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Source: Bloomberg

The European Union formally proposed Thursday to remove tariffs on American industrial goods, fulfilling a key element of the U.S.-EU framework trade agreement and ensuring that lower automobile tariffs will be retroactive to the beginning of August.

The European Commission, the executive arm of the EU, said in a statement that the removal of duties on industrial goods, along with providing "preferential market access" for some U.S. seafood and agricultural goods, would "ensure tariff relief by the US for the vital EU automotive sector starting retroactively from 1st of August."

"These steps contribute to restoring stability and predictability in EU-US trade and investment relations, to the benefit of business, workers and citizens on both sides of the Atlantic," it added.

The proposal, which now needs to be approved by the European Parliament and Council, was first outlined last week in a joint statement from the two trade partners. In it, they said the United States "expects the European Union's legislative proposals will be ... enacted by the necessary legislatures."

It said tariffs on autos would be reduced from the first day of the month when the EU's legislative proposal were introduced — which means the duties should be cut from Aug. 1.

The U.S. and EU announced they had reached a trade deal — after weeks of tense negotiations — at the end of July. U.S. President Donald Trump said the deal would see a 15% tariff imposed on most European goods to the U.S., including cars.

The rate came as a relief to the United States' largest trading partner after Trump previously threatened it with duties of 30%. Under the deal, the EU also committed to purchase $750 billion worth of U.S. energy and invest at least an additional $600 billion in the U.S.

Source: CNBC

The European Commission proposed on Thursday removing tariffs on imported U.S. industrial goods, part of a trade agreement with the United States that should result in a retroactive lowering of U.S. tariffs on European cars.

The proposal is the first step in enacting the framework agreement between U.S. President Donald Trump and Commission President Ursula von der Leyen on July 27, which saw the EU accept a broad 15% tariff to avoid a damaging trade war.

The United States has agreed to reduce its tariffs on cars built in the European Union to 15% from 27.5% from the first day of the month in which the EU's legislative proposal is presented - meaning from August 1.

Source: Yahoo Finance

The world of cryptocurrency is constantly evolving, bringing both exciting innovations and complex challenges. Recently, a significant voice from China’s financial establishment has raised eyebrows, sparking a crucial debate. Zhou Xiaochuan, the former governor of the People’s Bank of China (PBOC), has voiced strong opposition to stablecoins, citing deep concerns about stablecoin financial stability. His comments ignite a critical conversation about the future of digital currencies and their potential impact on global economies.

Why Are Stablecoins a Threat to Financial Stability?

Zhou Xiaochuan’s primary concern revolves around the potential for stablecoins to introduce significant financial stability risks. He argues that these digital assets, despite their name, could actually encourage speculative behavior rather than provide a steady anchor in the volatile crypto market. Such speculation, he suggests, might destabilize broader financial systems.

Furthermore, the former governor believes stablecoins could undermine existing, robust payment infrastructures, particularly in countries like China that already boast highly efficient digital payment networks. His arguments highlight several key points:

Are Stablecoin Cost Advantages Overstated?

A common argument for stablecoins is their promise of lower transaction costs and greater efficiency compared to traditional banking. However, Zhou Xiaochuan challenges this narrative. He asserts that claims of significant cost advantages over China’s existing payment systems are greatly exaggerated. China already utilizes advanced digital payment methods, like WeChat Pay and Alipay, which offer extremely low costs and high speed.

This perspective suggests that for nations with mature digital payment infrastructures, the perceived benefits of stablecoins might not be as revolutionary as proponents claim. Consequently, the potential downsides, such as regulatory challenges and risks to stablecoin financial stability, could outweigh any marginal gains.

Navigating the Future: Stablecoin Financial Stability and Regulatory Concerns

The former PBOC governor’s remarks come at a pivotal time. While he expresses caution, some experts and business leaders within China have recently advocated for the introduction of a yuan-backed stablecoin. This creates an interesting tension: the desire for innovation versus the imperative for financial security.

The global financial community is closely watching how major economies, especially China, approach digital assets. The debate around stablecoin financial stability is not just theoretical; it has real-world implications for how money moves, how economies function, and how individuals conduct transactions. Regulators worldwide are grappling with similar questions, striving to balance technological advancement with consumer protection and systemic resilience.

Key Considerations for Regulators:

A Crucial Dialogue for the Digital Age

Zhou Xiaochuan’s cautionary stance on stablecoins serves as a vital reminder that while digital currencies offer exciting possibilities, they also introduce complex challenges. His experience at the helm of a major central bank lends significant weight to his concerns regarding stablecoin financial stability. The ongoing debate highlights the crucial importance of a balanced approach, one that encourages innovation while rigorously safeguarding the integrity and stability of our financial systems.

Ultimately, the discussion around stablecoins is far from over. It requires careful consideration from policymakers, innovators, and the public alike to forge a path that harnesses the benefits of digital assets without compromising the foundational principles of financial security.

Frequently Asked Questions (FAQs)

Q1: What is a stablecoin?A stablecoin is a type of cryptocurrency designed to minimize price volatility by being pegged to a stable asset, such as a fiat currency (like the US dollar), a commodity (like gold), or even another cryptocurrency.

Q2: Why is the former PBOC governor concerned about stablecoins?Zhou Xiaochuan is concerned that stablecoins could encourage speculation, undermine existing robust payment systems, and pose significant risks to overall financial stability due to their potential for unregulated growth and lack of transparency.

Q3: Do stablecoins offer real cost advantages?While stablecoins are often promoted for their low transaction costs, Zhou Xiaochuan argues that for countries with highly efficient existing digital payment systems, like China, these cost advantages are often exaggerated and do not justify the associated risks.

Q4: Are there calls for a yuan-backed stablecoin?Yes, despite the former PBOC governor’s opposition, some experts and business leaders in China have expressed interest in introducing a stablecoin backed by the Chinese yuan, aiming to explore its potential benefits.

Q5: How do central banks typically view stablecoins?Central banks generally approach stablecoins with caution, focusing on potential risks to monetary policy, financial stability, and consumer protection. Many are actively researching or developing their own central bank digital currencies (CBDCs) as an alternative.

Source: CryptoSlate

The U.S. economy grew faster than initially thought in the second quarter, in part driven by business investment in intellectual property such as artificial intelligence, but tariffs on imports continued to cloud the outlook.

The upgrade to gross domestic product reported by the Commerce Department on Thursday also reflected upward revisions to consumer spending as well as business investment in equipment. That resulted in a measure of underlying domestic demand also being revised higher. With the Federal Reserve focused on a softening labor market, economists expected the U.S. central bank to resume cutting interest rates next month."I doubt this moves the needle for the Fed, but at the margin, these revisions work against the case for urgency to cut rates," said Stephen Stanley, chief U.S. economist at Santander U.S. Capital Markets.

GDP increased at a 3.3% annualized rate last quarter, the Commerce Department's Bureau of Economic Analysis (BEA) said in its second estimate. The economy was initially reported to have grown at a 3.0% pace in the second quarter. Economists polled by Reuters had expected GDP growth would be raised to a 3.1% rate.

The economy contracted at a 0.5% pace in the January-March quarter, which was the first GDP decline in three years.

The manner in which President Donald Trump's administration has implemented the tariffs, including escalations and 90-day pauses, has muddied the waters, making it challenging to parse economic data. A front-loading of imports as businesses rushed to beat the duties pulled down GDP in the first quarter before snapping back as the flow of foreign merchandise ebbed.

Neither first- nor second-quarter GDP readings are a true reflection of the economy's health because of the wild swings in imports. To get a better read of the economy, economists are focusing on the final sales to private domestic purchasers measure, which excludes trade, inventories and government spending.

This measure, also viewed by policymakers as a barometer of underlying economic growth, increased at an upwardly revised 1.9% pace last quarter, matching the first quarter's pace.

Domestic demand was initially estimated to have grown at a 1.2% rate. The revision reflected upgrades to consumer spending, the economy's main engine, which is now estimated to have increased at a 1.6% rate. That was up from the previously reported 1.4% pace.

Business spending on intellectual property products grew at a 12.8% rate, double the initially estimated 6.4% pace.

"Investment related to AI is helping mask some of the weakness elsewhere in the economy, but the good news is that there is little sign that this support is set to fade anytime soon," said Ryan Sweet, chief economist at Oxford Economics.

Growth in business investment in equipment was upgraded to a 7.4% pace from the 4.8% rate estimated last month.

Still, economists expect a lackluster second half, which would limit economic growth to about 1.5% for the full year because of tariffs.

That reading would be down from 2.8% in 2024.CORPORATE PROFITS REBOUND

The BEA also reported that profits from current production with inventory valuation and capital consumption adjustments rebounded $65.5 billion last quarter. Profits decreased $90.6 billion in the January-March period.

But further increases are likely to be hampered by Trump's protectionist trade policy, which has raised the nation's average import duty to its highest level in a century, inflicting pain on companies ranging from retailers to manufacturers.

Caterpillar (CAT.N) this month warned tariffs could cost the economic bellwether up to $1.5 billion this year.

In July, General Motors' (GM.N) second-quarter earnings took a $1.1 billion hit from the duties and the automaker anticipated more pain in the third quarter. Clothing retailer Abercrombie & Fitch (ANF.N), opens new tab on Wednesday warned that higher tariffs on countries such as Vietnam, Indonesia, Cambodia and India would increase costs by $90 million this year.

Fed Chair Jerome Powell last week signaled a possible interest rate cut at the central bank's September 16-17 policy meeting, in a nod to rising labor market risks, but also added that inflation remained a threat.

The Fed has kept its benchmark overnight interest rate in the 4.25%-4.50% range since December.

News on the labor market remained mixed, with a report from the Labor Department showing initial claims for state unemployment benefits decreased 5,000 to a seasonally adjusted 229,000 for the week ended August 23. The labor market is stuck in a no-hire, no-fire mode due to tariffs.The number of people receiving benefits after an initial week of aid, a proxy for hiring, fell 7,000 to a seasonally adjusted 1.954 million during the week ending August 16, the claims report showed. The so-called continuing claims data covered the week during which the government surveyed households for August's unemployment rate.

Continuing claims rose slightly between the July and August survey weeks, leaving some economists expecting the unemployment rate will rise to 4.3% in August from 4.2% in July.

A survey from the Conference Board on Tuesday showed the share of consumers viewing jobs as "hard to get" jumped to a 4-1/2-year high in August. But a shrinking labor market pool because of the White House's immigration crackdown is softening the impact of lackluster hiring on the unemployment rate.

Economists said reduced labor supply suggests the economy needs to create less than 90,000 jobs per month to keep up with growth in the working population.

Source: Reuters

Source: investing