aurangzeb and U.S. Commerce Secretary Howard Lutnick.

The negotiations, focused on reciprocal tariffs, are part of a broader push to reset economic ties at a time of shifting geopolitical alignments and Pakistan’s efforts to avoid steep U.S. duties on exports.

“Both sides showed satisfaction on the ongoing negotiations and resolved to conclude the trade negotiations next week,” Pakistan's finance ministry said in a statement, adding that a longer-term strategic and investment partnership is also under discussion.

Pakistan faces a 29% tariff on exports to the U.S. under President Donald Trump’s measures to target countries with large trade surpluses with the U.S.

Pakistan’s surplus was around $3 billion in 2024.

To offset the imbalance and ease tariff pressures, Islamabad has offered to import more U.S. goods, including crude oil, and to open up investment opportunities through concessions for U.S. firms in Pakistan's mining sector.

Earlier this week, the two countries co-hosted a webinar promoting investment in Pakistan’s mineral sector, including the $7 billion Reko Diq copper-gold project.

Senior officials from both governments and U.S. investors discussed public-private partnerships and regulatory reforms.

The U.S. Export-Import Bank is reviewing financing proposals worth $500 million to $1 billion in Reko Diq.

Trump, who hosted Pakistan's army chief Field Marshal Asim Munir at the White House last week, has earlier said trade helped avert a deeper conflict between Pakistan and India.

Source: Yahoo Finance

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Olivia Brooks

Cryptocurrency

Following Bitcoin’s drop below the $100,000 mark over the weekend, fresh narratives are surfacing about where the top crypto might be headed next. Despite more than $63 billion flowing into the crypto market in 2024, Bitcoin has only managed a modest 13% gain year-to-date, raising questions about what’s holding back the top cryptocurrency.

According to 10x Research, the usual catalysts such as ETF inflows, stablecoin activity, and corporate accumulation are in play, yet Bitcoin is no longer reacting the way it did during last year’s rally. Unlike the booming reaction in 2024, Bitcoin is now behaving differently, suggesting something deeper is shifting.

Bitcoin Price Prediction Today

Level	Price	Type	Description
Resistance	$110,000	Bullish Target	Next key upside level if $97K support holds; seen as a potential rebound zone.
Resistance	$106,000	Recovery Level	BTC has bounced to this level after the weekend dip; signals renewed interest.
Neutral	$100,000 – $106,000	Consolidation Zone	BTC may range between these levels until CPI or macro catalysts emerge.
Support	$100,000	Psychological Support	Former key level now acting as minor support after the recent drop.
Support	$97,000	Key Entry Point	Closely watched as a final dip zone; considered a solid re-entry point.

Traders Are Shifting Tactics

Instead of sparking a big rally, 10x Research says traders are showing their bullishness in quieter ways. They’re adapting to lower market volatility and putting their money into fewer top coins. This shift in strategy might be slowing down Bitcoin’s short-term gains, even though there’s still plenty of money flowing into the market.

Why the Disconnect?

The report also revisits the Fed’s surprise 50 bps rate cut in September 2024, which was met with skepticism. Bond yields surged, indicating investors weren’t convinced it was the right move. Meanwhile, inflation, which dropped from 3.5% in April 2024 to a stable 2.4%, has remained steady for three straight months. However, the expert’s warnings that tariffs would reignite inflation have so far proven inaccurate.

Meanwhile, unemployment has held steady at 4.2% for nearly a year, defying recession fears. With macro fundamentals stabilizing and the Fed’s tone becoming more dovish, many expected a stronger Bitcoin rally. Yet, the market seems to be waiting for clearer signals.

All Eyes on July CPI and Bitcoin’s Next Move

With inflation steady and liquidity still flowing, all eyes are now on the July 15 CPI report as the next big market catalyst. 10x Research hints that Bitcoin’s next move may depend less on money flowing in and more on how market participants continue to adapt to these changing geopolitical and financial scenarios.

Looking at the current sentiment, Analyst Astronomer suggests the decline may not be over yet, with a possible final dip before the price bounces back. The $97,000 zone is being watched closely as a key level for buyers to re-enter the market.

If support holds, Bitcoin could aim for a rebound toward $110,000. Weekend lows tend to be retested, and with sentiment shifting following a ceasefire deal between Israel and Iran, Bitcoin has already climbed back to $106,000.

This geopolitical development, along with improving market mood, has brought renewed buying interest. The overall outlook remains cautiously bullish, with investors eyeing $97,000 as a solid entry point if another dip happens.

Source: CryptoSlate

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Michelle

Economic

Forex

The euro’s latest rally is approaching a pivotal level that could either stall its momentum or unlock the next leg toward $1.20, a target strategists and traders have circled for months.

After climbing as much as 1.6% in the past three days, the common currency is closing in on $1.17 — a zone that holds the heaviest notional volume in euro-bullish options so far this month, according to Depository Trust & Clearing Corporation data. That makes it a potential inflection point.

A break and hold above $1.17 could open the door for an accelerated push toward $1.20, a level last seen four years ago. If resistance holds, however, expect some profit-taking or flow-rebalancing first.

HSBC strategists increased their year-end forecast for the euro to $1.20 from $1.15 last week as they predict broad dollar weakness in the coming months. Danske Bank A/S analysts reiterated their 12-month euro forecast of $1.20 last month while Deutsche Bank AG strategists see a rally to that level by December.

The euro climbed as high as $1.1641 on Tuesday, its strongest intraday level since October 2021, as easing geopolitical tensions and softer US economic data fueled fresh demand for the common currency. The announcement of a ceasefire between Iran and Israel, along with cautious remarks from Federal Reserve Chair Jerome Powell, helped spark the latest push.

Money markets are pricing in a total of 59 basis points of Fed easing by year-end, compared with 25 basis points by the European Central Bank. The process of bringing inflation back to 2% is almost over, ECB Chief Economist Philip Lane said Tuesday, despite some remaining price pressures.

Options markets suggest investors retain conviction in a stronger euro. Risk reversals — which reflect the difference in pricing between bullish and bearish bets — jumped Tuesday by the fourth-largest margin in more than three years, signaling a decisive return of bullish sentiment. The shift followed a brief period in which the dollar found support from rising oil prices.

The broader picture remains constructive. DTCC data shows more than 60% of notional euro options volume this month has favored calls. The euro was trading little changed near $1.1610 on Wednesday.

Source: Bloomberg Europe

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Gerik

Economic

Emerging Consensus for Rate Cuts as Trump Gains Unlikely Allies Inside the Fed

The Federal Reserve is facing an unusual degree of internal disagreement over the direction of monetary policy, as senior officials increasingly align with President Donald Trump’s call for lower interest rates. In recent days, Vice Chair for Supervision Michelle Bowman and Governor Christopher Waller, both Trump appointees, have publicly stated their support for policy easing if inflation remains under control.

Bowman’s remarks on Monday marked a clear shift in tone. She emphasized that with limited inflationary pressure and relatively muted price impacts from Trump’s new tariffs, it may be time to recalibrate policy toward neutrality. Her support for a rate cut in the next meeting comes despite earlier Fed consensus to hold steady.

Fed’s Tactical Shift: From Patience to Conditional Readiness

While not all officials have taken as clear a stance, several are now signaling a readiness to act. Chicago Fed President Austan Goolsbee said in a Milwaukee event that if tariffs don’t result in significant inflation, monetary easing should be considered a viable option. He hinted that the post-April tariff landscape might not be as disruptive as anticipated.

Chair Jerome Powell, despite Trump's increasingly aggressive personal attacks—including calling him “dumb” and “stubborn”—remains cautious. He reiterated that the Fed prefers to see more summer data before committing to any rate adjustment. Yet even Powell has acknowledged that energy shocks from geopolitical tensions, like the recent Israel-Iran conflict, have so far been short-lived in the past, unlike the structural shocks of the 1970s.

Geopolitical Risks and Energy Prices: Limited Reaction from Fed So Far

The recent U.S. airstrikes on Iran’s nuclear facilities and a shaky ceasefire agreement with Israel have raised global energy price concerns. Still, Fed officials remain calm. Bowman noted that while commodity prices may rise, weak consumer demand—especially from low-income groups—and stable supply chains are keeping retailers cautious about price hikes.

Powell reinforced this view, stating that U.S. dependence on foreign oil is far lower than in previous decades, reducing the pass-through effects of oil shocks. The Fed sees current events as manageable unless full-scale regional conflict breaks out, which would pose greater risks.

Political Pressure Meets Institutional Independence

Trump’s direct criticism of Powell has escalated, yet Fed officials insist that political interference does not impact policy decisions. Powell, in particular, has repeatedly stated that the central bank will continue to operate independently and base its decisions strictly on economic data.

Nonetheless, market sentiment is tilting toward the expectation of a rate cut. CME Group’s FedWatch tool reflects a rising probability of a policy shift at the July 29–30 meeting. Analysts warn that while current inflation trends are subdued, the Fed must also weigh potential second-round effects of tariffs, wage growth, and geopolitical instability.

As inflation remains modest and the labor market shows resilience, calls for monetary easing—particularly from Trump-aligned officials—are growing louder. The Fed's internal divergence reflects broader tensions between maintaining long-term credibility and responding swiftly to evolving risks. Whether July becomes the turning point for U.S. monetary policy will depend not just on inflation data but also on how much pressure the Fed can resist from both markets and politics.

Source: CNN

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Gerik

Economic

Commodity

Japan’s Fourth-Largest Economy Wavers as Bento Shops Fall Victim to Soaring Rice Prices

Japan’s bento economy—once a reliable staple for busy office workers and students—is faltering under the weight of stagflation. With core input costs, especially rice, rising at an unprecedented pace, many small businesses are now closing down or facing mounting losses.

According to Teikoku Databank, 22 bento shops declared bankruptcy between January and May 2025—already surpassing last year’s same-period figure. In 2024, a record 52 shops folded, and experts predict that 2025 could set a new high.

Daisuke Iijima, an analyst at Teikoku, commented that “many small bento vendors are barely hanging on,” with most opting to operate at a loss or raise prices despite customer resistance.

From Affordable Meals to Margin Killers: Rice Costs Spark Crisis

Once celebrated for affordability and convenience, bento meals are becoming harder to sustain. Rice—making up the bulk of ingredient costs—has more than doubled in price year-on-year as of May 2025. This steep rise is compressing margins across the board.

Bento consumption had already weakened during the pandemic as remote work reduced foot traffic and customer frequency. Now, a brutal combination of lower demand and spiraling costs is devastating a sector reliant on volume and affordability.

Data shows that in fiscal 2024, 45% of bento shops reported increased profits, but 30% suffered losses, and 22% saw profit declines. Larger chains are weathering the storm thanks to supply chain leverage, but mom-and-pop vendors lack the same financial cushion.

Raising Prices, Losing Customers: A No-Win Dilemma

Many bento sellers have had no choice but to raise prices. However, the speed and scale of price increases still lag behind input inflation. Worse, the bento market is hypersensitive to pricing—customers view it as the cheapest meal option, meaning even slight hikes can reduce demand.

This puts small businesses in a bind: raise prices and risk losing loyal customers, or absorb the costs and risk financial ruin. Iijima warns that “without greater resilience, more small bento shops will inevitably close.”

Uncertainty Over Rice and Consumer Prices

Japan’s inflation rate is expected to hover around 3% in 2025, a moderate figure by global standards but high enough to challenge a deflation-habituated economy. Industry insiders remain split on whether rice prices will normalize or remain elevated in the longer term.

While larger chains are adapting through scale, digital ordering, and diversified menus, many traditional bento shops lack both capital and innovation capability. Unless government or industry-level interventions ease the cost burden—or inflation retreats—the outlook remains bleak for this once-thriving segment of Japan’s food service economy.

Source: JPT

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Gerik

Economic

Chronic Profit Loss and Transfer Pricing: A Structural Weakness in Vietnam’s FDI Sector

According to Report No. 229/BC-BTC released by the Ministry of Finance, many foreign-invested companies in Vietnam register billions of dollars in capital but contribute minimal equity. Instead, they primarily use debt financing, which inflates financial expenses and depreciation costs, leading to years of reported losses. Experts argue this creates significant space for transfer pricing tactics, allowing firms to shift profits abroad, evade taxes, and erode state revenues.

These manipulative practices are not only a fiscal concern but also distort Vietnam’s investment climate. As capital outflows and tax avoidance persist, the credibility of Vietnam’s FDI environment and its equitable regulatory framework is increasingly at stake.

Regional and Sectoral Imbalances Continue to Undermine Investment Potential

Despite boasting over 43,000 active FDI projects as of May 2025—with over $517 billion in registered capital—the geographical distribution remains lopsided. Most projects are concentrated in industrial hubs like Ho Chi Minh City, Hanoi, and Binh Duong, while rural and mountainous regions such as the Mekong Delta and Central Highlands attract little attention.

Sectorally, the dominance of manufacturing, real estate, and electricity production continues. Manufacturing alone accounts for over $316 billion in registered capital, or 61.2% of all FDI. This concentration risks unsustainable development, overburdens urban infrastructure, and overlooks the diverse growth potential across sectors like high-tech, renewable energy, and digital services.

Weak Linkages Between FDI and Domestic Firms: Missed Opportunities in Value Creation

The report also highlights the limited integration between FDI firms and local enterprises. While a few foreign firms have helped transfer technology and build human capital, many still rely on importing raw materials and executing only low-value-added stages of production. This restricts knowledge spillovers and local value creation. Localization rates remain modest despite years of policy support for Vietnam’s supporting industries.

Such dynamics trap Vietnam in the low-value end of global supply chains and prevent the domestic private sector from upgrading capabilities. The potential for productivity gains, innovation, and export competitiveness is thus curtailed.

Structural Challenges Behind Inefficient FDI Utilization

Several systemic barriers compound the problem. These include a shortage of industrial land with adequate infrastructure, high logistics costs, uneven labor quality, and weak adaptive capacity among domestic firms. The lack of targeted investment promotion further contributes to misallocation of FDI capital, where large volumes of investment do not translate into commensurate socio-economic gains.

Toward a New FDI Strategy: From Volume to Value

Acknowledging these inefficiencies, Vietnam’s Ministry of Finance has committed to recalibrating its FDI attraction policies. Future FDI strategies will prioritize quality, efficiency, and sustainability over mere project count or capital volume. New criteria will focus on technological spillovers, domestic supply chain integration, environmental responsibility, and long-term economic contributions.

Infrastructure upgrades, labor upskilling, and institutional reforms will form the backbone of Vietnam’s “new-generation FDI” policy. Investment promotion will be more selective, targeting large corporations capable of driving innovation and management excellence into the domestic economy.

Priority sectors identified include high-tech manufacturing, renewable energy, semiconductor production, artificial intelligence, and digital finance. Instead of mass promotion, Vietnam aims for strategic alignment with global supply chain realignment, particularly in light of rising U.S.-China tensions and emerging Indo-Pacific economic dynamics.

While foreign capital continues to play a critical role in Vietnam’s development, the country now faces a turning point. The shift from quantity to quality is not only a policy imperative but also a strategic necessity in a more competitive and uncertain global landscape. To truly capitalize on FDI, Vietnam must close regulatory loopholes, boost domestic enterprise readiness, and build an ecosystem that values long-term, inclusive growth over short-term capital inflows.

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