European Officials Warn Much More Work is Needed to Reach A Trade Deal

Economic

Forex

Summary:

European officials say they're optimistic a trade deal can be reached with U.S. President Donald Trump, warning of significant economic harm to both Europe and the U.S. if an agreement isn't agreed and full-scale tariffs are introduced.

"I do believe an agreement can be reached, but at the same time, I do know we have lots of work that we have to do in order to get to that point," Pascal Donohoe, president of the Eurogroup and finance minister of Ireland, told CNBC on Wednesday.

"If we use the time ahead wisely, we can at least create a framework in which we can avoid measures being taken on both sides of the Atlantic that could harm ourselves, harm Europe and harm America," he said on the sidelines of the International Monetary Fund and World Bank spring meetings in Washington.

The European Union and U.S. are engaged in tense negotiations to reach a trade deal so that U.S. tariffs on EU goods announced by Trump, and EU countermeasures, can be avoided.

Trump initially imposed a 20% "reciprocal" tariff on all goods coming from the EU but paused the measures for 90 days for negotiations, lowering the duty to 10% until that time. A 25% tariff on foreign cars and steel and aluminum imports remains in place.

The EU paused its retaliatory duty targeting 21 billion euros ($24.1 billion) worth of U.S. goods "to allow time and space for EU-U.S. negotiations," the European Commission said.

Talks have not yet yielded any tangible compromises or results, European officials say, and the backdrop to discussions likely soured further on Wednesday after the EU fined U.S. tech behemoths Apple and Meta hundreds of millions of euros each for breaching the bloc's digital competition laws.

The EU insists that its trade in goods and services with the U.S. is reasonably balanced. Data from the European Commission, the executive arm of the EU, said the bloc had a trade surplus of 155.8 billion euros ($176.7 billion) with the U.S. for goods in 2023, but ran a 104 billion euro deficit on services. Overall, EU-U.S. trade in goods and services in 2023 was worth 1.6 trillion euros, according to the EU.

Machinery and vehicles make up the largest chunk of EU exports to the U.S. by product group, followed by chemicals, other manufactured goods and medicinal and pharmaceutical products.

Spain's Finance Minister Carlos Cuerpo told CNBC that any failure to reach a deal would be harmful for both Europe and the U.S., with more than 4 billion euros' ($5.1 billion) worth of trade in goods and services a day at stake.

"We need to engage in an open and frank conversation amongst the two sides of the Atlantic, because there's a lot to lose if we do not get into a fair and balanced agreement," Cuerpo told CNBC's Carolin Roth in Washington.

"There is this specific figure, of 4.5 billion euros on a daily basis across the Atlantic in terms of trade in goods and services — that's a treasure that we need to protect," he noted.

"It is [important] how we face these negotiations from the EU side, with an extended hand, to reach an agreement. But it has to be a fair agreement. Let's not forget that under the current situation, most of the tariffs that were imposed by the U.S. administration are already in place and affecting our companies."

Eelco Heinen, finance minister of the Netherlands, slammed tariffs as a taxation on goods that is "so bad for consumers" and would cause businesses to pause investment.

Major headwinds

On Tuesday, the IMF had warned that trade tariffs announced by President Donald Trump pose major headwinds for the U.S. and global economy in 2025.

In its April 2025 World Economic Outlook., the IMF forecast a U.S. growth outlook of 1.8% in 2025, down 0.9 percentage points from its January forecast. The fund also cut its global growth forecast to 2.8% this year, down 0.5 percentage points from its previous estimate.

The fund predicted a slight decline in the euro zone, forecasting that euro area GDP will hit 0.8% in 2025, before picking up modestly to 1.2% in 2026.

It singled out Spain as a bright spot in the region, stating its growth momentum "contrasts with the sluggish dynamics elsewhere," with the Mediterranean nation expected to expand its economy by 2.5% this year following an upward revision of 0.2 percentage points from the forecast made in January.

"This reflects a large carryover from better-than-expected outturns in 2024 and reconstruction activity following floods," the IMF said.

These were the fund's "reference forecasts" for global economic growth and inflation, which is based on data available as of April 4 — including the U.S.' "reciprocal" tariffs but excluding subsequent developments like the 90-day pause on higher rates.

Source: CNBC

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Adam

Political

Economic

Short-term impact of U.S. tariff policy on global economic performance

According to the IMF’s latest World Economic Outlook, the sharp increase in U.S. import tariffs under President Donald Trump is fueling an environment of heightened uncertainty, which is reverberating across global markets. The U.S. economy, projected to grow by 2.8% in 2024, is now expected to slow to just 1.8% in 2025. This sharp downward revision follows the announcement of tariff hikes that pushed average U.S. import duties to their highest level in a century.

The relationship between rising tariffs and lower economic growth appears to be causal. Higher import costs are eroding business competitiveness and raising domestic prices, which in turn suppresses consumer demand — a trend the IMF observed even before the latest tariffs were formally announced.

How U.S. trade policies are affecting other global economies

Major economic regions — including North America, Asia, and Europe — are increasingly vulnerable to economic shocks stemming from the U.S.'s unpredictable and unilateral trade measures. Retaliatory tariffs imposed by trading partners are further escalating tensions and triggering disruptions across global supply chains.

The IMF stresses that no region stands to gain from sustained protectionist policies. Both short-term and long-term consequences are projected to be negative. The parallel trends of rising tariffs and falling growth worldwide reflect a strong correlation, though in many cases, policy uncertainty itself is also an independent variable dragging down economic momentum.

Macroeconomic risk from political interference in monetary policy

In addition to trade measures, political pressure on the Federal Reserve is adding to the volatility. President Trump recently criticized Fed Chairman Jerome Powell and pushed for rate cuts, despite inflation being projected to rise. The IMF has now revised its inflation forecast for the U.S. to 3% in 2025, up from the previous 2%.

Cutting interest rates under rising inflation and higher tariffs could provide a short-term boost in demand but may also deepen inflationary pressures. The link between policy instability and inflation expectations shows a strong correlation, as both investment and consumption behaviors are shaped by shifting expectations.

Strategic outlook: Restoring trade clarity through multilateral cooperation

The IMF underscores that the path to recovery lies in de-escalating trade tensions and forging clear, stable trade agreements. Rebuilding trust in the global trading system is crucial to sustaining economic growth, especially as economies remain fragile in the post-shock recovery phase.

In a press briefing, IMF Chief Economist Pierre-Olivier Gourinchas emphasized that the world may be entering a "new era," where long-standing global economic frameworks are being redefined. But to avoid a prolonged cycle of protectionism, major economies must implement consistent and cooperative trade policies.

As the global economy struggles to regain stability, the U.S.'s aggressive trade measures and pressure on central bank independence are undermining macroeconomic confidence. The ripple effects of rising tariffs extend beyond immediate trade impacts, weakening the very foundations of global growth. The IMF’s warning is clear: without swift policy adjustments, the current direction could backfire on the U.S. economy and jeopardize fragile global recovery efforts.

Source: Reuters

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Michelle

Economic

Forex

The dollar took a breather on Thursday, following a sharp bounce after U.S. PresidentDonald Trumpbacked away from threats to fire Federal Reserve Chair Jerome Powell and his administration opened the door to a softer stance on China tariffs.

After dipping below 140 yen on Tuesday, the dollar has rebounded off major chart support and was last at 142.75 yenon Thursday.

It caught an extra boost when Treasury Secretary Scott Bessent said the U.S. did not have a specific currency target in mind, ahead of talks with his Japanese counterpart. Bessent has also said the current de-facto embargo on U.S.-China trade was unsustainable, while cautioning that the U.S. would not move first in lowering its levies of more than 100% on Chinese goods.

The dollar has recovered from a 3-1/2 year low of $1.1572 per euro, but encountered a little selling in the Asia morning to steady around $1.1338.

It is clear, by now, that no other currency is as sensitive to trade headlines as the dollar, said ING currency strategist Francesco Pesole in a note to clients.

"We still think the balance of risks remains skewed to the downside for USD in the near term, but we don't expect a repetition of the one-way traffic in dollar selling we have witnessed of late," he said.

"That said, EUR/USD remains almost entirely a function of USD moves. And another leg higher above $1.15 remains possible should fears about the Fed's independence take centre stage again."

The Australian and New Zealand dollars were similarly off recent peaks - although not all that much.

The Aussie, after briefly breaching $0.64 this week, was at $0.6355 and Commonwealth Bank strategist Joe Capurso said it could test resistance around its 50-day moving average at $0.6286 as worries about global growth persist.

The New Zealand dollarheld on at $0.5951.

Sterlingand the Swiss franceach steadied after a sharp retreat, leaving sterling at $1.3263 and the Swissy at 0.8290 per dollar.

China's yuanwas a touch weaker at 7.2980 per dollar.

In crypto markets, bitcoin has followed U.S. stocks and run higher even against a rebounding dollar. It hovered at $92,732 in Asia. Trump's meme coin surged overnight after the online promotion of a gala dinner with the president for the top 220 buyers of the $TRUMP coin.

Source: Reuters

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Glendon

Commodity

Economic

China–U.S. Trade War

Gold prices rose sharply in Asian trade on Thursday, rebounding from recent losses as doubts over a deescalation in the U.S.-China trade war persisted, while a new Russia-Ukraine clash also buoyed haven demand.

Gold had fallen from record highs this week after U.S. President Donald Trump raised the prospect of eventually reducing steep trade duties on China. But a lack of clarity on Trump’s comments, coupled with less optimistic statements from other officials, made gold’s fall short-lived.

Traders remained cautious towards the dollar and Treasuries, keeping gold and the Japanese yen as the main sources of safe haven.

Spot gold rose 1.3% to $3,331.34 an ounce, while gold futures expiring in June rose 1.4% to $3,341.25/oz by 01:37 ET (05:37 GMT).

JP Morgan forecast that spot prices could rise as high as $4,000/oz by next year.

Gold remains near record high amid steady haven demand

Spot prices remained in sight of a $3,500/oz record high hit earlier this week, as traders still remained largely biased towards bullion as a haven.

This trend was furthered by a sharp drop in the dollar in recent weeks, amid heightened uncertainty over the U.S. economy and a bitter trade war between Washington and Beijing.

Trump said this week that he could eventually lower his steep, 145% tariffs on China. But he said that such a move would be contingent on China coming to the negotiating table- a scenario Beijing has shown little interest in carrying out.

China retaliated with 125% tariffs against the U.S., and has shown few signs of backing down.

Comments from other members of the Trump administration also undermined optimism over a U.S.-China deescalation. Treasury Scott Bessent warned that trade talks with China could be a slog, and that the U.S. would likely need to first cut tariffs before engaging with Beijing.

Traders remained on edge over the potential impact of Trump’s tariffs, even as a report suggested he could offer some exemptions to automakers. But the dollar and Treasuries took little support from this.

Other precious metals were mixed on Thursday, but were sitting on some gains against a softer dollar in recent weeks. Platinum futures rose 0.1% to $979.75/oz, while silver futures fell 0.4% to $33.390/oz.

Among industrial metals, benchmark copper futures on the London Metal Exchange fell 0.1% to $9,371.35 a ton, while U.S. copper futures steadied at $4.8348 a pound.

Russia-Ukraine ceasefire talks waver, Moscow attacks Kyiv

Safe haven demand was also furthered by signs of increased friction in U.S.-brokered ceasefire discussions over Russia and Ukraine, especially as Moscow launched a deadly drone and missile attack on Kyiv on Wednesday.

This came as Trump lashed out against Ukrainian President Volodymyr Zelenskiy over his objection to Russia’s 2014 occupation of Crimea.

Trump’s Vice President JD Vance warned that the U.S. could exit ceasefire discussions, while several top-level U.S. officials dropped out of ceasefire talks in London this week.

Source: Investing

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FastBull Featured

Daily News

[Quick Facts]

1. Trump considers partial tariff exemptions for automakers

2. Beige Book: “Tariffs” were mentioned 107 times! The economic outlook has deteriorated significantly in many regions

3. Knot: A neutral policy stance is appropriate as shocks continue to unfold

4. March U.S. new home sales surge, surpassing forecasts, led by gains in the South

5. U.S. tariff revenue surges over 60% in April, reaching at least US$15 billion

[News Details]

Trump considers partial tariff exemptions for automakers

According to the Financial Times, President Trump is contemplating exemptions from certain stringent tariffs for automotive manufacturers, representing a concession following recent lobbying efforts by industry executives amidst the ongoing trade war. However, the 25% tariff on all imported finished vehicles will remain in effect. Another 25% tariff on automotive components will also be retained, with an effective date of May 3. Despite the prior exclusion of automotive products from "reciprocal" tariffs with major trading partners, U.S. automakers are currently seeking further exemptions.

These concessions signify an initial victory for the automotive sector and another retreat by Trump from his most aggressive tariff positions. Sources indicate that current negotiations primarily focus on streamlining the taxation process, such as relaxing the rules of origin requirements for automotive components. This policy adjustment reflects the Trump administration's pragmatic response to specific industry pressures while upholding the core tenets of its "America First" trade policy.

Beige Book: “Tariffs” were mentioned 107 times! The economic outlook has deteriorated significantly in many regions

In the Federal Reserve's Beige Book released on Wednesday, the term "tariffs" was cited 107 times, more than double the frequency in the previous report. "Uncertainty," in various forms, appeared 89 times. Economic activity showed minimal change since the last report, yet uncertainty surrounding international trade policies was a recurring theme across reports. Only five regions reported modest economic expansion, three indicated stable activity, and the remaining four noted a slight contraction.

Overall, both leisure and business travel have declined, with a decrease in international tourism in certain regions. Housing sales have increased, and many regions continue to experience low inventory levels. Net loan demand has remained flat or slightly increased, while non-financial services demand has decreased in some regions. Transportation activity has seen a modest uptick. Manufacturing performance is mixed, with two-thirds of the regions reporting little to no change or a decline in manufacturing activity. The energy sector has experienced a slight expansion. Agricultural conditions are relatively stable across multiple regions. The outlook has significantly deteriorated in several regions, driven by increased economic uncertainty, particularly concerning tariffs.

Prices have risen across all regions, with most indicating that businesses anticipate accelerated input cost growth due to tariffs. Many businesses have received notifications from suppliers regarding cost increases. Businesses report they have added tariff surcharges or shortened pricing terms due to trade policy uncertainty. Most businesses expect to pass additional costs to customers. Profit margins are reportedly being squeezed due to rising costs.

Knot: A neutral policy stance is appropriate as shocks continue to unfold

During his Wednesday speech, ECB Governing Council member Knot stated that a rate cut to stimulate the economy is unwarranted, given the uncertain medium-term effects of recent economic shocks. While the pace of disinflation may exceed prior forecasts, he noted that the implications of trade friction and increased European defense and infrastructure spending remain "far from clear." He stated, "This suggests that, overall, a policy rate that is neither accommodative nor restrictive remains viable. In any case, we will maintain a medium-term focus and strive to formulate a policy that sustainably keeps inflation near the 2% target level, with confidence not only at the baseline but also across a range of scenarios."

March U.S. new home sales surge, surpassing forecasts, led by gains in the South

U.S. new home sales experienced a significant increase last month, driven by a slight decrease in mortgage rates and ongoing sales incentives designed to stimulate the spring selling season. Data released Wednesday revealed that new single-family home sales rose by 7.4% to a seasonally adjusted annual rate of 724,000 units in March, primarily fueled by a surge in sales within the South. This performance exceeded the expectations of all economists surveyed. Sales in the South reached their highest pace in nearly four years, building on the modest growth observed in February following adverse weather conditions earlier in the year. Sales also increased in the Midwest, while the West and Northeast regions saw declines.

U.S. tariff revenue surges over 60% in April, reaching at least US$15 billion

According to data released Wednesday by the U.S. Department of the Treasury, U.S. tariff revenue surged over 60% in April, reaching at least US$15 billion, as President Trump's tariff measures took effect. This would establish a new monthly record in dollar terms, based on the aggregated data. The latest figures primarily reflect the tariffs paid by major importers and brokerage firms in April for imported goods that arrived at U.S. ports in March. Approximately two-thirds of importers pay tariffs monthly on the 15th business day of the following month. Treasury data indicates that tariff and other excise tax revenues on specific goods will total at least US$15.4 billion in April.

During his Wednesday speech, European Central Bank Governing Council member Villeroy stated that the impact of U.S. President Trump's tariff actions on Eurozone prices remains uncertain, potentially exerting downward pressure overall.

He further indicated that there are currently no inflationary risks in Europe, and in terms of bringing inflation back to the 2% target, "mission accomplished" is nearly the case, as he mentioned in his speech at the Atlantic Council on Wednesday. "The significant slowdown in wage growth is another piece of evidence," he added.

[Today's Focus]

UTC+8 20:30 U.S. March Durable Goods Orders MoM

UTC+8 21:00 ECB Chief Economist Lane Speaks

UTC+8 22:00 U.S. March Existing Home Sales

UTC+8 23:35 ECB Governing Council Member Rehn Speaks

UTC+8 05:00 Minneapolis Fed President Kashkari Speaks

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Grace Montgomery

Economic

Service prices among businesses in Japan stayed elevated last month, indicating sustained inflationary pressures before the impact from US tariffs kicks in, as the Bank of Japan prepares to set policy next week.

The cost of services among companies climbed 3.1% in March, remaining above 3% for a sixth month, the longest such streak since 1991 if the effects of sales tax hikes are excluded, according to a BOJ report Thursday. The result came in slightly stronger than economists’ estimate of 3%.

For January, the data were revised higher to 3.3%, to reflect the biggest jump in more than 33 years, excluding sales tax hike impacts.

Services related to machinery repair, hotels and transportation were among the biggest contributors to the overall gain as businesses continue to pass on rising labor and energy costs to customers, with overseas tourists helping boost demand for accommodations.

The data underscore the steady inflationary pressure in Japan — at least ahead of the impact from US tariff measures, in a result that by itself would back the case for the BOJ to raise interest rates once economic uncertainty clears. Governor Kazuo Ueda and his fellow board members are widely expected to keep borrowing costs at 0.5% at the conclusion of a policy gathering on May 1.

The tariffs have altered perceptions about the outlook for BOJ policy, with economists projecting a slower pace of hikes leading to a terminal policy rate for this cycle of 1%, down from 1.25% in a survey last month.

Source: Bloomberg Europe

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Michelle Reid

Political

Key points:

● Order seeks to make accrediting organizations more accountable.

● Schools' access to student financial aid could be affected.

● Directive requires universities to disclose source, purpose of foreign gifts.

In his latest step pressuring U.S. universities,President Donald Trumpon Wednesday signed an order intended to toughen standards for college accreditation, a requirement for accessing billions of dollars in federal student financial aid.

The order was one of seven education-related actions taken by the president during an event in the Oval Office. They covered a range of topics including fostering artificial intelligence competency in schools and improving job training for skilled trades.

The administration already has frozen hundreds of millions of dollars in federal funding for numerous universities, pressing the institutions to make policy changes and citing what it says is a failure to fight antisemitism on campus. Harvard University is suing the administration over a funding freeze.

While the federal government does not directly accredit U.S. universities, it has a role in overseeing the mostly private organizations that do so. Accreditation is required for colleges to access federal student loans and grants.

Trump has often complained that accreditors approve institutions that fail to provide quality education, a sentiment echoed in the executive order.

The order directed Education Secretary Linda McMahon to make the accrediting organizations more accountable for schools' "poor performance" and civil rights violations through restrictions on or termination of their accrediting rights, a White House fact sheet said.

Trump ordered McMahon and Attorney General Pam Bondi to investigate and take action against unlawful discrimination by U.S. colleges and graduate schools including law and medical schools.

Another order on Wednesday directed the administration to enforce existing laws requiring universities to disclose when they receive large foreign gifts, amid worries by Trump of foreign influence at universities.

It directed McMahon to take steps to require universities to disclose specific details about foreign funding, including "the true source and purpose of the funds," a White House fact sheet said.

Yet another order sets up an initiative on historically Black colleges and universities aimed at promoting excellence and innovation at the schools.

Under the initiative, an annual White House summit on HBCUs will be staged to "foster collaboration and address key priorities for HBCU success," a White House fact sheet said.

Trump said another order targeted diversity, equity and inclusion policies that impacted how students are disciplined. It said school discipline "should be based on student behavior, rather than racial statistics."