German Auto Exports to U.S. Take €500 Million Hit in April Amid Trump Tariffs

Economic

Summary:

Germany’s automotive sector suffered an estimated €500 million in additional costs in April 2025 due to import tariffs imposed by U.S. President Donald Trump, according to industry group VDA....

Tariff Impact Intensifies Pressure on German Auto Industry

The German Association of the Automotive Industry (VDA) has confirmed that carmakers faced an estimated half a billion euros in tariff-related expenses last April, highlighting the mounting toll of renewed trade tensions between Berlin and Washington. Hildegard Müller, the head of VDA, shared the estimate in an interview with Funke media group, attributing the spike in costs to U.S. import duties on vehicles manufactured in Germany.

This financial burden underscores the vulnerability of Germany’s export-dependent car industry to unilateral trade measures. The United States remains one of the largest non-European markets for German auto exports, particularly for premium brands such as BMW, Mercedes-Benz, and Volkswagen’s Audi. Tariffs not only raise the direct cost of exports but also erode the competitive price advantage German vehicles typically enjoy abroad.

Trade Disruption Linked to Policy Shift in Washington

The resurgence of trade protectionism under President Trump has reintroduced volatility into the global automotive supply chain. While exact tariff rates were not disclosed in the statement, previous measures under Trump’s administration in his first term involved duties as high as 25% on imported autos and parts. The renewed application of such tariffs appears to be part of a broader effort to revive domestic U.S. manufacturing and reduce the country’s trade deficit — a strategy that has re-escalated trade friction with long-standing allies like Germany.

For the German auto sector, these policy shifts present not only a pricing challenge but also a logistical one. Some manufacturers may begin to accelerate investment in North American production capacity to offset tariffs — a move that would involve significant long-term capital outlay.

Strategic Risks and Supply Chain Realignments

The tariff-related cost spike could also influence corporate strategy among major German automakers. Firms that export directly from Germany may face growing pressure to localize production or diversify export markets. However, such shifts come with trade-offs in cost, quality control, and brand perception.

Beyond individual companies, the broader German economy is also exposed. The auto sector is a pillar of Germany’s industrial base, accounting for a substantial share of GDP, employment, and export revenue. Continued trade friction with the U.S. could therefore carry macroeconomic consequences, especially if compounded by other challenges such as weak domestic demand in China or rising input costs from the energy transition.

The €500 million in estimated tariff-related costs borne by German car manufacturers in April illustrates the direct consequences of renewed U.S. trade barriers. While the figure is significant in financial terms, its strategic implications may be even greater. As Germany’s auto sector grapples with a complex external environment — spanning geopolitics, electrification, and supply chain reconfiguration — policymakers and executives alike will need to reassess how best to safeguard competitiveness in an era of escalating economic nationalism.

Source: Yahoo Finance

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Daniel Carter

Political

Middle East Situation

Israel began attacking Iran last Friday, saying it aimed to prevent its longtime enemy from developing nuclear weapons. Iran retaliated with missile and drone strikes on Israel. It says its nuclear programme is peaceful.

Israeli air attacks have killed 639 people in Iran, the Human Rights Activists News Agency said. Those killed include the military's top echelon and nuclear scientists. Israel has said at least two dozen Israeli civilians have died in Iranian missile attacks. Reuters could not independently verify the death toll from either side.

Israel has targeted nuclear sites, missile capabilities, while also hitting civilian areas, as it tries to shatter the government of Supreme Leader Ayatollah Ali Khamenei, according to Western and regional officials.

"Are we targeting the downfall of the regime? That may be a result, but it's up to the Iranian people to rise for their freedom," Israeli Prime Minister Benjamin Netanyahu said on Thursday.

Iran has said it is targeting military and defence-related sites in Israel, although it has also hit a hospital and other civilian sites.

Israel accused Iran on Thursday of deliberately targeting civilians through the use of cluster munitions, which disperse small bombs over a wide area. Iran's mission to the United Nations did not immediately respond to a request for comment.

Iran's emergency services said on Friday that five hospitals had been damaged in Israeli strikes.

With neither country backing down, the foreign ministers of Britain, France and Germany along with the European Union foreign policy chief were due to meet Iran's Foreign Minister Abbas Araqchi in Geneva to try to de-escalate the conflict on Friday.

"Now is the time to put a stop to the grave scenes in the Middle East and prevent a regional escalation that would benefit no one," said British Foreign Minister David Lammy.

U.S. Secretary of State Marco Rubio also met Lammy on Thursday and held separate calls with his counterparts from Australia, France and Italy.

The U.S. State Department said Rubio and the foreign ministers agreed that "Iran can never develop or acquire a nuclear weapon."

Lammy said the same on X while adding that a "window now exists within the next two weeks to achieve a diplomatic solution."

However, Araqchi told Iranian state television on Friday that Tehran would not agree to talks while Israeli strikes continued.

Russian President Vladimir Putin and Chinese President Xi Jinping both condemned Israel and agreed that de-escalation is needed, the Kremlin said on Thursday.

The role of the United States remained uncertain. President Donald Trump's special envoy to the region, Steve Witkoff, has spoken with Araqchi several times since last week, sources say.

The White House said Trump will take part in a national security meeting on Friday morning. The president has alternated between threatening Tehran and urging it to resume nuclear talks that were suspended over the conflict.

MISSILE STRIKES

At dawn on Friday, the Israeli military issued a fresh warning of an incoming barrage of missiles from Iran. At least one made a direct impact in Beersheba, Israel's largest southern city, which has been targeted in recent days.

The missile struck near residential apartments, office buildings, and industrial facilities, leaving a large crater and ripping off the facade of at least one apartment complex while damaging several others.

"We have a direct strike next to one of the buildings. The damage here is quite (extensive)," paramedic Shafir Botner said.

Israeli public broadcaster Kan aired footage showing cars engulfed in flames, thick plumes of smoke and shattered windows at apartment buildings.

At least six people sustained light injuries in the blast, according to Botner, who said that first responders were still searching apartments for casualties.

On Thursday, Iran hit a major hospital in Beersheba, Israel's largest city in the south. Iran said it was targeting Israeli military headquarters near the hospital but Israel has denied there were any such facilities in the area.

Israel's military also said it had carried out several overnight strikes in the heart of the Iranian capital. The targets included missile production sites and a facility for nuclear weapons research and development, it said.

Foreign Minister Israel Katz warned of action against Iranian ally Hezbollah on Friday, a day after the Lebanese militant group suggested it would come to Iran's aid.

Trump has mused about striking Iran, possibly with a "bunker buster" bomb that could destroy nuclear sites built deep underground. The White House said Trump would decide in the next two weeks whether to get involved in the war.

That may not be a firm deadline. Trump has commonly used "two weeks" as a time frame for making decisions and allowed other economic and diplomatic deadlines to slide.

With the Islamic Republic facing one of its greatest external threats since the 1979 revolution, any direct challenge to its 46-year-long rule would likely require some form of popular uprising.

But activists involved in previous bouts of protest say they are unwilling to unleash mass unrest, even against a system they hate, with their nation under attack.

"How are people supposed to pour into the streets? In such horrifying circumstances, people are solely focused on saving themselves, their families, their compatriots, and even their pets," said Atena Daemi, a prominent activist who spent six years in prison before leaving Iran.

Source: Reuters

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Gerik

Economic

Stocks

Sluggish First Half Amid Global Uncertainty

India’s once-booming IPO market is facing a period of subdued activity. As of mid-June 2025, only 99 companies have gone public, a notable decline from 147 listings during the same period in 2024, according to FactSet. The pullback is largely attributed to global economic volatility, a weakened rupee, and geopolitical tensions including multiple war fronts and the disruptive trade policies of major economies. These factors have dampened risk appetite and forced several high-profile companies — including Avanse Financial Services, Anthem Biosciences, and LG Electronics India — to pause or delay their listing plans despite regulatory approval.

One visible example of the market’s caution was the underwhelming debut of Ather Energy in May. Although the electric vehicle maker listed with a modest premium, its shares have since declined over 3%, indicating tepid post-listing investor confidence. This performance, alongside a 220% year-on-year drop in foreign portfolio investments during the first five months of 2025, points to deeper structural unease among both domestic and international stakeholders.

Consumer Demand Softens, Slowing Corporate Growth

Beyond external shocks, the softening in consumer demand is exerting downward pressure on revenue growth for many private equity-backed consumer brands. Rishika Chandan of Venturi Partners observed that revenue expansion for leading consumer companies, which historically ranged from 35% to 40% annually, has halved to just 15%–20% in FY2025. This slower growth weakens the investment case for immediate IPOs, prompting many firms to delay listings until consumer sentiment and seasonal spending — particularly during festive periods — show a meaningful rebound.

Chandan also noted that companies are strategically timing their IPOs to align with improved future financials, in order to secure better valuations and forward-looking multiples. This suggests that, rather than a collapse, the current lull may be a tactical recalibration.

Signs of Recovery: Share Sales Surge in May

Despite early-year headwinds, signs of a recovery are emerging. In May alone, Indian capital markets saw $6.4 billion raised through share sales — the highest monthly total since December 2024 — with $5.5 billion of that from block trades. The upward momentum has continued into June, with $1.2 billion raised in the first week alone. These figures reflect a resumption of market confidence and readiness among institutional investors to engage with equity issuances again.

Dhruba Jyoti Sengupta, CEO of Wrise Wealth Management Middle East, remains confident that India is only temporarily pausing before a new surge in listings. With more than 130 companies SEBI-approved and a $12 billion IPO pipeline, he expects landmark offerings from Reliance Jio (valued at ₹400 billion), Tata Capital ($2 billion), and LG Electronics India to catalyze the next phase of IPO activity.

Strategic and Startup Listings Poised to Lead Rebound

The anticipated listing of Reliance Jio could be a defining moment, not only due to its size but also because it represents the ambition to monetize a comprehensive digital ecosystem. Tata Capital’s move to the public market marks a notable shift for conservative Indian conglomerates, signaling a redefinition of capital markets as strategic vehicles for brand development and long-term scaling.

Among startups, Lenskart’s expected $1 billion listing will serve as a bellwether for investor appetite in tech-enabled consumer platforms. With backing from Softbank, KKR, and Temasek, and a solid growth record, Lenskart’s IPO is expected to help recalibrate valuation benchmarks in pre-IPO fundraising rounds. Other notable names in the pipeline include Urban Company and Bluestone, both of which are expanding aggressively and targeting unicorn status ahead of their public offerings.

Valuation Correction Brings Realism to Pricing

While enthusiasm is building, analysts warn that a more sober approach to IPO pricing is needed. Peeyush Mittal of Matthews Asia believes that future IPOs may be priced at a 25%–30% discount to industry leaders, contrasting with last year’s trend of aggressive pricing. Companies like Swiggy and Ola Electric, both of which are trading below their listing prices, exemplify the market’s response to overvaluation. This normalization may ultimately serve the broader market well by encouraging more disciplined and investor-aligned pricing strategies.

India’s IPO market in 2025 is transitioning from exuberant highs to a more disciplined phase marked by cautious optimism. While macroeconomic conditions and shifting consumer behavior have stalled some momentum, the depth of the pipeline, improved capital inflows, and promising listings in the second half of the year suggest that the slowdown is not structural, but cyclical. As investor expectations evolve and companies adjust their strategies, India’s capital markets appear poised for a resurgence defined not by hype, but by sustainable growth and strategic value creation.

Source: CNBC

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Gerik

Economic

Stability Returns After May Easing

The People’s Bank of China (PBOC) has maintained its 1-year loan prime rate (LPR) at 3.0% and the 5-year LPR at 3.5%, in line with expectations from financial analysts surveyed by Reuters. This decision follows a modest 10-basis-point rate cut in May — the first since October — aimed at shielding the Chinese economy from trade-related disruptions and domestic demand weakness. The pause suggests that authorities are assessing the impact of recent interventions while balancing growth support with financial stability.

The one-year LPR primarily influences corporate borrowing and consumer credit, while the five-year rate is closely tied to mortgage pricing. Both are calculated from submissions by commercial banks under PBOC supervision and reflect market-based adjustments in lending practices.

Trade Deal Eases Short-Term Growth Concerns

The rate hold is occurring within an improved external environment. Earlier this month, U.S. and Chinese negotiators reaffirmed a Geneva agreement allowing the resumption of rare earth and tech trade flows while pausing the implementation of punitive tariffs. This development reduced pressure on China's currency markets and improved market sentiment around future growth prospects.

The Chinese offshore yuan, which had weakened to 7.4287 against the U.S. dollar in April following a severe 145% U.S. tariff announcement by President Trump, has since rebounded by over 2%, trading at 7.1805. This currency recovery, combined with reduced external friction, grants Chinese policymakers more flexibility to fine-tune monetary policy without facing intense devaluation risks.

Monetary Policy to Play a Measured Role

Recent commentary from institutions like Nomura and Barclays suggests that China is likely to take a more cautious approach to additional monetary stimulus in the near term. Nomura revised its forecast for a Q4 rate cut to just 10 basis points, down from 15, and reaffirmed a 50-basis-point reduction in the reserve requirement ratio. The recalibration reflects growing optimism about short-term resilience due to the trade détente, yet acknowledges that lingering challenges might resurface in the second half of the year as the effects of preemptive business activity wear off.

Bruce Pang of CUHK Business School observed that PBOC’s current satisfaction with its policy mix reflects a broader shift in strategy. Instead of relying heavily on aggressive rate cuts, Chinese officials now prefer to position monetary policy as a supportive — rather than leading — instrument. This approach aligns with statements from senior financial regulators emphasizing stability, targeted support, and broader economic restructuring.

Currency Strategy and Digital Ambitions

As part of its evolving financial strategy, China continues to strengthen its capabilities in foreign exchange management. Zhu Hexin, head of the State Administration of Foreign Exchange, affirmed China’s growing ability to manage currency volatility, suggesting increased institutional confidence in navigating capital flows. Meanwhile, PBOC Governor Pan Gongsheng reiterated Beijing’s commitment to expanding the international use of the digital yuan, framing it as a tool to diversify the global currency architecture.

These long-term ambitions point to a deeper transformation of China’s financial architecture, one that moves gradually away from reliance on conventional rate tools and toward structural innovations in digital finance and multilateral monetary arrangements.

By holding its lending rates steady in June, China signals a cautious but optimistic outlook amid stabilizing external conditions and easing trade tensions. While broader policy stimulus remains on standby, the combination of a recovering yuan, resilient domestic conditions, and a commitment to monetary discipline suggests that China is navigating a transitional phase — one where financial innovation and selective intervention define the new growth model. The PBOC’s stance reflects both confidence in near-term momentum and preparedness for strategic flexibility should headwinds return later in the year.

Source: CNBC

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Gerik

Economic

Forex

Shifting From Aspiration to Implementation

Africa’s decades-long vision of settling trade in local currencies is evolving into operational reality. As of 2025, the Pan-African Payments and Settlement System (PAPSS) has expanded to 15 countries and over 150 banks, aiming to reduce reliance on costly dollar transactions. The goal is not to challenge the dollar’s dominance per se, but to address structural inefficiencies in Africa’s intra-regional trade, where settlements in third-party global currencies remain prohibitively expensive.

According to PAPSS estimates, cross-border transactions that currently cost between 10% to 30% of deal value due to correspondent banking intermediaries could see costs fall to around 1% with local settlement. For a $200 million transaction, this represents a potential saving of tens of millions of dollars. The broader implication is a projected $5 billion in hard currency savings annually, primarily through the use of African currencies such as the naira, cedi, or rand.

Domestic Cost Considerations Over Ideological Alignment

While the global debate over "de-dollarisation" intensifies, African stakeholders like PAPSS CEO Mike Ogbalu emphasize that their motivation is cost efficiency, not ideological divergence from the U.S.-led financial system. However, the operational logic overlaps with efforts by countries like China and Russia that seek alternative trade systems due to geopolitical constraints. Although the cause of Africa’s payment reform is primarily economic, its alignment with these larger shifts may influence how its actions are perceived on the global stage.

Africa’s dependence on external correspondent banks has long constrained trade integration. With 84% of the continent’s trade occurring with non-African partners, intra-regional flows remain thin. This imbalance reflects both logistical and financial barriers. According to the United Nations, Africa’s trade costs are 50% above the global average— a statistic that encapsulates both physical infrastructure challenges and outdated financial settlement systems.

Support from Multilateral Lenders and Regional Leadership

The International Finance Corporation, a private sector arm of the World Bank, has already begun offering loans in local currencies to mitigate exchange rate risks for African businesses. This strategic move complements PAPSS by easing the financial burden of dollar-denominated liabilities, which often constrain small and medium-sized enterprises not earning in hard currency.

Meanwhile, South Africa, leveraging its presidency of the G20, is actively pushing for regional payment systems to be prioritized on the global policy agenda. At recent G20 finance minister meetings, South African central bank governor Lesetja Kganyago highlighted the unusually high cost of cross-border transactions in Africa and urged meaningful steps to facilitate local currency trade settlements.

Trump's Rhetoric and the Risk of Global Fallout

Despite Africa’s practical and internally driven motives, its efforts have not escaped the scrutiny of U.S. President Donald Trump, who has adopted an aggressive stance against global shifts away from the dollar. Following BRICS’ discussion of a potential shared currency and reduced reliance on the U.S. dollar, Trump issued threats of 100% tariffs, warning that any nation moving in that direction could face economic penalties.

Such statements underscore the risk that Africa’s payment reforms—though not inherently political—could be interpreted as part of a broader anti-dollar movement. Syracuse University’s Daniel McDowell argues that the geopolitical context may entangle Africa’s domestic reforms with the more assertive financial realignment efforts led by China and Russia.

Africa’s pursuit of local currency payment systems reflects a growing commitment to practical economic reform aimed at reducing trade costs and enhancing regional integration. While not framed as a political challenge to U.S. monetary dominance, the overlap with broader global trends in financial realignment invites international attention—and potential backlash. As the G20 convenes again in July, the success of initiatives like PAPSS will depend not only on technical implementation but also on navigating the geopolitical tension surrounding the future of the dollar.

Source: Reuters

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Glendon

Economic

Forex

U.K. retail sales slumped in May, overturning the prior month’s hefty gains, with food store sales in particular declining sharply on a monthly basis.

Retail sales slipped by 2.7% last month on a monthly basis, dropping from a healthy revised gain of 1.3% in April, according to data released by the Office of National Statistics data earlier Friday.

Economists had predicted that retail sales, which mostly reflect goods and are not adjusted for inflation, would drop by 0.5% on a monthly basis.

Retail sales fell by 1.3% on an annual basis, having increased by an impressive 5.0% in April as sunny weather helped British consumers return to the high streets, particularly in food stores.

Data released earlier this week showed that U.S. retail sales also fell heavily in May, falling 0.9% last month, the largest decrease since January, after a downwardly revised 0.1% dip in April.

The second straight monthly decline unwound the bulk of the tariff-driven surge in March.

President Donald Trump’s aggressive and often shifting tariff position has heightened economic uncertainty, making it difficult for businesses to plan ahead.

U.K. consumer sentiment improved in June to its highest level since December, but remained firmly in negative territory, survey data from the British Retail Consortium showed on Thursday.

"Gen Z saw the biggest improvement, in both economic outlook and their expectations of their future finances, with younger generations remaining the most optimistic about the future," said BRC Chief Executive Helen Dickinson.

"This rising optimism may also reflect the increase in minimum wage from April, with many younger people expected to have seen a significant uplift in their pay packet. Expectations of future spending – both in retail and more generally – rose slightly, with more spending on groceries planned over the coming months."

The Bank of England decided to keep its benchmark Bank Rate at 4.5% at its meeting on Thursday, but said it was focused on risks from a weaker labor market and from higher energy prices as conflict escalates in the Middle East.

"Interest rates remain on a gradual downward path," Governor Andrew Bailey said in a statement, although policymakers said in minutes of the meeting that interest rates were not on a pre-set path.

"The world is highly unpredictable. In the U.K. we are seeing signs of softening in the labour market. We will be looking carefully at the extent to which those signs feed through to consumer price inflation," Bailey said.

Source: Investing

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Gerik

Economic

Strategic Shift Toward Midcaps After Trade Tensions Ease

Fidelity International has repositioned its multi-asset strategy to emphasize midcap equities, particularly in Japan, Germany, and China. According to portfolio manager George Efstathopoulos, the fund's current allocation to midcaps from these three economies now accounts for approximately 11% of its growth and income portfolio — a sharp contrast from the near-absence of such positions 18 months earlier. This transition signals a recalibration of market expectations now that the most disruptive phase of tariff-driven volatility may have passed.

The decision to scale into midcap assets followed what Efstathopoulos described as “Liberation Day” — the market panic that erupted on April 2 after a fresh wave of U.S. tariff threats. That date marked the nadir of equity sentiment, prompting a near-term capitulation that Fidelity interpreted as a signal of bottoming risk. Since then, key midcap indexes have rebounded: Japan’s MSCI Mid Cap Index is up over 4%, Germany’s DAX Mid-Cap Index has gained nearly 6%, and Chinese midcaps have edged up by about 0.5%. These returns suggest a recovery narrative taking hold, despite looming geopolitical and trade uncertainties.

Domestic Growth as a Buffer Against Global Shocks

A key rationale behind Fidelity's preference for midcaps is their reduced sensitivity to global trade friction and stronger ties to domestic consumption. This approach is particularly pronounced in Germany, where mid-sized firms are seen as direct beneficiaries of a historic pivot toward fiscal expansion. In contrast to traditional export-heavy giants, German midcaps now appear positioned to capture a more internally driven recovery cycle, aided by new government spending initiatives announced earlier this year.

In Japan, Fidelity views current macro conditions as indicative of a structural transformation. With moderate and sustainable inflation finally taking root — what Efstathopoulos calls “good inflation” — the economy is showing signs of healthier consumer activity. Midcaps, often more flexible and domestically oriented than their large-cap counterparts, are expected to outperform in this environment.

China, meanwhile, remains attractive due to ongoing prospects for fiscal stimulus and the implicit support of state-backed institutions. Although performance has lagged relative to Japan and Germany, the perception of downside insulation — including government intervention during market dips — underpins continued exposure. Fidelity sees limited risk of severe drawdowns, making Chinese midcaps a component of a broader strategy to balance growth potential with managed volatility.

Performance and Portfolio Positioning

The broader strategy, managed from Singapore and part of Fidelity’s global multi-asset fund, has returned nearly 14.8% over three years in U.S. dollar terms. The firm’s confidence in its midcap exposure reflects a forward-looking view that blends policy analysis, domestic economic shifts, and recalibrated global trade dynamics. With the 90-day tariff truce set to expire on July 8, Fidelity’s positioning suggests a belief that either a negotiated extension or domestic resilience will mitigate further downside risks.

Fidelity’s pivot toward midcap equities in Germany, Japan, and China is grounded in the view that recent tariff-induced volatility has peaked and that domestic economic shifts are reshaping the risk-reward profile of smaller firms. By focusing on companies with stronger internal demand links, the strategy aims to reduce exposure to global trade fragmentation while maintaining exposure to growth through targeted regional bets. As geopolitical tensions and trade policy timelines unfold, this allocation signals a conviction in structural resilience over cyclical speculation.