EU Warns It Could Accelerate Retaliatory Tariffs Over US Duties

Economic

Forex

Summary:

The European Union is preparing for another round of trade talks with the US and warned that it may speed up retaliatory measures if President Donald Trump follows through on his tariff threats, the latest of which includes a 50% levy on steel and aluminum imports.

The European Commission, which handles trade matters for the EU, said Monday it “strongly” regrets the tariff hike — up from an originally planned 25% — and said the move is undermining efforts to reach a solution to the trade conflict.

The EU’s trade chief, Maros Sefcovic, will meet with US Trade Representative Jamieson Greer on Wednesday in Paris and a team from the commission is on its way to Washington to continue technical talks, Commission Spokesman Olof Gill told reporters in Brussels Monday.

“If no mutually acceptable solution is reached, both the existing and possible additional EU counter-measures will automatically take effect on July 14 or earlier if circumstances require,” Gill said. “The commission has been clear at all times about its readiness to act in defense of EU interests protecting our workers, consumers and industry.”

The EU is trying to fast-track negotiations with the US before a July 9 deadline, when Trump said he’ll hit nearly all of the bloc’s imports with a 50% tariff. He’s lashed out at the bloc for being unfair on trade, and has called on the EU to reduce its trade surplus in goods and to lower tariff and non-tariff barriers, such as its value-added tax.

Trump agreed earlier to delay the implementation of tariffs on metals as well as on cars and car parts in a bid to allow negotiations to find a broader trade agreement. The EU also agreed to withhold its own counter-measures.

The EU has approved tariffs on €21 billion ($24 billion) of US goods in response to Trump’s metals levies that can be quickly implemented. They target politically sensitive American states and include products such as soybeans from Louisiana, home to House Speaker Mike Johnson, as well as agricultural products, poultry and motorcycles.

The bloc is also preparing an additional list of tariffs on €95 billion of American products. Those measures, which are in response to Trump’s “reciprocal” levies and automotive duties would target industrial goods including Boeing Co. aircraft, US-made cars and bourbon.

“In the event that our negotiations do not lead to a balanced outcome, the EU is prepared to impose counter-measures including in response to this latest tariff increase,” Gill said.

While warning of further tariffs, the bloc said its priority is to allow space for negotiations and that reducing levies remains the long-term goal.

The commission’s negotiating strategy focuses on critical sectors — such as semiconductors and pharmaceuticals — as well as tariff and non-tariff barriers, Bloomberg reported earlier. The commission will also link its approach to addressing regulatory barriers with its plans to simplify rules.

The industries that Sefcovic will focus on either have already been hit with US tariffs, or have been earmarked for future levies. The EU has proposed deepening cooperation with the US in those sectors as part of a previous proposal shared with the US last week, Bloomberg reported.

Source: Bloomberg Europe

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Adam

Stocks

US stock futures pulled back on Monday after China added fuel to simmering trade tensions with the US, setting investors on guard as they turned the page on a bullish May.

S&P 500 futures (ES=F) dropped roughly 0.5%, while those on the Dow Jones Industrial Average (YM=F) fell 0.4%. Contracts tied to the tech-heavy Nasdaq 100 (NQ=F) retreated 0.6%.

China hit back at President Trump's claim that it has violated the Geneva tariff truce on Monday, blaming the US instead for failing to keep up its end of the deal. The mutual finger-pointing has undermined hopes for a revival of trade talks between the two top economies and stoked lingering trade uncertainty.

The escalation comes after Trump ratcheted up pressure on Friday with a threat to double US tariffs on imported steel and aluminum to 50% from 25%. While a federal court last week struck down significant portions of Trump's duties, easing market fears, a higher court temporarily reinstated the duties a day later to allow legal proceedings to continue.

The US dollar (DX-Y.NYB) fell as markets assessed trade-war risks, with rising inflation and slowing growth in particular focus. Meanwhile, gold (GC=F) futures rose amid demand for safer assets, as Ukraine's dramatic drone strikes on Russia on Sunday added geopolitical worries to trade fears.

In US stocks, the tepid start to June follows a standout May: The S&P 500 (^GSPC) rallied more than 6% in its best month since November 2023 and best May since 1990. The Nasdaq Composite (^IXIC) soared 9%, and the Dow (^DJI) notched a 4% gain. Tech stocks led the charge, as investor optimism around AI and resilient economic data fueled risk appetite.

Against this backdrop, all eyes now turn to a critical slate of economic data this week — most notably the May nonfarm payrolls report due Friday, which will offer fresh clues on how trade frictions and interest rate expectations are shaping the broader US economy. May updates on US factory activity from S&P Global and ISM are on the docket on Monday.

Earnings season is almost wrapped, with results from CrowdStrike (CRWD), Broadcom (AVGO), DocuSign (DOCU), and Lululemon (LULU) the main points of interest in a smaller week of reports.

Source: finance.yahoo

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Adam

Bond

U.S. Treasury yields moved higher as China struck back at the U.S. over alleged Geneva trade deal violations.

The 10-year Treasury yield was up more than 1 basis point to 4.436%. The 2-year yield was less than a basis point higher, trading at 3.92%. The 30-year Treasury yield was more than 3 basis points higher at 4.971%.

One basis point is equivalent to 0.01%. Yields and prices move in opposite directions.

Investors are closely watching trade relations between the U.S. and China, which have deteriorated in recent days after U.S. President Donald Trump accused China of violating a preliminary trade agreement with the U.S. on Friday.

China refuted these accusations on Monday, also accusing the U.S. of violating trade terms. The two countries had previously agreed to a 90-day pause on most tariffs, but the clash has raised concerns over the future of the deal.

On top of these concerns, Trump said, Friday, that tariffs will double on steel imports to 50%, from Wednesday.

The Trump administration is also facing a legal battle after the U.S. Court of International Trade invalidated much of the president’s tariffs on Wednesday. A day later, however, a federal appeals court granted the administration’s request to temporarily pause that ruling, effectively reinstating the duties for the time.

“It is really hard to keep up or predict what’s going to happen on trade at the moment, and that’s before we factor in the full ramifications from the court ruling last Thursday night, and then subsequent brief stay of execution for them on appeal,” Deutsche Bank analysts said in a note.

“For now it seems likely that the tariff uncertainty will linger for a long time ahead even if we’re still likely past the peak aggressiveness of US policy.”

Investors are also awaiting a number of economic reports this week, which will offer fresh insights on how tariffs are impacting the economy, such as the May nonfarm payrolls reading on Friday.

source : cnbc

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Glendon

Economic

Forex

U.S. manufacturing contracted for a third straight month in May and suppliers took longer to deliver inputs amid tariffs, potentially signaling looming shortages of some goods.

The Institute for Supply Management (ISM) said on Monday that its manufacturing PMI edged down to a six-month low of 48.5 last month from 48.7 in April. A PMI reading below 50 indicates contraction in the manufacturing sector, which accounts for 10.2% of the economy.

The PMI, however, remains above the 42.3 level that the ISM says over time indicates an expansion of the overall economy.

Economists polled by Reuters had forecast the PMI rising to 49.3. The survey suggested manufacturing, which is heavily reliant on imported raw materials, had not benefited from the de-escalation in trade tensions between President DonaldTrump'sadministration and China.

Economists say the on-gain, off-again manner in which the import duties are being implemented is making it difficult for businesses to plan ahead. Another layer of uncertainty was added by a U.S. trade court last week blocking most of Trump's tariffs from going into effect, ruling that the president overstepped his authority. But the tariffs were temporarily reinstated by a federal appeals court on Thursday.

The ISM survey's supplier deliveries index increased to 56.1 from 55.2 in April. A reading above 50 indicates slower deliveries. A lengthening in suppliers' delivery times is normally associated with a strong economy. But in this case slower supplier deliveries likely indicated bottlenecks in supply chains related to tariffs.

In April, the ISM noted delays in clearing goods through ports. Port operators have reported a decline in cargo volumes.

The ISM's imports measure dropped to 39.9 from 47.1 in April. Production at factories remained subdued, while new orders barely saw an improvement.

The ISM survey's forward-looking new orders sub-index inched up to 47.6 from 47.2 in April. Its measure of prices paid by manufacturers for inputs eased to a still-high 69.4 from 69.8 in April, reflecting strained supply chains.

Factories continued to shed jobs. The survey's measure of manufacturing employment nudged up to 46.8 from 46.5 in April. The ISM previously noted that companies were opting for layoffs rather than attrition to reduce headcount.

Source: TradingView

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Warren Takunda

Economic

At the time of writing (13:05 CEST), all major European indexes were in the red after China said the US "severely violated" the terms of their recent trade agreement. Market participants also considered the impact of US President Donald Trump's plan to double current tariffs on steel and aluminium from 25% to 50% from this Wednesday.

The EURO STOXX 50 was down 0.68%, Germany's DAX fell 0.48%, while France's CAC 40 declined 0.63%.

“Donald Trump has upset markets once again,” Russ Mould, investment director at AJ Bell, said in an email note sent to Euronews.

“Doubling import taxes on steel and aluminium, and aggravating China once again, mean we face a situation where uncertainty prevails. Trump’s continuous moving of the goal posts is frustrating for businesses, governments, consumers and investors.

“Equity markets were down across Europe and Asia, with futures prices implying a similar pattern when Wall Street opens for trading on Monday. Unsurprisingly, gold got a boost as investors returned to safe-haven assets."

US markets end May on flat note

Meanwhile, US markets ended May on a flat note, although for the month as a whole each of the main indices rose strongly following hopes of tariff reconciliations.

"Such optimism will face an immediate challenge as June begins, with comments over the weekend keeping the aggressive rhetoric in place. The latest broadsides from the White House were primarily directed at China and the EU, with both threatening a response in kind to any further tariff hikes," Richard Hunter, head of markets at Interactive Investor, said in an email note to Euronews.

However, he noted, back on the ground, there were some promising economic signs with the Federal Reserve’s preferred measure of inflation, the Personal Consumption Expenditures index coming in lower than expected and with a consumer sentiment index showing higher than had been feared.

"However, such respite could prove short-lived as the latter was largely predicated on an apparent softening of hostilities between the US and China in the latter part of the month, which has since evaporated. There will be a further signal on the state of the economy at the end of the week, with non-farm payrolls expected to show that 130,000 jobs will have been added in May compared to 177,000 the previous month and that the 4.2% unemployment rate will remain unchanged.

"In the meantime, US markets have repaired much of the damage wrought over the last few months although sentiment remains fragile. The Dow Jones and Nasdaq are down by 0.6% and 1% respectively in the year-to-date, while the 0.5% gain for the benchmark S&P500 has in part been driven by a resurgence of the mega cap technology trade," Hunter said.

Asia markets under pressure

In addition to contending with the weekend comments, Asian markets fell foul of geopolitical uncertainty following the latest Russia-Ukraine developments, with the Hang Seng under pressure based on the renewed likely tariff hikes on aluminium and steel.

"Mainland China was closed for a public holiday, which could leave some losses being stored up ahead of its reopening, likely exacerbated by a report which showed a further contraction in factory activity over the last month," Hunter added.

Source: Euronews

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Adam

Commodity

OPEC+ Holds Steady, Crude Oil Futures Break Technical Levels

Daily Light Crude Oil Futures

Crude prices surged Monday, with light crude futures rising more than 3% and breaking above key resistance levels. WTI crude jumped past the 50-day moving average at $62.40 and short-term pivot at $62.59, with bulls now targeting minor tops at $63.07 and $64.19. The key resistance remains $64.40, a level that, if cleared, opens the door for a test of the 200-day moving average at $66.62. Support sits lower between $59.74 and $59.51.

OPEC+ Output Decision Reassures Markets

OPEC+ confirmed over the weekend it will stick with its planned July production increase of 411,000 barrels per day—the third month in a row at that level. The decision came after speculation that a larger increase might be on the table. Traders had already priced in the 411,000 bpd move, helping oil avoid a bearish reaction. Analysts noted that a larger-than-expected increase could have sharply undercut prices.

Onyx Capital Group’s Harry Tchilinguirian noted that markets dodged a negative surprise, while PVM’s John Evans pointed to Kazakhstan’s open refusal to cut output as evidence of internal pressures within the group. Still, the move appears aimed at managing a delicate balance: regaining market share without triggering a supply glut.

Goldman Sachs Sees Room for More Increases

Goldman Sachs remains bullish, citing tight spot fundamentals, strong global demand signals, and seasonal summer support. The bank expects OPEC+ to approve one more 410,000 bpd increase for August. Analysts argue that current demand strength makes it unlikely the group will pause production hikes when it meets again on July 6.

U.S. Fuel Inventories Raise Supply Concerns

Low U.S. fuel inventories and the kickoff of the summer driving season are adding upside pressure to prices. ANZ analysts highlighted a sharp jump in gasoline implied demand—up nearly 1 million bpd, marking one of the largest weekly gains in three years. Traders are also keeping an eye on what’s projected to be a more active-than-usual hurricane season, which could further tighten supply.

Market Forecast: Bullish Outlook for Oil Prices

With OPEC+ sticking to a measured production path, demand showing seasonal and structural strength, and U.S. supply risks rising, the market bias remains bullish. A break above $64.40 could trigger momentum buying, targeting the 200-day moving average at $66.62. Until then, any pullbacks are likely to find support near $59.50, offering dip-buying opportunities for traders.

Source: fxempire

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Michelle

Economic

Forex

In recent economic news, the Manufacturing Purchasing Managers’ Index (PMI) has shown a positive trend in the manufacturing sector, but still missed the forecasted figures. The actual PMI figure came in at 52.0, slightly below the anticipated figure of 52.3.

The Manufacturing PMI is a critical indicator of the activity level of purchasing managers in the manufacturing sector. A reading above 50 signifies expansion in the sector, while a figure below 50 indicates contraction. This index is a crucial metric for traders and market watchers because purchasing managers typically have early access to data about their company’s performance, which can act as a leading indicator of overall economic performance.

The actual PMI reading of 52.0, although lower than the forecasted 52.3, still indicates a growth in the manufacturing sector. This figure is a significant improvement from the previous PMI figure of 50.2, showing a steady rise in the manufacturing sector’s activity. The increase from the previous number suggests that the manufacturing sector is expanding at a faster pace.

However, the fact that the actual PMI missed the forecasted figure might be seen as a negative signal for the USD. Traders often interpret a lower than expected reading as bearish for the US dollar. Despite this, the actual PMI reading still shows an expansion in the manufacturing sector, which might mitigate any potential negative impact.

The Manufacturing PMI is of high importance in the economic calendar, with a rating of three stars. Its figures are closely watched by traders and economists as it can provide early indications of the overall economic performance. Despite falling short of the forecast, the steady growth indicated by the actual PMI figure could signal a positive trend in the manufacturing sector, contributing to the broader economic recovery.