Japan's Akazawa Heads To US For Latest Round Of Tariff Talks

The Bank of Korea (BoK) announced a quarter-point cut in its benchmark interest rate to 2.5% following its latest policy meeting. This decision aims to support a slowing economy affected by U.S. tariff hikes, weak consumption, and subdued business investment. The rate cut is the fourth since the BoK began easing borrowing costs last October after years of maintaining higher rates.

In its updated forecast, the BoK sharply reduced South Korea’s economic growth projection for 2025 from 1.5% to 0.8%. The bank cited continued sluggishness in domestic economic activity during April, following a contraction in the first quarter, alongside slow job creation in manufacturing and other sectors.

The central bank acknowledged that, despite recent easing in trade tensions, global economic growth is expected to decelerate due to the lingering effects of tariffs and geopolitical uncertainties. South Korea’s export-driven economy faces particular pressure from potential U.S. tariffs on key sectors such as semiconductors and automobiles.

In response, South Korean trade officials have engaged with the U.S. administration to address these trade challenges. A recent federal court ruling questioning Trump’s legal authority to impose tariffs adds complexity to the situation, though the White House has appealed the decision.

Political instability has further strained South Korea’s economic prospects. Former President Yoon Suk Yeol’s imposition of martial law last December, followed by his ousting in April, has unsettled markets and government policy continuity. The upcoming snap presidential election introduces additional uncertainty affecting business confidence and economic momentum.

Following the rate cut announcement, the South Korean stock market responded positively, with the Kospi index rising 1.7%, reflecting investor optimism that monetary easing will help cushion economic headwinds.

The Bank of Korea’s continued interest rate cuts and downgraded growth outlook underscore the combined challenges of external trade pressures and internal political turmoil facing South Korea’s economy. Monetary policy easing forms a key part of the strategy to stabilize growth as the country navigates an uncertain global and domestic landscape.

Elon Musk announced his departure from the Trump administration after spearheading efforts to reduce federal government size and spending through the Department of Government Efficiency (DOGE). Despite initial ambitions to slash trillions from the federal budget, Musk’s target was repeatedly scaled back—from $2 trillion to $1 trillion, then to $150 billion—as he confronted resistance from government agencies and political opposition.

Musk frequently expressed frustration with the slow progress and pushback, sometimes clashing with other administration officials protective of their domains. His tenure included significant layoffs and agency restructuring, but he acknowledged that he achieved less than hoped.

Though Musk’s government role was always intended as temporary, his exit—announced via a post on his social media platform X—signals a renewed focus on his private ventures such as Tesla and SpaceX. A White House official confirmed the departure, while Musk thanked President Trump for the opportunity to cut wasteful spending.

Musk’s exit followed an interview leak in which he criticized Trump’s flagship legislative effort, dubbed the “big beautiful bill,” for its expansive tax cuts and increased federal deficit. He called it a “massive spending bill” undermining his government efficiency mission. Trump defended the bill as a political compromise, acknowledging imperfections but expressing hope for further improvements.

Some Republicans, including Senator Ron Johnson, sympathized with Musk’s disappointment and voiced concerns about the bill’s spending levels. Speaker Mike Johnson thanked Musk for his work and vowed to continue pursuing spending cuts based on DOGE’s recommendations.

The administration plans to send rescission proposals to Congress, targeting over $9 billion in cuts to programs including public broadcasting and foreign aid, as part of DOGE’s agenda. Despite ongoing political challenges, there is a continued appetite among some Republicans for deeper spending reductions.

Musk candidly described the federal bureaucracy as worse than anticipated, calling reform efforts “an uphill battle.” He also indicated plans to reduce his political spending, feeling he had contributed sufficiently.

His early enthusiasm for reform and strong support for Trump, including significant campaign contributions and public endorsements, contrasted with the complex realities of navigating Washington’s institutional inertia.

Elon Musk’s departure marks the end of a high-profile but difficult experiment in federal government reform. His critiques of both the bureaucracy and legislative compromises underscore the entrenched challenges of fiscal overhaul in Washington, suggesting that meaningful change will require persistent political will beyond any single individual’s efforts.

South Korea, Asia’s fourth-largest economy and the first major exporter to report monthly trade data, is anticipated to see its exports fall in May for the first time since January. According to a Reuters poll of 16 economists, exports are expected to decline by 2.7% compared to May 2024. This comes after an unexpected 3.7% export rise in April, despite a 6.8% drop in shipments to the U.S.

Robust semiconductor exports, particularly for advanced artificial intelligence products, have so far offset tariff-induced losses in automotive exports. Chun Kyu-yeon from Hana Securities noted that strong chip sales in May may partly reflect advance orders placed amid concerns over potential U.S. tariffs on chip imports.

In the first 20 days of May, exports were down 2.4%, with U.S. shipments dropping sharply by 14.6% and exports to China falling by 7.2%. Stephen Lee of Meritz Securities expressed concern over declines to both the U.S. and China, pointing to signs of a global trade slowdown. South Korea’s exports had already contracted in the previous quarter, ending a 1.5-year streak of growth.

While some reciprocal tariffs announced by President Trump in April, including 25% duties on automobiles and steel, are currently paused pending negotiations, the base 10% tariffs remain. Economist Oh Suk-tae of Societe Generale emphasized that uncertainty remains high, especially with upcoming deadlines in July and August for the 90-day tariff pause between the U.S. and China.

South Korea’s imports are expected to have fallen by 3.1% in May, continuing a downward trend from April’s 2.7% decline. The median forecast for the country’s trade surplus is $4.61 billion, slightly lower than April’s $4.88 billion surplus.

South Korea’s May trade data will reflect the ongoing tug-of-war between strong semiconductor demand and the dampening effects of U.S. tariffs on exports to key markets. With tariff negotiations still unresolved and global trade showing signs of weakness, the export outlook remains cautious for the coming months.

1. OPEC+ confirms overall production quotas for this year and next year, and will decide on whether to increase production in July over the weekend.

2. Trump administration's cuts to US research funding spark outrage

3. The Bank of Mexico has significantly lowered its economic growth forecast for 2025.

4. Fed warns: Loss of safe haven status for U.S. assets will have long-term impact on U.S. economy

5. German Foreign Minister expects US to impose new sanctions on Russia

6. Timiraos: Fed's stagflation forecast may set the tone for June economic forecast summary

7. Trump says US-Iran nuclear deal "could be reached in the coming weeks"

8. The Trump administration can appeal the federal court's "tariff suspension ruling"

9. Fed meeting minutes: A patient approach will be adopted

The Organization of the Petroleum Exporting Countries (OPEC) and its allies have confirmed the production quotas for the entire alliance for the next two years, with eight key member states set to decide this weekend whether to implement another output increase in July. According to the statement released following Wednesday's virtual meeting, OPEC+ reaffirmed its medium-term targets for 2025 and 2026, which underpin the current supply restraint measures. The final decision on whether to proceed with the planned daily production increase of 410,000 barrels will be made during Saturday's teleconference.

Discussions surrounding this decision are highly market-sensitive, as announcements of output hikes over the past two months have triggered significant declines in oil prices. The scheduling of the meeting underscores the diminished influence of the 22-member OPEC+ coalition's collective production quotas over the past two years, with actual supply adjustments now primarily executed by the eight leading countries, headed by Saudi Arabia and Russia. During Wednesday's session, these countries also agreed to establish a mechanism to determine the 2027 production baseline based on maximum sustainable capacity. OPEC+ is scheduled to hold its next ministerial meeting on November 30. The Joint Ministerial Monitoring Committee, responsible for assessing the oil market and authorized to convene ministerial meetings, will continue to meet bi-monthly.

On May 28, local time, sixteen U.S. states, including New York, California, Illinois, and New Jersey, filed a lawsuit in the U.S. District Court for the Southern District of New York seeking to block the Trump administration's significant cuts to federal funding aimed at enhancing diversity in scientific research and related programs within the fields of science, technology, engineering, and mathematics (STEM). According to reports, the attorneys general of these states asserted that the Trump administration lacks the authority to restrict research funding or to terminate diversity initiatives authorized by Congress and administered by the National Science Foundation.

On May 28, local time, the Bank of Mexico released its quarterly report, significantly revising downward its economic growth forecasts for this year and next, citing domestic economic weakness and uncertainties stemming from U.S. trade policies. The central bank now projects Mexico's GDP growth at only 0.1% for the current year, substantially lower than the 0.6% forecast made in February. Additionally, the 2026 GDP growth forecast was halved from the previous estimate of 1.8% to 0.9%. The report highlights that domestic economic activity is expected to remain subdued, while changes in U.S. trade policy pose significant challenges to the global economy.

Federal Reserve officials have warned that the global trade war initiated by U.S. President Trump, which has undermined the U.S.' safe-haven status, could have "long-term" repercussions for the U.S. economy. The latest Federal Reserve meeting minutes reveal that several policymakers noted declines in U.S. Treasury securities, equities, and the dollar in the weeks following Trump's announcement of comprehensive tariffs on trade partners. The minutes state: "These participants highlighted that the sustained shift in this correlation, or the diminished perception of U.S. assets as a safe haven, may have enduring economic consequences." The May FOMC meeting was the first since the market turbulence triggered by Trump's tariff announcement on April 2, known as "Liberation Day." Historically, during periods of market volatility, global investors have typically flocked to, rather than shunned, U.S. assets.

German Foreign Minister Wadephul expressed optimism about Washington imposing new sanctions on Russia if President Putin continues to evade a peace agreement with Ukraine, following his meeting with U.S. Secretary of State Rubio. "We share a unified stance on the Ukraine issue," Wadephul stated. "Over 80 U.S. senators are prepared to consider and pass a sanctions bill in Congress. This decision lies with the Senate, not my interlocutor (Rubio). However, both he and I agree that action will be taken if Putin maintains his refusal." President Trump had signaled to Ukraine and its European allies that the U.S. would impose new sanctions on Moscow if it did not agree to a ceasefire, but appeared to abandon this position after last week's call with Putin. Meanwhile, the European Union is preparing to implement its 18th round of sanctions against Russia.

Nick Timiraos, regarded as the Federal Reserve's whisperer, highlighted that Fed staff presented a clear stagflation forecast during the May meeting, a critical point as it may form the foundational framework for the officials' upcoming Summary of Economic Projections (SEP). As usual, the Fed's language remained measured, yet staff explicitly identified a significant labor market slowdown, projecting an increase in the unemployment rate this year and sustained elevated unemployment through the forecast horizon ending in 2027. Additionally, Fed staff anticipate a "substantial" rise in inflation this year, followed by a "moderate" deceleration in price growth by 2026. Notably, the staff indicated that if their inflation forecasts for 2026 and 2027 (when inflation is expected to reach 2%) are inaccurate, the risk is more likely to be an underestimation rather than an overestimation.

On the 28th local time, U.S. President Trump said that the U.S. is having some really good talks with Iran, and the talks are going well. Trump also said that the nuclear deal between the U.S. and Iran "could be reached in the coming weeks". Trump said he wants to send inspectors to Iran. So far, Iran hasn't responded to this.

On Wednesday, the U.S. International Trade Court issued a significant ruling, determining that President Trump's invocation of the International Emergency Economic Powers Act (IEEPA) to implement the "Liberation Day" tariff policy exceeded his authority and ordered a suspension of the policy's enforcement. The Manhattan-based federal court emphasized that the U.S. Constitution vests exclusive trade regulation powers in Congress, and the President's exercise of emergency economic powers to protect the U.S. economy cannot override this constitutional mandate.

The lawsuit was initiated by the nonpartisan Free Judiciary Center on behalf of five small U.S. import businesses, all of which argued that the tariff policy would severely impair their operational capabilities. Notably, this represents the first major legal challenge to the Trump administration’s tariff measures. Currently, seven similar lawsuits are underway, including legal actions from 13 U.S. states and other small business coalitions.

However, the Trump administration may appeal this decision to the U.S. Federal Circuit Court of Appeals, with the potential for a final appeal to the U.S. Supreme Court. Oregon Attorney General Dan Rayfield characterized the tariffs as unlawful and reckless, causing devastating economic harm, and stated that his office is leading the multi-state litigation effort. In a statement, Rayfield said, "This ruling reaffirms the primacy of U.S. law and that trade decisions cannot be made unilaterally by the President's discretion." The White House has yet to respond. The Trump administration now has the option to appeal the ruling in federal court.

The Federal Reserve's minutes released on Wednesday emphasized a patient approach, with nearly all members expressing concern that inflation remains more persistent than anticipated. Policymakers generally agreed that economic uncertainties warrant a cautious stance on interest rate adjustments. Officials noted that since the March meeting, the potential impact of tariff policies has heightened risks of both rising inflation and unemployment, potentially placing the Fed in a dilemma between its dual mandates of price stability and maximum employment. The minutes indicated that, given robust economic growth and labor market conditions alongside a moderately restrictive monetary policy, the Federal Open Market Committee (FOMC) unanimously agreed to await clearer signals on inflation and economic outlook before taking further action. Additionally, Fed researchers downgraded their economic growth forecasts for 2025 and 2026 to reflect announced trade policies, projecting a significant weakening in the labor market, with the unemployment rate expected to exceed the natural rate this year and remain elevated through the end of 2027. Tariffs are also anticipated to substantially increase inflation levels in 2024.

UTC+8 20:30 Richmond Fed President Barkin Speaks

UTC+8 22:00 U.S. April Existing Home Sales Index (seasonally adjusted) MoM

UTC+8 22:40 Chicago Fed President Goolsbee Speaks

UTC+8 04:00 San Francisco Fed President Daly Speaks

Asian shares advanced sharply and U.S. futures jumped after a three-judge panel at the United States Court of International Trade blocked a series of sweeping tariffs imposed by President Donald Trump. The court ruled that the 1977 International Emergency Economic Powers Act (IEEPA) does not authorize the president to enact broad import duties, casting doubt on key trade policies that have unsettled global markets.

This legal decision came amid multiple lawsuits challenging Trump’s tariff authority, raising uncertainty about future trade relations and the economic outlook. Although the Trump administration plans to appeal, it remains unclear whether the administration will suspend these emergency tariffs during the legal process.

Following the ruling, futures for the S&P 500 rose 1.6% and Dow Jones futures gained 1.2%. Japan’s Nikkei 225 climbed 1.5% to 38,263.36, reflecting relief in a key U.S. ally that has repeatedly urged tariff rollbacks on imports of steel, aluminum, and autos. South Korea’s Kospi surged 1.4% to 2,707.77, aided further by the Bank of Korea’s recent interest rate cut to 2.5%.

The U.S. dollar strengthened sharply against the Japanese yen, trading at 146.06 yen early Thursday, up from 144.87 yen late Wednesday. Australia’s S&P/ASX 200 index also saw modest gains of 0.3%.

Despite the court ruling and subsequent rally, U.S. stocks had closed slightly lower on Wednesday amid cautious sentiment. The S&P 500 declined 0.6% to 5,888.55 but remained within 4.2% of its record high after rebounding from a steep decline of roughly 20% last month.

Earnings reports added volatility: Nvidia’s shares slipped 0.5% during the day but surged 4.9% after-hours ahead of its quarterly release. Retailers like Abercrombie & Fitch and Dick’s Sporting Goods posted better-than-expected results, fueling selective buying.

The 10-year U.S. Treasury yield rose modestly to 4.47%, reflecting limited market reaction to the Federal Reserve’s recent decision to keep rates steady. The Fed continues to hold off rate cuts amid inflation concerns partly linked to ongoing tariff impacts.

Oil prices increased, with U.S. benchmark crude climbing 60 cents to $62.44 per barrel and Brent crude adding 56 cents to $64.88 per barrel. Meanwhile, the euro weakened slightly against the dollar, slipping to $1.1239.

The court’s decision to block key elements of Trump’s tariffs provided markets with a welcome reprieve and sparked rallies across Asia and U.S. futures. However, with appeals underway and trade tensions unresolved, volatility and uncertainty are expected to persist. Investors remain cautious as they weigh legal, economic, and geopolitical developments shaping global trade and market sentiment.